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Taxation of Not-For-Profits

Taxation of Not-For-Profits. Ann O’Connell Melbourne Law School 20 May 2009. Henry Review – Chapter 7 Q7.1 What is the appropriate tax treatment for NFPs, including compliance obligations?

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Taxation of Not-For-Profits

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  1. Taxation of Not-For-Profits Ann O’Connell Melbourne Law School 20 May 2009

  2. Henry Review – Chapter 7 • Q7.1 What is the appropriate tax treatment for NFPs, including compliance obligations? • Q7.2 Given the impact of the tax concessions for NFPs…is there a more efficient way of assisting philanthropic and community based activities?

  3. Do we as a society want to support the work of charities and other NFPs? • Is the tax system the best way to do that? • If we do want to provide concessions, what is the most appropriate way to do it?

  4. The NFP sector and tax concessions • Large and diverse sector (PILCH submission) • Quantitative and qualitative contribution • Range from very small to very large • General community support • Cost of providing tax concessions – see AFTS Consultation Paper p 161 • Current tax concessions and eligibility →

  5. Income tax exemption – charitable institutions and funds + 13 other categories + some named entities • DGR status – 44 categories (including PBIs) + named entities + PPFs (more than 750) • FBT concessions • Exemption: PBI, health promotion charities, some hospitals, public ambulance service • Rebate: 14 categories of NFP including charitable institutions (that are not PBIs) • GST concessions – charitable institutions and funds, gift-deductible entities and government schools • Other concessions

  6. Problems with existing concessions • Too complex • Not targeted • Word Investments → raises issues about trading activities and off-shore activitiesnb Budget announcements • ATO as gate-keeper nb Senate Report on “Disclosure Regimes for Charities and NFP Organisations” (December 2008)

  7. Alternatives (Q7.2) • Direct funding: • better targeting • likely to favour large, well organised entities • Tax concessions • issues relating to eligibility • issues relating to nature of concession

  8. Appropriate tax treatment (Q7.1) • Income tax exemption – eligibility; types of income? • Fundraising support – eligibility; tax concessions for donor or charity? • Other concessions

  9. Suggestions for reform • Adopt a statutory definition similar to UK • Reduce complexity • Make choices about which types of NFP entities should be entitled to which concessions • Eligibility determined by external body

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