Queensland 2016-17 Budget Measures, tax avoidance and the not-for-profit sector

WHO SHOULD READ THIS

• Persons responsible for entities registered as exempt institutions for Queensland Government tax and duty concessions (for example, aged care facilities, disability providers, public benevolent institutions and charities)

THINGS YOU NEED TO KNOW

• The Queensland Office of State Revenue is focusing on tax avoidance

WHAT YOU NEED TO DO

• Review your organisation’s entitlement to and compliance with the Taxation Administration Act 2001 (Qld) and the requirements of the Office of State Revenue

Not-for-profits and charities registered as exempt institutions under the Taxation Administration Act 2001 (Qld) (the Act) may be exempt from land tax, payroll tax and transfer duty in particular circumstances.

In the 2016-17 Budget Measures, the Queensland Government announced that to deliver additional revenue the Queensland Office of State Revenue (OSR) will be focusing on tax avoidance. ‘This will include those incorrectly claiming to be not-for-profit organisations and claiming tax exemptions.’

This serves as a timely reminder to charities and not-for-profit organisations to review their entitlement to remain registered as an exempt institution and their compliance with specific requirements to claim exemptions and concessions potentially available for payroll tax, land tax and duty purposes.

Is your organisation eligible for Queensland State Government tax concessions

Some not-for-profit organisations are entitled to be registered as an exempt institution under the Act, which entitles those organisations to significant concessions relating to State Government tax and transfer duty. Such organisations include:

• religious bodies, or bodies controlled by or associated with a religious body
• public benevolent institutions
• universities or university colleges (and their trustees)
• kindergartens
• organisations that care for children on a full-time basis and provide them with necessary food, clothing, shelter; wellbeing and protection, and
• institutions that have a principal object or pursuit that is fulfilling a charitable object or promoting the public good.

Concessions include:

• an exemption from transfer duty on the acquisition of property for an exempt purpose
• land tax exemptions for property used for an exempt purpose
• payroll tax exemptions for wages paid to employees who are engaged exclusively in work for a qualifying exempt purpose (including employees engaged via employment agents), and
• relief in relation to motor vehicle registration and insurance costs.

Implications for charities and not-for-profit organisations

Whilst there is no detail behind the Budget announcement, it is a warning to all not-for-profits and charities which are registered as an exempt institution in any State or Territory to review their eligibility and to do so on a regular basis.

Not-for-profits and charities will need to consider whether they continue to meet the requirements to be a registered institution under the Act. If this is not the case, then they will no longer be in a position to claim exemptions and concessions otherwise available to not-for-profits and charities which are registered institutions under the Act.

Registered institutions claiming payroll tax exemptions for workers engaged for a variety of purposes will need to consider whether the workers are engaged exclusively for a qualifying exempt purpose. Similarly, registered institutions claiming land tax exemptions will need to consider whether land held is used predominantly for an exempt purpose.

From a transfer duty perspective, an institution that claimed a duty exemption which it is no longer eligible to claim must complete and lodge a notice for reassessment (Form OSR – D10.4) within 28 days along with the original previously stamped documents with the OSR. Failure to comply with this requirement can result in payment of additional duty, unpaid tax interest, a potential penalty and a fine of up to $10,000 for failing to lodge a notice for reassessment.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.