While we have many not for profit charities operating here, one has to question their legitimacy when they start to accumulate assets with their tax free dollars, which effectively means for every asset they buy (bricks and mortar), that's one less asset available to the normal tax paying individual/entity, effectively limiting the number available, a situation that can inflate market prices.

So my question is, should not for profit organisations be allowed to accumulate assets when those assets are purchased with tax free income.

Good point Rehctub.
We should start with the various religious organizations like the Catholic Church, who is one of the richest organizations on this planet!

Actually identify a particular asset? Is there any individual who actually benifits who does not pay tax?

Aren't those of the Catholic Church required to live by a vow of poverty ? Yet they possess real estate all over the world, worth trillions of dollars ? I'm not condemning their church nor their religion, it's just they may consider perhaps converting some of that real property to better use ? Such as building hospitals, encouraging medical Doctors to practice in the more socioeconomic areas of the world ? I'm sure they'd not miss say 10% of their total wealth ? The same could be said for the Anglicans, another Christian faith with massive real property assets in the western world at least ?

Less talk from the pulpit, more demonstrative actions, with their cheque books ! Is not charity the corner stone of Christianity ? I believe the Church would accumulate many more churchgoer's, if only the Church would substantially increase their financially support for some of the world's poorest people ? Moreover, it would work against much of this evil propaganda circulated by many of these boofheaded Islamic extremists ! Furthermore, don't actions speak louder than words ?

Dear rehctub,

I'm not sure what the rules are for non-profit
organisations concerning the accumulation of assets.
You might want to contact the Taxation Department.

However you ask - at what point is a not for
profit organisation considered a business? I guess
when they stop qualifying as a charitable organisation.
Again certain criteria and rules are set in place-
and need to be looked into. Most non-profit organisations
are run by a Board of Directors - not personal ownership
of the organisation - and other conditions apply - which
I suggest you Google.

cont'd ...

The following link may help:

http://www.australia.gov.au/topics/business-and-industry/abn-acn-business-management/non-profit-organisations

Dear Foxy,

Rehctub asked a moral question (to which I have no clear answer so I did not reply).
How possibly could a legal investigation answer moral questions?

Dear Yuyutsu,

A not for profit organisation in order to
continue with its tax exemptions has to
meet certain legalities (morals aside).
And therefore it isn't a question of morals
as such - but legalities, whether or not
it still qualifies as a not-for-profit
organisation or not.

Dear Foxy,

Rehctub asked about how things OUGHT to be, in the future: "should not for profit organisations be allowed to accumulate assets when those assets are purchased with tax free income?", which is a moral question - not about how the law stands now.

Dear Yuyutsu,

The laws would still apply in the future.
Unless they are gotten rid of - which I don't see
happening. You see it as a moral issue.
I see it primarily - as a legal one.

Most Christian Churches run hospitals and health clinics around the world. Health clinics especially in third World Countries because of shortage of staff to run hospitals, but hospitals do exist. They run schools and universities in many countries.

Of course there are those here that believe Churches schools should be seated under trees and not in buildings. The Church I attend support teachers in Cambodia, schools and tech training in Nairobi under basic shelter. Yet the mean minded want to tax churches who support such development in third World countries.

Josephus, if churches are so generous in the third world as is claimed, ( not spending NGO funds on behalf of first world Govts) then why don't they come clean and open their financial books, so we all know exactly what happens to the money.

I seem to recall that Cardinal Pell has gone to Rome to clean up the mess which is Vatican accounts and it seems hundreds of millions are missing. The Vatican is an enormously wealthy organisation, why should we contribute even more to their piggy bank by granting them tax free status on their Australian income? As far as I know, their hospitals here don't operate for nothing, but typically charge 900$ a day for a bed. How much of that is tax free profit, we really don't know.

Yabby,
They do have to provide a financial statement to the Government.
http://exwwwsvh.stvincents.com.au/index.php?option=com_content&task=view&id=331&Itemid=355

Josephus, there is no report there as to what the Catholic Church does with its profits in Australia and how much profit they make on all their real estate holdings etc. Those are not accounts.

Owning a church or place of worship is one thing, but when the likes of churches compete in the open market for real estate, it's my belief that they have stepped outside of their protected tax free haven.

Individuals can donate to the likes of churches, and claim the tax write offs in doing so, then benefit from the use of say a holiday complex, purchased by the church. So in effect these individuals, and their families, can then holiday in very popular destinations, rent free, which an individual who's company owns a similar asset can't.

I say any asset acquired over and above the principle place of worship is an investment and as such should be treated with the same level of scrutiny as any other tax liable entity. Furthermore, in the event that such an asset is purchased, with tax free money, then the tax that would have been paid by a non exampt entity, should first be paid, with indexation, prior to, or as part of the process,, thus placing the church and all other interested parties on a level competitive playing field.I would also suggest that any asset aquired with tax free dollars should not be allowed to be used as security for borrowings out side of what's used to improve the asset, as this again offers a competitive advantage in the open market.

Once acquired, these assets and their use by owners, in this case members of the church, should then be subject to laws as per any other legal transaction.

At present, these assets, acquired with tax free dollars, are often rented out to the likes of schools, which generates more tax free income, providing further competitive advantages to the churches in the open market.

This is why I say it's a business.

rehctub, What absolute misinformation. Gifts to Churches is not tax exempt! We are having a Church camp next month and it is costing us normal off-season fees which is normal for Feb - March. If you believe this stuff no wonder you hold the opinions you do. Get the facts!

Lots of Churches use Public School assembly halls on weekends and pay rent for the use which benefits the school.

Any other organisation like Clubs does not raise your ire it is merely because of your attitude toward Christianity.

Josephus, my views on christianty you say. My views are that if people wish to worship some mythical being, that's their given right, just like those who believe their are space ships hovering above us just waiting to pounce. It's their given right to do as they please, provided they do not inter fear with others in doing so and this is where they cross the line, because they are taking tax free dollars, and competing for assets in the open market with tax layers. They are gaining an unfair advantage. Not only that, but I'm assuming that if they were to sell that asset for a considerable profit, I doubt that profit would be taxable, which means that 100% of their gain could be used to secure yet more tax free assets, creating even more of an unfair advantage.

By all means spend your tax free dollars on your church, but anything else should be treated as a business transaction and subjected to the same laws as all others.

As for donations, if you donate to any charity, used to be $2 or more, it's tax deductible. It's when that tax free money is used for commercial gain that the charity has stepped outside of it's tax free haven in my opinion.

These churches have multi million dollar parcels of lreal estate, often in prime positions, Caloundra and Coolum Beach are two that come to mind. When these prime pieces of real estate are used to generate income, then that income, which is tax free, is used to secure even more real estate, it's a business in every sense of the word.

Church-owned land is typically untaxed (no rates). Some most spectacular sites were simply given free. When a church organisation buys an additional block, the council does without the rates from that block. When one considers inner city church schools, one sees immediately that that many millions in rates are not collected, on sites that extend far beyond the original establishment but serve an exclusive few.

Rusty

rehctub, The Church are the members who meet in buildings. Every honest member of a church has paid tax on his / her income and there is no charitable exemption on their income. The members have paid tax on their income.

Too right Rusty, and what's more, that exclusion site is no longer available to a pax paint entity for purchase, which generally means the prices for remaining lots are inflated due to lower supply. What happens in the church should stay in the church.

Joseph, are you suggesting that a donation of more than $2 for a charity is tax deductible, yet one for a church is not?

God I hate spell check!

rehctub,
The Church is the people who pool their resources to build buildings for services, there is NO charitable exemptions given to members who choose to contribute to its funding. Members have paid tax on this money as income. Churches own a very small proportion of and town development. What puts the price of land up are developers, location of shopping centers, Clubs and transport hubs. Most Churches today prefer to buy land out of town to allow development and parking. In the Canberra development there was only one area in each suburb allocated for a Church building. This was done at the planning stage and was not done by any Church. They were located nearby to town Centers because of parking.

Josephus, I think you are forgetting what would be one of the main income streams for churches and that is legacies. I read on one American Catholic website the claim that "you can take it with you" by leaving it to the Church!

Now think about how many people have no children, it is quite a large% of the population. Catholic palliative care is a large industry, with many a believer hoping for a ticket to heaven, so income from legacies is how the churches accumulate so much real estate and such valuable real estate.

Yabby, perhaps your parents might leave you a legacy after probate, any gifts given by a member to the common good of members is not exempt from probate. Should you also then pay tax on that as income?

Josephus, I personally don't have an issue with probate, as long as it is reasonable, as I think taxes should be many but at a lower rate, rather than a few high ones.

That said, I think that everyone except a spouse should pay probate and that includes legacies left to the churches, which are now free of probate.

Yabby,
The legacy left to a Church is to a Charity and not to the administration of member. The charity is run by a Board of directors; responsible to the Government. The Charity comes under laws governing Charities, and Churches are not exclusive in running Charities.

Your pursuant of getting tax from Church Charities will affect all Charities not just Church run. The attitude reeks more of antagonism to Churches rather than to honest gaining taxes from Charities. Some Charities have highly qualified staff who receive taxable payment for services others run on volunteers. You would not be happy for Charities run by volunteers, because no one pays tax. You see its not about getting tax from registered Charities; it is antagonism toward Churches.

Josephus, I have always maintained that running a church is an extremely good business. I can sell people their tickets to heaven and never have to actually deliver. Any other business doing the same, would be nailed by the ACCC.

How much of the money donated to churches is actually used for charity work and how much is siphoned off, for the benefit of church leaders and is salted away in the Vatican Bank and other banks, sadly we will never know. IMHO those figures should all be published and churches made publicly accountable.

Josephus, would you agree that money raised in a church, which is then used to purchase real estate, that is then used to generate income, is in fact a business, and should be taxed like any other business.

Now if you don't agree, then what is your justification for churches to increase their wealth and real estate holdings under a tax free environment.

As I have said many times, what happens in the church should stay in the church. And expansion of the church and improvements on the church grounds to me is fine, but the purchase of additional land/buildings is stepping outside of their tax free umbrella in my view, especially when that asset, be it a hall, school of holiday camp, all of which charge a commercial fee, is a business, not a charity.

I say this because one, they are competing for that asset on the open market, with tax free dollars, and two, they are generating a tax free income from that asset, meaning for evey $100,000 in profits generated, they have an additional $30,000 that a normal tax paying entity would have. Furthermore, as many of their staff are actually volunteers, they gain an additional advantage because a commercial business is not allowed to engage the services of a volunteer on a regular basis.

For all accounts they are a business in my view and their incomes and tax liabilities should be treated as such.

rehctub,
What are you talking about no Church charges fees or provides an invoice to its members. What business are Church Members conducting in Their services? Give examples! Money given in offerings rarely meet the expenses of running the Church; average offerings is about $5 per head. From that all house expenses are paid and the minister receives his stipend. Sometimes fees are charged for parties, weddings, and funerals to persons using the building facilities to cover running cost and insurance.

Give examples of all this business money being exchanged among members that could be taxable.

Josephus, you are now trying to divert the thread, so answer the question if you would please.

As for your comment on a church barely meeting costs, where then does the money come from to secure real estate holdings?

Requirement one is security. Requirement two is the ability to service the debt.

Now if the assets are purchased 'debt free' then they must be done so with donations, and donations, especially larger ones, are tax deductible are they not.

The Churches I have attended have used public buildings and school halls and where they have their own buildings the funding has come from wealthy underwriters. This then is to be paid back by the local members with interest over the period of the loan. Interest is at standard levels usually on a fixed rate. I have never known purchases of land by Churches to affect increases in property, it is usually the opposite as noise and off-street parking becomes an issue.

The Church I currently attend has purchased a disused quarry and restored the land. Our buildings get used for many community events, with a section given to the "Men's Shed" who have to raise their own funding for buildings. The Church makes no income from the Shed, but rather covers their liability insurance because it is on their property. The Shed serves about a membership of 105 members of which about a dozen are members of the Church.

One building of the church equipped with multiple power outlets is used by over 40 ladies quilting club who pay a small fee for the use of electricity etc. It is not an income it is a reimbursement for expenses.

Income or no income, it is still tax free and, it competes with other tax paying businesses who no doubt would like to rent their premises out.

If a business were to have the same arrangement, discounted space for let, even to cover costs, they would first pay 30% of that revenue in tax for any amount over and above costs whereas the church, offering the same let able space, does not and, it's when those tax free dollars are used to secure yet more assets that the line is crossed between a charity and a business. While your church may not be wealthy, some churches control casts amounts of wealth, accumulated through tax deductible donations and tax free income.

As for your wealthy underwriters, many businesses operate under similar arrangements, the main difference being that they have to pay tax on their profits before repaying their loans because while the interest may be deductible, the capital is not and as such must be repaid with after tax dollars. A point that again strengthens the argument that a church, that can secure funds to purchase additional assets is a business and as such should be treated as one, not a charity.

At the end of the day a charity is meant to raise funds to assist others. When these funds raised are then used to secure additional assets, it's my view that the cease being a charity because the donated funds are nit being distributed to the needy, they are being used to increase wealth.

rehctub,
You talk a lot of absolute mean community nonsense so I suggest you become an auditor of Church income and see how much tax can be collected from Churches. Try the surf lifesaving Society, and the Scouts as well, they each solicit income.

Yes Joeseph they are also what I would consider a business, not the SLS club, but most certainly the club house, although I suspect income from their food, grog and pokies would not be tax free.

Besides, it's not so much the church I am referring to, it's the businesses they operate under the banner of the church that I feel is of concern

Il ask you again, what justification do they have to run what is obviously a business that does not have to pay tax because they are operating in a competitive market, with a definite advantage. Not all, but some.

rehctub,
If you consider Churches businesses then do not patronize them. Go somewhere where you will pay to the Government tax.

Joeseph, just like you choose to worship some mythical being, I choose not to although both our children attended private Christian schools and church regularly. I attended as well on several occasions, for the benefit of my children because I was of the opinion that the best I could do was to introduce them to the church, then let them decide for themselves once the reached adult hood.

However, this topic has nothing to do with patronizing a church, it has to do with how a church, or any other charity for that matter uses it's tax free income because people like my self also miss out on public taxes if the line is crossed between charity and business.

All you are trying to do is divert the thread so as to avoid the question. So just answer the question, or, is this yet another case of a thread ending due to the defenders of charities not wanting to enter real debate about their ligitimisy as a charity.

It's a simple question, what is the justification for a charity being able to use tax free dollars to secure income producing assets?

A business can't do it, nor an individual, so why a charity?

I should also remind you that I have no problem with what happens within the church, it's outside that my concerns lie.

Churches are not registered Charities. Charities run by a board of directors under a Churches name are there to assist the poor or disabled. Lions, Rotary are Charities similar to Church established Charities.
The question should be asked, gifts to the poor should they be taxed? Charities like Lions and Rotary often raise tax free money for community projects should they pay tax?

The whole proposal to tax Charities reeks of a spirit of meanness and not community. There is an underlying antagonism toward Church charities. All Charities are answerable to the Government to retain their Charity status. Ask are they improving condition in the community, or merely serving themselves?

Joseph, another diversion.

What happens in the church is not the issue, the issue is when they use tax free money to acquire income producing assets.

Are they still a church/charity, or are they a business?

rehctub, Church buildings have never been considered a Charity, or a business, they are the project of members of a group who pool their already taxed income to house themselves for meetings and services. There are no fees for entry. There is no legal financial transaction between members and the body of members. Members make voluntary donation toward the upkeep of the buildings and resources. However within membership there are groups that raise money for charity, and these Charity groups are answerable to Government to retain their charitable Status.

Unless you can give examples of competing businesses run by Churches competing with open market then you are wasting your time and mine.

Joeseph, check the ad on page 7 of the thread, above your last post, it says, make a tax deductible donation to a charity before June 30. How ironic.

Now, it's what that charity does with those tax deductible donations that in my opinion determines whether they are acting as a charity or a business.

It truly is that simple.

rehctub,
Identify what businesses are receiving tax free dollars?

Il give you a common scenario Joeseph, and il use a church as an example, simply because it's comon practice.

A church often starts out as land gained through a government grant. The member then work very hard with fund raising to be able to build their church.

They then collect donations, and hold fund raising events along the way, all of which is considered tax free income, and rightly so.

So then the church finds its self in a position to secure additional land to build a venue that is commonly used as a school camp, or for social groups, as these types of venues commonly have a hall, a kitchen and dorms.

It's is this type of activity, whereby the funding used to purchase the venue was tax exempt because they were a charity.

So, when they purchased this asset, they did so on the open market, which meant other tax paying entities may have been competing for the same asset.

Then there is the situation whereby a wealthy church member, (while stil alive) gifts the asset to the church, and the church then proceeds to utilize this asset as an income producing asset.

So the income from this asset is also tax free and over time this tax free income can be used to secure yet more tax free income producing assets, albeit over a period of many years.

So this is why I ask, is this stil a charity, or is it now a business.

If it's stil a charity, then there is a definite competitive advantage over a tax paying entity running a similar business.

So as I say, I don't have a problem with a church generating tax free income within the church, my problem is how they use thiese tax free dollars and why they are given a commercial advantage.

Can you justify a charity having this advantage, if so, how?

From my experience Church Camp sites have been:
1. privately owned and developed with private money especially for children and youth holidays. The person has had to pay tax on their income.
2. Owned by a group of Churches for those Churches to have group holidays together, and for conferences.
3. Owned by Children's home in the 1960's for their school holidays and let to others for group bookings.

Currently our Church uses Caravan and National Parks so we can change venues.

So Joeseph, all the above appear to be businesses for the purpose of earning an income. So do theypay tax on the income, or, if they are a charity is the income tax free.