Contributed by Frank Hinoporos, Partner, Rachell O’Donnell, Special Counsel, Todd Bromwich, Lawyer and Tamara Charlwood, Graduate Lawyer, Hall & Wilcox
The 2019/20 Australian bushfires have prompted an outpouring of support throughout Australia and around the world. It’s easy to see why, considering the extent of the economic, environmental and personal devastation they have caused.
The Federal, Victorian, New South Wales and South Australian governments have now announced a raft of tax relief measures to ease the pressure on individuals, families and businesses affected by the bushfires. These measures are outlined below.
We also discuss the Australian framework for the tax deductibility of donations to certain organisations and the position internationally.
Providing support – it’s not taxing
In Victoria, affected communities will be given access to the following concessional measures, similar to those provided in response to the 2009 Black Saturday bushfires:
- If a taxpayer’s property was destroyed or substantially damaged, they may seek ‘ex gratia’ relief (ie a waiver of their debt) from their 2020 land tax in relation to those properties.
- Taxpayers’ 2021 land tax will also be waived if they own a property that is used for more than six months to provide free accommodation to people displaced by the bushfires. If it is used for more than one but less than six months, land tax will be reduced proportionately.
- If a taxpayer’s property was destroyed and they purchase a replacement home (or vacant land for building a home), they may access stamp duty relief capped at $55,000. This can be claimed in the next four years.
- 50% reduction of land transfer duty on the purchase of commercial or industrial property in the local government areas of East Gippsland, Mansfield, Wellington, Wangaratta, Towong and Alpine for contracts of sale entered into from 27 January 2020 to 30 June 2023 (inclusive). After this date, the 50% concession becomes available across “regional Victoria” (as the current concession available for commercial or industrial property in all of “regional Victoria” progressively increases).
- If taxpayers lost motor vehicles in the fires and they replace them, they can seek to have the motor vehicle duty on up to two vehicles reduced by up to $2,100 (not available for companies). This must be claimed before 1 April 2022. After two replacement vehicles, relief may be considered on a case by case basis.
- Payroll tax will apply at the reduced rate of 1.2125% (half the current rate) for “regional employers” in East Gippsland, Mansfield, Wellington, Wangaratta, Towong and Alpine for 1 July 2019 to 30 June 2022 (inclusive). After this date, the reduced rate will apply across “regional Victoria”. Relief will be considered on a case by case basis for affected employers outside these local government areas.
- The Victorian State Revenue Office has temporarily suspended the issuing of land tax assessments in “affected postcodes” in Alpine, Benalla, East Gippsland, Indigo, Mansfield, Moira, Snowy Valleys, Towong, Wangaratta and Yarra Ranges.
With the exception of the reduced stamp duty rate and payroll tax rates, these measures should be available immediately as they are being provided in the form of ex gratia relief and do not require legislative changes to take effect. However, taxpayers should be aware that these waivers may not be applied to them automatically. The reduced stamp duty and payroll tax rates will not come into effect until the Victorian parliament passes legislation to this effect. Taxpayers are encouraged to contact the Victorian State Revenue Office for further details and assistance.
New South Wales measures
In New South Wales, people affected by the bushfires will be given access to the following concessional measures:
- Lodgment dates and payment deadlines for NSW taxes, duties, grants and royalties may be extended. This may include time limits for lodging objections.
- Interest may not be charged on taxes, duties and royalties that are due and payable and arrangements can be made for payment of debts by instalments.
- The collection of fines and debts payable by people in bushfire affected areas will be temporarily halted and payment deadlines may be extended.
- If a motor vehicle was written off in a declared natural disaster, the owner may apply for a refund of motor vehicle duty paid on a replacement vehicle.
- Wages may be exempt from payroll tax if they are paid to an employee while they are absent from work and unable to perform work duties as they are carrying out emergency operations related to the bushfires. Revenue NSW has indicated outlining involvement with a letter to either the Rural Fire Services NSW or the NSW State Emergency Service which can serve as evidence for the exemption. Payments should be recorded as “emergency services leave”.
- Driving sanctions and Work and Development Orders may be lifted or placed on hold if Revenue NSW or the relevant Work and Development sponsor is contacted.
Again, these measures should be available immediately but may not be applied automatically. Affected parties are encouraged to contact Revenue NSW.
South Australian measures
The South Australian government has announced the following tax relief measures and waivers to assist people affected by the bushfires:
- If taxpayers were directly impacted by the bushfires, they may seek ‘ex gratia’ relief (ie a waiver of their debt) for 2019/20 and 2020/21 land tax liabilities, and a refund of 2019/20 land tax liability. This will depend on the extent of the damage to their property.
- If property was destroyed and replacement property is purchased, stamp duty relief of up to $48,830 may be available. Duty relief will be capped at $48,830, and the balance of the duty will be payable for replacement properties valued above $1 million.
- If registered motor vehicles were destroyed in the bushfires, registered owners can apply for a refund of the unexpired registration and other components of the registration (such as the CTP premium, Lifetime Support Scheme Levy and Emergency Services Levy).
- If a replacement motor vehicle is purchased, owners can apply to have the duty reduced by up to $1,940 for a passenger vehicle or $1,470 for a commercial vehicle. The Registrar of motor vehicles may also waive the administration fee on the registration of replacement motor vehicles.
- If a driver’s licence was lost or destroyed as a result of the bushfires, Service SA may waive the administration fee for replacement drivers licences. Fees may also be waived when purchasing replacement copies of births, deaths and marriages certificates if these were lost or destroyed in the bushfires.
- Collection of Emergency Services Levy debts will be placed on hold.
Again, these measures should be available immediately but may not be applied automatically. Affected parties are encouraged to contact RevenueSA.
Other states and territories
Similar announcements have not yet been made in other states and territories. Despite this, if taxpayers have been impacted by the bushfires in other States, they may be able to seek an extension of their lodgment or payment due dates, or ex gratia relief in relation to existing debts.
The ATO has announced it is granting automatic deferrals for tax lodgements and the payment of tax debts by persons living in postcodes identified as being impacted by the bushfires (the announcement includes a full list of affected postcodes). The ATO’s Emergency Support line is also available for those impacted by the bushfires, regardless of whether they reside in one of the unlisted postcodes.
Importantly, these deferrals do not exempt taxpayers from paying their debts or making required lodgements, they simply defer these obligations to a later time.
In addition, the Treasury Laws Amendment (2019-20 Bushfire Tax Assistance) Bill 2020 was introduced into parliament on 5 February 2020 and passed by both the House of Representatives and the Senate the following day. The Bill currently awaits assent and includes amendments to make government support payments to volunteer firefighters and all relief and recovery payments and benefits in relation to the 2019/20 bushfires tax exempt.
Affected payments include payments of Disaster Recovery Allowance relating to the bushfires and payments by the states or territories relating to the bushfires under the Disaster Recovery Funding Arrangements 2018. These amendments will apply retrospectively to the 2019/20 income year and to later income years.
Claiming a tax deduction in Australia
Australians can claim a tax deduction for a donation of cash of $2 or more made to an organisation that is endorsed by the ATO as a Deductible Gift Recipient (DGR). There are many different types of DGRs including Public Benevolent Institutions like the Australian Red Cross Society, or organisations established to prevent or relieve the suffering of animals like Wildlife Victoria Inc.
The Australian Business Number register allows potential donors to check whether an organisation has DGR status and the date at which they obtained this status. Importantly, if the organisation does not have DGR status when a donation is made, a tax deduction cannot be claimed (unless the organisation subsequently obtains DGR status and has the endorsement apply from an earlier date).
Included in the Treasury Laws Amendment (2019-20 Bushfire Tax Assistance) Bill 2020 is an extension of DGR status to two new charitable trusts, the Australian Volunteers Trust and the Community Building Trust.
A common complaint of donors is that they don’t know how donations will be applied and indeed, to what degree those donations are depleted by the DGR’s administrative expenses. It is important to note that DGRs are subject to oversight by the ATO and (usually) the Australian Charities and Not-for-profits Commission (ACNC). They are restricted to applying their assets and income toward the approved purpose or purposes for which the organisation was established and is maintained, and all expenses must be consistent with that.
While many charities publicly share the stories of their charitable works, a more detailed view of how a charity manages the donations it receives can be obtained by looking them up on the ACNC Charity Register. Registered charities are required to lodge an annual information statement and, depending on their size, may also be required to lodge audited financial statements. These documents are made publicly available on the ACNC Charity Register.
…but what about our friends across the globe?
It is important to note that the above rules only apply to provide Australian taxpayers with a deduction that may be claimed to reduce their Australian tax. If tax is paid in an overseas jurisdiction, it should be kept in mind that whether or not a tax deduction can be claimed will depend on the entity to whom the donation is being made and the laws of the country in which tax is paid.
Ordinarily, if a taxpayer resides and is taxed in a foreign jurisdiction, they will likely not be able to claim a tax deduction for a donation made to an Australian DGR. This will depend on the tax laws of that particular jurisdiction and advice should be sought before attempting to claim such a deduction.
Alternatively, individuals may be able to make a donation to a charity established in their local jurisdiction that provided financial or non-financial support to an Australian-based organisation. For example, the approach in the US is similar to that in Australia. A donation will be deductible in the US if the organisation receiving the donation has been granted tax exempt status under s 501(c)(3) of the Internal Revenue Code.
There are, of course, restrictions on a US-based organisation’s ability to distribute funds or provide goods and services to Australian-based organisations for the purpose of assisting with natural disasters like the 2019/20 bushfires. This reflects the Australian position, whereby the organisation will be restricted to applying their assets and income toward the approved tax exempt purpose or purposes for which the organisation was established and is maintained.
If a tax exempt organisation established in the US intends to make a distribution to an organisation in Australia, then the Internal Revenue Service (IRS) must be notified of the Australian organisation’s details and the intention to distribute funds to them. The US-based organisation must also satisfy the IRS that distributions to those Australian organisations do not compromise their ability to achieve their approved purpose, and they must notify the IRS of any procedures put in place to ensure that distributions are applied properly and responsibly.
Supporting affected communities
To support to impacted communities, Hall & Wilcox are taking part in a coordinated pro bono response to the bushfire emergency by Justice Connect, Disaster Legal Help Victoria, Legal Aid NSW, Victoria Legal Aid, the Law Institute of Victoria and the Law Society of NSW. Hall & Wilcox have also pledged $10,000 to the Australian Red Cross Society to support their fantastic work in assisting Australian communities impacted by the bushfires.
[This article was published in CCH Tax Week on 7 February 2020. Tax Week is included in various tax subscription services such as The Australian Federal Tax Reporter and CCH iKnow. CCH Tax Week is available for subscription in its own right. This article is an example of many practitioner articles published in Tax Week.]