ACNC in the Firing Line

Article by Prof Myles McGregor-Lowndes published in ProBono 3/9/13

Has there been a  sneaky ‘roll back’ of the regulatory role of the ACNC back to the ATO or just another complicating legislative tax issue, asksProfessor Myles McGregor-Lowndes,

The opinion piece by Professor Wiltshire, Charity in the Firing Line,The Australian, August 30 2013, has caused my phone to run hot with inquiries about a “roll back” of the ACNC being the definitional gateway to federal benefits and concessions for charities.

Prof Wiltshire wrote in the opinion piece:

A sneaky manoeuvre of the Gillard government in its last hour slipped a large bundle of legislation through parliament while all eyes were on the battle for the Labor leadership. One of those pieces of legislation broke a promise to the not-for-profit sector by allowing the Australian Taxation Office to take back tax jurisdiction for the sector from the new Australian Charities and Not-for-Profits Commission.

I suspect that he is referring to Tax Laws Amendment (2013 Measures No. 2) Act 2013 Schedule 11.

Sections 50-15, 50-50, 50-55, 50-65, 50-70 and 50-72 of the ITAA 1997 are amended to standardise requirements that an entity falling within those sections must comply with all the substantive requirements in their governing rules and apply its income and assets solely for the purpose for which the entity is established.

These sections involve not only ACNC charities, but also employee and employer associations; trade unions; scientific institutions; public education institutions; public hospitals; hospitals carried on by a society or association; funds established to enable scientific research by or in conjunction with a public university or hospital; organisations established for the encouragement of science, community service purposes, animal racing, art, a game or sport, literature, or music; and certain funds.

The reasons given in the Explanatory Memorandum were that the amendment “confirms the High Court’s interpretation in Commissioner of Taxation v Bargwanna [2012] HCA 11, relating to whether a charitable trust is applied for the purposes for which it was established”.

However, in my view this fails to recognise that in Commissioner of Taxation of the Commonwealth of Australia v Word Investments Limited [2008] HCA 55 the High Court specifically made the point that this need not apply to charities.

Further, the ACNC must already consider similar issues under its Act (s25-5(3)). This leads to double handling by both ACNC and ATO as well as the opportunity for the two regulators to diverge in their application of the qualifications. It is hoped the two regulators will sort out a common approach and issue a concise and unambiguous public statement as soon as possible.

As for Prof Wiltshire’s other claims that the “so-called support functions are hard to identify”, one should look at the ACNC Commissioner’s six month progressreport and then at the Australian National Audit Office report on the ATO’s handling of DGR applications.

The comparison is stark. The ACNC reduction in application assessment times is really remarkable. If you are still not convinced – take the “ring a hotline” test. Ring the ACNC and be answered by someone who specialises in charities in an average of 11 seconds or take your luck on the general ATO help line!

About the author:Professor Myles McGregor-Lowndes, is the Director of The Australian Centre for Philanthropy and Nonprofit Studies, QUT, and makes the following acknowledgement:

“As I am an engaged scholar I have multiple conflicts which include being a founding member of the ATO Charities Consultative Committee, founding member of the ACNC Advisory Board, as well as having worked for the Productivity Commission, Commonwealth Treasury, ATO and as a legal adviser to or board member of any number of large and small charities.”

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