BACKGROUND
Until recently, SES units were eligible to be registered as a charity and administered by the Australian Charities and Not- for-profits Commission (ACNC). Not-for-profits (NFP) registered with the ACNC and endorsed by the ATO as income tax exempt are eligible for income tax exemption. The ineligibility to register as a charity means that SES units are taxed as companies and may have to pay income tax.
AREN’T SES UNITS PUBLIC BENEVOLENT INSTITUTIONS (PBI)?
The ATO advises that the ACNC is responsible for determining PBI status. The ACNC registers organisations as charities, including particular types of charities such as PBIs. The ATO accepts that an organisation is a PBI if it is registered by the ACNC as a PBI. But the ACNC has already ruled that SES units cannot be registered as a charity with the ACNC. Nevertheless, the Australian Business Register, which is administered by the ATO, shows WA SES units are recorded as “Public
Benevolent Institution”. Confused?
ANNUAL REPORTING
As part of its 2022 Budget measures, the Australian Government announced changes to the administration of non- charitable not-for-profits (NFP) entities that self-assess as income tax exempt. Subsequently, in August last year, the Australian Taxation Office (ATO) announced that from the 2023-24 income year, NFPs with an active ABN will need to lodge an annual return.
SES units are NFPs but do not meet the registration requirements of the ACNC. They are therefore not eligible to self- assess as income tax exempt.
HOW MUCH TAX WILL SES PAY?
Generally, the SES unit governing document (i.e. its Constitution) prohibits it from making any distributions, whether in money, property or otherwise, to its members. It is therefore an NFP company.
An NFP company with taxable income of:
- $416 or less a year is not required to lodge a tax return and will need to notify the ATO of a Return Not
- more than $416 a year is required to lodge a tax return for that
WHAT IS THE TAXABLE INCOME OF AN SES UNIT?
Any income of an SES unit will be taxable income unless exempt income. Interest, donations (in money or goods) and sales of goods, sausage sizzles and other fundraising activities are examples of income.
WHEN MUST A RETURN OR NOTICE BE LODGED?
Either a company income tax return or a ‘Return Not Necessary’ needs to be lodged between 1 July and 31 October 2024.
DFES RESPONSE
DFES was contacted for comment on this topic and directed the SESVA to the Volunteer Hub where it provides taxation advice under the heading “Commonwealth taxation status”.
https://www.volunteerhub.dfes.wa.gov.au/home/toolboxes/administration/finance-and-funding/taxation- information#Commonwealth-taxation-status
On that page is the statement:
“… the Australian Taxation Office (ATO) has provided taxation advice that all WA brigades, groups, and units can self-assess their income tax exemption status as being a government-like entity, specifically a public authority constituted under Australian law.”
This DFES advice pre-dates the recent ATO announcements referred above. However:
- There is no known public or class ruling to that effect for WA
- SES units that are unincorporated are not constituted under Australian
CONCLUSION
The recent ATO announcement has prompted the SESVA to call for a review of the Federal income tax obligations on SES units and to consult the SESVA accordingly. There may also be wider implications for other volunteer FES units. Taxation is a complex area of law and imposes an unacceptable administrative burden on SES units. SES unit committees of management should consider their individual unit circumstances and seek appropriately qualified taxation advice.
Submitted by SESVA Vice President Alan Hawke
