CHARTING NEW HORIZONS: GOVERNANCE WITH PASSION AND PURPOSE Victor Hamit B.Ec (Acc), LLB, FAICD, CTA. Wentworth Lawyers Level William Street MELBOURNE Liability limited by a scheme approved under the Professional Standards Legislation Disclaimer: This presentation is of general nature only. Legal advice should be obtained in relation to any specific circumstances. Protecting Your Income Tax Exempt Status: Two New Additional Tests and the ATO View. 1

Scope Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation Our discussion is limited today to the 2 new additional special conditions introduced into the Income Tax Assessment Act 1997 (the “Tax Act”) for NFP entities to satisfy in order to qualify for income tax exemption. New Special Conditions:- 1.Governing Rules Condition 2.Income and Assets Condition 2

Background Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation June 2013, the Federal Labor Government introduces legislation for 2 additional special conditions for NFP entities to satisfy for income tax exemption status. Tax Laws Amendment (2013 Measures No. 2) Act – “An Act to amend the law relating to taxation and the Tax Agent Services Act 2009 and other purposes” Schedule 11 – “Miscellaneous amendments” 3

Why? Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation 4

Entities Covered Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation Registered Charities Scientific Institutions Public Educational Institutions Funds for scientific research by or in conjunction with a public University or Public Hospital Societies, Associations or Clubs for the encouragement of science Societies, Associations or Clubs for community service purposes (except political or lobbying purposes) Employee or Employer Associations Trade Unions Hospitals (Public and NFP Society or Associations) Societies, Associations or Clubs for Animal Racing, Sport, Music and Musical purposes. 5

What are the new Conditions? Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation The entity must: 1)comply with all the substantive requirements in its governing rules (the “Governing Rules Condition”); and 2)apply its income and assets solely for the purpose of for which the entity is established (the “Income and Assets Condition”) 6

1. Governing Rules Condition Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation What are the governing rules?  Constitution  Law  Other 7

Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation What are the substantive requirements? The Rules that define the rights and duties of the entity such as:  give effect to the object or purpose of the entity;  relation to not for profit status;  set out the powers or duties of the Directors and Officers of the entity;  require an entity to maintain a register of members; and  relate to winding up of the entity. 8

Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation Contrast substantive to procedural rules. Procedural rules are those which prescribe the method or manner in which the rights and duties of the entity are carried into effect, and where applicable enforced. Administrative processes are typically procedural requirements. For example the following are procedural requirements:-  rules regarding the process for granting membership of the entity;  the format in which the register of members is maintained;  how a particular meeting is to be conducted (including requirements for a quorum); and  the rules setting out how a member may vote at a meeting by proxy. “All year”. Governing Rules Condition (cont) 9

Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation apply solely for the purpose; purpose = purposes; Accumulations; “immaterial amount”, “one-off” or “occasional unrelated misapplication”; and “all of the year”. 2. The Income and Assets Condition 10

Review Action Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation 11

Further Information Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation Taxation Ruling TR 2015/1 ( Income Tax Assessment Act 1997, particularly Division 50 ( and Updated – ATO Putting NFP’s to the Test: Two Additional Tests for Income Tax Exemption ( 12

Q&A Wentworth Lawyers Pty Ltd Liability Limited by a scheme approved under the Professional Standards Legislation 13

Thank You Victor Hamit Wentworth Lawyers Pty LtdTel:(03) Liability Limited by a scheme approved under the Professional Standards Legislation 14