The Australian Institute of Company Directors made a submission as part of Federal Treasury’s tax white paper process.
NFP tax arrangements
Following feedback from our members, the substantive focus of our submission related to tax arrangements for not-for-profit (NFP) organisations. As Australia’s leading organisation for NFP governance we recognise it is our role to encourage effective and positive reform across the NFP sector.
The submission was completed following engagement with NFP directors from our membership. The main points include:
- A simple, efficient and understandable tax regime will support good governance in the NFP sector.
- If one of the policy drivers for tax reform is efficiency then federal taxation is only one issue to be considered. State taxes and duties also add to the complexity for the sector. Further, simplification of the overall regulatory regime for NFPs at a state and federal level is a key factor the government should consider.
- As deductible gift recipient (DGR) status encourages giving it should be retained, however the system could benefit from simplification.
- We recommend the government focus on encouraging competition within the NFP sector, rather than debating whether NFPs have a competitive advantage over for-profit businesses.
- No changes should be made to income tax exemption for NFPs.
- Tax concession arrangements could be simplified for charities. One way to achieve this could be by removing the existing fringe benefits tax (FBT) concessions and ensuring that there is an alternative benefit immediately in place. For example, the income tax exempt thresholds could be increased for employees who work for charities.
We also used the opportunity to reinforce some of our existing policy positions in relation to taxation reform.
Employee share schemes
We strongly support the changes proposed to the taxation laws that apply to employee share schemes. In particular, we welcome the repeal of the changes introduced by the previous government in 2009 that altered the taxation laws relating to shares and options granted under employee share schemes.
We also support the introduction of tax concessions for grants of shares and options to the employees of start-up companies.
We believe there are a number of ways that the tax treatment of employee share schemes could be further improved, including:
- Addressing the triggering of tax liability in respect of unvested or restricted securities under an employee share scheme on cessation of employment to encourage (or at least not deter) the holding of securities by employees beyond cessation of employment.
- Allowing for greater flexibility for security grants to employees and directors of start-up companies by loosening some conditions (for example, the requirement that the grants be offered to at least 75 per cent of the company’s employees and that the securities must not vest earlier than three years).
Section 8Y of the Taxation Administration Act
We continue to be concerned about section 8Y of the Taxation Administration Act 1953 which provides that if a corporation commits a taxation offence, a director of the corporation will be deemed guilty of the same offence. In other words, the provision reverses the fundamental legal principle that a person is innocent until proven guilty. It also fails to recognise that the corporation is a legal entity distinct from its directors by holding the directors liable for the offence, without the need for directors to be involved in the offence.
We believe that section 8Y of the Taxation Administration Act should be re-drafted so that it becomes an accessorial liability provision which requires the prosecution to prove a director’s involvement as an accessory to a corporation’s taxation offence.
You can read our views in full on our website.
In other news
• ASIC has released updated regulatory guidance for investors to help them in taking collective action to improve the corporate governance of listed entities. It is reflected in Regulatory Guide 128 Collective action by investors (RG 128).
• ASX has released a detailed consultation response and final version of Guidance Note 8 - Continuous Disclosure: Listing Rules 3.1 -3.1B.
• The Northern Territory Government has introduced the Statute Law Amendment (Directors’ Liability) Bill 2015 to amend director liability provisions in the territory. We are currently reviewing the legislation. A copy of the bill is available on the Northern Territory Government website.
• ASIC has again extended Class Order CO 14/632 Key management personnel equity instrument disclosures to financial years ending on or before 31 December 2015.
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