Final Report and recommendations released

The Not for Profit (NFP) Sector Tax Concession Working Group (the Working Group) reported to the previous government in May 2013. The report was finally released by the current government on 21 February 2014. 

The Working Group, formed by the previous government in February 2012, comprised representatives from across the NFP sector as well as several technical experts, including our own Elizabeth Lucas, a Tax Services Partner and FBT specialist.  It was charged with examining the current range of tax concessions provided to the NFP sector in terms of fairness, simplicity and effectiveness. They were asked to consider whether there are better ways to deliver the current envelope of support provided through tax concessions to the NFP sector. The Working Group received over 225 submissions in response to its initial Discussion Paper released in November 2012 and met with a number of stakeholders for more targeted consultation.
In Australia, the NFP sector is sizeable – the Final Report identified that at the moment there are almost 56,500 charities registered for tax concessions. In reviewing and examining the tax concessions currently available, the Working Group considered all types of NFP entities including deductable gift recipients, mutual organisations, public benevolent institutions and health promotion charities. 

The Final Report identifies a number of significant findings for the sector and makes 23 recommendations across:

  • income tax 
  • deductible gift recipients
  • FBT concessions 
  • GST concessions 
  • mutuality, clubs and societies

The most significant recommendations, which would bring about the most change, are:

  • review and consolidate the income tax exemptions
  • extend Deductible Gift Recipient status to all charities other than in relation to religious, child care and primary and secondary education activities
  • remove the minimum gift deduction threshold (currently $2)
  • explore mechanisms to promote giving
  • remove FBT concessions to the extent used in salary packaging and replace with a direct payment to employers
  • include meal entertainment and entertainment facility leasing expenses in current caps for concessional treatment
  • allow use of the minor benefit exemption for entertainment 
  • tax all income, including membership income, of mutual organisations, or alternatively, tax the gaming, catering, entertainment and hospitality income of such organisations

The Working Group has recommended that any savings arising from the implementation of its recommendations should be returned to the NFP sector.  It has also recommended that a program of ongoing examination should occur and that the NFP sector and State and Territory governments should be consulted on the implementation of the recommendations.

The Final Report seeks to emphasise the importance of tax concessions in helping the NFP sector pursue worthy causes and provide goods and services that are of public benefit.  However, it seeks to balance this with the broader tax burden, the competitive neutrality of the government and supporting entities that are delivering a genuine public benefit.

Click here to view full the Final Report.

The current government has not made its intentions in relation to the recommendations in the report clear. It is possible that Not for Profit tax reform will be bundled up with the Government’s planned White Paper on tax reform more generally.