1. CPA Congress Tax for the public and NFP sectors Matthew Whittaker 20 November 2015

2. Page 2 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Agenda ► Compare/contrast not-for-profit and public sectors ► Snapshot of reforms impacting the not-for-profit sector ► Recent tax developments ► Risk based approach to tax

3. Page 3 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Compare/contrast NFP with public sector Not-for-profitPublic sector Income tax XX GST √√ GST concession √X FBT √√ FBT concession √X

4. Page 4 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Snapshot of reforms for NFP sector ► Tax discussion paper ► Chapter 7 – focused on NFPs ► Tax ruling TR 2015/1 on special conditions for tax exempt NFPs ► PSLA 2014/1 “Administration of penalties for failure to comply with Ancillary Fund Guidelines” ► Exposure draft law proposing to centralise and restate “in Australia” requirements ► Shift in funding models ► Workplace giving – an opportunity rather than a reform

5. Page 5 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Recent developments – FBT rates 2014-15 FBT year 2015-16 FBT year 2016-17 FBT year 2017-18 FBT year FBT rate47%49% 47% Type 1 gross-up2.08022.1463 2.0802 Type 2 gross-up1.88681.9608 1.8868 FBT rebate48%49% 47%

6. Page 6 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Recent developments – FBT cases ► FC of T v Qantas Airways Limited [2014] FCAFC 168 ► John Holland Group Pty Ltd v Commissioner of Taxation [2015] FCAFC 82 ► ATO ID 2014/15 – parking fees and meal entertainment ► ATO ID 2015/1 – skills training for staff being made redundant

7. Page 7 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Recent developments – FBT ► Proposed cap on meal entertainment ► Affects FBT exempt and rebatable entities ► Cap for meal entertainment and entertainment facility leasing proposed to be $5,000 ► Make salary packaged meal entertainment and EFL reportable ► Overseas postings and s23AG ► Overseas aid projects provided by Government

8. Page 8 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Recent developments – Third party reporting ► Tax and Superannuation Laws Amendment (2015 Measures No. 5) Bill 2015 ► Reporting of government grants paid to partied with ABNs ► Reporting of payments for services provided to government ► Reporting annually on 31 st day after the financial year ► Information related to “tax-related liability”

9. Page 9 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Recent developments – Superannuation ► Superstream ► 19 or fewer employees – 30 June 2016 ► 20 or more employees – 31 October 2015 ► CSS, PSS and PSSap – transitional agreement extends to 30 June 2017 ► Payslip reporting ► Treasury Legislation Amendment (Repeal Day) Act 2015

10. Page 10 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Risk based approach to tax ► Two key reasons for adopting a risk based approach to tax: ► Required under PGPA Act ► Limited resources can be used in the most effective way ► Governance tools available: ► Self-governance checklist for non-profit organisations ► Better practice guides

11. Page 11 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Risk based approach to tax – importance of proper systems ► Documented processes in place for compliance with the tax law ► New legislative requirement for Commonwealth entities ► “Duty to establish and maintain systems relating to risks and controls” – Section 16 of the PGPA Act ► Poor or no communication between departments ► IT  HR  Payroll  Tax  Finance  Business units ► Director penalty regime ► PAYG & SGC ► Who is responsible? Who is the relevant contact person?

12. Page 12 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Risk based approach to tax – outsourcing risk ► Can you make it someone else’s risk? ► Relying on third parties ► Example: car parking rates provided by external provider ► Salary packaging providers ► Ultimately the responsibility lies with the taxpayer

13. Page 13 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Risk based approach to tax – Digital ► “Digital” – does this really affect tax functions? ► Analytics tools and analysis of large volumes of data ► Electronic tools such electronic logbooks, declarations within systems

14. Page 14 Copyright © 2015 Ernst & Young Australia. All Rights Reserved. Liability limited by a scheme approved under Professional Standards Legislation Questions?

15. Thank you Matthew Whittaker E: matthew.whittaker@au.ey.commatthew.whittaker@au.ey.com T: (02) 6267 3977