New Tax Laws for NFPs - FAQ's

During July and September 2004 the Australian Tax Office presented free seminars around the country to assist charities implement new endorsement measures that come into effect from July 2005 and has collated some of the frequently asked questions.

Changes to the tax law extend the current endorsement arrangements that provide charities with access to charity tax concessions. Also introduced is a statutory extension to the common law meaning of charity.

Questions raised by participants at these seminars were on a broad range of topics including, goods and services tax, fringe benefits tax, the endorsement process and the impact of the changes on child care service providers.

Here’s the background:

From 1 July 2004
There is a statutory extension to the common law meaning of charity to allow:
– organisations providing non-profit child care available to the public
– open and non-discriminatory self-help bodies that are for charitable purposes only, and
– closed or contemplative religious orders that offer prayerful intervention for the public, to be treated as charities for the purposes of all Commonwealth legislation.

From 1 July 2005
New endorsement arrangements begin. Charities will need to be endorsed by the Tax Office in order to access income tax, fringe benefits tax (FBT) and goods and service tax (GST) charity concessions. Currently, charities only need to be endorsed to access income tax concessions.

Changes will be introduced to the Australian Business Register (ABR) at www.abr.business.gov.au so that a charity’s endorsements for tax concessions can be viewed by the public.

Charities currently endorsed as income tax exempt charities (ITECs)
If your charity is currently endorsed as an ITEC:
– your charity’s ITEC endorsement, and any other existing endorsements your charity has for deductible gift recipient status, will continue. However, the ATO asks that your charity review its existing endorsement/s and advise if it has ceased to be entitled.
– Your charity can continue to self-assess it entitlement to fringe benefits tax (FBT) and goods and services tax (GST) charity concessions up to 1 July 2005. However, from 1 July 2005, your charity will require additional endorsements in order to access these concessions. The Tax Office will automatically do this for you, unless you advise otherwise.

If your charity is not currently endorsed and wants to access charity tax concessions, it will need to apply to the Tax Office for endorsement.
Charities that are not currently endorsed may include:
– organisations that are charities because of the statutory extension to the common law meaning of charity (for example, non-profit child care providers that satisfy the criteria of charity)
– newly formed charities, and
– existing charities that are not currently endorsed and have been self-assessing their entitlement to FBT and GST charity concessions.

If you would like a copy of collated FAQ’s in Word format just send us an email with the words New tax measures for charities: frequently asked questions in the subject line to probono@probonoaustralia.com.au.