Changes to Queensland State Tax Concessions for Charities

Changes to Queensland state tax concessions for charities

All NFP Constitutions should be reviewed by October 2020 at the latest

At the end of 2018 the Queensland Government amended the Taxation Administration Act 2001 (Qld) by the Revenue and Other Legislation Amendment Act 2018 (Qld). These amendments may have significant impact upon all charities and not-for-profits enjoying State Revenue exemptions in Queensland. All charities in Qld should be checking their Constitutions.

Andrew Lind (Director) unpacks the effect of the proposed amendments here.

Charitable Institution registration – a gateway condition to State Revenue concessions

In summary, the amendments relate to whether charities (and other requisite not-for-profits) will satisfy the requirements to be registered as “charitable institutions” under the Taxation Administration Act 2001 (TAA), which is the gateway requirement for access by those entities to the following State revenue exemptions:

  • [Stamp] Duty;
  • Land Tax;
  • Payroll Tax.

For example, section 414 of the Duties Act 2001 (Qld), in relation to concessions for Transfer Duty refers the reader to the TAA for the definition of a “charitable institution”. Charitable institution is defined in Schedule 6 of the Duties Act as follows:

charitable institution means an institution registered under the Administration Act, part 11A.

Administration Act is then in turn defined in that same Schedule as follows:

Administration Act means the Taxation Administration Act 2001.

TAA – Charitable Institution registration

Part 11A of the TAA (Registration of charitable institutions)sets out requirements for registration as a charitable institution under that part which in effect provides a Queensland definition of charity, which is different to the Commonwealth definition of charity as defined for Commonwealth purposes in the Charities Act 2013 (Cth).

Prior to amendment the material section of Part 11A of TAA currently provided as follows (emphasis added):

149C Restrictions on registration

(1) The commissioner may register the institution only if it is an institution mentioned in subsections (2) to (4).

(2) Each of the following may be registered—

(a) a religious body or a body—

(i) that is controlled by, or associated with, a religious body; and

(ii) whose principal object and pursuit is the conduct of activities of a religious nature;

(b) a public benevolent institution;

(c) a university or university college;

(d) a primary or secondary school;

(e) a kindergarten;

(f) an institution whose principal object or pursuit is the care of the sick, aged, infirm, afflicted or incorrigible persons;

(g) an institution whose principal object or pursuit is the relief of poverty;

(h) an institution whose principal object or pursuit is the care of children by—

(i) being responsible for them on a full-time basis; and

(ii) providing them with all necessary food, clothing and shelter; and

(iii) providing for their general wellbeing and protection.

(3) Also, an institution may be registered if its principal object or pursuit—

(a) is fulfilling a charitable object or promoting the public good; and

(b) is not a leisure, recreational, social or sporting object or pursuit.

(4) In addition, the trustees of an institution mentioned in subsection (2) or (3), other than a university or university college, may be registered.

(5) However, an institution, other than an institution or trustee of an institution mentioned in subsection (2)(a) or (c), must not be registered unless, under its constitution, however described—

(a) its income and property are used solely for promoting its objects; and

(b) no part of its income or property is to be distributed, paid or transferred by way of bonus, dividend or other similar payment to its members; and

(c) on its dissolution, the assets remaining after satisfying all debts and liabilities must be transferred—

(i) to an institution that, under this section, may be registered; or

(ii) to an institution the commissioner is satisfied has a principal object or pursuit mentioned in subsection (3)(a); or

(iii) for a purpose the commissioner is satisfied is charitable or for the promotion of the public good.

The amending Act changed Part 11A, as it relates to the requirements of the Constitution of a charity, were amended as follows (emphasis added):

Amendment of s 149C (Restrictions on registration)

(1) Section 149C(5), ‘unless, under its constitution, however described’—

omit, insert—

unless its constitution, however described, expressly provides that

(2) Section 149C—

insert—

(6) In this section—

constitution, of an institution, includes a law, deed or other instrument that constitutes the institution and governs the activities of the institution or its members.

The amending Act therefore provides a definition of “constitution” along with the requirement that the Constitution (as defined), expressly provides that:[1]

(a) its income and property are used solely for promoting its objects; and

(b) no part of its income or property is to be distributed, paid or transferred by way of bonus, dividend or other similar payment to its members; and

(c) on its dissolution, the assets remaining after satisfying all debts and liabilities must be transferred—

(i) to an institution that, under this section, may be registered; or

(ii) to an institution the commissioner is satisfied has a principal object or pursuit mentioned in subsection (3)(a); or

(iii) for a purpose the commissioner is satisfied is charitable or for the promotion of the public good.

It seems that the amendments were in response to the decision of the Supreme Court of Queensland, by Jackson J, on 15 April 2015 in Queensland Chamber of Commerce and Industry v Commissioner of State Revenue [2015] QSC 77 (Qld Chamber of Commerce Case).

The Qld Chamber of Commerce Case was in relation to payroll tax and particularly whether the Queensland Chamber of Commerce and Industry was entitled to be registered under Part 11A of the TAA as a charitable institution. The Commissioner contended that there were no express provisions in the constitution of the Queensland Chamber of Commerce and Industry that satisfied the following:

  • the s149C (a) – use of income and property solely for promoting its objects – requirement; and
  • the 149C (b) – no distribution of income or property to members – requirement.

The court looked to the effect of the provisions of the constitution of the Queensland Chamber of Commerce and Industry and decided that these requirements were satisfied, despite, (a) not being in the constitution at all and, (b) only in terms of language of “profits”.

It was the purposes (or objects) of the Queensland Chamber of Commerce and Industry in its constitution, that according to his Honour satisfied the sub-paragraph (a) requirement, in that the objects imposed obligations for the income and assets to be applied for the promotion of the objects.[2]

What the amendments mean is that, at least in relation to the s149C (a) (use of income and property solely for promoting its objects) requirement, the Queensland Chamber of Commerce and Industry would have failed.

The Explanatory Memorandum to the Bill that gave rise to amending Act explains[3] (emphasis added):

It was never intended that an entity should qualify for registration if its constitution, or another instrument constituting and governing it, does not expressly contain the restrictions in section149C(5) of the Taxation Administration Act.

However, as the Taxation Administration Act does not specifically state that these restrictions must be expressly included, an entity may be registered as a charitable institution if the practical effect of its constitution or other governing instrument, within the framework of the relevant statutory and common law rules, is that the restrictions are satisfied.

The Taxation Administration Act will be amended to require that an entity must expressly

include the restrictions in section 149C(5) in its constitution or other governing instrument.

The practical effect of these amendments will be to require all charities (or qualifying not-for-profits) in Queensland to carefully review their constitutions, take legal advice on them, and if necessary amend them within the transition period. In our experience many charity constitutions will need to be amended in order to comply.

Transition period – 9 November 2018 – 8 November 2020

A transition period for existing registered charities (under the TAA) of 2 years from the date of commencement (9 November 2018) applies (see s15A of Acts Interpretation Act 1954 (Qld)). This is dealt with section 178 of the amending Act which provides as follows:

178 Application of s 149C to currently registered entities

(1) This section applies to an institution that, immediately before the commencement, was registered under part 11A.

(2) Despite the Revenue and Other Legislation Amendment Act 2018, the unamended section continues to apply in relation to the institution until the day that is 2 years after the commencement.

(3) In this section—

unamended section means section 149C as in force immediately before the commencement.

 

Our specialist NFP and Charity lawyers are regularly advising on these matters. Ask us for quote to review your Constitution for compliance with these changes.


[1] Then picking up the balance of the language in s147C of the TAA

[2] See especially paragraphs 57 and 58 of the judgment

[3] Page 12

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