David Van (Victoria, Liberal Party) Share this | Hansard source

I rise to speak on the Treasury Laws Amendment (2021 Measures No.2) Bill 2021. This bill makes a number of important changes to laws to implement reforms to the administration and oversight of organisations that have deductible gift recipient, or DGR, status, and it also delivers on the Morrison government's commitment to amend Australia's offshore banking unit regime to address concerns raised by the OECD Forum on Harmful Tax Practices.

The bill is made up of two schedules. Schedule 1 amends the Income Tax Assessment Act 1997 to require non-government entities to seek endorsement as deductible gift recipients to be a charity registered with the Australian Charities and Not-for-profits Commission, the ACNC, or operated by a registered charity. Ancillary funds and specifically listed entities will be exempt from this requirement. The requirement to be a charity already applies to the majority of the general DGR categories, and this measure will amend the special conditions applying to the remaining general DGR categories. The majority of the general DGR categories currently have a special condition requiring that the fund authority or institution be a registered charity or an Australian government agency or to be operated by a registered charity or an Australian government agency.

For the remaining 11 general DGR categories, these requirements do not need to be satisfied for the fund authority or institution to be entitled to DGR endorsement. These categories can include organisations on the Register of Environmental Organisations and the Register of Cultural Organisations. As charity registration is not a precondition for DGR endorsement for these categories, there can be inconsistent governance and reporting requirements for these DGRs. Making charity registration a precondition for DGR endorsement across the general DGR categories will improve the consistency of regulation, governance and oversight of DGRs whilst also reducing unnecessary compliance.

Fewer than 2,000 entities are expected to be affected by the changes. These amendments do not affect ancillary funds or funds specifically listed by name as DGRs. When the amendments take effect, DGR applicants generally must register as a charity with the ACNC before applying for DGR endorsement. In practice, there will be a streamlined process to allow DGR applicants to lodge a single application with the ACNC seeking charity registration and indicating their intention to be endorsed as a DGR. Once the ACNC is satisfied that the applicant is entitled to be registered as a charity, the ACNC will pass on the necessary information to the Australian tax office to assess the applicant's entitlement to DGR endorsement.

To be eligible for registration as a charity with the ACNC, the entity must: have an Australian business number, an ABN; be able to demonstrate its charitable purpose and not-for-profit character through governing documents or other means; provide the details of people responsible for the governing entity; have only charitable purposes or purposes ancillary to charitable purposes; provide other relevant information periodically such as financial information; be able to demonstrate compliance with the government's standards and external conduct standards if applicable; and, importantly, not be covered by a decision in writing made by an Australian government agency under an Australian law that provides for it to be characterised on the basis of it engaging in or supporting terrorist or other criminal activities. The schedule also amends the definition of 'environmental organisation' and 'cultural organisation'. These amendments provide that a fund, authority or institution must be registered to be listed on the Register of Environmental Organisations or the Register of Cultural Organisations.

Schedule 2, as I said earlier, looks at the offshore banking units regime. It addresses the concerns of OECD and European Union countries about offshore banking or the OBU regime. Action to amend the OBU regime to remove the effective concessional tax rate is necessary to avoid future sanctions that would have adverse outcomes for Australian financial markets. The existing OBUs can continue to access the concessional tax rate for the next two income years to ensure a smooth transition process. The OBU regime is closed to new entrants.

I commend the bill to the Senate.