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By Greg Thom and Matthew Schulz, journalists, Institute of Community Directors Australia
A leading not-for-profit finance expert has accused the Australian Taxation Office of failing to clearly communicate the rationale behind sweeping regulatory changes that will affect more than 150,000 NFPs.
The Centre for Public Value’s Professor David Gilchrist said a desire to protect tax revenue was the primary motivator for the changes that will require NFPs with an ABN and not registered with the ACNC to submit an annual self-review tax return from July 1.
Organisations that fail to comply risk losing access to their income tax concessions.
Professor Gilchrist said he believed the overhaul, rather than being a drive to reduce red tape, was part of an effort by the ATO to better understand the NFP sector before more effectively regulating it from a tax perspective.
“The ATO's primary responsibility as we all know is to protect national revenue,” said Professor Gilchrist.
“And so, to that extent, this is a strategic process designed to collect information to help them to protect that revenue.”
However, Professor Gilchrist said the ATO needed to be transparent about how it would use the information over the longer term.
“I think at the end of the day, the ATO need to be open and honest with the broad community to let them know what they're doing in relation to not-for-profits and charities, and then be accountable for the information that's gathered.”
“The ATO's primary responsibility as we all know is to protect national revenue.”
Professor Gilchrist’s comments came as the ATO released a recorded version of a 45-minute webinar hosted by assistant commissioner Jennifer Moltisanti and designed to step NFPs through the new process of lodging a return.
Topics covered in the webinar include:
The webinar also provides information on client-to-agent linking and how NFPs can nominate an agent to lodge the self-review return on their behalf in online services for agents.
Ms Moltisanti has described the new reporting requirements as “the most significant change to the sector since the introduction of the Australian Charities and Not-for-profits Commission (ACNC) in 2012.”
The ATO maintains it has gone to great lengths to consult with the NFP sector on the changes and communicate what needs to be done well ahead of the looming July 1 deadline.
“The new reporting requirement, which was announced in the 2021–22 federal Budget, aims to enhance transparency and integrity in the tax, super and registry system by ensuring only eligible non-charitable NFPs access the relevant income tax exemption,” an ATO spokesperson said.
“The ATO has consulted extensively on the design and implementation of the new return, working closely with key stakeholders representing the not-for-profit sector.”
However, experts fear many organisations lack the expertise needed to navigate the required changes and will be unable to meet the ATO deadline.
Professor Gilchrist said many individual NFPs, particularly smaller volunteer-run organisations, remained confused.
“The charities [not registered with the ACNC] have not had to submit tax returns up to this point as we know, so I do think there's a real need for much greater transparency about what the ATO's doing and why they're doing it, what the outcomes might be in relation to that, but more importantly, how directors might understand their responsibilities and to be able to meet those responsibilities.”
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