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.

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:

• the Assistant Treasurer's media release[2], here; and
• about the Treasury’s consultation paper, of 27 May 2011, on the proposal in Thomson Reuters’ 2011 Weekly Tax Bulletin 22 [791].

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

• see http://www.thomsonreuters.com.au/weekly-tax-bulletin/productdetail/9572; or
• contact Thomson Reuters on 1300 304 195 or at LTA.Service@thomsonreuters.com

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.