Deductible gift recipients are eligible to receive income tax deductible gifts (such as financial donations) and tax deductible contributions (such as the purchase of a ticket to attend a fundraising event). The revenue forgone from these tax concessions is significant. According to the discussion paper, the revenue forgone from donations to deductible gift recipients was $1.31 billion in 2016-17 and is expected to rise to $1.46 billion in 2019-20.
The MCA’s submission notes there is substantial evidence that some deductible gift recipients – including registered environmental organisations and registered charities – are deliberately and persistently not complying with existing law. The MCA has publicly documented numerous cases in which some entities have:
- Committed, authorised or encouraged activities that are unlawful or unsafe
- Sought tax-deductible donations to support politically partisan activities
- Have not disclosed, or only partially disclosed, political activities to regulators.
The MCA supports early implementation of the government’s proposed integrity measures to improve compliance by deductible gift recipients, including:
- Requiring all non-government deductible gift recipients to be registered charities
- Requiring deductible gift recipients to report advocacy activities more rigorously
- Requiring deductible gift recipients to certify every year that they meet eligibility criteria, with penalties for false statements
- Implementing recurrent formal reviews by regulators.
The MCA also suggests that the government examine the privacy provisions that currently prevent the Australian Charities and Not-for-profits Commission (ACNC) from commenting on the basis, progress or outcome of regulatory decisions. The ACNC itself has confirmed that greater transparency would enhance administration and public trust.
The government’s proposal to require registered environmental organisations to commit up to 50 per cent of their annual expenditure to environmental remediation is sound in principle, but the requirement should not exclude legitimate environmental education or research as defined in the Income Tax Assessment Act. A number of MCA members undertake such work in partnership with environmental groups.
Alternatively, the MCA submits that the government should consider adopting Canada’s political activity rule for charities, to close the loophole of uncapped tax-deductible political donations through deductible gift recipients. Under Canadian law, charities may devote only a minority share of their resources (including staff and volunteer time) on political advocacy. Moreover, that advocacy must be non-partisan and secondary to their charitable purpose.