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Better Targeting of Not-For-Profit Tax Concessions

March 01, 2013

The Federal Government announced on 31st January 2013 that the “Better Targeting of Not-For-Profit Tax Concessions” legislation will now commence from 1 July 2014. Assistant Treasurer, David Bradbury MP said "this extension will enable further consultation and engagement with the NFP sector on this measure and ensure there is an opportunity for detailed stakeholder input to be provided."

The new reform, once passed into law, was due to commence on 1 July 2011 and apply only to "new" unrelated commercial activities that commenced after 7.30pm (AEST) on 10 May 2011. This commencement date was previously deferred to 1 July 2012 and with this latest announcement will now apply from 1 July 2014.

The purpose of the legislation is to ensure that tax concessions provided to NFP entities are targeted only at those activities that directly further the NFP's altruistic purposes. Any activity pursued by a NFP entity that is deemed to be "unrelated" business will not be eligible for the tax concessions that the entity is registered for (including FBT, GST and DGR). This proposed tax is commonly referred to as "UBIT" (Unrelated Business Income Tax).

The UBIT is expected to become payable on "new" unrelated commercial activities from 1 July 2014. A "new" unrelated commercial activity is one that commenced after 7.30pm (AEST) on 10 May 2011. UBIT would be payable only on any surplus that is not applied to the altruistic purposes of the entity. If a NFP is liable to pay UBIT, the tax would be calculated commencing on the revised commencement date of 1 July 2014.

The legislation also proposes that from 1 July 2015, UBIT will become payable on any unrelated commercial activities which were commenced prior to 7.30pm (AEST) on 10 May 2011, but will not impact on tax concessions that were used for these activities prior to 1 July 2015.

The Government is expected to be releasing soon a further discussion paper and draft legislation for public comment.

We suggest that you seek professional assistance if your organisation receives unrelated business income and needs advice.

For further information, please contact Basil Lambert at basil@wacoss.org.au