Expert Evidence in Canberra at the Invitation of the Senate Economics Committee

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Andrew Lind, Director, was invited to Canberra by the Senate Economics Committee (June 2010) to give e

Here’s a summary of some of the expert evidence given:

Who’s the umpire? Who decides who’s in and who’s out? The parliament, the Courts, the regulator, the administrator (ATO)?

Who gets to decide what institutions are sufficiently contributing to the common good as to be relieved from paying tax on their income like the rest of us?

The sustainable under-pinning must be, it seems to me, that tax relief is granted for activity that may otherwise be paid for and delivered directly by government.

Who decides who is sufficiently contributing to the common good?

The amending legislation seeks to have the parliament, the regulator and a conflicted administrator front and centre with a prescribed “public benefit test” (assuming we know what it is) for the courts to apply. Fine, but this results in a reduced role for an “independent umpire” (which the courts have played until now) in the development of the meaning of charity through the common law.

Some comments on the need for an un-conflicted administrator.

Currently the ATO, the very arm of government charged with maximising the size of the public purse, stands at the gateway of who is and who is not entitled to tax concessions. A clear conflict of interest.

An independent umpire is needed to decide who is a charity and who isn’t, a Charities Commission who doesn’t report to a minister or a government but the parliament, who can without fear or favour make decisions about who is charity and who isn’t.

And it makes sense that if such an independent umpire is to be established, resourced and staffed by really good and expensive brains, those brains should first pay for their keep by helping frame the very rules that they will be charged with administering.

I am not against moving to codify common law, but I have grave fears for the attempt to do so with such a short consultation and without the input of a highly resourced independent umpire.

I submit that the first priority is the establishment and resourcing of a Charities Commission, and that that commission be charged with recommending a detailed codification of the charities test.

Existing items 1.1 and 1.2 of s 50-5 of the Income Tax Assessment Act 1997

Item 1.1 = Charitable Institution

Item 1.2 = Religious Institution

“Charitable Institutions” under item 1.1 commonly include religious institutions provided that they are “publicly charitable.” Endorsement as a Charitable Institution (which may include a public religious institution) results in:

  • Income tax exemption
  • GST concessions
  • Rebateable FBT

“Religious Institutions” under item 1.2 are not required to be “charitable” so for example closed religious groups may be included. However no GST or FBT relief is available with this endorsement.

(However the Extension of Charitable Purpose Act 2004 allows closed religious orders to be considered charitable. Section 5(1)(b) of that Act provides, “a closed or contemplative religious order that regularly undertakes prayerful intervention at the request of members of the public.”)

I submit that if there is to be legislative clarification it should be limited to item 1.2.