Transcript

Facilitator – Matt Crichton:
Good afternoon everyone, and welcome to our webinar this afternoon. This is the third instalment of our, I guess special series of ‘Ask ACNC’ webinars, where we bring you the presentations that we took around the country over quite a few weeks in August and September. So for those of you who were unable to make it to one of those sessions, these webinars are providing you the presentations that we delivered in person.

Today’s is a very popular one. We’ve got a special guest from the ATO, Mel Gibbs, who will be presenting today’s session, and it will be focused on the ATO’s relationship with the ACNC and registered charities. Also with us today is a colleague of mine at the ACNC, Anne Duffy, who’ll be answering your questions via text as they come through. And, I just realised that I’ve forgotten to introduce myself, my name is Matt Crichton. I’m from the ACNC’s Education Team, and I will be, with Mel, facilitating this session.

Just a couple of things before we do begin though. If you have any difficulties with the sound on your computer using the GoToWebinar program, try calling the number listed in the GoToWebinar control panel, that’s sometimes a way to fix the sound, and you can use the voice over internet phone. Also, if you want to ask a question you can type it in anytime during the webinar into the control panel on the right hand side of your screen. There should be a little box there to be able to send some questions to us, and we’ll get to them as they come through. Of course if there’s a flood of them coming through we may not be able to get to all of them, but we will try our best, and some of the questions that we can answer in the Q&A session later in the webinar we will hold off until then. So if there’s anything that pops into your mind, just send us a question in the control panel, and we will get to it as soon as we can.

For those of you that don’t get any questions answered, don’t panic, we will be sending out an email, a follow up email, following this webinar which will contain lots of links and information that covers many of the questions that we receive throughout the webinar. And of course, you can give us a call and our friendly Advice Services staff will be able to answer any questions you have if we don’t get to yours in today’s webinar. And just on that, if you do have something really specific that you’d like to know about your charity, or the particular tax concessions that your charity has, or want to get, or anything like that, it may be better that you do give us a call and we can talk you through the specifics of your situation and answer your question then. As you can imagine this webinar will cover some of the broader basics and will touch on some things that are relevant for your charity, I’m sure, but some of the specifics are probably better dealt with on a phone call to our Advice Services team.

There will be a recording of this webinar put on our website, and on our YouTube page, in a couple of days. So if you do have to leave early, or you miss out on bits and pieces of it, don’t worry, there will be a recording of the webinar up later that you can view it at a later time. And also, just finally, we do value any suggestions you have, too, for us to improve our webinar series, so at the end of the webinar if you have any comments, feedback, or suggestions, feel free to send them through. We love receiving those and working on improving our education products for everyone.

OK, that’s me for the moment. And I will pass over to Mel Gibbs now from the ATO, and she will take us through today’s presentation.

Mel Gibbs:

Hi everyone. My name’s Mel Gibbs. A little bit of background about me. I look after a team of, well, a small team in Parramatta, and we operate the Not-for-Profit Information Line, which we’ll give you the number for later on in the webinar, and we also look after all the endorsements for tax concessions and deductible gift recipients there as well. So we have a team within the ATO that has quite a lot of specialist knowledge, and we work very closely with the ACNC, so it’s great to be here today.

So we might just start. So today’s session, as Matt explained, is a bit of a broad overview, and if you do have any kind of specific questions that’s where we can help you later, you can give us a call on our number. In today’s session, we’re going to go over the ATO’s role with the not-for-profit sector. We’re going to talk to you about tax concessions and obligations that you may be entitled to or have, our engagement approach with the not-for-profits, our reinvention initiatives, the support that we can provide you, and then there’ll be some time for questions and answers at the end.

So the ATO and the not-for-profit sector: the not-for-profit sector is enormous, there are around 600,000 not-for-profits in Australia. We don’t know for sure how many there are because a large chunk of them are not actually registered with the ATO. So there are about 194,000 that are registered with the ATO, and they include 54,000 odd charities that are endorsed with us for tax concessions, 28,500 deductible gift recipients, and of those about 11,400 are endorsed as public benevolent institutions or health promotion charities. We also have some not-for-profits that are registered with us to pay Pay as you go withholding for their employees, and any goods and services tax that they might have to pay to the ATO.

So our interaction with the sector: we basically administer tax concessions and also the obligations that not-for-profits and charities have with the Tax Office. I’m going to spend a little bit of time on this slide, and go over these tax concessions and DGR things in a little bit more detail, but I’ll just quickly run through that [indicating to presentation slide]. Some not-for-profits have obligations under the tax and superannuation laws. So they need to report and pay things like Pay as you go withholding for their employees, superannuation, they need to report GST on business activity statements, and they might need to be registered for fringe benefits tax and lodge returns for that if they’ve got employees and they’re providing benefits to them.

The other thing that people are really interested in, in what we can do for you, is we can endorse you for income tax exemption. So registered charities need to be endorsed with the ATO to be exempt from income tax, and that basically means that you don’t pay tax and you don’t need to lodge tax returns with us. We can endorse you for fringe benefits tax exemptions or rebates as well. And fringe benefits tax concessions allow charities and not-for-profits to provide benefits to employees instead of salary wages, and it depends on the type of charity that you are, as to the type of fringe benefits that you can provide, and these are usually up to a cap as well, because sometimes the fringe benefits are exempt, and then sometimes you get a rebate of the tax that you might have to pay. But it provides a bit of an incentive if you can’t pay a lot of wages to your employees, you may be entitled to provide them with fringe benefits.

The other big thing that we do is endorse deductible gift recipients. So being endorsed as a deductible gift recipient allows you to accept gifts from donors that are tax deductible to the donor, so it’s an endorsement that makes giving to your organisation beneficial to the donor. With DGR, not all charities are able to be endorsed as DGR’s, you have to fall within one of the specific categories that we have, and there are over 40 categories, and a lot of them are very narrow and very specific. Some examples that we have are things like school building funds, which allow schools to collect money to build public libraries, and museums and hospitals. And then if you are registered under the public benevolent institution subtype with the ACNC, or health promotion charity subtype, you are also able to apply for DGR endorsement with the ATO. And the other thing the ATO does, is we deal with taxable not-for-profits as well, things like clubs, and we tax them under a special concession under the mutuality principle.

We might move on to the next slide, and then if anyone has any - I’m sure there will be questions that will come through about DGR and tax concessions - we can talk about them as we go.

OK, so our engagement approach with the sector: what we kind of know about charities, is that the vast majority of organisations, they really want to do the right thing, that your role is to help the community. We also understand that the tax law is quite complex to understand and that you have a high turnover and a reliance on volunteers with limited tax knowledge. There’s a low level of tax agent and intermediary involvement, and that’s generally because of the cost of those services as well. So we do get that you know it’s not a very tax savvy sector, so we’re here to kind of help you with that. And what we do know as well is that there are very few that use tax exempt entities as a vehicle for incorrectly obtaining benefits. There’s not many, but there are a couple out there.

So what you can expect from us at the ATO is that we really want to make it easy for you to access any tax concessions to which you’re entitled, and I’ll just talk a little bit more to that point. My team’s role in endorsing charities for DGR and tax concessions is that when you call us, or when you apply, our team will really look at what you’re entitled to and work with you so that you can access those concessions.

We don’t want to withhold your access to those, we want you to be able to access them so that you can then go and do the important work that you need to do in the community. We understand that the vast majority meet their tax obligations, and we only focus our compliance area, our compliance work on the areas of greatest risk.

So how we work with charities: we provide advice and guidance, and we do this through dedicated not-for-profit content on ato.gov.au. Now in the last, well few months, and moving forward, the ATO is working really hard on revising that content, and making sure that the information that we provide is in a language that charities can understand. So we’re working on it. It hasn’t been the best in the past, but it’s getting there. We have our dedicated not-for-profit advice line, and this is the area where I work, it’s a 1300 number, and we’re there Monday to Friday, eight to six, to answer all of your tax related questions that you have. And within that advice line we have a specialist advice team, so that’s all they do in the Tax Office, is look after not-for-profits and charities, and talk to you about income tax exemptions. They also have very specific fringe benefits tax knowledge as well.

The ATO also does a lot of consultation with the sector. We have regular not-for-profit stewardship group meeting with representatives from the sector and the community, and we listen to issues and then take action on those. We do early engagement now, so if you’re planning to do something, or you want to talk to us before you do it, you can get in contact with us. We do audits and reviews on not-for-profits and charities. Sometimes those are referred to us directly from the community, or from risks that’s been identified, but then also from referrals from the Charities Commission as well. We do some law advocacy as well, when we see that a law is not working the way that it’s intended, or causing problems for organisations or charities, we work to fix that, and we work with Treasury, and we work with the ACNC and the sector. And the other really big thing that we do is that we work directly with the ACNC to reduce complexity and apply consistent treatment to the sector. So that’s been a really big change for the ATO since the ACNC was born a few years ago, and it’s been great working with them and getting good outcomes for the sector.

So things that attract our attention at the ATO are organisations that may not be applying their income and assets for the purpose for which they’ve been established, and this includes deliberate arrangements to avoid tax. So I guess in plain English, we want to see that you are using the money that you have for the purpose for which you’ve been established, that there are no private benefits, or benefits going back to members, just that it’s being used for the purpose.

Other things that attract our attention are offering tax deductibility for gifts when they’re not endorsed as a DGR. So something that we quite regularly see are charities, that may be registered charities, or just not-for-profits, and on their websites they’ll advertise that donors can get a tax deduction, when they’re not actually endorsed as a DGR. So they’re things that we do look into and provide education around that, also organisations claiming FBT rebates and exemption when they’re not eligible to do so. So we have quite a sophisticated data matching system where they look at information on employees payment summaries, and information that the organisation might lodge with the ATO, as well as matching up with like Centrelink as well, so that information matching sometimes gives us an idea about when we need to have a chat with people.

So how we address non-compliant behaviour: in two ways – so the first way, and I think this is a big thing for the ATO, is that we try to take an administrative approach. When it’s clear that you’ve made an honest mistake we’ll try and provide you with some education and some assistance to get things back in order and back on track, and that’s the way that we like to do it. We like to give that information upfront now, rather than chasing afterwards. We also do sometimes have to take a regulatory approach, and that does involve revoking endorsement, either prospective or retrospectively, and we revoke endorsement when it’s clear that an organisation is no longer entitled to that endorsement. We do sometimes work with the ACNC.

The ACNC will revoke charities if you haven’t met all of your requirements with them, and your reporting obligations, they feed that information through to the ATO and we will revoke the endorsement on that basis, or we may revoke the endorsement as a result of compliance activity, although that doesn’t happen very often. The other thing that can happen is that we can disallow a gift deduction to an individual donor. So if a donor lodges a tax return and they’ve claimed a $10,000 deduction, and a little flag goes up on that, and we find that the organisation they have gifted that money to is not endorsed as a DGR, then that gift will be disallowed.

OK, so what we expect from you: we expect you to keep your organisation details up to date. For a lot of charities, your interaction with the Tax Office, if you’re under all the thresholds of having to be registered for GST, or you don’t have employees, you may really never need to deal with us. Except you know, ten years down the track, and then we find that there’s no authorised contact, and that’s where organisations and charities tend to run into trouble. So we just kind of make a recommendation that you keep your details up to date. I think you know we are working towards like cross-government and cross-agency information sharing of details, but we’re not quite there at the moment, so you do need to keep up to date with the ATO.

We also ask you to regularly review your not-for-profit status, and to let us know if you’re no longer entitled to access your concessions. On our website we have some worksheets, some annual review that you just do as maybe part of your annual general meeting, and you keep that on your records, just to ensure that you are still accessing the concessions that you’ve been endorsed for. And we also ask you to ensure that good tax governance practices are in place.

We know now that all charities that are registered with the ACNC have got annual reporting requirements with them, and we kind of roll in with that, and as long as you’re reporting and you’re meeting the ACNC’s governance standards, that’s generally good enough for us as well; more than enough.

OK, so I’ll just have a brief chat about ATO Reinvention. So the ATO has been going through a program of reinvention over the last couple of years, and setting priorities for each year and things that we want to do for our different clients. So for the not-for-profit and charitable sector the things that we’re looking at for this coming year are improved education services and products, and I touched on this a bit before, where we’re looking at communicating in a language that not-for-profits understand. We’ve been going out and doing some market research, working with the ACNC, talking to different members of the sector, and seeing how we communicate and how we can make it better. We’re improving how we promote our products and services, and we’re offering more support options now. We have started doing a series of webinars, videos that are specific for NFPs and charities, and decision making tools as well.

If you’re interested in kind of tapping into what’s coming up with that, on our website as well we also have our not-for-profit news service that you can register for, which will give you like little update emails every now and then, to let you know about new content on website, and any educational materials that are coming up.

We’re also working to fix the basics. We do understand that there are some major irritants at the moment with the Australian Business Register, and that work is ongoing. What we do know, that if sometimes the tax concessions that you may have been endorsed for don’t correctly appear on the ABR, we’re working to fix that. We’re also advocating for some law fixes at the moment, on some irritants that are there.

One big thing that’s just been introduced is our streamline reporting requirements for Ancillary Funds. So Ancillary Funds historically have had additional reporting requirements with the ATO, they have to lodge an Annual Information Statement as well with the ATO. We’ve been working with the ACNC to streamline that reporting, so that Ancillary Funds that are registered charities can report their Ancillary Fund information at the end of their Annual Information Statement with the ACNC, which is a big bonus. So that’s a good red tape cutting measure.

OK, so some support that we’ve got for not-for-profit organisations: we actually have an NFP homepage on our ATO website. So when you go onto our website, you’ll see there’s tabs up the top that are for individuals and business and tax professionals. But we have a dedicated not-for-profit tab, and that has all the information that I’ve been talking about today, some more detailed stuff about tax concessions and endorsements, but it also goes over things for assessing your income tax exemption. There’s a lot there.

One really important thing, and this kind of goes back to keeping your details up to date, we have this handover checklist for not-for-profit administrators. It’s not just a tax only thing, it’s a fillable PDF that you can pull up on there, and it’s a really useful tool to take to your annual general meeting and to fill out all the current information. Because the one thing that we know about not-for-profits and charities is that you have a very fluid kind of turnover, and each year your board or your committee may change. This checklist actually helps you to keep track of all of your registrations. So if you have employees, if you have Pay as you go withholding, your FBT, all of your registrations. It’s a really good checklist. Also, you can record who the authorised contacts are with the ATO on there. We then have a self-governance checklist for not-for-profit organisations, and when we’re talking about reviewing your entitlement to income tax concessions, this checklist is a good thing to use to do your annual review. You just print it out, and then keep it in your records. You don’t need to send that to the Tax Office.

I mentioned briefly before that we’ve got our not-for-profit news service. It’s a free email service, it’ll keep you updated and let you know about key things that are happening, or new information available on our website. We have our not-for-profit information line, that’s 1300 130 248. We’re open between 8 am and 6 pm, Monday to Friday, to help you with your tax matters. We don’t deal with things like your business activity statement lodgement and stuff. We’re there really to talk to you about accessing concessions, maybe like when you’re setting up your organisation what you need to do tax wise. But if you’re having any kind of specific issues that our guys can’t help you with, they’ll be happy to transfer you though to the business area to deal with lodgements and stuff.

The other big thing that we do is that we have started quite rigorous like consultation activities as well. So if there’s something that you’re interested in getting in contact with the ATO about, you can register as a consultation participant. So that consultation can take many forms, and we’re testing content on the website all the time, we’re talking to people about streamlining our registration services. So by registering as a participant, you can be involved in those changes.

OK, so that’s actually me done, and it seems quite brief.

Facilitator – Matt Crichton:

Excellent. Thanks very much, Mel. No, that was excellent. And I think, particularly at the end there you raised a couple of really good points I think people would be wise to jot down. The registering as a participant is a really good idea we often hear at the ACNC also, people have ideas about the way things, maybe information should be presented, or some improvements, and that’s one of the great opportunities to be able to have your voice heard. So if you are interested in doing so, I highly recommend registering as a participant. It’s a really good idea.

Also, just quickly, some of the links that Mel had in this presentation will be sent in the follow up email. So if we went through it, went past the slide a bit too quickly and you didn’t get a chance to jot down the URL, don’t worry, it’ll be in the follow up email and you’ll be able to click on it.

We did get a few questions come through, so if you don’t mind, Mel, we’ll pick your brain on a few things.

A fairly simple one I guess, but it’s quite common, we’ve got it a couple of times today, and it comes through our call centre as well. When a charity wants a particular tax concession, I guess most commonly this would be a deductible gift recipient. So they’re already registered, they’ve already got a couple of tax concessions, and they think they might be entitled to a few more, or maybe a beefed up version of what they’ve got, what is their first step? Who should they go to?

Mel Gibbs:

The first step is to call our call centre. So our guys will talk you through what you may be entitled to be endorsed for. There’s the opportunity when you register as a new charity to indicate on your ACNC form that you do want these tax concessions, and that comes automatically through to the ATO. But after you’ve been charity registered, you can just come directly to the ATO and apply to us directly to access them.

It’s sometimes best when you are looking to apply for DGR to actually call our call centre and to talk to our staff about what you do, what your objects are, and what category you fall into. So then, that will help you to fill in the application form, and then it also helps the case officer that’s assessing it at the other end to do that, if you’ve chosen the right category to start off with.

Facilitator – Matt Crichton:

Excellent. Actually, one further point on that, just from the ACNC’s side, sometimes, well not all charities are eligible for deductible gift recipient status, and that’s a common misconception. We often hear that people associate registrations of charity with endorsement as a deductible gift recipient. They’re not actually the same thing, and only a minority of registered charities are actually eligible for a deductible gift recipient endorsement. As Mel mentioned in the presentation earlier, there’s quite a number of categories, but they are fairly specific and narrow, and in many cases an organisation may not fit into any of the categories, and they may not be eligible as a deductible gift recipient.

So in a few cases, application for a deductible gift recipient endorsement, may involve coming back through the ACNC if it does require you to be a different type of charity. Some of the categories do require specific types of charity registration to be eligible. So if your organisation fits into that, and you may be eligible, it may involve coming back through the ACNC just to make sure you’re registered as the right type of charity before the ATO can endorse you. So there’s a bit of co-operation between the two agencies on that one.

Another question that has popped up, just on a similar note I guess around co-operation with the ACNC and the ATO, does the ATO accept the determinations of the ACNC? So if an organisation comes to the ACNC and wants to be registered as a charity, and the ACNC assessing the application and gives it the tick of approval, says, “Right, you’re a registered charity,” then the information gets passed on to the ATO for the tax concessions. Is it generally the case that the ATO will accept the ACNC’s endorsement?

Mel Gibbs:

Yes, it is always the case. So if the ACNC has registered a charity the ATO will always accept that decision. Same being that the ACNC can register charities under particular charitable subtypes, like health promotion charities and public benevolent institutions, so the ATO will always accept those. I might just add there, though, that there are some other eligibility requirements for endorsement. So yes, there’s charity registration, and we’ll always accept that, but then we may need you to have some particular clauses, winding up and revocation clauses in your governing documents, or you might need to demonstrate to us that the purposes of your organisation fit specifically into one of these DGR categories.

So, yes, we do accept the ACNC determination, but then we might need to look further at your eligibility, and our team will do that with you.

Facilitator – Matt Crichton:

And if an organisation is required to show some of that extra information, they only need to provide that information to the ATO, right, they don’t have to come back through the ACNC?

Mel Gibbs:

That’s right. Yes. And because we share information on the application side, if there’s any documents that you provided as part of your application to the ACNC, sometimes you don’t need to provide them again to the ATO, because we’ve already got them.

Facilitator – Matt Crichton:

An interesting question’s just come through about the reporting obligations. So again, we’re touching on DGR entities here. So organisations registered as charities, and also have the endorsement for a deductible gift recipient, do they have any reporting requirements outside those required of them by the ACNC? Does the ATO require anything in addition?

Mel Gibbs:

No. The ATO doesn’t. However, there are a few DGR categories that are actually approved by other government departments. Organisations that are on the Register of Environmental Organisations, Register of Cultural Organisations, and Harm Prevention may have additional reporting requirements with that government department. But there are no reporting requirements to the ATO for DGR purposes.

Facilitator – Matt Crichton:

It’s probably a good moment there to just reiterate the importance of knowing the categories of DGR, and knowing what category you’re endorsed under, because it’s very easy to think of DGR as one single monolith, one stamp that you get from the ATO and then everything’s the same after that, but it’s not actually the case. As Mel’s pointed out, different categories come with different requirements, and also with different reporting requirements. So the category that you’re endorsed under is a really important piece of information, and a charity board or a committee, or the governing body, should be aware of this and should know if there are any other organisations that they need to also report to.

Another question, on a different topic this one, what’s the best way to tell if an organisation is registered or is a not-for-profit? On this question, we’re getting slightly away from charity specific. But it’s a common question we also hear, because you mentioned at the beginning of the presentation, that the not-for-profit sector, more broadly than the charities, the not-for-profit sector is huge and we don’t actually know exactly what sort of numbers we’re dealing with. So if an individual wanted to check up the details of an organisation, how would they know that they are a not-for-profit?

Mel Gibbs:

They can’t at the moment. So unless they’re a registered charity, the Business Register is not going to show that they are actually a not-for-profit. I have a feeling I might know where this question is coming from, because there are certain concessions and discounts that are available to not-for-profits who might be obtaining a bank account or things like that. So the ATO, because not-for-profits are not endorsed with us, not like charities, basically the advice that we give is that they need to show their governing documents to that bank and those governing documents will show that they’re not providing benefits to members, and have all the appropriate not-for-profit clauses in them.

So unfortunately there’s nothing on the ABR that shows whether they’re not-for- profit. Charities are very different, because their charity status will show on the Business Register.

Facilitator – Matt Crichton:

And one other thing that an individual can do, even though the ABR doesn’t quite provide an easy way of checking this up, but organisations would have a notification within their own governing documents, so for example their constitution, or their rules, or the formal document that sets out how the organisation is set up and how it runs. If you were to have a look at an organisation’s governing documents, governing rules, you would see evidence that they are a not-for-profit in a few specific clauses. It would likely be there would likely be a comment about the way, or a clause about the way in which funds and monies can be used.

And similarly the legal structure can give you a hint, too, many incorporated associations at the state level take the form of not-for-profits, and again their governing documents or their governing rules will provide the evidence of that for you, too.

Mel Gibbs:

And also unincorporated associations.

Facilitator – Matt Crichton:

Oh, yes.

Mel Gibbs:

Which generally when these things start out, before they take wings, they start as unincorporated associations.

Facilitator – Matt Crichton:

Back to some tax specific stuff now. We’ve got a question about GST concession. What kind of GST concession, or maybe it might be worth explaining briefly, what a GST concession is and then what kind of GST concessions are available for not-for-profit organisations?

Mel Gibbs:

There are lots of GST concessions that are available, some for endorsed charities, and then others for just self assessing not-for-profit organisations. Some of the GST concessions that can be valuable for charities are the ones that allow them to treat their fund raising activities as input tax supplies.

That basically means that they don’t need to charge GST on like charity dinners, so they don’t need to collect it, and they don’t need to remit that to the Tax Office. Not-for-profits and charities have an increased GST registration threshold. A normal business would have to register for GST when it hits $75,000, but charities and not-for-profits have got a $150,000 turnover. So that means that a lot of smaller charities and organisations don’t even need to register for GST, which means they don’t need to collect it, they don’t need to report it on a quarterly basis, it saves a lot of hassle for them.

There are certain GST concessions available for calculating GST on the sale of second hand goods, for what we call non-commercial transactions, where charities might be providing goods and services for less than the market value. And then there are some GST concessions available for schools that are running tuckshops as well, so they can treat their supplies as input tax. So there’s quite a number of concessions that are available, and this is where calling us on our not-for-profit information line about your specific organisation and what the concessions may have to offer you would be good.

Facilitator – Matt Crichton:

We’ve got a question that we can probably start actually on the ACNC side of things before going through for Mel to answer, but a question about the process of registering for PBI status. This is a really popular charity registration status because, as Mel mentioned before, it does come with an endorsement for deductible gift recipient status as to that particular category, so many organisations want to apply as a PBI when they apply to register as a charity, and that stands for public benevolent institution.

This is a specific type of charity that has to meet certain requirements; it has to be providing benevolent relief to a beneficiary group that is recognisably in need. That may sound like bit of a mouthful and not particularly clear, but in a nutshell that’s what it’s required to do. We do have a really comprehensive guide to registration as a public benevolent institution on our website, which I’ll include in the follow up email, but if you go to acnc.gov.au/PBI, you should be able to find it there. But put briefly, you must meet the requirements to be registered with the ACNC as that particular type of charity before it can be considered by the ATO. Once the ACNC has looked at the application and decided that whatever the organisation does is consistent with that of a public benevolent institution, and decides to endorse the organisation as a public benevolent institution then, as per the normal process, the information will be sent to the ATO to have a look at the details that they need to have a look at, before the endorsement comes.

But again, the decision to endorse the deductible gift recipient aspect of it sits with the ATO, not with the ACNC. You would come to the ACNC first to register as that particular type of charity, but then the second step sits with the ATO.

Mel Gibbs:

I might take over from there, and we touched briefly on this, we do accept the ACNC’s decision about the charitable subtype. So if you’ve gone to the ACNC and they’ve agreed to register you as a public benevolent institution, many people come to the ATO and talk to us about endorsements that you might be entitled to as a public benevolent institution. When we look at the DGR endorsement, we see that you’re registered as a PBI, public benevolent institution, with the ACNC, and then the other thing that we do as part of that endorsement process is we make sure that your governing documents meet ATO requirements.

The one important thing that we look for then is a winding up and revocation clause. What that clause does is it protects those tax deductible gifts that have gone into your organisation, and if there is ever a time that your DGR is revoked or your organisation winds up, then that clause ensures that that money then goes to another similar type of organisation. So that’s the only other thing that we check off when we look at that. We also make sure that you’ve got a permanent establishment in Australia, that’s an important thing, but it’s pretty much just an administrative process for us to give you that endorsement.

The other thing that being a PBI entitles you to, which is really beneficial for organisations, and we touched on that, is FBT exemption. So that allows you to provide fringe benefits to your employees instead of salary and wages, up to a grossed up value of $30,000. So it is quite a good endorsement, and allows you to attract good employees and to pay them with benefits, rather than salary and wages, so that as a PBI we can talk to you about that endorsement as well.

Facilitator – Matt Crichton:

And actually just before we move onto one more question, a couple more questions, but just on that, that one important thing, it does sound like an administrative obstacle course to be able to get that, but it’s really not. The application to the ACNC to be registered as that particular type of charity covers the information, in most cases, what you need to provide to the ATO. So you don’t need to go to the ATO separately, you can just wait for those processes to go through.

Mel Gibbs:

We run a process where as soon as the ACNC has registered the charity, our team in Parramatta gets notified of all the new registrations or the changes in registrations, and then we just take action. We will sometimes only just call you, just to let you know that it’s been done. Sometimes we do need to talk to you to get further information, but it’s a seamless process, hopefully, for the new charities.

Facilitator – Matt Crichton:

Just a quick one now, someone’s just asked about the difference between charity and not-for-profit, and I realise that we often speak about these two terms with lots of assumed knowledge, but sometimes we forget that in the broader community they’re almost interchangeable.

If you think about charities as a sort of smaller subset of not-for-profits. So not-for-profits are organisations that, as the name suggests, don’t operate for the private benefit of the profit of the people involved. But a charity, whilst it is not-for-profit in nature, has to have a particular charitable purpose for which it was setup to be registered as a charity. So whilst they’re also not-for-profits, they do have a particular purpose which over many years the courts and different laws have decided that those purposes are considered charitable.

A good way to think about it would be that, so for example, many sporting clubs, local football or soccer, cricket clubs, would likely be not-for-profits in that they don’t operate for the private benefit of the people involved, or people aren’t benefiting or making profit out of it, the money’s going back into the club. But it’s not charitable because sport is not considered a charitable purpose. So charities are the not-for-profits that also have a charitable purpose.

Back to the ATO now for this question, and we have one about Private Ancillary Guidelines. Who administers these guidelines, is it the ATO or the ACNC?

Mel Gibbs:

Yes. The ATO administers the Private Ancillary Fund Guidelines. The guidelines have been set down by Treasury, they’re a legislative instrument, and they are administered by the ATO. In very few cases as well there are penalties involved for not complying with the guidelines, and the ATO administers those penalties as well. There are obligations also with the governance requirements that the ACNC has. There are a very small handful of Ancillary Funds that are not charitable because of who they give money to, and they’re not required to be registered with the ACNC.

I maybe should just explain for the broader group as well that a Private Ancillary Fund, as well as a Public Ancillary Fund, is a particular type of DGR that’s set up by a trust; it has a very specific purpose, to give money to other DGR’s. Some of them are very broad, but then some Ancillary Funds might be set up to just give money to hospitals, or to art galleries, things like that.

The ATO is conducting an Ancillary Fund webinar on the 30th, so if anyone is interested in that they can have a look on our website to look into that.

Facilitator – Matt Crichton:

Nice little segue back onto the website, because Mel’s presentation did mention a couple of things. It really is a good thing to have bookmarked, or have handy, or have all the members of your committee or board aware of the not-for-profit section of the ATO’s website.

I know sometimes if you go to the ATO’s website it’s got so much information you don’t know where to start. But at least if you are familiar with that section, and it really is a fairly clean and easy to navigate website I think, so if you go to ato.gov.au/nonprofit, you’ll be able to find much of this information.

And also the 1300 number is really good to keep handy – I’m going to have to try and remember it off the top of my head, Mel, test me – 1300?

Mel Gibbs:

1300 130 248.

Facilitator – Matt Crichton:

That’s it. 1300 130 248, if you want to go straight to the not-for-profit guys. So rather than calling and having to then be transferred to a content expert later, call that number, just go straight to the not-for-profit area, and you’re likely to speak to someone who will know exactly what you need to know in not-for-profit tax.

Mel Gibbs:

I’ll just add there, too, our team that man’s that phone line, they also do all of the endorsement applications as well, so a lot of the times if you’re talking to them and then you need to lodge an application, then they’ll say, “Just email it to me,” so they’re a good bunch of people to talk to.

Facilitator – Matt Crichton:

Excellent. I think we’re sort of getting close to our hour now, and we’ve answered most of the questions that have come through. If you feel like there’s something you still want answered, feel free to type it into the chat window on the right hand side of your control panel there and we’ll be happy to type an answer back. But I think for the moment the speaking presentation part of the webinar is probably ready to wind up.

We’d like to thank everyone for participating in today’s webinar. We really do appreciate it when you take part in these. I think they’re a really good way to learn some important aspects of charity regulation, particularly when we have special guests like the ATO to come along. It’s a really valuable hour.

I’d like to thank Mel for making her way to the ACNC to help us out today. It’s been really informative and I think really valuable for all of our attendees.

Mel Gibbs:

Thank you so much for having me. I always love doing this stuff, and I’m looking forward to helping you guys on the phone.

Facilitator – Matt Crichton:

And again we’ll plug the ATO’s webinar coming up soon, so for those – oh, I’ll let Mel do it.

Mel Gibbs:

For people who are interested in establishing Ancillary Funds, or learning about what they can do for you as a vehicle for charitable giving, the ATO is hosting a webinar on the 30th of November, and you can access that by just searching for the Let’s Talk facility on our website.

Facilitator – Matt Crichton:

Great. OK, we’ll wrap it up there. If there are a few more questions coming through, we will get to them, we’ll hang around and type answers over the next ten or 15 minutes or so. And again, a follow up email will be going out in the next couple of days, so if you have missed any of the links or the URL’s or whatever that were in the presentation, never fear, you will receive them in your inbox fairly shortly. And also a recording of this will be put on our website and our YouTube page.

So once again, thanks Mel for coming along, and thanks everyone for participating. We hope you got a lot out of it.

Mel Gibbs:
Thank you.

Facilitator – Matt Crichton:
Thanks.

Transcript
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