ACNC is off and running

The Not-for-Profit (NFP) sector is undergoing a period of massive transformation with significant reforms already announced, legislated or under consideration. This Monday (3 December 2012), the wheels have officially been set in motion for the new regulator for the sector, with the Australian Charities and Not-for-profits Commission (ACNC) finally opening for business.

The registration and reporting obligations under the new ACNC regime have now started. The first annual information statement for the 2012-2013 reporting period is due by 31 December next year.

More significant reforms to come

There are a number of further reform initiatives under consideration. Currently, the Not-for profit Sector Tax Concession Working Group (Working Group) is reviewing the current range of tax concessions provided by the Commonwealth Government.

While some measures are welcome, some others may have a critical impact on the financial viability of many NFPs. They may also add considerable unnecessary complexities to the regulation of the NFP Sector.

This is an important process and NFP organisations should be keeping a close eye on the developments. Some of the reforms canvassed in the Discussion Paper may have a significant impact on how you operate.

What you should know about the ACNC

  • NFP organisations will need to be registered with the ACNC in order to get or keep the endorsement for various tax concessions by the Australian Taxation Office.
  • Entities with existing ATO endorsement prior to 3 December 2012 are automatically registered.
  • Registered entities are under ongoing obligations to notify the ACNC of any organisational changes and keeping records.
  • Registered entities, depending on their size, are required to prepare annual information statements or financial reports. The first lodgment deadline for annual information statements for the 2012-2013 reporting year is 31 December 2013 (or within 6 months of the end of the entity’s reporting period). Medium and large entities are only required to provide annual financial report for the reporting periods starting on and after 1 July next year.

Stay across other key reform initiatives for the sector

Other reform initiatives that have been announced and/or under consideration include:

Click here to view list.

Time to make submissions on the Working Group Discussion Paper

The Working Group for NFP sector tax concessions released a Discussion Paper in November 2012. The comprehensive set of consultative questions seeks stakeholders’ views across most Commonwealth tax concessions under the income tax regime, the deductible gift recipients (DGR) regime, the fringe benefits tax regime, the goods and services tax regime and the mutuality principle. Some of these questions originated from the recommendations by the Productivity Commission in their Report on Contribution of the Not-for-profit Sector released in February 2010 (PC Report).

The Working Group intends to make recommendations to the government in March 2013. These may include measures to broaden or curtail the provision of tax concessions in critical areas. This may have significant impacts on the viability and financial positions of many organisations in the NFP sector.

A number of the reform areas and options include:

  • Eligibility for income tax exemption and refunds of franking credits and what criteria should apply;
  • Extension of DGR status and on what conditions;
  • Replacing the current tax deduction for gifts with a two-tiered tax offset system should replace the current tax deduction for gifts; and
  • Phasing out FBT exemptions and FBT rebates as per the PC Report and what other forms of support should be made in their place.

Submissions to the Working Group are due on 17 December 2012.