If your organisation is currently registered as a charitable institution and you receive tax concessions on this basis, you have until 9 November 2020 to check and, if required, amend your constitution. After that date if your constitution is not compliant, you may cease to qualify for those tax concessions including payroll tax, land tax and stamp duty exemptions.
The law relating to the qualifying criteria for tax concessions for charitable institutions has subtly changed. Charitable institutions that are schools, benevolent institutions, kindergartens, aged care facilities and orphanages (among others) must now include three not for profit provisions in their constitution in order to qualify for the Queensland tax concessions.
The change reverses the 2015 Queensland Chamber of Commerce and Industry decision to the effect that an institution only had to be subject to the not for profit criteria and did not have to have them embedded in its constitution. This small change in requirement is most likely going to affect organisations with a constitution based on business documents, such as companies limited by guarantee or trusts. Incorporated associations usually have the relevant not for profit criteria embedded in their constitution.
In summary the not for profit criteria are as follows.
- Your charitable institution’s income and property must be used solely for promoting the purpose for which your institution was created (e.g. to be a school or for the relief of the sick).
- None of your charitable institution’s income or property is allowed to be distributed its members.
- On the dissolution of your charitable institution, your assets after paying all debts must be transferred to another organisation which has a purpose that would allow it to be registered as a charitable institution or for the promotion of the public good.
This does not affect charitable institutions that are religious organisations, bodies controlled by them whose principal object is the conduct of religious activities, or universities and colleges. These entities are exempt from the relevant requirement.
Charitable institutions such as schools that have previously fallen under the “religious organisation” exception may now be at risk as the religious order reduces its control over the institution. If the religious order’s control over the organisation continues to lessen, at some point the exception may no longer apply and the charitable institution’s constitution will need to contain the not for profit criteria.
This article is an abbreviated version of the changes and the devil is in the detail so to speak. The safest way to ensure your constitution is compliant is to contact your lawyer.
The potential losses for not amending your constitution (which could include a backdated tax bill should this apply to your institution and you hadn’t accounted for it) far outweighs the cost of instructing a lawyer to check your constitution is compliant.
If you would like to see whether this applies to your charitable institution, please contact me.