The not-for-profit sector is large and very diverse with
over 600 000 not-for-profit entities in Australia, of which around 10%
could be referred to as charitable organisations, and will be directly impacted
by this Bill. Many of these organisations have few, if any, staff and rely
heavily on volunteers to run their organisations. It requires significant
additional effort to contribute to the various rounds of drafting and review
that these Bills have been through given the complexity of the legislation The
Australian Greens are aware of the short time frame within which this inquiry
was conducted and thank those organisations were able to provide detailed
feedback to the inquiry.
There is clearly support and goodwill from many
organisations within the not-for-profit sector to proceed with the development
of an Australian Charities Commission, if that Commission and the associated
legislation can be established in terms that promote a strong sector through
transparency and accountability mechanisms, while also meeting the sector's
need for independence, diversity and innovation and delivering significant
reductions in administrative and reporting requirements.
Although the Government has resolved many of the issues that
were identified by the House of Representatives Committee Economics Committee's
inquiry into the drafts of these bills, this committee also heard evidence for
a wide variety of submitters such as Western Australian Council Of Social Services,
Catholic Health Australia, Uniting Care, the Bishops Council of Australia, the
Australian Council for Social Services and the
Australian Institute of Company Directors that this has not resolved all
of the significant concerns of the sector. These concerns need to be addressed
before the Bills proceed.
This dissenting report from the Australian Greens outlines
those concerns as they relate to each of the three bills, the Australian
Charities and Not-For-Profit Commission Bill 2012, hereafter referred to as the
ACNC Bill; the Australian Charities and Not-For-Profit Commission Bill
(Consequential and Transitional) 2012, hereafter referred to as the ACNC
Transitional Bill; and the Tax Laws Amendment (Special Conditions for
Not-For-Profit Concessions) Bill 2012, hereafter referred to as the Tax Bill;
and proposes recommendations for the Government's consideration.
Independence of the sector
One of the stated aims of the Government, in introducing
this legislation, has been to support a robust, vibrant, independent and
innovative Australian not-for-profit sector, as set out in Section 15-5(1)b of
the ACNC Bill. The Australian Greens welcome this approach as a policy setting
for Australia's not-for-profit sector, but the inquiry has demonstrated that
the Bill is heavily slanted towards compliance and regulatory oversight.
Both the ACOSS and Uniting Care submissions propose
achieving great independence in the sector by inserting an additional clause at
Section 45-10 of the ACNC Bill that limits the powers of the government to
insert gag-clauses into the governance standards.
UnitingCare also propose introducing an amendment at Section
205-45 ACNC Bill as follows:
Under Subdivision 205-C – Other concepts, insert:
205-45 Independence of the NFP Sector
Independence of the sector means that NFP entities are
autonomous entities subject to the direction and control of their Boards or
Governance body(ies). The independence of an NFP entity, particularly in
relation to advocacy cannot be set aside, limited or controlled by condition of
direct or indirect Government funding.
The Australian Greens believe that the references to the
independence of the sector need to be strengthened in the text of the Bill.
That further amendments be made to the Objects of Division 45 -
Governance Standards to ensure that the Division reflects the Objects of the
Act, as set out in Section 15-5(1)b
That the Bill be amended to ensure that the governance standards
cannot now or in the future be used to prevent a charity from advocating for
its charitable purpose.
The concerns about gag-clauses were also raised in the
context of Government contracts. Uniting Care noted in its submission that the
Government has a monopsony over funding arrangements for many not-for-profit
service providers, which places it at an advantage when negotiating contracts.
To fully alleviate the concerns of the sector that it could be prevented from
advocating for its mission or criticising a Government policy that relates to its
purpose, amendments should also be made to other Commonwealth legislation to
prevent Commonwealth contracts from containing 'gag-clauses' that restrict a
not-for-profit organisation in its advocacy or criticism of Government policy
or other issues relating to its mission or purpose.
That an amendment be made to the relevant Commonwealth legislation
to ensure that Commonwealth contracts are prevented from containing
'gag-clauses' that restrict a not-for-profit organisation in its advocacy or
criticism of Government policy or other issues relating to its mission or purpose.
Governance and External Conduct
This Bill leaves governance and external conduct standards
to be defined by regulations.
These standards were originally intended to be in legislation
but during the consultation phase of this Bill it became apparent that drafting
these standards would hold up the progress of the Bill.
Regulations are not subject to the same level of
Parliamentary scrutiny that legislation is, and governance standards that are
embedded in regulation will be flexible and open to frequent revision.
Regulation is a tool for determining aspects of legislation that can frequently
change, such as annual fees or levies. Governance and external conduct
standards do not need to be so flexible and open to constant revision, so it
would be more appropriate to introduce them as a schedule to the legislation
once appropriate sector-wide consultation has occurred.
That the governance standards and external conduct
standards be added to the legislation as a schedule of amendments once
appropriate sector-wide consultation has occurred.
The governance and external conduct standards may require a
registered entity to 'act, or not act, in a specified manner'. Catholic Health
Australia argued that such a power is too broad, and 'gives rise to uncertainty
about future independence of a not-for-profit organisations being able to
determine how, within the boundaries of the law, they might act, or not act, in
a specified manner.'
The Australian Greens see no reason to retain this broad
power within the text of the legislation.
That the reference to 'act or not act' in sections 45-10
and 50-10 be removed.
Consultation on the Regulations
introducing the Governance Standards
In addition to improving the governance and external conduct
standards, submitters called for a commitment in the legislation that the
sector must be consulted about these standards and that their input be
adequately considered and included in the final version of the standards.
PilchConnect gave evidence on this requirement:
It will be vital that these standards be developed in close
collaboration with the sector, and that they do not unduly interfere with an
organisation’s autonomy and independence... A sector‐based consultative approach to the
development and ongoing review of the governance standards is in our view
ideally enshrined in legislation.
Robust, public consultation with the affected community is a
good standard for any legislation, and particularly relevant in this instance
given that significant governance rules are currently proposed and will
determine how the organisations should operate. As noted by PilchConnect,
consultation needs to be included in the legislative framework set out by the
ACNC Bill and be an integral part of any further work on governance and
external conduct standards. The WACOSS submission drew attention to the West
Australian Electricity Industry Act (2004) as a template for legislating a
robust consultation and review process.
That consultation is a prerequisite for first
implementing and subsequently amending the governance standards and external
conduct standards, and that the requirement for robust, public consultation be
inserted into the text of the Bill.
Section 35-10 covers the circumstances under which the
Commissioner may revoke the registration of a registered entity. Included in
the text of the ACNC Bill is a provision to revoke registration if:
35-10(1) c (i) the registered entity has contravened a
provision of this Act, or it is more likely than not that the registered entity
will contravene a provision of this Act.
35-10(1)c(ii) the registered entity has not complied with a
governance standard or external conduct standard, or it is more likely than not
that the registered entity will not comply with such a standard.
The Bill continues on to state that in deciding whether or
not revoke registration, the Commissioner must have regard to:
35-10(2)e 'the extent to which the registered entity is
conducting its affairs in a way that may cause harm to, or jeopardise, the
public trust and confidence in the not-for-profit sector mentioned in
subsection 15-5(1) (Objects of this Act).
Taken together, without any insight into what the governance
standards might contain, these provisions have generated significant concern
from submitters, such as World Vision, the Australian Baptist Ministries,
Anglicare and Catholic Health Australia.
The issues with governance standards raised in the previous
section must be resolved in order to further clarify the significance of the statements
in 35-10(1) c (i) and 35-10(1) c (ii).
The Government should clarify what is meant by
more-likely-than-not and include references to existing usage in Australian
case law within the Explanatory Memorandum. The Government should also further
clarify that the regard to 'public trust and confidence' is not a trigger of
the Commissioner's powers, and should not be considered in isolation from the
other items listed under 35-10(2) of the Act.
That the government further clarify the definition of
more-likely-than-not as a trigger of some power for the Commissioner.
That the government further clarify how and in what
context the Commissioner may have regard to 'public trust and confidence'.
Other enforcement powers
More-likely-than-not provisions are present in other sections
of the bill, for example sections 40-5, 80-5, 85-5 and 100-5, which outline the
Commissioner's other powers such as the ability of the Commissioner to issue
warnings. The clarification of the definition of more-likely-than-not as a
trigger of the Commissioner's powers in the Explanatory Memorandum should be
address all instances of 'more-likely-than-not' within the legislation.
Web Reporting of Compliance Issues
Warning notices that are issued by the commission are
published online after fourteen days for a minimum of 5 years. Submitters such
as World Vision and Australian Catholic Bishops Conference raised concerns that
this carries significant reputational risk, particularly if the ACNC is
successful in its aim to create an information portal that donors can use to
assure themselves of the accountability and good management of a particular
In this instance, the Government should have regard to the
need to publish warnings, particularly when the compliance issue is minor and
quickly resolved through education and an undertaking from the entity to
resolve the issues, or is successfully appealed.
That the Government should clarify the circumstances in
which warning notices will be posted online and have regard for the reputational
risk this imposes on charities that are acting in good faith.
The independence of the ACNC from the Australian Taxation
Office is discussed at length in the Majority report to this inquiry, and the
Australian Greens note in particular the reference to evidence from the Green
Institute about the Advisory Board and the possible inconsistency within the
text of the Bill, as covered in sections 2.11 to 2.13 of the Majority report,
that has still not been satisfactorily resolved.
The Australian Greens also support the suggestion put forth
in the Green Institute submission, and set out at section 2.17 of the Majority
report, that the independence of the sector could be enhanced if the ACNC
...given specific responsibility for upholding the objects of
the Act and advising the Minister on its implementation.
This could be achieved by adding an additional statement to
this effect after Section 15-5(2)b(iii) of the ACNC Bill.
That the text of the Bill be amended to give the ACNC
Commissioner specific responsibility for upholding the objects of the Act and
advising the Minister on its implementation.
This legislation covers a range of different entities. Some
are already registered as corporations and exposed to ASIC rules, but the
registry will also extend to a significant number of organisations that are not
formed under limited liability arrangements.
Moore Stephens Accountants and the Australian Institute of
Company Directors (AICD) raised concerns that, where unincorporated entities fail
to meet the ACNC regulation, it is the individual directors who will be deemed
to be the legally responsible persons.
AICD argued that while the amendments represent a
'significant improvement' from the draft legislation:
...it is concerning to us that individuals overseeing
unincorporated charities will still have the same obligations and will be
liable for any and every amount payable by the unincorporated association under
the Bill without exception and without access to defences.
Moore Stephens suggested:
...that the provisions be revised (where possible) to provide
for a limited recourse against the members of the committee to that level of
the net assets of the registered entity as disclosed in the last Annual Information
Statement lodged immediately prior to the conduct of the offence (or in the
case of BRC the level of assets based on the financial records of the entity).
The Australian Greens acknowledge the need for a legal
person to bear responsibility for criminal or negligent acts that their
organisation may engage in, and recognise that in unincorporated bodies, the
legal entity is the individual directors.
As there are already provisions in the Bill which allow the
Commissioner to have regard to the size and nature of the organisations, the
Australian Greens expect the Commissioner to consider whether the directors
acted in good faith and the extent to which compliance issues can be resolved
through education, particularly with volunteer directors of unincorporated
However, the Australian Greens remain concerned about the
extent to which directors of unincorporated entities are exposed to legal
liability on behalf of the entity under this legislation. We urge the
Government to review the impact this will have on entities that are run by
volunteers, particularly the impact on the ability of organisations to recruit
The Australian Greens note the comments from World Vision
Australia that, 'it is well-accepted that non-compliance is usually a matter of
ignorance or under resourcing'.
In light of these comments, the Australian Greens also expect that the
Commissioner will take an active role in educating registered organisations
about their obligations, and ensuring that volunteer directors have easy access
to plain-English explanations of their duties and responsibilities under this
Act and how to perform them.
That the protections already in place in the Bill, that
minimise the liability that volunteer individual directors of unincorporated
entities will face if their organisation breaches the legislation, should be
further described in the Explanatory Memorandum.
That the Government further investigate the opportunities
to strengthen the protections available to not-for-profit directors,
particularly those who represent unincorporated entities, and consider carving
out more protections for volunteer directors.
Broad Principles for Reporting
The Bill does not yet contain reporting standards. Section
60-15(1) states that these will also be contained in regulation after further
development work and sector consultation is complete.
Broad principles for reporting should be inserted into the
text of the Bill and/or the Minister should clarify in the Explanatory
Memorandum, or by some other mechanism, the broad principles that will be used
to guide the development of these standards.
Red Tape Reduction
One of the important policy aims that this Bill seeks to
fulfil is the reduction of administrative obligations and elimination of
duplication, colloquially known as 'red-tape'. The importance of this aspect of
the Bill was emphasised by submitters to the earlier Economics Committee
Inquiry, and as a result a new object to 'promote the reduction of unnecessary
regulatory obligations on the Australian not-for-profit sector' was inserted
into the Bill.
Paragraph 1.98 of the Explanatory Memorandum states:
The ACNC will advance initiatives to reduce unnecessary
reporting, including implementing a “report-once, use-often” framework and
developing the charity passport (which is a collection of core information that
has already been gathered by the ACNC as part of the registration process or
annual information statement) which can then be provided to other government
agencies negating the need for other agencies to collect that information,
minimising the interactions that NFPs need to have with government.
The charities passport was welcomed by the submitters, but
there were concerns that until this and other initiatives have been successful,
the ACNC actually represents an additional compliance burden rather than an
improvement on the current arrangements.
For example, Mission Australia stated:
Our overriding concern is that rather than reducing red tape
and compliance burden, the ACNC will add another layer of compliance and that
nothing will be taken away.
These concerns were echoed by submitters such as Uniting
Care and the Conservation Council of South Australia.
That the Bill should include under Section 60-25 of the
ACNC Bill (or elsewhere as appropriate) a statement to the effect that, 'Where
a registered entity is required to provide an annual financial statement to the
ACNC, that entity will no longer be required to provide a financial audited
statement for any individual grant or grants provided by an Australian
Government Agency unless that Agency has reason to suspect fraud in relation to
the use of the grant money.'
The Government is currently reviewing all of the grants
within the context of the Fair Work Equal Pay obligations, so the ability of
the Government to identify who is in receipt of Commonwealth Grants and quickly
link this information to the ACNC registry exists.
The Minister could allay some of the sector's concerns by
giving an undertaking to move quickly on the red tape aspects of the
legislation, and requiring the Commissioner to develop a timetable that
demonstrates the key milestones that need to be reached.
The terms red-tape and unnecessary regulatory obligations
need to be defined within the Explanatory Memorandum. This will help to ensure
that the Government and other users of this legislation have regard to the
broader policy intent when reviewing the activity of the commission and its
success in meeting its objects.
In addition to the 5 year review that the Government has now
promised to undertake, there should be more regular reporting from the
Commission on the success of its initiatives to reduce red-tape.
As well as meeting the Annual Reporting Requirement set
forth in Section 130-5(2), the Australian Greens would like the ACNC to report
to Parliament against its progress on an established timeline for reducing
unnecessary compliance burdens and harmonising reporting requirements across
both federal departments and the states.
That the ACNC establish a timeline for reducing
unnecessary regulatory obligations on the Australian not-for-profit sector and
table an annual report to Parliament that details its progress against that
However, the red tape issues are significantly broader than
just those under the direct influence of the ACNC, and while the ACNC has been
given the task of 'promoting' greater integration and fewer reporting
requirements, the Government as a whole should set forth its commitments to the
sector and have on-going regard to delivering on that commitment.
The Government should also commit to ensuring that an
independent regulatory impact assessment is undertaken, and should factor in
the cost of compliance with the ACNC into its regulatory calculator.
Some submitters also referred to opportunities to strengthen
the red-tape reduction mechanism, which is contained in Section 10 of Schedule
1 of the Transitional Bill and which states that the Commissioner may treat a
statement or report given to another agency as an information statement or
For example, the Australian Catholic Bishops Council
suggested that the Government should amend the statement to read, 'The
Commissioner will...' and argued that this arrangement would protect organisations
from unnecessary duplication as a result of ACNC registration until other
arrangements can be resolved.
The Australian Greens agree with the Government's concern
that taking this step to amend the text of the Bill may have unintended
consequences, but that for all Commonwealth Departments there is no reason why
this could not be the standard until other arrangements have been instituted.
The Government should give an undertaking in the Explanatory Memorandum, or
through some other mechanism, confirming that for all Commonwealth Departments
the Commissioner will accept a report to a Department as sufficient for an
organisation to meet its obligations under this legislation and vice-versa: a
report to the Commissioner will be sufficient to meet Departmental reporting
That the Government should give an undertaking in the
Explanatory Memorandum, or through some other mechanism, confirming that for
all Commonwealth Departments the Commissioner will accept a report to a
Department as sufficient for an organisation to meet its obligations under this
legislation and vice-versa: a report to the Commissioner will be sufficient to
meet Departmental reporting obligations.
Basic Religious Charities
Basic Religious Charities are recognised as complex entities
that have evolved over time, in a way that is different to other not-for-profit
organisations. As a result, there are some different reporting thresholds and
responsibilities applied to this type of entity. The Australian Greens are
still concerned that these arrangements may not provide sufficient requirements
to ensure their accountability and transparency, and hence maintain public
trust and confidence in these organisations.
That the Government should ensure that these arrangements
deliver transparency and accountability of basic religious charities, and the
conditions and exemptions allowed for basic religious charities should be
included in the 5 year review.
The Bill sets forth definitions of small, medium and large
entities and sets different reporting requirements for each. Some submitters
have raised concerns about the upper-threshold on the small entity category.
This evidence is considered in detail in the Joint Committee into Corporations
and Finance Report into these Bills.
The Australian Greens acknowledge these concerns, but are
also aware that a higher threshold may impact on the ability of the Commission
to negotiate a handover of powers with state governments which have set low
thresholds for unincorporated entities. The appropriateness of these thresholds
should be evaluated as part of the five year review.
That the appropriateness of the reporting thresholds that
define small, medium, and large entities should be evaluated as part of the
five year review.
Although there remain considerable problems with the ACNC
and Transitional Bills, The Australian Greens do not believe that they are
insurmountable. However, they do need to be addressed before the Bill can
The ACNC and Transitional Bills should be passed only
after the concerns raised in this report have been addressed.
Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill
The Tax Bill seeks to clarify and standardise the
definitions of not-for-profit and in-Australia as they existing across a suite
of Taxation legislation. The Tax Bill is bundled with the ACNC and Transitional
Bill but the passage of the other Bills is not reliant on this Bill. Unlike
the ACNC Bill, submitters did not express a specific timeframe for the passage
of this Bill, and several submitters such as the Salvation Army and World
Vision raised significant concerns about the effectiveness of the definitions
outlined in this Bill to achieve the aims set forth in the Explanatory
Memorandum or in the Government's statements on these issues.
The evidence discussed below demonstrates some of the
concerns that exist about the effectiveness of this Bill, but is by no means an
exhaustive summary of the issues set out by contributors to the inquiry.
Definition of Not-For-Profit
The committee received evidence that the definition of
not-for-profit that is set forth in this Bill may not support a robust,
diverse, independent sector.
Particular concern was noted in relation to the wording in
Schedule 1, Provision 3, Section 44, which refers to a not-for-profit, 'not
being carried on for the profit of gain of its members'. Evidence submitted by
Neumann and Turnour, and discussed more extensively in the Joint Committee into
Corporations and Finance Report on these Bills, suggests that the wording of
the definition could potentially undermine the capacity of organisations, such
as disability service organisations, to recruit members who serve on the
organisation's board if they also benefit from the services that the
The response provided by the Department in response to this
issue did not satisfy the Australian Green's concerns.
That the definition of not-for-profit is insufficient and
that it should be both amended within the text of the Bill and further clarified
in the Explanatory Memorandum.
The Australian Greens also acknowledge that additional work
is being undertaken to review and reform the statutory definition of a charity
by mid-2013, and recommend deferring codifying the definition of a
not-for-profit in legislation until that work is completed.
That the definition of a not-for-profit be reviewed in
the context of reviewing and reforming the statutory definition of a charity.
The ‘In-Australia’ special conditions for Deductible Gift
Recipients (DGR) have been inserted to reverse the effect of the High Court of
Australia's decision in the Federal Commissioner of Taxation of the
Commonwealth of Australia v Word Investments Ltd (2008) 236 CLR 204 (Word
Investments). In that case the High Court ‘found that charities are considered
to be pursuing their objectives principally ‘in Australia’ if they merely
operate to pass funds within Australia to another charity that conducts its
During the inquiry, submitters such as Neumann and Turnour
raised concerns about the application of the In-Australia provisions and the
effectiveness of the current wording.
The committee received evidence from Neumann and Turnour
about the difficulties associated with the application of the In-Australia rule
as it applied to the responsibility of a registered entity to ensure that
monies distributed to another entity are not subsequently sent overseas.
Evidence regarding the application of these rules to touring
arts organisations also demonstrated the extent of the definitional problems.
For example, two touring arts organisations, the Sydney Dance Company and the
Australian Chamber Orchestra, have been listed for exemption in Schedule 3 of
this Bill. However, the evidence from the Australian Major Performing Arts
Group points out that other touring companies of a comparable size and nature,
such as Bangarra Dance Theatre and Circus Oz, have not been included.
The supplementary submission from Treasury indicated that,
until 2011, the Commonwealth maintained a classification of arts organisations
that included four designated 'international touring organisations'. While the
classification was recently discontinued, no evidence was received by the
committee that explained why two of those four organisations should now be
given a type of exemption while two should not.
The Australian Major Performing Arts Group evidence pointed
out that, 'the use of deductible funds for international purposes can
disqualify the fund for all donations – at least the financial year but perhaps
for all periods thereafter'. It continued on to say, 'AMPAG members are
developing international partnerships and activities to advance the Australian
company and artists. It seems that expenses incurred in this regards may still
disqualify the fund of the member for gift deductibility.'
This evidence indicates that the application of the in-Australia
test is still problematic.
The Government should investigate ways to address these
concerns, such as designating arts and cultural organisations exempt from the
“In Australia” rule so that international touring activities do not affect
their tax status, rather than granting exemptions on an ad-hoc basis.
Similarly, the Australian Greens recommend that the
Government further clarify the extent to which an entity is responsible for the
actions of another entity as it relates to the expenditure of money provided by
the first entity. Until these concerns are resolved through further
consultation with the sector and the application of expert advice, the
Australian Greens recommend that these Bills be deferred.
That the application of the In-Australia rule should be
resolved through further consultation with the sector and the obtaining of
That this Bill not be passed until further work has been
undertaken to resolve the concerns of the not-for-profit sector.
Senator Rachel Siewert
Navigation: Previous Page | Contents | Next Page
Back to top