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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

Ordering a not for profit company from Cleardocs

You can order a "Not for profit Pty Ltd company" from Cleardocs here.

Also Cleardocs is in the final stages of developing a document package to enable you to order a Public Company Limited by Guarantee from Cleardocs.

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

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


Lawyer in Profile

Paul Ellis
Paul Ellis
Senior Associate
PH: 61 3 9258 3524

Paul is a Senior Associate in the Maddocks Commercial team with particular expertise in commercial agreements for the supply of goods and/or services, the Personal Property Securities Act 2009, the National Consumer Credit Protection Act 2009 and the National Credit Code and the Australian Consumer Law.

Paul's key areas of practice include:

  • Australian Consumer Law;
  • credit and securities law;
  • commercial law and contracting;
  • government contracts; and
  • trust and superannuation law.

Before joining Maddocks, Paul was employed for 13 years with the Victorian Department of Justice, principally as a Deputy Registrar in the Victorian Magistrate's Court, but also as a legislation, policy and project officer for the Department.