20 April 2012

Manager
Philanthropy and Exemptions Unit
Personal and Retirement Income Division
The Treasury
Langton Crescent
PARKES ACT 2600

Submission regarding:

Exposure Draft – 
‘In Australia’ Special Conditions for Tax Concession Entities

Australian Missionary Tidings (AMT) is a non for profit charitable organisation working with volunteer aid and development workers in thirty six countries around the world. These workers are involved in projects including medical assistance and HIV-AIDS programs, education projects, leadership training and development, orphanages, drug rehabilitation programs, projects empowering tribal and marginalised groups, disaster relief programs, and aid and development.

Professional advice received by us leads us to conclude that the Exposure Draft will have the following impact on AMT:

1.	Loss of income tax exempt status As a member of Australian Evangelical Alliance Inc through its membership of Missions Interlink which is prescribed by law under regulation 50.50.02, AMT receives income tax exempt status under 50-50(d) of the Income Tax Assessment Act. Under the Exposure Draft this would be lost, which would put at risk the many worthwhile activities carried out through the activities of AMT in 36 countries around the world. 
a.	Relief work among refugees from the Horn of Africa would be endangered by the envisaged legislation as AMT could not afford the funds if income tax exempt status were removed and donation income was taxable.
b.	HIV-AIDS prevention and education programs in South Africa and CHAD would be endangered by the loss of income tax exempt status as again the flow of funds would be reduced and in some cases cut off as AMT would not be in a position to receive adequate funding under the new arrangements.
The impact of losing tax exemption would not be restricted to the amount of tax that would be payable to the government, but would also include the extra expense of meeting administrative expenses and the cost of extra staff to meet ATO requirements, as well as the impact of donor organisations losing their income tax exempt status as outlined below. The amount of tax so raised would not be material for the Australian government, but would be catastrophic for AMT and associated entities.

2.	Donor organisations would lose their income tax exempt status. AMT receives funding from many charitable organisations which pass on donations from their members to AMT for use in projects overseas. These organisations are grassroots community groups such as the 200 local churches and community organisations affiliated with AMT. Loss of charitable status by AMT will in turn lead to loss of charitable status by these hundreds of small organisations and community groups, and will lead to low compliance and administrative problems due to lack of information and understanding in these small community groups. It will also lead to a large drop in funds forwarded to AMT as these organisations are taxed and lose their viability due to the cost and complexity of the new arrangements. There may even be a further effect as these small groups transfer funds themselves directly overseas and erode control by the Australian government.

3.	Loss of goodwill towards Australia The impact of the funds used in development and humanitarian assistance by workers associated with AMT cannot be understated. The funds are raised by volunteer community groupsgiving sacrificially of their own time and money, and the funds are used efficiently and well by Australian volunteers living and serving in local communities according to the norms of local culture, making genuine and deep connections with the local communities. The work done in these projects reflects well on the Australian community providing Australia with invaluable goodwill in an extremely cost-effective manner, and in a way sanctioned and desired by local community groups across the breadth of Australian society, as evidenced by the breadth of support by the many community groups that donate through AMT.

Recommendation

It is recommended that the Exposure Draft be redesigned to retain exemptions for all prescribed institutions listed in the current regulations. 

It is also recommended that a minimum threshold for donations to entities without income tax exempt status should be introduced into the legislation so that materially small donations do not trigger the adverse effects outlined above.

Yours sincerely,

Brian Adams
Executive Director
Australian Missionary Tidings