Mark Fowler & Rachel Sloper (13 May 2015)
What’s in the Budget for charities and not-for-profits?
Significant new power for Commissioner of Taxation
The item which immediately caught our attention is in Budget Paper No 2, Revenue Measures, for the Treasury portfolio. The Government is proposing to give the Commissioner of Taxation a ‘remedial power’ to ‘modify the operation of the tax law to ensure that the law’s purpose or object is achieved’. In full, it reads:
“The Government will provide the Commissioner of Taxation with a power to make a legislative instrument to modify the operation of the tax law to ensure that the law’s purpose or object is achieved. The measure will have effect from the date of Royal Assent of the enabling legislation. This measure is estimated to have no revenue impact over the forward estimates period.
The nature and volume of tax law and its evolution has sometimes produced unforeseen or unintended outcomes when applied. The statutory remedial power will allow the Commissioner to administer the law consistently with its purpose or object, where it has no more than a negligible budget impact and provided it has a beneficial outcome for affected taxpayers. This measure will reduce the regulatory burden on taxpayers by enhancing certainty.
A legislative instrument made by the Commissioner will be subject to extensive consultations and disallowance by Parliament.”
NFPs will no doubt grasp, as we did, the enormous implications that such a power could have for NFP tax benefits.
It is not clear, if the Commissioner is given the power to make delegated legislation which modifies ‘unforeseen and unintended outcomes’, to what extent the Commissioner may have the power to bypass judicial interpretations of the law not shared by the Commissioner.
The measure provides some comfort in stating that the Commissioner will be required to consult ‘extensively’ and only use the power where it has a ‘negligible’ revenue impact and a ‘beneficial’ outcome for ‘affected taxpayers’. However, without further details of what kind ‘consultation’ will be required, or how ‘beneficial impact’ or ‘affected taxpayers’ will be defined, we cannot be sure how expansive the power will be or how it could be used.
NFPs registered with the ACNC may recall that the ACNC’s Governance Standards were to be made subject to consultation and disallowance by Parliament in a similar attempt to provide safeguards for the sector. Ultimately, while the Opposition and the Greens considered disallowing the Standards, this did not eventuate.
The Budget papers say that the measure is not expected to result in any net revenue gains. Given the vague and expansive nature of the proposed powers, our view is that it is difficult to predict in advance whether this estimate is accurate. Charities will be keen to review the proposals in detail once such are available.
Fringe benefits changes
As anticipated, the Budget restricts access to the previously uncapped fringe benefits of meal entertainment and entertainment facility leasing. Each employee will be able to access up to a grossed-up $5,000 worth of these benefits as a separately capped amount in addition to the general FBT cap. Meal entertainment benefits over the cap value can still be accessed but will count towards the general FBT cap. In addition, meal entertainment will be a reportable fringe benefit.
The measure will apply from 1 April 2016.
The Budget also changes the available methods for working out car expense deductions. The 12% of original value and 1/3 of actual expenses methods will end, and the cent per kilometre method collapsed into a single rate of 66c/km. The logbook method is unaffected.
Small business measures
The Budget measure allowing small businesses with turnover of less than $2 million to transfer to a new legal structure without incurring CGT liability may benefit NFPs. It is not clear yet whether this benefit and other tax benefits for small business announced in the budget will be restricted to for-profit businesses or whether NFPs and charities will also benefit.
Chaplains funding to continue
Federal funding for chaplains is set to continue, at least for the next few years, with $60.6 million in annual funding for the National School Chaplaincy Program allocated to 2015-2016, 2016-2017, and 2017-2018.
ACNC funded to 2018-2019
Consistent with the Social Services Minister’s statements that abolishing the ACNC is not an immediate priority, the ACNC has been funded until 2018-2019. Its allocated funding does, however, reduce from $14.98 million in 2014-2015 to $14.81 million this financial year, continuing to drop over the forward estimates to a low of $13.23 million in 2018-2019.
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DISCLAIMER: This update contains general information only. It is not all inclusive and should not be considered legal advice. You should always obtain legal advice for your specific circumstances before relying on general information.