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Taxing charities: Reform without reason?


The federal government is currently proposing to introduce what amounts to a new, unrelated business income tax on the income of not-for-profit entities. Broadly, the proposal, at least initially, is that NFP entities pay tax on any retained earnings not annually remitted and applied to the purposes of the tax concession entity, and that existing input tax concessions would not be available for unrelated commercial activities. Consultation on the details of the tax is continuing, but uncertainty is mounting. Meanwhile, external events have overtaken the proposal. In the authors’ view, three factors in particular have undermined the justification for the government’s proposals. These are an apparent retreat from the government’s position on recommendations made by three government-initiated inquiries, the forthcoming Australian Charities and Not-For-Profits Commission, and the impact of a recent High Court decision.

This article examines these factors in turn, and questions whether the reasons given for introducing the new tax remain.

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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Dr Matthew Turnour
Matthew is the Chairman of Neumann & Turnour Lawyers. - Current at 01 December 2014
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