64 Questions – Are Charities at the Bottom of the Pile?

The new Coalition Government’s decision on a number of unresolved tax issues will directly impact charities and the Not for Profit sector, writes the CEO of the Community Council for Australians, David Crosbie.

On the 6th November the Treasurer and Assistant Treasurer made a joint announcement about 92 unlegislated and unresolved tax and superannuation issues. 

Decisions were made about 28 of these measures, but the rest were to be reviewed over a period of two weeks “with a predisposition not to proceed with the remaining 64 measures”.

Two weeks have passed. Two of these unresolved measures directly impact on charities and  the Not for Profit sector.  One has the potential to impose significant new compliance costs and undermine the capacity of charities to diversify their income; the other may restrict the overseas activities of arts and performance organisations amongst others.

One in eight Australians are employed in the Not for Profit sector, mostly within charitable organisations working in health, education, welfare, arts, education, employment, housing, environment, sport and recreation.  

Not for Profit organisations contribute over 4 per cent of GDP (and rising), turnover around $100 billion annually, and, most importantly, hold our community together in good times and in bad.

The unresolved “better targeting of Not for Profit tax concessions” measure is a bill that seeks to reduce the capacity of the Not for Profit sector to raise income through commercial activities.  

It is a bill that is counter to the views of the Productivity Commission, the Henry tax review and has attracted universal condemnation from across the Not for Profit sector.  

It seeks to withdraw tax concessions for what is termed “unrelated commercial activities” but it fails to adequately exclude the vast bulk of fundraising and other income producing activity undertaken across the Not for Profit sector.

Pay a charity a gold coin for a carpark at the weekend sporting event, buy a sausage at a local charity barbeque, have your car washed by the scouts for a few dollars, buy some recycled clothing from a charity shop, purchase a book at a regional art gallery shop, engage in any activity that produces a commercial income for a charity, and under this proposed bill you may be putting in jeopardy the capacity of the charity to claim tax concessions.

This is a bill born of a department that “in principle” opposes tax concessions to charities, a department that views all tax concessions given to charities as “foregone revenue”.  This is also a bill that the previous government could never quite bring itself to enact, despite the push from Treasury and the ATO.

The second bill – the proposed “in Australia” bill restricts tax deductible status for overseas activities, but may catch out groups operating predominantly in Australia that have set up special tax deductible funds or foundations to support their overseas activities.

So why is the Not for Profit sector not storming the office of the Assistant Treasurer to ensure these bills meet the fate they deserve?  The answer might lie in the fact that most Not for Profit organisations are driven by the immediate needs of their community and do not have the resources to actively monitor or be involved in national tax policy.  

Most also have a fundamental belief that if you are doing good work and making a positive difference in your community, the government and the broader community will not undermine your efforts.

The Not for Profit sector is now dealing with the fourth Assistant Treasurer in four years, and like those before him, Assistant Treasurer Sinodinos has very important issues to deal with that will impact across our whole economy now and into the future.

The Not for Profit sector is often described as the “third sector” – the bronze medalist behind government and business.  This is reflected in the way Assistant Treasurers tend to leave the Not for Profit sector towards the bottom of their priority lists, especially in the first few months of their appointment.

The needs of the sector are really not that hard to understand.  Like the business sector, the Not for Profit sector craves stability and the capacity to get on with what it does best – serving our communities.  There is scope for reform, but it needs to be led and informed by the sector, not government officials.

Assistant Treasurer Sinodinos is a very experienced policy maker.  Allowing the Not for Profit sector a period of consistent regulatory and taxation rules would be a very positive policy goal.  One million Australians employed in the Not for Profit sector would appreciate that outcome.  

More importantly, all Australians would benefit through having a stronger Not for Profit sector.

About the author: David Crosbie is the Chief Executive Officer of the Community Council for Australia (CCA), a member of both the Not for Profit Sector Reform Council and the Advisory Board to the Australian Charities and Not-for-profits Commission (ACNC).