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  • 7 October 2018

Articles

Is your charity entitled to a franking-credit refund?

NFPs and the Common Reporting Standard

Single-touch payroll out of the blocks

ATO guidance on NFPs’ company tax

Continued funding for Islamic school

Draft ruling on ‘in Australia’ condition

Proposed changes to the CATSI Act


Is your charity entitled to a franking-credit refund?

Registered charities that receive dividends or distributions from investments may be entitled to franking-credit refunds from the Australian Taxation Office.

Check your charity’s dividend or distribution statements to see if you have received franked dividends and the amount of franking credits.

To be eligible for a refund, the ATO will need to have endorsed your charity as income-tax exempt or a deductible gift recipient.  You will also need to meet certain residency requirements.

To find out if you’re eligible, or for more information on how to apply, visit ato.gov.au/non-profit or call the ATO NFP advice line on 1300 130 248.

NFPs and the Common Reporting Standard

NFPs may be affected by the Common Reporting Standard (CRS).

The CRS is the single global standard for the annual collection, reporting and exchange of financial information on foreign tax residents.

The CRS requires ‘financial institutions’ to collect and report ‘financial account’ information on those deemed to be foreign tax residents.

Some NFPs will be financial institutions and may have obligations to report to the ATO.  NFPs could be classified in this way either by possessing managed investments or by conducting an investment business.

Even if an NFP is not a financial institution, it may be asked by other entities for ‘self-certification’, which requires a financial institution to ask new (and some existing) financial account holders questions about their residence and entity status for tax purposes.  

Where self-certification shows that an account holder is from a foreign jurisdiction, the financial account will have to be reported to the tax office.

If CRS applies, an NFP should have reported by 31 July on the period 1 July to 31 December last year.  In the future, the reports will cover full calendar years.

Single-touch payroll out of the blocks

Thousands of employers have shifted to single-touch payroll in the first month of its operation.

Employers with 20 or more employees need to report STP information on paydays, be they weekly, fortnightly or monthly.  They report simultaneously superannuation information.

ATO assistant commissioner John Shepherd said that the STP information would give employers a better picture of their tax position.

‘Employees will be able to check their year-to-date tax and super information by logging into myGov and accessing ATO online services,’ he said.

The STP rollout is being staggered, and the ATO expects to have around 60,000 of the 70,000 employers on-board and reporting each payday by December.

If you have failed to move to STP, talk to your software provider if you are unsure about what you need to do. Apply for a later start date if you need to.

The ATO has several factsheets, checklists, information packs and technical guidance available to download from the ATO website.

Need more information? Visit ato.gov.au/stp

ATO guidance on NFPs’ company tax

The ATO has issued guidance on company tax returns for NFPs.

The guide will help NFP clubs, societies and associations not exempt from income tax to complete their 2018 return.

Continued funding for Islamic school

Federal funding for Malek Fahd Islamic School Limited will continue if its board meets several conditions.

The Department of Education has advised that the school has corrected management issues, putting in place new governance and financial arrangements.

To remain an approved authority, the school will need to:

  • Ensure that the board is demonstrably independent of the Australian Federation of Islamic Councils
  • Demonstrate that sale or lease arrangements for school land are commercially sound
  • Provide advance notice of new or changed arrangements with the federation, and
  • Maintain a separate bank account for its federal funding.

The department has reserved the right to consider compliance action if the conditions are not met.

Education Minister Dan Tehan said: ‘The Australian Government will not tolerate the misuse of taxpayer dollars intended for schools.  All school authorities must meet the requirements of the Education Act to ensure taxpayer dollars, as well as any private investment by parents, is spent to benefit Australian students.’

Draft ruling on ‘in Australia’ condition

The ATO has published draft ruling TR 2018/D1 about the ‘in Australia’ requirement for certain deductible-gift recipients and income-tax-exempt entities.

The ruling explains what it means for:

  • A DGR to be ‘in Australia’ as a condition of its endorsement
  • Certain entities to have a ‘physical presence in Australia’ as a condition for its income’s being exempt from tax, and
  • A registered charity or DGR to have a ‘physical presence in Australia’ as a condition for their qualifying for a refund of franking credits.

Proposed changes to the CATSI Act

The federal government is proposing amendments to the CATSI Act.  They are:

Topic

Summary of proposed amendment

Size threshold

  • Simplify the classification test to make it easier to determine a corporation’s size
  • Revise the thresholds for each classification to align the CATSI Act more closely with other legislative frameworks
  • Make size alone determine reporting requirements

Rule books

  • Require that a corporation’s rule book is easy to follow and comprehensive – that is, it covers all the topics known as ‘replaceable rules’
  • Allow the registrar to refuse to register a rule book if it is not ‘fit for purpose’

Business structures

  • Make it easier to create subsidiary and joint-venture entities

Meetings and reporting

  • Provide greater flexibility in the frequency and deferral of meetings and reporting, particularly for small corporations
  • Increase members’ access to reports of medium and large corporations

Membership

  • Make better use of alternative member contact details
  • Increase a corporation’s ability to protect personal information in certain circumstances

Transparency of senior executives

  • Provide access to information that allows greater scrutiny of senior management appointments and benefits

Thresholds for related-party financial benefits

  • Give corporations freedom to enter into some low-value related-third-party transactions
  • Give the registrar discretion to allow other related-third-party transactions

Special administrations

  • Broaden and clarify the grounds for putting corporations into special administration
  • Revise outdated processes in appointments
  • Streamline the appointment process when a board unanimously requests it

Voluntary deregistrations

  • Make the criteria for voluntary deregistration more flexible

Compliance powers

  • Broaden investigation and compliance powers to address lower-level compliance problems

 

Submissions have closed.  Changes to the act are planned to take effect from 1 July 2019.

 

Written by Colin Parker, GAAP Consulting and former member of the AASB. 

© GAAP Consulting Services Pty Ltd.

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