Community Sheds are now tax deductible.
A new item 1.1.9 has been added to the list of Deductible Gift Recipients in subsection 30-20 (1) of the Income Tax Assessment Act 1997 (the Tax Act). The effect of it is that when the new item commences 1 October 2020, gifts to Community Sheds after 30 June 2020 will be tax deductible.
Not all community sheds will be tax deductible.
As usual, the devil is in the detail. In this case in the definition of community shed in subsection 995-1 (1) of the Tax Act.
Here are the details:
- There must be an Institution. The Australian Charities and Not-for-profits Commission explains its view of “Institution” in section 6 of its Commissioners Interpretation Statement on Public Benevolent Institutions (ACNC PBI CIS). In short it is an identifiable body that brings a charitable purpose into action.
https://www.acnc.gov.au/tools/guidance/commissioners-interpretation-statements/public-benevolent-institutions - The institution must be “public”. Again, see the ACNC PBI CIS section 4. “Public” has the colours of serving a significant group in the community and of accountability to the public for use of funds.
- The Institution must be a registered charity. That is, registered by the ACNC as a not for profit entity with an Australian Business Number, complying with governance standards and advancing a charitable purpose.
- The dominant purposes must be to advance mental health and prevent and relieve social isolation.
- The means of achieving the purposes is principally a physical location supporting individuals to undertake activities with others. There is no need for a shed.
- Membership must generally be open, although gender or indigenous status may be criteria for membership.
Who decides?
Unlike the DGR categories of Public Benevolent Institution (PBI) or Health Promotion Charity (HPC), Community Sheds are not listed as a subtype of charitable entity in section 25 of the ACNC Act. Thus, the ACNC can determine whether a community shed is a charity (presumably under the category of advancing social or public welfare), but the Australian Taxation Office will be the arbiter of whether it meets the requirements under the Tax Act.
Why would you want to?
The question remains, why would an institution want to be classified as a community shed under the Act when there are better tax concessions under the categories of Public Benevolent Institution or Health Promotion Charity? That is, exempt fringe benefits for employees not available to Community Sheds.
If a community shed has a dominant purpose of advancing mental health or preventing and relieving social isolation, it may be better off exploring the categories of PBI or HPC before Community Shed which carries lesser tax preferment. Bright, shiny, new, does not always mean better.