SERVE  INDONESIA  INCORPORATED
ABN 71 728 513 615
		Secretary & Public Officer: 	Malcolm  Young
						2 Dilga Close
						BANGOR,   NSW							AUSTRALIA  2234
										Ph. 02 9543 4565
10TH August, 2011

Attention: Manager
Philanthropy and Exemptions Unit
Personal and Retirement Income Division
The Treasury
Langton Crescent
PARKES 
ACT                       2600

Dear Sir/Madam,

Submission regarding:

Exposure Draft – 
‘In Australia’ Special Conditions for Tax Concession Entities

SERVE INDONESIA INC 

SERVE INDONESIA INC is a not-for-profit organisation whose aim is to ensure that the disadvantaged in Indonesia are assisted. The Australian workers engaged by SI focus on local Indonesian communities for the following community development activities:

• Health and hygiene – training locals, establishing medical
    clinics, provision of essential healthy food and clothing
• Social development – literacy and language skills
• Vocational – skills training
• Community – community centre and social skills development

In this regard, a local community agency of SI has been established in Bali with its aim to provide mentoring and accountability to the local Indonesian people so they can ultimately take control of the above activities. This will allow the SI team to move on to another location within Indonesia. Currently, the benefits extend to more than 150 Indonesian adults and children each week. 

CONCERNS

Professional advice suggests that the Exposure Draft will have the following impact on SERVE INDONESIA INC:

1.	Loss of income tax exempt status 

SERVE INDONESIA INC risks having its tax exempt status withdrawn due to the proposed Government amendments to the “in Australia” requirements in Division 50 of the Income Tax Assessment Act. Currently, SERVE INDONESIA INC enjoys tax exempt status as a member of Australian Evangelical Alliance Inc (Missions Interlink) which is prescribed by law under regulation 50.50.02. Loss of tax exempt status would jeopardise the good work and outcomes above which SERVE INDONESIA INC has worked hard to achieve. Reduced funding due to loss of the income tax exempt status would result in a smaller amount being spent on community development projects and vocational training for Indonesians. Although the tax impact might not be huge, the financial impact would be further exacerbated by the cost of additional administration to fulfill ATO requirements together with the impact of reduced funding from donor organisations that no longer support SERVE INDONESIA INC for fear of losing their income tax exempt status (point 2 below). 

2.	Loss of income tax exempt status for donor organisations. 

It is expected that this will have a huge impact on the Australian churches, schools and not-for-profit organisations which currently donate funds to SERVE INDONESIA INC. If SERVE INDONESIA INC loses its income tax exempt status, we understand that under the Exposure Draft, any other tax-exempt organisation which then makes a donation to it will lose its own tax exemption. Donor organisations may also be further impacted by the new legislation due to low compliance (because of lack of information and understanding). As a result, SERVE INDONESIA INC will have far less funding to assist disadvantaged people in Indonesia. Another result will be that donor individuals and organisations will send money directly overseas, resulting in reduced accountability and control by the Australian government and agencies such as ourselves.

RECOMMENDATIONS

(1)	That the new law retains exemptions for all prescribed institutions listed in the current regulations. 

and

(2)	A minimum threshold for donations to entities without income tax exempt 
      status should be introduced into the legislation. 

Yours faithfully,

Malcolm Young
Secretary & Public Officer

c.c.   Pam Thyer, Missions Interlink