Delineating the Fiscal Borders of Australia's Non-Profit Tax Concessions

Abstract

Since the inception of tax exemption and tax deductibility for non-profit entities, Australian governments have made policy choices about where to draw the fiscal border for such concessions. The legislation states that entities entitled to these tax concessions must be ‘in Australia’, however the meaning of ‘in Australia’ has been subject to different interpretations over time. Judicial decisions have disrupted the Australian Tax Office’s (ATO) longstanding interpretation, resulting in measures to realign these decisions with government policy. Following a lapsed ‘in Australia’ Bill under one government and a languishing exposure draft by another, the ATO recently announced it would issue a public ruling. We examine the various interpretations of ‘in Australia’ to understand how the current misalignment between tax law and government policy came to be. Our findings uncover the precarious legal foundations underlying reform.

Keywords: Cross-border charity, deductible gift recipient, income tax exemption, non-profit tax concession, public benefit, public benevolent institution, tax deductibility

JEL Classification: K10, K30, K34