Daniela Chiew, Partner and Catherine Dean, Director, in KPMG’s Corporate Tax group welcome the Government’s decision to keep the ACNC, and the certainty this provides for charities and not-for-profits.
After an extended consultation period the Government announced in March 2016 that it would retain the Australian Charities and Not-for-profits Commission (ACNC) and that it will operate with a renewed focus on improving effectiveness and governance in the sector as well as reducing red tape.
The ACNC was established in December 2012 as a national regulator for the charities and not-for-profits sector. The sector has undergone enormous growth in recent years, and there are currently around 53,000 registered charities as well as 600,000 not-for-profit entities in Australia.
To be registered as a charity, entities must apply through the ACNC which reviews the application and, where deductible gift recipient (DGR) status is also sought in the same application, the ACNC refers this determination to the Australian Taxation Office (ATO).
There are a number of key requirements to obtain DGR endorsement, specifically the entity must have an Australian Business Number, must fall within a prescribed DGR category, have acceptable rules for transferring surplus gifts on a winding up or revocation of DGR endorsement and be established and operated in Australia.
The ATO has recently provided some clarification on this last test: the “in Australia” requirement. Specifically, the guidance suggests that the purposes and beneficiaries of a DGR do not have to be in Australia unless the DGR is a public fund specifically required by law to have its purposes and beneficiaries in Australia such as a necessitous circumstances fund. The guidance provides an example where the controlling board, donors and most of the assets are located in Australia and less than half of the money provided is sent to beneficiaries overseas, the institution will satisfy the in Australia test.
With the ACNC's renewed focus on governance, charities should consider on an ongoing basis their compliance with the requirements for endorsement for tax concessions.