Charitable organisations do not have to pay certain duties and taxes. However, recent amendments to some legislation have changed the definition and scope of what makes an organisation a charity. You can find more information on these changes in the Revenue (Charitable Organisations) Legislation Amendment Act 2015 and below.
What is a charity?
Under ACT tax laws, an organisation is a charity – and therefore eligible for tax exemptions – if its purpose is religious, educational, benevolent or charitable. According to the new legislative amendments, however, charities for ACT tax purposes now also exclude chambers of commerce, commercial and industry peak bodies, professional organisations and organisations that engage in political lobbying. These organisations must pay tax to the ACT Government whether or not they are considered charities by the Commonwealth or another State or Territory.
If an organisation is run for the profit or benefit of its members, the ACT does not consider it a charitable organisation for tax purposes. The ACT also doesn’t consider ‘excluded organisations’ (see below) as charities unless the Commissioner for ACT Revenue has granted a beneficial organisation determination (BOD) and that BOD is in force.
For more information, see the Charitable Organisations circular GEN010.
The law defines the following as ‘excluded organisations’, which are not eligible for charitable tax exemptions:
- political parties
- industrial organisations (trade unions)
- professional organisations
- organisations that promote trade, industry or commerce.
For more information on excluded organisations, see the Charitable Organisations circular GEN010.
Charitable status for excluded organisations
To safeguard against the risk of these legislative amendments inadvertently excluding more traditional charities, the Commissioner for ACT Revenue can make a BOD to regrant tax-exempt status to some organisations.
Only professional organisations or organisations that promote trade, industry or commerce can apply for a BOD. Political parties and industrial organisations are ineligible.
Organisations that apply must satisfy the commissioner that their primary purpose is charitable and that the items that exclude them are not significant to their overall purpose. The purpose of the organisation also must benefit the general community – not just a smaller class of people. Once the commissioner is happy that an organisation meets these criteria, then he or she can make a BOD.
Organisations have the right to seek a BOD, to lodge an objection, and to have the ACT Civil and Administrative Tribunal (ACAT) and other courts review an objection decision; however, there are restrictions.
For organisations for which the commissioner has made a BOD, the usual reassessment process applies. That is, they’ll be tax-exempt in future and may be eligible for refunds for any previous taxes paid.
For excluded organisations, a transitional provision prevents the commissioner from reassessing their charitable status. This limitation applies regardless of whether the organisation made a submission to the commissioner or the ACAT (including an objection or appeal) concerning their status. It’s restricted to situations in which the purpose of the reassessment is to put into effect the decision that a now-excluded organisation was or is a charitable organisation (and its tax liability was therefore nil or negligible).
If you require more information about obtaining a BOD, please contact us.