Tax concessions for not-for-profit organisations

Transcription

1 Tax concessions for not-for-profit organisations Thank you for your attendance The webinar will be starting shortly at pm. Please note that all webinar participants will be on mute to minimise background noise for all attendees. Questions can be typed at any time through the Question Pane of your Go-to-Webinar portal and can be read by the webinar presenters only. 1

2 Tax concessions for not-for-profit organisations 5 September 2016 Anna Lyons - Manager of Advice (Vic), Not-for-profit Law Simon Bowden - Special Counsel, Clayton Utz Tessa Livingston - Lawyer, Clayton Utz The webinar will begin at pm PO Box Melbourne VIC Tel Fax justiceconnect.org.au/nfplaw

3 Justice Connect 3

4 Not-for-profit Law 4

5 Introduction What this webinar will cover: 1. The basics an overview of tax concessions and endorsements 2. Tax concession charity (TCC) endorsement 3. Deductible gift recipient (DGR) endorsement 4. Common events and issues that may have tax implications Today s webinar contains legal information and should not be taken as legal advice 5

6 The basics Not-for-profit organisations in Australia 600,000 NFP organisations in Australia Charities DGR 6

7 The basics Commonwealth tax concessions / endorsements Income tax exemption GST concessions Fringe benefits tax rebate Fringe benefits tax exemption Deductible Gift Recipient status State tax concessions Payroll tax exemptions Land tax exemptions Stamp duty exemptions 7

8 The basics Cth Tax status check: 8

9 A scenario to set the scene Placedale Foodbank Inc 2015: Placedale Foodbank started as a group of residents delivering food to people in need Early 2016: incorporated as Placedale Foodbank Inc Now: want to access tax concessions 9

10 A scenario to set the scene May be eligible for tax concession charity (TCC) endorsement May be eligible for deductible gift recipient (DGR) endorsement 10

11 A scenario to set the scene Tax concession charity: Income tax exemption GST concessions Fringe benefits tax rebate Public benevolent institution? Deductible Gift Recipient status Fringe benefits tax exemption 11

12 Tax concession charity (TCC) status Tax / DGR

13 Tax concession charity Overview of registration & endorsement 1. ACNC* decides 2. ATO** decides Registered charity Tax concession charity * Australian Charities and Not-for-profits Commission (ACNC) ** Australian Taxation Office (ATO) 13

14 Tax concession charity Charity status (Charities Act 2013 came into effect on 1 January 2014) Charity = 1. not-for-profit + 2. all purposes charitable and for public benefit + 3. no disqualifying purposes + 4. not an individual, political party, government entity 14

15 Tax concession charity Applying to the ACNC for registration as a charity Must be an entity (incorporated or unincorporated association / company limited by guarantee) Must have an Australian Business Number (ABN) Must exist for the public benefit Purposes must meet the definition of charitable purposes Must be not-for-profit Need clauses in the rules or constitution addressing these 15

16 Tax concession charity Compliance requirements for registered charities As a registered charity, an organisation must comply with: Australian Charities and Not-for-profits Commission Act 2012 (Cth) Charities Act 2013 (Cth) Under ACNC laws, you need to provide information to the ACNC annually, notify of certain changes, and comply with governance standards (and external conduct standards if operating overseas) 16

17 Tax concession charity Charity registration check: 17

18 Tax concession charity The next step: endorsement as a TCC When applying to ACNC, also apply for TCC endorsement by the ATO ACNC will pass the application on to the ATO ATO will look at: Charity status from the ACNC What s in the constitution or rules Information provided to the ACNC Publicly available information (website, Facebook, media) NB ATO imposes some additional requirements 18

19 Tax concession charity Income tax exemption Don t need to lodge income tax returns, unless requested by the ATO 19

20 Tax concession charity GST concessions NFP must register for GST when annual turnover is $150,000 or more (can voluntarily register if less) If registered/required to be registered for GST price for goods and services will be GST inclusive. Must pay GST collected from sales to the ATO. TCC endorsed organisation may be able to claim GST credits on its purchases Can treat any sales connected with a fundraising event as input taxed 20

21 Tax concession charity Charities Must apply to ACNC for registration/endorsement Have certain clauses in Rules/Constitution Tax Concession Charity (TCC) Other? Must not be eligible to register as a charity Must fit within one of recognised categories in the Act Can self-assess as income tax exempt 21

22 Deductible Gift Recipient (DGR) status Tax / DGR

23 Deductible gift recipient How DGR works DGR status Donor gives $10 to DGR Can claim tax deduction for $10 gift (subject to donor s tax circumstances) NOTE: ACNC now determines whether an organisation is a public benevolent institution or a harm prevention charity (previously determined by the ATO) 23

24 Deductible gift recipient Key DGR requirements Must fit DGR category see table in subdivision 30-B of the Income Tax Assessment Act 1997 (Cth) Must be not-for-profit Must have an ABN Must be in Australia Must have clauses in rules/constitution dealing with transferring surplus gifts/contributions if wound up or DGR status revoked Maintain a public/gift fund (if required) 24

25 Deductible gift recipient Common categories (not an exhaustive list) Public Benevolent Institution (PBI) Health Promotion Charity Harm Prevention Charity (on the Register of Harm Prevention Charities) Cultural Organisation (on the Register of Cultural Organisations) Environmental Organisation (on the Register of Environmental Organisations) Institution with benevolent relief as its main purpose, and that relief is provided to people in need Promotes prevention or control of disease in humans Promotion of prevention or control of harmful behaviour Promote a cultural activity Protection, enhancement, information, education, research about natural environment Overseas Aid Relief Fund Provides funds for relief of people in developing countries 25

26 Deductible gift recipient Record-keeping Must keep accounting and other records that record and explain ALL transactions relevant to status as a DGR Records must show that gifts & deductible contributions are used for your principal purpose Records must be kept for at least 5 years Not all DGR reporting is the same check the requirements of the particular category 26

27 Deductible gift recipient DGRs running fundraising events General principle: only a true gift is tax deductible People who attend eligible fundraising activities (run by DGR endorsed orgs) can claim a tax deduction for contributions made where: The contribution is paid to attend/participate in a fundraising event in Australia OR They purchase goods/services as the successful bidder at an auction that is, or is at, a fundraising event in Australia The contribution must be more than $150, AND The GST-inclusive value of the goods or services must not exceed the lesser of $150 OR 20% of the contribution 27

28 Deductible gift recipient DGRs running fundraising events Be careful how tax deductions are advertised Comply with receipting requirements See for more information on tax and fundraising events 28

29 Deductible gift recipient Resources NFP Law s DGR Guide ACNC website ATO website Key legislation - Income Tax Assessment Act 1997 (Cth) 29

30 Tax issues for NFPs Tax / DGR

31 Tax issues 1. Working with volunteers 6. Winding up 2. Changing the constitution or rules 3. Changing activities 4. Social enterprises 5. Mergers or amalgamations 31

32 Tax issues 1. Working with volunteers Employees, independent contractors & volunteers have different tax requirements know who is who! If a payment is made to a volunteer in their capacity as a volunteer no tax payable No PAYG requirements for true volunteers No FBT payments for benefits paid to true volunteers Reimbursement of volunteer expenses: can claim GST credits in some circumstances 32

33 Tax issues 2. Changing a constitution or rules Take particular care with purposes/objects, notfor-profit clause, winding up clause Potential for ACNC or ATO to review the organisation 33

34 Tax issues 3. Changing activities Consider whether a change of activities will impact on tax concessions Consider whether the proposed new activities are consistent with the NFP s stated purposes Take care with NFPs proposing to undertake significant business activities 34

35 Tax issues 4. Social enterprises Running of an enterprise to achieve an economic, social, cultural or environmental mission that benefits the public or a particular community. Can be for-profit or not-for-profit, or a hybrid of both Must be for-profit if investors are purchasing equity For existing NFP: would starting a social enterprise be consistent with the NFP s purposes? 35

36 Tax issues 5. Mergers and amalgamations Consider both the tax and charity status of both NFPs Both NFPs need legal advice about any tax consequences after the merger A newly merged organisation is likely to need to register as a new charity. Will it be eligible? Consider ABN 36

37 Tax issues 6. Winding up Must follow constitution/rules and all legal requirements See regulator s websites for step-by-step guides (ASIC, Consumer Affairs Victoria, NSW Fair Trading, or other state regulator) Notify ATO (if required) Cancel registration with ACNC (if registered) Ensure surplus assets are only distributed as per the winding up or dissolution clause in constitution/rules 37

38 Not-for-profit Law tax resources Tax / DGR

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40 Further information Website: Phone: 1800 NFP LAW Our services: Legal information factsheets on common legal issues Legal training for community groups Law reform work aimed at reducing unnecessary NFP regulation Phone advice to answer quick legal questions** Referral to a lawyer to assist with complex legal issue** ** These are limited services, available for eligible organisations only: see 40