Proposals to strengthen the ACNC

A review panel has made 30 recommendations to strengthen the ACNC’s legislative framework.

Strengthening for Purpose: Australian Charities and Not-for-profits Commission Legislative Review 2018 aims to tighten the commission’s legislative structure.

Recommendations focus on the ACNC’s objectives, functions and powers, the regulatory framework itself, and how to reduce red tape.

Topic and Recommendations

Part A – Objectives, functions and powers

Objectives

  • That the objectives in the Australian Charities and Not-for-profit Commission Act 2012 (Cth) not be changed.

Functions

  • That the ACNC Act be amended to include functions and duties that align with the objectives.
  • That the ACNC should continue to prioritise its educational and research functions, including the use of behavioural insights and incentives.

Powers

  • That the ACNC Act be amended to replace the term ‘responsible entity’ with ‘responsible person’.
  • That the powers of the commissioner to replace a responsible person be removed (recommendation 5).
  • That an executive committee, including the commissioner and assistant commissioners, be established to be responsible for the strategic direction and performance of the ACNC.
  • That ACNC Act be amended to give the commissioner broader powers to delegate functions and powers to staff.

Advisory Board

  • That the advisory board be empowered to provide advice to the minister or commissioner on its own initiative and engage directly with the sector.

Part B – Regulatory framework

Governance

  • That ACNC governance standard 3 be repealed and governance standard 5 be amended to remove the word ‘perceived’ with a view to consistency with the Corporations Act.
  • That a registered entity be presumed to comply with the ACNC governance standards if it already complies with other comparable governance requirements (recommendation 10).
  • That the Corporations Act 2001 (Cth) be amended to ‘turn on’ the duties and other provisions previously ‘turned off’.

Reporting and proportionality

  • That registered entities be required to report based on size, determined on rolling three-year revenue, with thresholds of less than $1 million for a small entity, from $1 million to less than $5 million for a medium entity, and $5 million or more for a large entity (recommendation 12).
  • That minimum reporting requirements for small registered entities be amended to allow in annual information statements an option to provide a simplified balance sheet or a statement of resources (recommendation 13).
  • That registered entities be required to disclose related-party transactions.
  • That large registered entities be required to disclose the remuneration paid to responsible persons and senior executives on an aggregated basis.

Basic religious charities

  • That if recommendations 12 and 13 are adopted, the necessity for the exemption from financial reporting for basic religious charities be reviewed, and if recommendations 5 and 10 are also adopted, all exemptions for basic religious charities be reviewed.

Secrecy

  • That the commissioner be given a discretion to disclose information about regulatory activities (including investigations) when it is necessary to protect public trust and confidence in the sector.
  • That the commissioner be authorised to collect the personal details of responsible persons involved in unlawful activity.

Advocacy

  • That the ACNC be resourced to enable the commissioner to enforce and develop the law where registered entities engage in disqualifying purposes (within the meaning of the Charities Act 2013 (Cth)).
  • That test-case funding be made available to develop the law in matters of public interest, including disqualifying purposes.

Criminal misconduct

  • That the ACNC’s regulatory approach to high-risk registered entities be further developed in partnership with the Australian Criminal Intelligence Commission (ACIC), the Australian Transactions Reports and Analysis Centre (AUSTRAC) and other Commonwealth departments and agencies.
  • That the ACNC be resourced to enhance its access to criminal intelligence databases, use of secondments and information-sharing with the ACIC and other agencies.
  • That the Australian Charities and Not-for-profit Commission Regulations 2013 (Cth) be changed to disqualify a person from being a responsible person if he or she has a conviction for terrorism, terrorism-financing, money-laundering, fraud, importation or distribution of illicit drugs or a child sexual offence under commonwealth, state and territory law.

Beyond charities

  • That the ACNC Act be amended to provide that certain not-for-profits with annual revenue of $5 million or more must be registered under the ACNC Act to be exempt from income tax and access to commonwealth tax concessions.

Part C – Red-tape reduction

Fundraising

  • That Australian consumer law be amended to clarify its application to charitable and not-for-profit fundraising and a mandatory code of conduct be developed.

One-stop-shop

  • That using the charity passport by commonwealth departments and agencies be mandated.
  • That responsibility for the incorporation and all aspects of the regulation of companies that are registered entities be transferred from the ASIC to the ACNC, except for criminal offences.

A national scheme

  • That a single national scheme for charities and not-for-profits be developed.

Part D – Additional amendments

Legislative amendments

  • That the interface between the ACNC Act and the Corporations Act be reviewed and additional amendments be considered.  (These are described in Appendix B to the report.)
  • That the ACNC Act be consolidated and reviewed every five years.

Charities must obey the law

The ACNC has reminded charities of their obligations to act lawfully and be run in an accountable and responsible way in the pursuit of their charitable purpose.

Basic religious charities (BRCs), however, are exempt from complying with the ACNC’s governance standards.

They are exempted from supplying financial information in annual information statements and submitting annual financial reports.  Exemption from governance principles means that the ACNC is unable to take compliance action.

An ACNC spokesperson says: ‘This does not mean that charities are above the law.  In addition to being pursued by law enforcement and other government agencies, unlawful activity can lead to revocation of charity status.’

The commission emphasises that registered charities cannot have a ‘purpose of engaging in or promoting unlawful activity’, which may be grounds for the revocation of charity status and loss of tax concessions.

Red tape cut for NSW charities

NSW Fair Trading and the ACNC have signed a new agreement that reduces the administrative burden on registered charities.

NSW associations will from now on be required to submit their annual financial reports only to the ACNC, which will share the data with NSW Fair Trading.

NSW Fair Trading commissioner Rose Webb said that it was a positive move for about 4000 charities.

Ms Webb said: ‘These associations have been spending extra time and money filling out the same forms twice.  [The] new report-once system will see a reduction in unnecessary regulatory obligations […].’

The memorandum of understanding between the ACNC and Fair Trading marks the beginning of a new secure data-sharing arrangement between NSW public entities and the ACNC that will streamline reporting, reduce red tape and cut administrative costs for incorporated associations that are also registered charities.

ACNC commissioner Gary Johns said that it was a big win for registered NSW charities that are incorporated as associations.

Dr Johns said: ‘These charities will no longer need to spend considerable resources meeting duplicative reporting requirements.  Instead, they can spend more time and energy on delivering services and support to the people of NSW.

‘Most Australian registered charities now have streamlined reporting arrangements, and I hope to be able to make further announcements in the coming months.’

The new reporting arrangement is in line with Victorian, South Australian, Tasmanian and ACT reporting arrangements, and will be available to NSW associations from 1 October.

New reporting exemption for Victorian charities

As of 1 July, annual reporting requirements for many Victorian incorporated associations have changed.

If an association is also an ACNC charity for any financial year of the association that ends on or after 30 June 2018, it will no longer need to lodge an annual statement with Consumer Affairs Victoria and pay a lodgement fee.

It continues to lodge an ACNC annual information statement and follow the commission’s regulatory requirements.

The new reporting exemption applies only to annual reporting obligations.  Incorporated associations must continue to notify CAV via myCAV of changes such as its name, details and rules.

The exemption is not retrospective.  For financial years that end before 30 June, entities must still submit separate annual statements to the ACNC and CAV.

Reporting changes for NSW charitable associations

NSW associations also registered as a charity with the ACNC will no longer need to lodge an annual summary of financial affairs with NSW Fair Trading and pay a lodgement fee.

Charities must lodge the association’s annual information statements (and financial statements if required) with the ACNC for each financial year.

The ACNC’s annual information statement for NSW organisations has been updated to include additional questions that collect information on behalf of Fair Trading.

Associations’ NSW registration number and registered name must be in the statement so that they may be correctly identified as being exempt.  If an association chooses to decline to answer questions it will need to lodge an annual summary with Fair Trading and pay the lodgement fee.

This change only applies to annual financial reporting obligations to Fair Trading.  Incorporated associations must continue to notify Fair Trading of changes such as the association’s name, details, constitution and public officers.

If the association is not on the ACNC charities register, reporting obligations stay the same.

The change is not retrospective.  Associations that must lodge annual summaries before 1 October must submit separate annual reports to both the ACNC and Fair Trading.

Associations must hold their AGM within six months of their financial year-end date, when financial statements must be submitted to members.  Visit the Running an association webpage for more information about reporting obligations.

The change does not apply to charities approved by the ACNC to withhold details (for example, revenue and address) and financial reports from the ACNC register.

You can confirm your association’s status by using the ACNC charities register.

It should be noted that red-tape amendments do not apply to financial-reporting obligations under the Charitable Fundraising Act 1991 (NSW)and the Charitable Fundraising Regulation 2015 (NSW).

ACNC revokes charities’statuses

The ACNC has revoked the charity status of Lieu Quan Buddhist Association Incorporated, The Genevieve Audrey Foundation and Breaking Through Transitional Services Limited.

The organisations have lost the GST concession, income-tax exemption, and FBT rebate.

Breaking Through also lost deductible-gift-recipient status.

The commission is prevented from disclosing further details due to secrecy provisions in the ACNC Act.

Every month the commission receives around 100 concerns about charities, many of which are submitted by members of the public (acnc.gov.au/charityconcern, or by calling 13 ACNC (13 22 62)).

Mounting successful AGMs

Many registered charities will soon be holding AGMs, reporting to members on their activities and finances and electing members of governing committees.

ACNC’s governance standards require charities to be open and transparent with their members – holding an AGM each year is a way of doing this.

The ACNC recently hosted a webinar aimed at helping charities hold AGMs.  You may watch it at acnc.gov.au/webinars.

The commission also has a range of other guidance, tips and templates available at acnc.gov.au/AGM.

Treasury portfolio arrangements confirmed

Federal Treasurer Josh Frydenberg has confirmed that the Assistant to the Minister for Treasury and Finance Senator Zed Seselja will take responsibility for the not-for-profit sector, including the ACNC.

More information? To find out more, give us a call on 1300 023 782 or email team@cdrta.com.au.

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Craig is the principal consultant of C&D Restructure and Taxation Advisory and has been working in the industry since 1999. Having established C&D Commercial Partners in 2015 the precursor to the current business.

Post Author: Craig Dangar

Craig is the principal consultant of C&D Restructure and Taxation Advisory and has been working in the industry since 1999. Having established C&D Commercial Partners in 2015 the precursor to the current business.

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