Not for Profit Reforms - 2011 Federal Budget

Last night's Federal Budget (10 May 2011) saw a number of announcements impacting upon the Not for Profit sector. In summary they are:

1. Taxing unrelated business income

We have written about this in a separate paper in our Legal Resource Centre, Federal Government to move to shut the "Word Investments" gate and tax charities on unrelated business income.

2. Adoption of a statutory definition of "Charity"

This will be a difficult exercise but if done carefully will hopefully result in some greater certainty and ease for not for profit bodies being able to determine if they are charitable or not.

3. Establishment of a new Australian Charities and Not-for-profits Commission

This is a welcome move provided that the culture of the Commission is one of equipping and encouragement of the sector.

Given that the budget paper announces that this measure (presumably combined with the statutory definition of charity) is expected to result in increased tax revenue of $41 million over four years, this indicates that the government intends to narrow the scope of charitable activity in its definition of Charity and have the Commission take a hard line. This does not seem to encourage a culture of "equipping and encouragement" from the new Commission.

We also query the wisdom of corporate services to the new commission being provided by the ATO. Independence from the ATO is an essential ingredient.

Our Legal Resource Centre includes the text of the relevant Budget announcements.

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