Unrelated Business Income Tax postponed
The Commonwealth Government today announced that the commencement its Unrelated Business Income Tax (UBIT) will be postponed until 1 July 2014.
Following a prolonged period of silence on the status of the UBIT, Assistant Treasurer David Bradbury and Minister for Social Inclusion Mark Butler have released a statement that suggests further consultation will take place on the tax before it commences on 1 July next year.
The UBIT has now been postponed twice, and draft legislation is still yet to be released after almost two years. Further, a publication released by the ACNC this month states that the government intends the UBIT to be ‘developed further in 2013’ (‘Not-for-profit reform and the Australian Government’, January 2013). This further delay and these commends suggest that the government appreciates the difficulties with the UBIT.
It is proposed to tax profits from unrelated business activities:
- Begun after 7:30pm AEST on 10 May 2011: from 1 July 2014 onwards if the profits are not applied to the charitable/NFP purpose
- Begun before 7:30pm AEST on 10 May 2011: from 1 July 2015 onwards if the profits are not applied to the charitable/NFP purpose
This is good news for charities and not-for-profits, as it provides around 18 months for some, and 2 ½ years for others, to assess their position and make necessary adjustments. In their paper ‘Not for profit income tax exemption : is there a hole in the bucket, dear Henry?’, Dr Turnour, Professor Myles McGregor-Lowndes and Ms Elizabeth Turnour set out at page 22 five ways in which income intended for charitable purposes can be received effectively tax free.
Neumann & Turnour encourages all not-for-profits and charities to be involved in any future consultation on the UBIT to ensure that the views of the sector are heard on this important issue.
Dr Matthew Turnour on the UBIT
You can read Dr Matthew Turnour’s thoughts on the UBIT in ‘Taxing Charities: Reform without Reason?’, written with Professor Myles McGregor-Lowndes of the Australian Centre for Philanthropy and Nonprofit Studies, published in 2012. In the paper, it is argued that there is no longer a need for a UBIT, as the rationales provided by the government have been negated by the establishment of the ACNC and the decision of the High Court in the 2012 Bargwanna case.
Subscribers to Taxation in Australia will find the article in the August 2012 issue.
DISCLAIMER: This update contains general information only. It is not all inclusive and should not be considered legal advice. You should always obtain legal advice for your specific circumstances before relying on general information.