Alert for charities operating in Queensland

10 December 2018

Recently, the Revenue and Other Legislation Amendment Act 2018 (Qld) (the Act) was passed by the Queensland Parliament.
Recently, the Revenue and Other Legislation Amendment Act 2018 (Qld) (the Act) was passed by the Queensland Parliament.

Recently, the Revenue and Other Legislation Amendment Act 2018 (Qld) (the Act) was passed by the Queensland Parliament. The Act amends the Taxation Administration Act 2001 (Qld) (the TAA) to impose additional requirements for registration as a ‘charitable institution’. The constitutions of charitable institutions must now expressly include particular clauses which govern the use of their income and property.

Charities that are already registered as a ‘charitable institution’ will have 2 years to make any necessary changes to their constitutions. The changes affect charities that want to access Queensland tax exemptions, including payroll tax exemption, transfer duty exemption and land tax exemption.

Background

Part 11A of the TAA outlines the process and requirements to register a charitable institution.  Previously, under section 149C(5) of the TAA an institution:

“…must not be registered unless, under its constitution, however described –

  1. its income and property are used solely for promoting its objects; and
  2. no part of its income or property is to be distributed, paid or transferred by way of bonus, dividend or other similar payment to its members”.

In 2015, the Queensland Supreme Court[1] held that this section did not require an entity’s constitution to expressly provide that income and property were to be used solely for promoting its objects or that no part of income or property be distributed to members.  It was enough if this was the legal effect of the constitution.

Revenue and Other Legislation Amendment Act 2018 (Qld)

After this decision, the Queensland government decided to amend the TAA.

According to the government, it was never intended that an entity should qualify for registration if its constitution, or another instrument constituting and governing it, did not expressly contain the restrictions in section 149C(5) of the TAA.

As a result, section 149C(5) now reads:

“an institution…must not be registered unless, under its constitution, however described expressly provides that –

  1. its income and property are used solely for promoting its objects; and
  2. no part of its income or property is to be distributed, paid or transferred by way of bonus, dividend or other similar payment to its members”.

Proposed Public Rulings

When the Act was passed, the Treasurer stated that the Commissioner will issue a number of public rulings to:

  1. Confirm that charitable trusts that have no members will not need to include provisions which relate to distributions to members.
  2. Clarify that the constitutions do not need to contain exactly the same wording used in the Act.
  3. Set out which template rules are considered to comply with section 149C(5).
  4. This is important because it does not appear that the ACNC model constitution complies with the amended requirements.  Guidance from the Commission on this point will be helpful.
  5. Confirm that the Commissioner will not take action against a charity after the transitional period if it has not appropriately amended its constitution but has not accessed any relevant tax exemptions.
    Ordinarily, in the above circumstances, the Commissioner could take action against a charity on the basis that it had failed to notify the Office of State Revenue that it was no longer entitled to be registered as a charitable institution.

The above matters address some of the concerns raised by the Queensland Law Society about the operation of the proposed legislation. Rather than amending the legislation, the Government has opted to deal with concerns though the administration of the law. While this will provide some comfort to charities, it is important to understand that administrative approaches can change, and the court will not consider administrative approaches in determining how the law should be applied.   

What does this mean for QLD charities?

Queensland charities that access State tax concessions should consider whether they need to amend their constitutions to comply with new legal requirements.

Charities that were registered under part 11A of the TAA before 9 November 2018 will have two years to amend their constitutions[2]. These charities should wait for the public rulings to be issued to clarify how the Commissioner intends to administer the law.

How we can help

Moores provides advice to charities and not-for-profits who wish to make changes to their constitutions, rules and framework documents. We can provide support to Queensland charities needing to make amendments to ensure compliance with the TAA.

If you would like further assistance, please contact our Not-for-profit team leaders, Marla Cowen or Rebecca Lambert Smith on (03) 9843 2100, or fill out the enquiry form.

[1] Queensland Chamber of Commerce and Industry Ltd v Commissioner of State Revenue [2015] QSC 077.

[2] Section 178 of the TAA.

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