2008

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

SENATE

SUPPLEMENTARY EXPLANATORY MEMORANDUM

Amendments to be moved on behalf of the Government

(Circulated by the authority of the

Treasurer, the Hon Wayne Swan MP)

General outline and financial impact............................................................ 5

Chapter 1            Extension of charitable purpose....................................... 7

Amendment of the Extension of Charitable Purpose Act 2004

These amendments add Schedule 2 to the Bill.  Schedule 2 amends the Extension of Charitable Purpose Act 2004 to include in the definition of charitable purpose the provision, by a charitable body, of rental dwellings under the National Rental Affordability Scheme.  The extension will apply to approved participants of the National Rental Affordability Scheme during the first two years of the Scheme’s operation.

Proposal announced:  The amendments have not previously been announced.

Financial impact:  The amendments to extend the definition of charitable purpose to incorporate the provision of rental dwellings under the National Rental Affordability Scheme will be in the order of $90 million over the forward estimates.  The extension will have the following financial implications:

GST impact:  The amendments are estimated to cost $30 million to $40 million in lost GST receipts over the forward estimates.

Compliance cost impact:  Negligible. 

Outline of chapter

1.1                   The definition of charitable purpose under the Extension of Charitable Purpose Act 2004 will be extended to include the provision, by a charitable body, of rental dwellings under the National Rental Affordability Scheme.

Context of amendments

1.2                   The National Rental Affordability Scheme will use tax incentives and financial support to provide rental housing to low and middle income families at 20 per cent below market rates.

1.3                   The Government supports charitable organisations providing community housing to households on low incomes.

1.4                   During the implementation of the National Rental Affordability Scheme, a number of charitable community housing organisations raised concerns that their participation in the Scheme may put at risk their eligibility for the concessions they currently enjoy as charities. 

1.5                   All charitable purposes must fit within one of four ‘heads of charity’.  The relevant charitable purpose for charitable community housing organisations is the ‘relief of poverty’. 

1.6                   The charitable status of an organisation primarily derives from the common law concept of charity.  This concept is used in the income tax law to provide assistance to charities.

1.7                   The Extension of Charitable Purpose Act 2004 provides a statutory extension to the common law meaning of ‘charity’ for the purposes of all Commonwealth legislation. 

1.8                   The amendments will ensure that a charity’s participation in the Establishment Phase of the National Rental Affordability Scheme will not, of itself, put at risk its charitable tax concessions.

Summary of new law

1.9                   The amendment to the Extension of Charitable Purpose Act 2004 made by this Bill expands the definition of charitable purpose to include the provision, by a charitable body, of rental dwellings under the National Rental Affordability Scheme. 

Detailed explanation of the new law

1.10               The amendments made by Schedule 2 to the Bill amend the Extension of Charitable Purpose Act 2004 to include in the definition of charitable purpose the provision, by a charitable body, of rental dwellings under the National Rental Affordability Scheme.  [Schedule 2, items 1 to 8]  

1.11               The amendments provide that the definition of charitable purpose will include the provision of rental accommodation where those dwellings are provided by an entity endorsed by the Commissioner of Taxation to be exempt from income tax and where that entity is an approved participant in the National Rental Affordability Scheme.  The amendment will apply to dwellings approved during the Establishment Phase of the Scheme.  [Schedule 2, item 8]