Overseas Operations of Charities – ATO Draft Ruling

The Australian Tax Office (ATO) has recently released a new Draft Ruling on its interpretation of the legislative requirements that charities and deductible gift recipients (DGRs) operate ‘in Australia’. Charities that operate overseas or send monies overseas must comply with these requirements in order to obtain and maintain tax exemption and, for DGRs, tax deductible gift recipient  status

The Draft Ruling outlines the Commissioner’s proposed interpretation of the requirement that a tax exempt charity have a physical presence in Australia and incurs its expenditure and pursues its objectives principally in Australia. It also outlines requirements on DGRs,  that they be established or legally recognised in Australia and operate in Australia.

The Draft Ruling also provides a range of examples of what the Commissioner considers acceptable conduct, and conduct which would lead to loss of a charity’s tax exemption. The Draft Ruling also outlines the circumstances in which certain amounts, including gifts and some government grants, may be disregarded in determining whether a charity satisfies the ‘in Australia’ test.

We don’t anticipate that the Draft Ruling will significantly impact on the operations of Christian schools.  If any school has, however, established a separate entity to conduct international activities, mission trips or overseas student services for example, these entities may be affected.

A copy of the ruling can be viewed at the ATO’s website here.