Charities and not-for-profits Bills introduced Print E-mail

A package of Bills establishing a new regulatory system for the not-for-profit (NFP) sector has been introduced in the House of Reps. The Bills are the Australian Charities and Not-for-profits Commission Bill 2012, Australian Charities and Not-for-profits Commission (Consequential and Transitional) Bill 2012 and the Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012.


ACNC Bills

New regulator - ACNC

The Australian Charities and Not-for-profits Commission Bill 2012 will establish a new independent statutory office, the Australian Charities and Not-for-profits Commission (ACNC), which will be the Commonwealth level regulator for the NFP sector. The ACNC is designed to be a "one-stop shop" for ACNC registration, tax concessions and accessing Australian Government services and concessions.

The ACNC Commissioner will be responsible for registering entities as NFP entities according to their type and subtype. Registration with the ACNC is not compulsory, but it is a necessary precondition for access to certain Commonwealth taxation concessions.

The Australian Charities and Not-for-profits Commission (Consequential and Transitional) Bill 2012 provides transitional registration arrangements for certain entities that are endorsed under Div 50 of the ITAA 1997. Under the transitional registration arrangements, charities, health promotion charities, PBIs and religious institutions that are endorsed by the ATO prior to the commencement of the ACNC will be taken to be registered entities on the commencement of the ACNC. However, all registered entities will then be subject to the ongoing requirements of the ACNC in order to remain registered and NFPs that are not registered with the ACNC will not be eligible to continue to receive Commonwealth tax concessions from 1 October 2012.

Governance and external conduct standards

The ACNC Bill sets up the framework for the minimum governance and external conduct standards an entity must satisfy to be and remain a registered entity. The standards are expected to be principle-based, specifying the outcome to be achieved, rather than detailing how an entity must meet the standards, in its particular situation. Non-compliance with the standards may result in the ACNC Commissioner revoking the registration of the entity.

Record-keeping and reporting obligations

A registered entity will be required to keep records that correctly record and explain its transactions, and the financial position and performance of the entity. These records must be thorough enough to enable true and fair financial statements to be prepared and audited. A registered entity must also keep records that correctly record its operations.

All registered entities will be required to provide an annual information statement (in the approved form). The ACNC Commissioner will have the discretion to allow entities to provide collective or joint reports, in certain circumstances.

The first annual information statement will be in respect of the 2012-13 financial year and will have to be lodged with the ACNC by 31 December 2013, unless a substituted accounting period applies.
In addition to the annual information statement, medium and large entities will be required to provide annual financial reports to the ACNC. Large entities will be required to have their financial reports audited, while medium entities can choose to either have a review or an audit

 

 

 

 

Date of effect

The ACNC will commence operations on 1 October 2012.

Tax-exempt entities: Special Conditions Bill

The Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012:

  • re-states the "in Australia" special conditions for income tax exempt entities, ensuring that they generally must operate principally in Australia and pursue their purposes principally in Australia, and for the broad benefit of the Australian community (with some exceptions). If an entity provides money or property (to further its purpose) to other entities that are not entitled to be income tax exempt, the use of those funds by those other entities should be taken into account when determining whether or not the entity giving the money has met the "in Australia" special condition;
  • standardises the other special conditions an entity must meet to be income tax exempt, in particular complying with all the substantive requirements in its governing rules, applying income and assets solely to pursue the purposes for which it was established and being a "not-for-profit" entity (with some exceptions);
  • standardises the term "not-for-profit", replacing the defined and undefined uses of "non-profit" throughout the tax laws; and
  • codifies the "in Australia" special conditions for deductible gift recipients (DGRs) ensuring they must generally operate solely in Australia, and pursue their purposes solely in Australia (with some exceptions, such as overseas aid funds and some environmental organisations).

If an entity does not meet the first two dot points above, it can instead be prescribed in the Income Tax Assessment Regulations or be endorsed as a DGR (subject to the separate requirements applying to DGRs).

Date of effect

The Special Conditions for NFP Concessions Bill will commence from Royal Assent, and will apply to determine whether an entity is entitled to be income tax exempt or remain income tax exempt for income years following Royal Assent, and to determine whether an entity is entitled to be a deductible gift recipient or remain a deductible gift recipient for income years following Royal Assent. Changes to the FBT provisions apply to FBT years of tax following Royal Assent.

 

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