Changes to tax rules for charities

There have been some changes to the Income Tax Act this year relating to charities.

The first amendment was made to ensure that the net assets tax for deregistered charities also applies to non-registered entities exempt under section CW 42 of the Income Tax Act and which cease being “charitable”. The amendments also clarify that all entities that cease to be charitable must transfer their accumulated income and assets for charitable purposes or in accordance with its rules as contained on the Charities Register.

Other Changes

Another proposed change is the treatment of GST on sale of assets by charities. An issues paper, GST on assets sold by non-profit bodies released on 15 May 2018, set out proposals to clarify the GST rules for the sale of assets by charities and other non-profit bodies.

Proposal

The main proposal ensures that GST is paid on the sale of assets where input tax deductions have been claimed. This applies to insurance receipts and de-registrations, as well as asset sales. For not-for-profits who did not expect to pay this GST, the proposal allows a 12-month period in which GST input tax claimed can be repaid. The proposed changes will apply from 15 May 2018, with a savings provision to preserve tax positions taken before this. These changes will be made as part of a Supplementary Order Paper (SOP) to the tax bill currently before parliament.

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