Public Benefit Test Potentially Damaging

Philanthropy Australia warns that a Private Members Bill to require religious and charitable institutions to meet a public benefit test to justify their exemption from taxation may have the potential for enormous “collateral damage” in the Not for Profit sector.

The Tax Laws Amendment Bill (Public Benefit Test) was introduced by independent Senator Nick Xenaphon in May 2010 and is now being considered in a Senate Economics Legislation Committee hearing.

In his second reading speech to Parliament, Senator Xenaphon says the Bill is prompted by the heartbreaking stories he has heard from victims of the Church of Scientology and that the organisation’s tax-exempt status needs to be examined.

He says Scientology needs to be open and transparent, and to prove that the good they do in the community outweighs the harm.

Philanthropy Australia's CEO, Gina Anderson says the Bill could result in further administrative burdens placed on an already financially strained sector to prove public benefit, potentially on an annual basis, in order to retain their tax concessions.

Anderson says the result will also add an administrative and resource cost to the Australian Taxation Office with the potential cost of an appeal mechanism for disallowed charities which may pass into the Court system.

In a letter to the Senate hearing, Gina Anderson says redefining what constitutes charity and how this definition fits with the overall Not for Profit sector, is a complex issue which over the past decade has been the subject of much debate and two lengthy and complex Government inquiries; the Inquiry into the Definition of Charities and Related Organisations (2001) and more recently the Productivity Commission Report into the Contribution of the Not-for-Profit Sector (2010).

Anderson says this is proof that the redefinition of charity is an issue which needs to be addressed as a whole, rather than piecemeal.

Philanthropy Australia has called on the Federal Government to adopt a statutory definition of 'charitable purposes' and to take up the recommendations of the Productivity Commission.

Anderson says rather than taking a blunt instrument to these issues in the form of the Private Members Bill to test the tax status of a couple of organisations, the Productivity Commission has already done the work after wide consultation.

Anderson says Philanthropy Australia would be happy to address the Senate Committee.

In his second reading Speech, Nick Xenaphon says the public benefit test is not limited to the Church of Scientology. Under this legislation, he says all religious or charitable organisations will have to come clean about what they do—both the good and the bad.

He says the Government has previously responded to calls for a public benefit test with the line that they did not want to pre-empt any recommendations that may have been made in the Henry Tax Review.

While both the Henry Review and Productivity Commission report are both out and call for a National Charities Commission to monitor, regulate and streamline tax concessions for NFP organisations, he says the Government has chosen to ignore this recommendation, and similar recommendations from previous reports saying the same thing.

Philanthropy Australia is the national peak body for philanthropy and is a Not for Profit membership association.