‘Potentially billions’ of dollars unreported due to religious charities’ exemption

Si Gladman / 20 December 2022

Evidence given to the Senate estimates hearings last month underscores the need for an inquiry into the operation and scope of the tax exemption for entities claiming to be religious, says the Rationalist Society of Australia.

When asked whether there were “potentially billions” of dollars going unreported, with ‘basic religious charities’ exempt from submitting financial reports to tax authorities, an official from the Australian Charities and Not-for-profits Commission (ACNC) responded: “That’s correct.”

Under laws passed in 2012, basic religious charities – which qualify for charity status solely for ‘advancing religion’ – do not need to lodge financial details or comply with other governance standards required of other charities.

In September, RSA president Dr Meredith Doig wrote to charities minister Dr Andrew Leigh, arguing that there was public interest in having an inquiry into the operation and scope of the tax exemption for entities claiming to be religious. 

She said such an inquiry should give consideration to the appropriateness of exemptions from financial reporting for basic religious charities. Also, it should examine: whether it would be appropriate to remove the ‘advancement of religion’ from the charity subtypes; whether any commercial operations should be eligible for this exemption; and whether there should be a requirement that religious organisations demonstrate public benefit – as exists in the United Kingdom – rather than this being automatically presumed.

At Senate estimates last month, Greens Senator David Shoebridge told representatives of the Australian Taxation Office and the ACNC that it was a “fraught environment” to have billions of dollars moving through the economy with almost no reporting to taxation authorities.

Officials from the ATO confirmed for Senator Shoebridge (pictured) that there were no limitations in regards to the volume of money or the size of the charity for the use of the basic religious charity exemption.

The ACNC noted that 8,210 basic religious charities provided an annual information statement in 2020, but 7,719 utilised the exemption in relation to providing financial information.

In 2018, Robert Fitzgerald AM, a former commissioner from the Royal Commission into Institutional Responses to Child Sexual Abuse called for the exemptions to be scrapped, saying they sent a “poor signal” to the wider community that some charities deserved special treatment simply because of their religious status.

In response to the RSA’s letter in September, Dr Leigh said the Albanese government had committed to developing a charity sector blueprint and strategy to boost giving. He said that, during those processes, the government would be able to consider “proposals that support our valuable community building charities”.

Dr Doig had also pointed to numerous media articles from recent years about alleged taxation evasion involving religious organisations, including Church of Scientology, the Mormon Church and Hillsong.

In his response, Dr Leigh acknowledged the “concern that some organisations might be inappropriately accessing income tax and other tax concessions available to charities”, and said such concessions should only be available to those pursuing charitable purposes.

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Si Gladman is Campaigns & Communications Coordinator at the Rationalist Society of Australia. You can contact him at sigladman@rationalist.com.au or follow him on Twitter at @si_gladman

Image: David Shoebridge(Facebook)

All the more reason.