NFP Update: Treasurer releases tax discussion paper

Matthew Turnour Mark Fowler

Dr Matthew Turnour and Mark Fowler (30 March 2015)

The Treasurer released the tax discussion paper today.

Amongst others, the NFP section of the discussion paper seeks submissions on the following concerns:

1. The administration of the tax concessions generally, noting ‘it is important to assess [the] effectiveness [of tax concessions] to ensure that the concessions continue to meet their intended policy objectives, do not result in unintended consequences (such as high compliance costs or an uncompetitive advantage) and deliver the greatest possible community benefit.’

2. On forgone revenue due to the tax concession the paper notes that ‘the two largest groups of tax concessions involve exemptions from paying fringe benefits tax (FBT) for public benevolent institutions (PBIs), health promotion charities (HPCs), public hospitals, non-profit hospitals, and public ambulance services; and income tax deductions for making gifts to DGRs. The amount of revenue forgone from these concessions has been increasing, particularly the FBT exemptions.’

3. The paper also raises concerns with competitive neutrality – ‘Given the size and reach of the NFP sector, some tax concessions may result in distortions that affect the broader allocation of resources in the economy, particularly where they operate in competition with for-profit providers. These distortions arise when the prices that NFPs pay for their inputs (such as labour) are altered by the presence of concessions in the tax legislation.’

4. On income tax exemption and mutuality for employee or employer associations and clubs, the paper notes that ‘there appears to be no clear rationale underlying this exemption.’

5. On Deductible Gift Recipient Status, the paper notes that the time consuming nature of endorsement and the complexity arising from differing requirements are matters upon which submissions are sought.

Discussion Questions

The NFP discussion questions arising from the foregoing are as follows:

47. Are the current tax arrangements for the NFP sector appropriate? Why or why not?

48. To what extent do the tax arrangements for the NFP sector raise particular concerns about competitive advantage compared to the tax arrangements for for-
profit organisations?

49. What, if any,administrative arrangements could be simplified that would result in similar outcomes, but with reduced compliance costs?

50. What, if any, changes could be made to the current tax arrangements for the NFP sector that would enable the sector to deliver benefits to the Australian community more efficiently or effectively?

These concerns and questions will be familiar to those who provided submissions to the 2012 Not-for-profit Sector Tax Concession Working Group review of the Not-For-Profit Sector.

Submissions are due by 1 June 2015. We have in the past assisted clients to provide submissions that address their particular concerns for similar reviews. Please contact our office if you require assistance in this regard.

DISCLAIMER: This update contains general information only. The information is not all inclusive and should not be considered to be legal advice. You should always obtain legal advice for your specific circumstances before relying on general information.