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Not for profit income tax exemption: Is there a hole in the bucket, dear Henry?


Australia’s Future Tax System Review, headed by the then head of the Australian Treasury, and the Productivity Commission’s Research Report on the not for profit sector, both examined the state of tax concessions to Australia’s not for profit sector in the light of the High Court’s decision in Commissioner of Taxation v Word Investments Ltd. Despite being unable to quantify with any certainty the pre- or post-Word Investments cost of the tax concessions, both Reports indicated their support for continuation of the income tax exemption. However, the government acted in the 2011 Budget to target the not for profit income tax concessions more precisely, mainly on competitive neutrality grounds.

This article examines the income tax exemption by applying the five taxation design principles, proposed in the Australia’s Future Tax System Review, for assessing tax expenditure. The conclusion is that the exemptions can be justified and, further, that a rationale for the exemption can be consistent with the reasoning in the Word Investments case.

Author profiles

Prof Myles McGregor-Lowndes
Myles is a Professor in the Faculty of Business at the Queensland University of Technology and Director of The Australian Centre for Philanthropy and Nonprofit Studies (CPNS). The Centre is the first research group outside North America to be admitted as a fully accredited member of the Nonprofit Academic Centres Council. He is presently a Governor of the Queensland Community Foundation, Chair of the ACFID Code of Conduct Committee which supervises International Development Agencies and a member of the Queensland Community Gambling Benefit Fund. - Current at 01 December 2011
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Elizabeth Turnour
Elizabeth practises exclusively in the area of not-for-profit law and governance as a member of the not-for-profit team at Moores Legal, Melbourne. - Current at 01 December 2011
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Dr Matthew Turnour
Matthew is the Chairman of Neumann & Turnour Lawyers. - Current at 01 December 2014
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