Home' Charter : 0911 Charter Sept Contents September 2011 I Charter 51
The Institute is concerned that the
proposed measures as currently drafted go
beyond the stated policy objectives and will
have unintended and adverse consequences
for not-for-proft entities with DGR and/or tax
At the time of writing, the Institute was
fnalising its submission.
IMPROVING THE SELF-ASSESSMENT
On 1 August 2011 the Institute lodged a
submission with the Inspector-General of
Taxation (IGT) in relation to his review into
improving the self-assessment system.
The review stems from issues raised
with the IGT that the current system and
its operation are imposing increased costs
and an unacceptable level of uncertainty on
Australia’s income tax system has
been administered on a self-assessment
basis since 1986-87. Steps were taken
following Treasury’s 2003 review into
aspects of income tax self-assessment (the
ROSA review) to implement many of the
recommendations in the fnal 2004 ROSA
report (some legislative, others procedural or
administrative) but problems remain.
In the submission, the Institute’s urges
that a plan be put in place to deal with the
outstanding recommendations of the 2004
ROSA report such as replacing remaining
unlimited amendment periods with a fxed
period and reviewing discretions and
Other areas requiring attention include
in the area of the penalty provisions and,
in particular, the concepts of a “reasonably
arguable position” and “reasonable care”.
The submission goes on to make a number
of observations on the new reportable
tax position schedules currently under
development for larger taxpayers and ATO
pre-assessment products and other activity.
From an administration point of view, the
Institute expresses concern with the time
it takes for the ATO to issue public rulings,
particularly in relation to new legislation,
and the lack of binding advice for smaller
taxpayers priced out of the private ruling
Details of the IGT review are at
states its concern that in cases of negative
net interest, it seems that taxpayers will only
be able to deduct 50 per cent of their net
interest loss against other income, which is
inconsistent with the Institute’s understanding
of the government’s policy and at the very
least is inconsistent with imposing a cap on
(positive) interest income. Lastly, the proposal
for the discount to be applied evenly across
sources of interest should be reconsidered in
order to reduce complexity.
NOT-FOR-PROFIT TAX REFORM
The Institute’s work on tax changes affecting
the not-for-proft sector has been continuing.
On 20 July, the Institute lodged its
submission on Treasury’s May 2011
consultation paper entitled Better Targeting
of Not-for-proft Tax Concessions which
concerns the government’s 2011-12 Budget
announcement to target tax concessions
more effectively to those activities that directly
further altruistic purposes of not-for-profts
(NFPs) by excluding unrelated commercial
activities if certain conditions are not met.
In the submission, the Institute puts on
record its concerns with the overarching
proposals put forward in the consultation
paper and urges the government to delay the
commencement of any reforms in the area.
The Institute frmly believes that the
measures ought to be considered in the
context of, and in conjunction with, the
other reforms to the NFP sector (such as
the establishment of a national regulator and
a statutory defnition for charities). At the
moment it appears as though the proposed
changes are being considered in isolation.
The submission goes on to say that the
consultation paper does not adequately
identify the policy and/or revenue risks at
which the proposals are being directed and
suggests that a process of co-design should
be established to identify the right approach.
The Institute is also highly critical of tax
policy by press release as has been the case
here since the proposals are to apply to new
unrelated commercial activities (commenced
from Budget night last in May) from 1 July 2011.
More tax changes were announced on
4 July 2011 with the release of exposure
draft legislation to restate the “in Australia”
special conditions for tax concession entities.
Unlike the changes above, these are
not to come into effect until the year after
the legislation receives Royal Assent.
Nevertheless, the Institute considers that
they should also be rolled up into a cohesive
reform process for the NFP sector, rather
than also being considered in isolation.
The proposed rules will mean that
income-tax-exempt entities generally
must be operated principally in Australia
and for the broad beneft of the Australian
community while deductible gift recipients
(DGRs) generally must be operated solely in
Australia, again for the broad beneft of the
WANT TO KNOW MORE?
Once lodged the Institute’s
submissions are posted on the website
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