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Not-for-profit tax reform: start date postponed

A proposed law would require a not-for-profit organisation to pay tax on profits:

  • the organisation earns on commercial activities that do not relate to the organisation?s altruistic purpose; and
  • that are not directed back to the organisation?s altruistic purpose.

The law will apply to commercial activities that start after 7.30pm (AEST) on 10 May 2011. There are transitional provisions for pre-existing commercial activities. The law was expected to be in force from 1 July 2011. But to allow further consultation, it is now expected to be in force from 1 July 2012.

Jane Tu

The date change

The Assistant Treasurer has announced that the new law to implement the 2011 Budget proposal[1] to better target tax concessions provided to not-for-profit organisations has been postponed from 1 July 2011 to 1 July 2012.

The postponement is to provide additional time for consultation, and to reduce uncertainty for not-for-profit organisations that commenced commercial activities after the 2011 Budget announcement.

Implications of the proposed law

Under the proposed law, the not-for-profit income tax concessions that currently exist will apply only to profits:

  • generated by commercial activities unrelated to the organisation?s altruistic purpose; and
  • that are directed back to the not-for-profit organisation to carry out its altruistic work.

The proposal means that not-for-profit organisations:

  • will pay income tax on profits from their unrelated commercial activities if those profits are not directed back to the organisation?s altruistic purpose; and
  • will ? for the relevant commercial activities ? have limited ability to access: Fringe Benefit Tax exemptions, and rebates; GST concessions; and deductible gift recipient support.

The date the law takes effect

Although the law is not expected to be in force until 1 July 2012, it will apply to profits:

  • on new commercial activities that start after 7:30pm (AEST) on 10 May 2011; and
  • on existing commercial activities under transitional arrangements. Initially, the organisation will be able to continue to use the tax concessions on those activities. However, the Government intends to phase out the concessions.

More information

You can read:

Source: This article was first published in Thomson Reuters? Weekly Tax Bulletin. To subscribe to Weekly Tax Bulletin, or for more information, please

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[1] Thomson Reuters? Weekly Tax Bulletin 2011 WTB 19 [666].

[2] Assistant Treasurer's media release No 009, 30 March 2012.


Lawyer in Profile

Jack Coventry
Jack Coventry
Senior Associate
+61 3 9258 3819

Qualifications: BA (Philosophy), Monash University, JD (Juris Doctor), University of Melbourne

Jack is a member of Maddocks Commercial team. He advises a range of corporate and private clients on:

  • M&A transactions,
  • corporate reorganisations, and
  • legal and tax structuring.

Jack acts for clients on both buy-side and sell-side and specialises in founder-owned businesses and Australian subsidiaries of multi-national companies. He works across a number of sectors including information technology, professional services, and property development and management including land lease.

Jack’s structuring work includes assisting multinationals to structure Australian operations, listed companies to achieve regulatory compliance / optimisation and providing general tax structuring. He has also represented clients in tax controversies including before the General Anti-Avoidance Review Panel (GAAR Panel) and the Federal Court of Australia.

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