BILLS DIGEST NO. 55 2015–16              24 November 2015

Tax Laws Amendment (Gifts) Bill 2015

Kali Sanyal
Economics Section 

Date introduced: 12 November 2015

House:  House of Representatives

Portfolio: Treasury

Commencement: The day of Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

Glossary

Table 1 Abbreviations

ITAA 1997

Income Tax Assessment Act 1997

DGR

Deductible gift recipient

NFP

Not-for-profit

Purpose of the Bill

The Bill amends the Income Tax Assessment Act 1997 (ITAA 1997)[1] to update the list of specifically listed deductible gift recipients (DGRs). It adds two entities to the list of DGRs, thereby generally allowing for donations of $2 or more to these entities to be tax deductible for the donor.

Background

A DGR is an organisation that is entitled to receive income tax deductible gifts and deductible contributions. There are two methods of gaining DGR status, by either:

•       applying to the Commissioner of Taxation for endorsement as a DGR or

•       having the organisation listed by name in Division 30 of the ITAA 1997 or in the Income Tax Assessment Regulations 1997.[2]

Taxpayers who make gifts of $2 or more to an organisation which is a DGR are able to deduct those amounts from their taxable income. Treasury estimated the annual cost to the budget of tax deductibility for gifts to DGRs at around $1.09 billion in 2013–14, and $1.10 billion in 2014–15.[3]

As at 31 October 2014, there were in total 28,100 entities with DGR status, including 190 entities specifically named in the ITAA 1997, and 10,827 DGR funds.[4] In the 2012–13 income year individual claims for deductions were made in respect of a total of 4.6 million gifts valued at almost $2.3 billion.[5]

Recent reforms to DGR status

In 2012, the Labor Government announced the formation of the Not-For-Profit Tax Concession Working Group to ‘consider ideas for better delivering the support … provided through tax concessions to the not-for-profit (NFP) sector’.[6] The terms of reference stated that the ‘Working Group will identify whether there are fairer, simpler and more effective ways of delivering the current envelope of support provided through tax concessions to the NFP sector’.[7] The Working Group released a discussion paper in November 2012, which included a history of DGR concessions as well as discussion of the DGR framework. [8] Subsequently it published a final report with recommendations for reform, including extending DGR status to all charities, changes in the threshold, and a number of other options.[9]

The Working Group’s final report was made public by the Treasury in response to a request for access under the Freedom of Information Act 1982[10] on 21 February 2014.[11] The report is dated May 2013, but had not been previously released. The Working Group recommended that:

Except in the most exceptional circumstances, DGR status should be limited to charities and charitable-like government entities… The current minimum of $2 for deductible gifts is an anachronism and could be removed with few consequences.[12]

The Working Group also rejected other options to modify the DGR system such as a replacing deductibility with a tax offset for donations.[13]

There has since been no statement from the Government regarding the release of the report.

Proposed changes to the list of deductible gift recipients

In the 2015–16 Budget, the Government announced that the following organisations, which are currently not listed as DGRs, would be listed as DGRs:

•       International Jewish Relief Limited and

•       National Apology Foundation.[14]

Information about the activities of each of the entities is set out in the Explanatory Memorandum.[15] This material is summarised in Table 2, with links to each of the entities’ websites.

Briefly, the International Jewish Relief Limited was incorporated on 10 September 2013. The company is now registered with the Australian Securities and Investments Commission (ASIC). The business is recorded as an Australian Public Company, and its registered business location is in Melbourne.[16]

The National Apology Foundation was created by Mr Kevin Rudd, the former Prime Minister, on 7 February 2014.[17] The purpose of the foundation is to sustain the spirit of apology to indigenous Australians[18] that Mr Rudd, as Prime Minister of Australia, expressed through his ‘Apology Speech’ on 13 February 2008.[19]

Taxpayers will be entitled to claim back an income tax deduction for gifts of money or property to these DGRs on or after 1 January 2015.[20]

Table 2 Deductible Gift Recipients (DGRs) of the Bill

DGR type

DGR name

Conditions

Summary of activities as outlined in the Explanatory Memorandum

Link to website

International affairs

International Jewish Relief Limited

The inclusion of the listing of the International Jewish Relief Limited applies to gifts made to this organisation on or after 1 January 2015.

The International Jewish Relief Limited is a charitable entity with objectives of helping impoverished Jews and struggling Jewish communities around the world. The activity also includes strengthening response to worldwide humanitarian crises and disasters.

The International Jewish Relief Limited[21]

Other recipients

The National Apology Foundation Ltd

The inclusion of listing of the National Apology Foundation Ltd applies to gifts made to this organisation on or after 1 January 2015.

The National Apology Foundation Ltd is a charitable entity with an aim to sustain the spirit and substance of the National Apology to Indigenous Australians for future generations of Australians.

The National Apology Foundation Ltd[22]

Source: Explanatory Memorandum, Tax Laws Amendment (Gifts) Bill 2015, p. 6.

Financial implications

The revenue implication of this measure is an estimated tax expenditure of $2.1 million over the forward estimates period.

Table 3 Financial impact of including the entities in the DGR list, $m

Organisation

2015–16

2016–17

2017–18

2018–19

The International Jewish Relief Limited

-

- $0.3

- $0.3

- $0.3

National Apology Foundation Ltd

-

- $0.4

- $0.4

- $0.4

Source: Explanatory Memorandum, Tax Laws Amendment (Gifts) Bill 2015, p. 3.

Committee consideration

Senate Standing Committee for the Scrutiny of Bills

At the time of writing this Bills Digest, Senate Standing Committee for the Scrutiny of Bills had not considered the Bill.

Senate Standing Committee for Selection of Bills

On its meeting on 12 November 2015, the Selection of Bills Committee deferred consideration of the Bill.[23]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[24]

Parliamentary Joint Committee on Human Rights

At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights had not considered the Bill.

Key issues and provisions

Division 30 of the ITAA 1997 sets out the rules for working out deductions for certain gifts or contributions. In particular, Subdivision 30-B contains tables of recipients of deductible gifts, divided into a number of categories.

Item 1 of Schedule 1 of the Bill amends the table in subsection 30-80(2) of the ITAA 1997, which specifies entities that have DGR status as ‘international affairs recipients’, to include International Jewish Relief Limited. Item 2 of Schedule 1 amends the entry in the table in section 30-105 of the ITAA 1997, which specifies entities that have DGR status as ‘other recipients’, to include the National Apology Foundation Ltd.

The effect of both amendments is that gifts made on or after 1 January 2015 to the International Jewish Relief Limited and the National Apology Foundation Ltd are tax deductible (gifts made prior to 1 January 2015 will not be tax deductible).[25]

Items 3 and 4 amend the index in Division 30 of ITAA 1997 to include International Jewish Relief Limited and National Apology Foundation Ltd respectively, to reflect the DGR status accorded to these entities by the amendments made by items 1 and 2.

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[1].               Income Tax Assessment Act 1997 (Cth), accessed 18 November 2015.

[2].              Ibid., sections 30-17 and 30-120; Income Tax Assessment Regulations 1997, accessed 19 November 2015.

[3].              Treasury, ‘Chapter 2: tax expenditures’, Tax expenditures statement 2014, The Treasury, Canberra, 30 January 2015, p. 28, accessed 18 November 2015.

[4].              Australian Taxation Office (ATO), ‘Deductible gift recipients’, ATO website; ATO, ‘Charities – table 3: deductible gift recipients, number of deductible gift recipients as at 31 October 2015’, Taxation statistics 2012–13, data.gov.au website, 8 April 2015, both accessed 24 November 2015.

[5].              ATO, ‘Charities – Table 5: charities and deductible gifts, individuals’ gifts claimed, by state/territory and amount claimed, for the 2012–13 income year’, Taxation statistics 2012–13, data.gov.au website, 9 April 2015, accessed 19 November 2015.

[6].              M Butler (Minister for Social Inclusion) and M Arbib (Assistant Treasurer), Not-for-profit sector tax concession working group, media release, 12 February 2012, accessed 19 November 2015.

[7].              Ibid.

[8].              Not-For-Profit Sector Tax Concession Working Group (NFPSTCWG), Fairer, simpler and more effective tax concessions for the not-for-profit sector, Discussion paper, The Treasury, Canberra, November 2012, pp. 18–34, accessed 18 November 2015.

[9].               NFPSTCWG, Fairer, simpler and more effective: tax concessions for the not-for-profit sector: final report, The Treasury, Canberra, May 2013, p. 5, accessed 19 November 2015.

[10].              Freedom of Information Act 1982 (Cth), accessed 18 November 2015.

[11].              Treasury, ‘FOI disclosure log’, Treasury website, accessed 18 November 2015.

[12].              NFPSTCWG, Fairer, simpler and more effective: tax concessions for the not-for-profit sector: final report, op. cit., p. 5.

[13].              NFPSTCWG, Fairer, simpler and more effective: tax concessions for the not-for-profit sector: final report, op. cit., p. 5.

[14].              Australian Government, Budget measures: budget paper no. 2: 2015–16, p. 28, accessed 23 November 2015.

[15].              Explanatory Memorandum, Tax Laws Amendment (Gifts) Bill 2015, p. 6, accessed 18 November 2015.

[16].              Australia Company List, ‘The International Jewish Relief Limited’, Australia Company List website, accessed 24 November 2015.

[17].               C Atfield, ‘Kevin Rudd announces National Apology Foundation’, Sydney Morning Herald, (online edition), 7 February 2014, accessed 19 November 2015.

[18].               K Rudd, Annual Address to National Apology Breakfast, speech, 4 March 2014, accessed 19 November 2015.

[19].               K Rudd (Prime Minister), Apology to Australia’s indigenous peoples, speech, 13 February 2008, accessed 19 November 2015.

[20].              Australian Government, Budget measures: budget paper no. 2: 2015–16, p. 28, accessed 18 November 2015.

[21].              Australia Company List, ‘The International Jewish Relief Limited’, op. cit.

[22].              ABN Check, ‘The National Apology Foundation Ltd’, ABN Check website, accessed 24 November 2015.

[23].              Senate Selection of Bills Committee, Report, 14, 2015, The Senate, 12 November 2015, p. 4, accessed 19 November 2015.

[24].              The Statement of Compatibility with Human Rights can be found at page 6 of the Explanatory Memorandum to the Bill.

[25].              Explanatory Memorandum, Tax Laws Amendment (Gifts) Bill 2015, op. cit., pp. 5–6.