Emil Ford Lawyers

ACNC - A more secure future?

It no longer appears that the abolition of the Australian Charities and Not-for-profits Commission (ACNC) is imminent. The Minister for Social Services, Scott Morrison, was recently quoted in the media as saying  the abolition of the charity regulator was a lesser priority. His admission comes after months of consultation between the Federal Government and charities and civil society organisations on the earlier released Options Paper and the proposed replacement arrangements for the ACNC. Although its axing is now less likely, it is still worthwhile for charities to familiarise themselves with the Charities and Not-for-profits Consultation Report, which was released in December 2014 and provides a summary of consolidated feedback.

New self-reporting requirements

The Government’s proposal that charities will be required to maintain a publicly accessible website that features relevant business information (such as the names of responsible persons, details of all Government funding and financial reports) was met with mixed reviews.

Respondents generally viewed reliance on websites and the loss of centralised reporting as inefficient and insecure. They also raised concerns that it might undermine the integrity and consistency of information provided to organisations and the public.

Similarly, respondents generally agreed that consistent and transparent reporting of activities and financial information would be most readily achieved through one free and publicly accessible register, which is already in existence. Respondents also highlighted various risks in publishing financial reports on organisations’ websites, such as exposure of an organisation’s growth strategy to its competitors.

The prospect of whether a website would reduce red tape divided respondents: some viewed the requirement to establish and maintain a website as overly burdensome, whilst others suggested that this was not the case because the majority of organisations already provide information on their websites.

Determining charitable status

The Options Paper proposed that responsibility for determining eligibility for charitable status will return to the Australian Tax Office under one of two different models.

The first model involves the establishment of an independent panel comprised of external experts who would provide advice on objections raised by charities that disagree with the initial ATO assessment on the determination of charitable status. This model was not however well received, as respondents noted that the panel would only have an advisory role and the three tiered appeal process would increase the red tape surrounding appeals.

The second model involves forming a separate area within the ATO that would be responsible for determining outcomes for applicants who disputed findings on their eligibility for charitable status and various tax concessions. Respondents agreed that this model did reduce the possibility of conflicting roles between assessing and subsequently reviewing charities, but highlighted that the separate area would not be independent if staffed by ATO members.

Proportionate compliance framework

Respondents noted that the decentralisation of powers in relation to information collection, monitoring and compliance to various regulatory bodies, including ASIC, ATO and State and Territory Governments, may lead to different interpretations and potential cross over in powers between regulatory bodies.

Furthermore, if directors’ duties return to arrangements under the Corporations Act, respondents noted that not-for-profit directors (acting honestly with an appropriate degree of care and diligence) should be protected from the risk of personal liability so as not to discourage their involvement. This might take the form of a clause that gives directors the ‘safe harbour’ they need to devote their attention to the best interests of the charity.

Transitional arrangements

The feedback on transitional arrangements highlighted the need for guidance on what form self-reporting will take, the need for lengthy implementation of the new arrangements (especially for smaller organisations) and the need for time allowances for organisations that have to change their constitutions and governance procedures.

Next steps

The Report states that feedback received through the consultation process will influence the development of the replacement arrangements and drafting of new legislation. However, although these replacement arrangements were planned for introduction later this year, their implementation now seems highly unlikely. The Minister has identified the development of a families package as his first priority. He said that he has no immediate plans to progress any further on the issue of abolishing the ACNC. Even then, much opposition to the bill remains. For the time being, it seems the charity regulator will continue in its present role.

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