CHARTING NEW HORIZONS:
GOVERNANCE WITH PASSION AND PURPOSE
Protecting Your Income Tax
Exempt Status:
Two New Additional Tests and
the ATO View.
Victor Hamit B.Ec (Acc), LLB, FAICD, CTA.
Wentworth Lawyers
Level 40
140 William Street
MELBOURNE 3000
Email: [email protected]
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Disclaimer: This presentation is of general nature only. Legal advice should be obtained in relation
to any specific circumstances.
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Scope
Our discussion is limited today to the 2 new
additional special conditions introduced into the
Income Tax Assessment Act 1997 (the “Tax Act”) for
NFP entities to satisfy in order to qualify for income
tax exemption.
New Special Conditions:1. Governing Rules Condition
2. Income and Assets Condition
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Background
June 2013, the Federal Labor Government
introduces legislation for 2 additional special
conditions for NFP entities to satisfy for income tax
exemption status.
•
Tax Laws Amendment (2013 Measures No. 2)
Act – “An Act to amend the law relating to
taxation and the Tax Agent Services Act 2009
and other purposes”
•
Schedule 11 – “Miscellaneous amendments”
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Why?
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Entities Covered
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Registered Charities
Scientific Institutions
Public Educational Institutions
Funds for scientific research by or in conjunction with a public
University or Public Hospital
Societies, Associations or Clubs for the encouragement of science
Societies, Associations or Clubs for community service purposes
(except political or lobbying purposes)
Employee or Employer Associations
Trade Unions
Hospitals (Public and NFP Society or Associations)
Societies, Associations or Clubs for Animal Racing, Sport, Music
and Musical purposes.
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What are the new Conditions?
The entity must:
1)
comply with all the substantive
requirements in its governing rules (the
“Governing Rules Condition”); and
2)
apply its income and assets solely for
the purpose of for which the entity is
established (the “Income and Assets
Condition”)
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1. Governing Rules Condition
•
What are the governing rules?
 Constitution
 Law
 Other
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•
What are the substantive requirements?
The Rules that define the rights and duties of the entity
such as:
 give effect to the object or purpose of the entity;
 relation to not for profit status;
 set out the powers or duties of the Directors and
Officers of the entity;
 require an entity to maintain a register of members;
and
 relate to winding up of the entity.
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Governing Rules Condition (cont)
•
•
Contrast substantive to procedural rules.
Procedural rules are those which prescribe the method or manner in
which the rights and duties of the entity are carried into effect, and where
applicable enforced. Administrative processes are typically procedural
requirements. For example the following are procedural requirements:



•
rules regarding the process for granting membership of the entity;
the format in which the register of members is maintained;
how a particular meeting is to be conducted (including requirements
for a quorum); and
the rules setting out how a member may vote at a meeting by proxy.
“All year”.
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2. The Income and Assets Condition
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apply solely for the purpose;
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purpose = purposes;
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Accumulations;
•
“immaterial amount”, “one-off” or
“occasional
unrelated
misapplication”; and
•
“all of the year”.
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Review Action
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Further Information
•
Taxation
Ruling
(www.ato.gov.au);
•
Income Tax Assessment Act 1997,
particularly
Division
50
(www.austlii.edu.au); and
•
Updated – ATO Putting NFP’s to the
Test: Two Additional Tests for Income
Tax Exemption
(http://betterboards.net/)
TR
2015/1
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Q&A
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Thank
You
Victor Hamit
Wentworth Lawyers Pty Ltd
Tel:(03) 9607 8380
Email: [email protected]
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