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2022-2023
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
TREASURY LAWS AMENDMENT (REFINING AND IMPROVING OUR TAX
SYSTEM) BILL 2023
SUPPLEMENTARY EXPLANATORY MEMORANDUM
Amendments to be moved on behalf of the Government
(Circulated by authority of the Assistant Minister for Competition, Charities and
Treasury, the Hon Dr Andrew Leigh MP)
Table of Contents
Glossary................................................................................................. iii
General outline and financial impact ...................................................... 1
Parliamentary amendments to Schedule 3 - DGR
registers reform............................................................ 3
Correction to the Explanatory Memorandum - Treasury
Laws Amendment (Improving Our Tax System) Bill
2023............................................................................. 5
Statement of Compatibility with Human Rights ............ 7
Glossary
This Supplementary Explanatory Memorandum uses the following abbreviations and
acronyms.
Abbreviation Definition
Bill Treasury Laws Amendment (Refining
and Improving Our Tax System) Bill
2023
DGR Deductible Gift Recipient
ITAA 1997 Income Tax Assessment Act 1997
OAGDS Overseas Aid Gift Deduction Scheme
Treasury Laws Amendment (Refining And Improving Our Tax System) Bill 2023
General outline and financial impact
Parliamentary amendments to Schedule 3 -
DGR registers reform
Outline
The parliamentary amendments to Schedule 3 to the Bill ensure existing overseas aid
funds eligible for endorsement as DGRs remain eligible under the new requirements.
Date of effect
The amendments will commence on the first 1 January, 1 April, 1 July or 1 October
after the date of Royal Assent (as per general tax measures). The measures will apply
six months after Royal Assent to facilitate the machinery of government changes
necessary to administer the changes.
Financial impact
Nil.
Human rights implications
The parliamentary amendments do not raise any human rights issues. See Statement of
Compatibility with Human Rights -- Chapter 3.
Compliance cost impact
The parliamentary amendments ensure existing DGRs remain eligible as DGRs as
intended, meaning there will be no additional compliance cost for affected DGRs.
1
Parliamentary
amendments to Schedule 3 - DGR
registers reform
Outline of chapter
1.1 The purpose of the parliamentary amendments to Schedule 3 to the Bill is to
ensure existing overseas aid funds endorsed as DGRs remain eligible as DGRs.
Context of amendments
1.2 Some submissions to the Senate Standing Committee on Economics' inquiry
into the Bill raised concerns that Schedule 3 to the Bill may have the
unintended consequence of affecting the continuing eligibility of certain
DGRs, especially organisations participating in the OAGDS.
1.3 The changes to all DGRs, including the OAGDS are intended to be
administrative; transitioning from departments such as DFAT and the ATO
each administering aspects of the scheme to the ATO administering the scheme
in its entirety.
1.4 No entities that are currently eligible as DGRs through addition to registers
will become ineligible as DGRs as a result of the proposed changes, as the
eligibility requirements are all substantively similar to the requirements for
being added to registers. However, entities which did not meet the
requirements to be registered as DGRs under previous law, and continue to be
ineligible under the proposed law may need to work with the ATO to ensure
compliance. The legislative changes are not associated with increased
compliance activity by the ATO - the ATO will continue to monitor
compliance with the ITAA 1997 as normal.
1.5 The OAGDS is an exceptional case - there is no register associated with the
OAGDS. In order to facilitate the administrative change to the OAGDS, the
test for eligibility needs to shift from a test of capacity (assessed by DFAT) to
a test of principal purpose (assessed by the ATO) given the different functions
and capabilities of each agency.
1.6 While it was never intended that this change would necessitate any
documentary changes to constitutions or rules associated with endorsed
organisations or funds (the intention was that continuing participants could
prove their principal purpose by their conduct), it is important that existing
3
Parliamentary amendments to Schedule 3 - DGR registers reform
participants have certainty about their continuing endorsements as part of the
OAGDS, despite the change in the test for eligibility.
Detailed explanation of amendments
1.7 Existing institutions and Australian government agencies will continue to be
eligible to operate a fund that is a DGR even if they do not meet the new
criteria set out in new item 9.1.1 of the table in subsection 30-80(1).
[Schedule 3, item 20, Paragraph 3(c) and 3(d)]
1.8 Instead, all existing DGRs will be deemed to meet the requirements of new
table item 9.1.1 in subsection 30-80(1) until their principal purpose changes.
This means all currently endorsed DGRs will remain endorsed so long as there
is no change to that organisation's principal purpose.
[omit Schedule 3, item 20, Subitem (4), replace with new subitem (4)]
Example 1.1
For example, if Clean Water Access Incorporated, a fictitious
charity organisation, is endorsed for the operation of an Overseas
Aid Fund under section 30-120(b) of the ITAA 1997, prior to the
passage of this Bill, Clean Water Access Incorporated and their
fund are not required to meet the principal purpose test.
Clean Water Access Incorporated is deemed to meet the
requirements of item 9.1.1 and will continue to be endorsed for the
operation of a fund under paragraph 30-120(b). However, if the
Clean Water Access Incorporated begins to use its Overseas Aid
Fund to provide aid to persons in need in Australia (not overseas),
their principal purpose has changed. Thus, the transitional
provisions will no longer apply, and the Clean Water Access
Incorporated and its Overseas Aid Fund must meet the
requirements of item 9.1.1 if they wish to continue to participate in
the OAGDS. Importantly, the Clean Water Access Incorporated
may be eligible as a DGR under other provisions as a registered
charity.
4
Correction to the
Explanatory Memorandum - Treasury
Laws Amendment (Improving Our Tax
System) Bill 2023
Correction
2.1 A correction is made to Chapter 3 of the Explanatory Memorandum to the Bill.
The Explanatory Memorandum referred to section 130-125 of the ITAA 1997
instead of section 30-125 of the ITAA 1997.
2.2 In Chapter 3, paragraphs 3.29, omit the sentence:
"Cultural organisations eligible for endorsement as DGRs remain bound under
existing section 130-125(6) and (7) of the ITAA 1997 to include provisions in
constitutions or governing rules that require the transfer of surplus assets to
another DGR when the former DGR is wound up."
and substitute:
"Cultural organisations eligible for endorsement as DGRs remain bound under
existing section 30-125(6) and (7) of the ITAA 1997 to include provisions in
constitutions or governing rules that require the transfer of surplus assets to
another DGR when the former DGR is wound up."
2.3 In Chapter 3, paragraphs 3.36, omit the sentence:
"Overseas aid organisations eligible for endorsement as DGRs remain bound
under existing section 130-125(6) and (7) of the ITAA 1997 to include
provisions in constitutions or governing rules that require the transfer of
surplus assets to another DGR when the former DGR is wound up."
and substitute:
"Overseas aid organisations eligible for endorsement as DGRs remain bound
under existing section 30-125(6) and (7) of the ITAA 1997 to include
provisions in constitutions or governing rules that require the transfer of
surplus assets to another DGR when the former DGR is wound up."
2.4 In Chapter 3, paragraph 3.41, omit the last sentence:
"This is consistent with the general obligation on all DGRs under existing
section 130-125(6) and (7) of the ITAA 1997 to include provisions in
constitutions or governing rules that require the transfer surplus assets to
another DGR when the former DGR is wound up."
5
Correction to the Explanatory Memorandum - Treasury Laws Amendment (Improving Our Tax
System) Bill 2023
and substitute:
"This is consistent with the general obligation on all DGRs under existing
section 30-125(6) and (7) of the ITAA 1997 to include provisions in
constitutions or governing rules that require the transfer surplus assets to
another DGR when the former DGR is wound up."
2.5 In Chapter 3, paragraph 3.42, omit the last sentence:
"This is consistent with the general obligation on all DGRs under existing
section 130-125(6) and (7) of the ITAA 1997 to include provisions in
constitutions or governing rules that require the transfer surplus assets to
another DGR when the former DGR is wound up."
and substitute:
"This is consistent with the general obligation on all DGRs under existing
section 30-125(6) and (7) of the ITAA 1997 to include provisions in
constitutions or governing rules that require the transfer surplus assets to
another DGR when the former DGR is wound up."
6
Statement of
Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Treasury Laws Amendment (Refining and Improving Our Tax System) Bill
2023
Parliamentary amendments to Schedule 3 -
DGR registers reform
Overview
3.1 The parliamentary amendments are compatible with the human rights and
freedoms recognised or declared in the international instruments listed in
section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
3.2 The parliamentary amendments ensure existing DGRs remain eligible as
DGRs.
Human rights implications
3.3 The parliamentary amendments do not engage any of the applicable rights or
freedoms.
Conclusion
3.4 The parliamentary amendments are compatible with human rights as they do
not raise any human rights issues.
7
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