Reforming Administration of Tax Deductible Gift Recipients - a victory for common sense?
December 2017 | News | Seak-King Huang and Jon Cheung
On 5 December 2017, the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, issued a Media Release announcing significant reforms impacting the administration and oversight of organisations with deductible gift recipient (DGR) status.
The Media Release appears to be a positive development for charities. It promises an enhanced role for the Australian Charities and Not-for-profits Commission (ACNC) and has the potential to achieve a reduction in complexity for DGRs.
On 15 June 2017, the Commonwealth Treasury released a discussion paper for public consultation regarding opportunities for tax deductible gift recipient reforms. See our previous update here.
The purpose of the consultation was to review ways to strengthen the DGR governance arrangements, reduce administrative complexity and ensure that an organisation’s eligibility for DGR status is up to date.
Although no details in the form of draft legislation were made available, the Media Release announced the following reforms:
1. In general terms, the role of the Australian Charities and Not-for-profits Commission (ACNC) will be enhanced and administrative complexity for DGRs is to be reduced.
2. All non-government DGRs are to be automatically registered as charities with the ACNC from 1 July 2019, with a 12 month transitional period to assist current non-charity DGRs with compliance. The Commissioner of Taxation will have the power to exempt DGRs from this requirement in certain circumstances.
3. The requirement for organisations to maintain a public fund for certain DGR categories will be abolished.
4. The Government will issue External Conduct Standards to be enforced by the ACNC. This was recommended by the ACNC and that AUSTRAC report of 28 August 2017 titled ‘Australia’s non-profit organisation sector: money laundering and terrorism financing risk assessment report’.
5. The ‘DGR registers’ will be integrated with the ACNC charity register and duplicative reporting requirements will be abolished.
The existing reporting requirements of DGRs on these ‘DGR registers’ will be collected by the ACNC in the Annual Information Statement (AIS).
According to the Discussion Paper, the ‘DGR registers’ are:
a. the Register of Environmental Organisations (REO);
b. Register of Cultural Organisations (ROCO);
c. Register of Harm Prevention Charities (RHPC)); and
d. the Overseas Aid Gift Deduction Scheme (OAGDS).
6. The ROCO eligibility criteria will be amended to enable organisations that promote Indigenous languages to be endorsed as DGRs.
7. The ACNC is to publish charities’ declarations of political expenditure to the Australian Electoral Commission and relevant criminal activities of charities’ staff or responsible persons in the AIS.
Other proposals referred to in the Media Release
The Media Release also set out the following in relation to previous policies and proposals:
1. There is to be no mandated level of remediation by environmental organisations listed on the REO as originally recommended by the House of Representatives Standing Committee on the Environment in its report on its inquiry into the REO tabled in Parliament on 4 May 2016;
2. The unlegislated 2009-10 Budget measure Philanthropy – reforming the ‘in Australia’ requirements that apply to tax exempt entities will not be proceeded with. This could have had the potential to prevent many DGRs from conducting legitimate activities outside Australia.
On the whole, the content of the Media Release appears to be a positive development for charities, and has the potential to achieve a reduction in complexity.
We will be monitoring the progress of these reforms, in particular how they are to be implemented in legislation, and will continue to provide updates as more detail comes to light in relation to them.