A WORKING paper examining potential changes to taxation concessions in the not-for-profit sector with a view to simplifying the process has raised concerns among some in the NFP sector.
The NFP Sector Council Tax Concession Working Group’s discussion paper, ‘Fairer, simpler and more effective tax concessions for the not-for-profit sector’, was released for comment late last year.
The discussion paper looks at the entire range of tax concessions provided to the sector by the federal government with a view to identifying reform options that could improve their effectiveness.
While the government has stressed that the report is designed to stimulate discussion and is not a position paper, several NFP organisations have expressed concern over aspects of the working paper.
Business and corporate advisory firm BDO has released a survey in order to canvass the feelings of NFPs around the country about the points raised in the working paper.
BDO national tax director Lance Cunningham said there were three points raised in the working paper that were attracting concern from the sector.
“The main [concerns] we’ve identified are in relation to possible changes to the income tax exemption and deductible gift recipient status, as well as changes to the franking credits that are currently available as refundable to tax exempt charities,” Mr Cunningham said.
He said the working paper discussed whether the franking credit refunds should be amended or continued, which had been queried by some NFPs.
Currently, NFPs registered for gift recipient status are able to claim as refundable the franking credits they receive from their share portfolios.
“These deductable franking credits are very important to a number of charities in particular, which use them to fund the administration of their services,” Mr Cunningham said.
The working paper also floats the idea of raising the threshold of the minimum tax-deductible donation from $2 to $25.
“Many of the charities have said they actually receive quite a lot of donations in the under $25 range, and it could be detrimental to raise the limit,” Mr Cunningham said.
Other concerns identified by BDO include reforms to the range of fringe benefits tax concessions that NFPs can claim.
“These fringe benefits allow NFPs to attract staff and without these they would be forced to pay more in salaries in order to match market rates,” Mr Cunningham said.
“There is talk of replacing those credits with direct grants and direct concessions to the NFPs, but the concern we’re hearing is they may disappear over time.”
Aged and Community Care WA chief executive officer Steven Kobelke said his organisation,which represents NFP organisations providing aged care in Western Australia, believed the loss of fringe benefits would be acutely felt across the sector.
“Funding for residential aged care comes entirely from the government, and they haven’t funded it properly for years,” Mr Kobelke said.
“The NFP providers we represent can only pay what the government provides, so the fringe benefits concession is even more important to this industry. A lot of potential employees see this as a tipping point for working in this industry.”
Mr Kobelke said surveys undertaken for their submission to the working group indicated between 10 and 15 per cent of employees in the aged care sector would leave if the fringe benefit tax concessions were removed.
