Charities and their tax exempt status – new court ruling.

A recent High Court decision on the tax exempt status of charities may have ramifications for your organisation.

Late last year the High Court of Australia presided over the case of Commissioner of Taxation vs Word Investments Limited.

The case involved a charitable organisation (Wycliffe Bible Translators) taking the taxation commissioner to court over its refusal to grant tax exemption status to Word Investments, which is a commercial enterprise set up by Wycliffe to raise funds for their charitable purposes.

The High Court ruled that, put simply, Word was set up to raise funds for charitable purposes, and therefore should be granted tax exempt status, even though it was run as a commercial business. This decision has ramifications for all charities operating in Australia.

Enterprise Care supporter Cornwall Stodart Lawyers has compiled an informative brief on the decision and its implications for Australian charities. Read the brief on the Enterprise Care website: http://www.enterprisecare.com.au/ebiz/content/wsc.aspx?ID=25

Changes to Not for Profit Regulations

Damien and I recently attended a presentation hosted by the Australian Institute of Company Directors (AICD) on the future regulation and disclosure requirements for Charities and Not for Profit Organisations. The guest speaker, Senator Annette Hurley MP, gave an overview of a recent inquiry on this topic, including the key recommendations arising out of the inquiry.

Listening to the Senator speak and the subsequent remarks and questions from the attendees it appeared to me that:

• The larger Charities and Not for Profit organisations, with some reservations, were generally supportive of the inquiry, the Federal Governments focus on the “Third Sector” and the key recommendations;
• The smaller organisations, particularly those with limited resources and funding, were concerned about the potential additional resources and cost to comply with the recommendations;
• The Federal Labour Government appears to be committed to implementing the recommendations and is keen to move on some of the recommendations that it believes can be implemented quickly, i.e. in 2009, and with limited adverse impact on the sector;
• There is going to be increased expectation for Not for Profit organisations and Charities to disclose key financial data, particularly relating to fundraising, in a new standardised format;
• There is likely to be one national regulator for the sector and a desire to have standardised constitutions and laws relating to the governance of all organisations in the sector, irrespective of size and purpose;
• The more contentious recommendations, particularly those relating to increased disclosure, transparency and accountability are likely to be deferred until consensus can be achieved after consultation with organisations and other key parties involved in the sector.

In my view it is important for all Charities and Not for Profit organisations to at least familarise themselves with the recommendations and understand how they might impact on their organisations current governance and reporting requirements.

A summary of the recommendations is listed in our latest newsletter, which can be found on the Enterprise Care website at www.enterprisecare.com.au.

Mark Rudd, Director