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Government response to Senate Inquiry
The Government is shortly expected to table a response to the 2008 Senate Inquiry into the Disclosure Regimes for Charities and Not-For-Profit Organisations.
In that Inquiry, the Government was presented with 15 recommendations focussing on reform of the NFP sector, including the establishment of a single, national regulator for the sector and harmonisation of legal structures and fundraising laws.
PilchConnect will continue to track the progress of the Government’s response to the Senate Inquiry and will post developments on its website at:
 PilchConnect website
Government response to Word Investments decision
In announcing the Budget in May 2009, the Federal Government indicated that it will be seeking to amend legislation to reverse the recent High Court decision in Commissioner of Taxation v Word Investments.
As a brief background, December 2008 saw the High Court hand down the Worddecision which overturned a determination by the ATO that Word Investments’ business activities (which raised funds for another charity) prevented the organisation from being considered ‘charitable’.
The practical impact of the High Court’s decision is that an organisation could still be considered ‘charitable’ even where it is a commercial venture and profits are put towards charitable purposes. Secondly, the decision suggested that even when that organisation distributes profits to a charity which carries out activities overseas, the organisation may still considered to be pursuing its objectives principally in Australia. A case summary of the High Court’s decision is available at:
Word Investments decision
The Government now intends to introduce changes that will allow the ATO to fully scrutinize organisations that are seeking to pass money to overseas charities and other entities.
The Government has decided to wait until the outcome of the Henry Review into Australia’s Tax System before addressing the High Court’s treatment of commercial activities of charities contained in the Word decision.
Further developments on this issue will be updated on the PilchConnect website at:
PilchConnect website
ATO response to decision Australian Women's Lawyers case
The ATO has released a ‘decision impact statement’ following the Federal Court’s decision in Victorian Women Lawyers’ Association Inc v Commissioner of Taxation. In that decision, the Federal Court held that the VWLA was a charitable institution, despite hosting a number of activities that appeared to only benefit its members (i.e. social functions, seminars and publications).
The Court found that while there were elements of the VWLA’s activities which benefited private members, the organisation was held to have maintained its principal function of providing a broader community benefit, which included the removal of barriers and increasing opportunities for women in the legal profession.
In its decision impact statement, the ATO clarifies its view that the Federal Court’s approach does not extend the current definition of a ‘charitable institution’. Instead, the ATO holds the view that where there are member benefits within an organisation, it can still be considered charitable where those member benefits are merely ‘incidental or ancillary’ to the broader purpose of providing a benefit to the community.
Productivity Commission
PilchConnect has been working on a response to the Productivity Commission study. We will be drawing on our submissions to the 2008 Senate Inquiry into Disclosure Regimes for Charities and Not-for-profits and the Henry Review of Taxation. For more information about the Productivity Commission's review of the not-for-profit sector, see the link below:
Productivity Commission Report
We (like others) have been given an extension and expect to lodge our submission by mid June. If you would like to receive a copy of our submission or to provide us with information that you think might be relevant before it is lodged please contact: Nathan MacDonald on  (03) 8636 4428 or email Nathan at: nathan.macdonald@pilch.org.au
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