In the Federal Budget 2014-15, the Government announced a number of measures that affect not-for-profit (NFP) tax concessions.

Click here for the Federal Budget 2014-15 Paper No.2.

Taxing NFPs for conducting certain unrelated commercial activities

On 14 December 2013 the Government announced that it would not proceed with the previous proposal to tax NFPs on their unrelated commercial activities. However, it stated that it would consider alternatives.

In the Federal Budget 2014-15 and the Acting Assistant Treasurer’s media release ‘More Progress in Restoring Integrity in the Tax System’ dated 13 May 2014, the Government further announced that it considered alternatives to the proposed taxation of unrelated commercial activities are not required at this time.

This decision will be welcomed by most NFPs because had the Government proceeded with the original proposal or alternative measures, it would have created considerable difficulties for those NFPs that conduct commercial activities to generate funds to advance their charitable objectives.

Click here for the media release.

Fringe benefits tax exemption and rebate

In the Federal Budget 2014-15, the Government announced that it will increase the annual fringe benefits tax (FBT) caps for employees of public benevolent institutions (PBIs) and health promotion charities, public and not-for-profit hospitals, public ambulance services and certain other tax- exempt entities. The announcement was accompanied by the introduction of the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014. The

Bill has been referred to the Senate Economics Legislation Committee on 15 May 2014 and a report from the Committee is due 16 June 2014.

Click here for the Explanatory Memorandum for the Bill.

The effect of the change is that for PBIs and health promotion charities, the FBT exemption for benefits will increase to a grossed-up annual cap of $31,177 per employee (currently $30,000). For public and not-for-profit hospitals and public ambulance services, the FBT exemption for benefits will increase to a grossed-up annual cap of $17,667 per employee (currently $17,000).

The increase of the FBT caps applies from 1 April 2015 until 31 March 2017, and is to protect the cash value of the benefits received by employees of these entities, as the government announced that it will increase the FBT rate from 47% to 49% from 1 April 2015 until 31 March 2017.

Also, the FBT rebate rate will be aligned with the FBT rate from 1 April 2015. This means that for certain other tax-exempt entities, such as charitable institutions, that are currently entitled to a 48% rebate of the FBT otherwise payable up to a grossed up cap of $30,000, the rebate rate will increase to 49% from 1 April 2015 until 31 March 2017, and then fall to 47% (not 48%) from 1 April 2017. The cap will be increased from $30,000 to $31,177 from 1 April 2015 until 31 March 2017.