The Queensland Law Society is concerned the proposed tax self-assessment for non-for-profit entities will impose undue compliance costs on organisations and has suggested an alternative approach.
QLS representatives Emeritus Professor Myles McGregor-Lowndes, member of the QLS Not for Profit Law Committee, and Wendy Devine, QLS Manager Legal Policy, shared the Society’s concerns during the public hearing with the Senate Economics References Committee on the Inquiry into Not-for-profit Entities – tax assessments on 22 October.
On 18 September 2024, the Senate referred an inquiry into Not-for-profit Entities – Tax Assessments to the Senate Economics References Committee for inquiry and report by 31 October 2024.
QLS has recommended an alternative policy approach, under which the Australian Charities and Not for profits Commission (ACNC) should, in accordance with the Australian Charities and Not for profits Commission Review, register large non-profit organisations (that are not charities) with a revenue of over $5 million to access tax concessions.
“The QLS Not for Profit Law Committee has closely followed the development of these new requirements since they were announced in 2021,” Wendy said.
“We were so concerned that we met with the ATO on 5 June 2023 and expressed our concerns. We also made a detailed submission to the ATO in relation to the draft legislative instruments.
“The Society has no time for tax-abusive behaviour in the Australian non-profit sector and supports the ATO and ACNC in their regulatory functions. Chronic tax abusive behaviour in relation to non-profit organisations in North America should not be permitted to gain a foothold here.
“However, we noticed that in Budget Estimates 2022-23, the ATO advised this Committee that there were no cases of sham self-assessing income tax-exempt entities in that year.
“In our written submission, QLS highlighted our concerns that the new regulatory requirements are not proportionate to the mischief and that the significant compliance costs will be particularly felt by smaller, not-for-profit entities.”
Myles said the Government had “not articulated a cogent reason for its regulatory approach. We could have expected this in a regulatory impact statement or regulatory impact assessment but they weren’t made public, if they were done”.
“The government, in its response to the ACNC review, merely said that eligibility for income tax exemptions and other tax concessions for noncharitable not-for-profits is best regulated by the ATO. I’ve not been able to find anything else official on what was behind that reasoning,” he said.
“QLS suggests the ACNC is indeed better placed to implement and manage this regulatory reform, given their expertise not only with charities but also with not-for-profits in Australia.
“As outlined in our written submission, the alternative policy approach of setting up a revenue threshold over which large organisations must register with the ACNC to access tax concessions would be more proportionate to any risks to tax revenue. We further argue that Division 50 of the Income Tax Assessment Act, which underlies the self-assessment return, is not fit for purpose.
“In fact, one of Australia’s most respected tax professors – Professor Ann O’Connell, of the University of Melbourne – called division 50 ‘a dog’s breakfast of a piece of legislation’ in a refereed journal.
“The public have experienced difficulties to date in complying with these returns. These have mainly been not with filling out the form itself but with ancillary matters of getting access to the ATO platform through the Australian Business Register, which itself needs reform—which was partway through and then stopped. We encourage the government to get on with that reform because it’s clearly needed with myGov.”
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Excellent, thank you all for this.