Coalition Members and Senators


Coalition Members and Senators

Dissenting Report

The Committee’s inquiry covered three bills - the Australian Charities and Not-for-Profits Commission Bill 2012, Australian Charities and Not-for-Profits Commission (Consequential and Transitional) Bill 2012 and the Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012.

Rationale for the Legislation

Coalition senators recognise that the current regulatory framework for the sector is fragmented, inconsistent, and uncoordinated across a range of government agencies. It meets neither the sector’s needs nor that of the wider community.

The Objects of the bills are broadly supported by Coalition senators who recognise the importance of maintaining, protecting and enhancing public trust and confidence in the not-for-profit (NFP) sector. Coalition senators also endorse measures to support and sustain a robust, vibrant, independent and innovative NFP sector and to promote the reduction of unnecessary regulatory obligations on the NFP.

The bills establish the Australian Not-for-Profits Charities Commission (ACNC), the role of the Commissioner of the ACNC, and make provision for the NFP sector’s eligibility for taxation concessions.

In essence the Coalition senators see the primary objective of the bills to promote the reduction of unnecessary regulatory obligations on the Australian NFP sector.

The Coalition senators endorse the sentiments expressed by Mission Australia and the Conservation Council of South Australia that suggested there were no obligations explicitly set out in the bill to realise this noble objective.

The Conservation Council of South Australia in its evidence said:

It is good to have that objective but, when that was added as an objective, there was almost nothing changed in the act... There is little or nothing in the act that would be a positive obligation to support not-for-profit's through community education. We have had conversations with the ACNC or the task force and are pleased with some of those directions. But there is nothing in the act to reflect that and that creates a disjunct between the conversations we are having with the ACNC staff and what is in the legislation.[1]

The Coalition members of the Committee do not support passage of any of the three bills.

Coalition concern with the legislation centres around the following issues:

  • The imposition of additional and unnecessary red tape
  • The lack of certainty regarding the governance and responsibilities of the ACNC
  • Privacy implications
  • Poor policy construction

The Coalition’s Position

The Coalition would support a small Charities Commission as an educative and training body for the sector, and does not support the creation of another regulatory body that will add to the red tape burden for charitable organisations and duplicate state and territory regulation. 

The Coalition would retain the regulatory powers that already exist in the ATO, ASIC and other similar bodies and not transfer them to the new Commission.

Issues

The Regulatory Burden

Coalition Senators of the committee believe these bills will increase the regulatory burden being placed on charities and NFPs, many of whom are already struggling to meet the demands of government in this space.

Unless and until the States and Territories agree to hand over their powers to the Commonwealth regulator and harmonise their laws, these bills are going to add an additional layer of red tape which the sector will have to meet.

Uniting Care Australia in its submission said:

While the Objects of the ACNC Bill now include the promotion of red-tape reduction, we are concerned that there are limitations to the ACNC’s capacity to deliver any tangible red-tape reduction measures outside of its own activities. The majority of the proposed red-tape reduction benefits of a single national NFP regulator are predicated on State/Territory Government cooperation or agreement which is yet to be secured from other Commonwealth agencies and regulators. While the ACNC Bill mandates for the ACNC to work towards those agreements it is incorrect to assume they are conclusive savings.[2]

YouthCARE Inc in its submission said:

The Report claims that the adoption of the Bill and the establishment of the ACNC will result in significant reduction in reporting and regulation requirements for NFP's and Charities. Although many organisations welcome this objective, the Report does not demonstrate the practical application that will lead to the reduction of red tape. With the exception of companies limited by guarantee, there are no practical examples cited that would give the sector any comfort that such reduction would take place.

Many organisations currently have a high level of reporting and compliance cost related to funding from state and federal government agencies. YouthCARE currently submits audited financials to the Department of Employment, Education, and Workplace Relations (DEEWR), the Western Australian Department of Education, and the Department of Commerce, in addition to numerous local government bodies on an annual basis.

With the introduction of the ACNC there would be further duplication and additional reporting burden placed on organisations in contradiction with the Bill’s objective.[3]

Martin Laverty, Chief Executive Officer of Catholic Health Australia in evidence on September 4 said:

At the moment, a not-for-profit aged-care organisation has to acquit annually to the Department of Health and Ageing. So too does a for-profit aged-care organisation. The challenge in expecting the ACNC to manage reporting through its front door—reporting that is also going to satisfy the needs of the Department of Health and Ageing on aged care—triggers the question of a two-stream process: one for for-profits and one for not-for-profits. We see that there is an existing reporting framework in relation to that illustration of aged care, whereby possibly all of the type of data that the ACNC would seek is already provided through an existing and established channel that is open to both for-profits and not-for-profits—and, indeed, government agencies in the case of Victoria. Disturbing that could throw up unforeseen, unintended consequences that we think would be better avoided by the ACNC being required to visit the Department of Health and Ageing to extract the data that it seeks for its purposes.[4]

Coalition senators were drawn to concerns raised by the Independent Schools Council of Australia which focussed on the relationship between the ATO and the ACNC with respect to the authority of ACNC to require information to enable taxation compliance contrary to the stated aims of the legislation of increasing transparency:

The ACNC should not act on behalf of the ATO and the annual information statement should be framed to give quality public information and not be framed to attempt to "catch out" any supposed Taxation non-compliance.[5]

Coalition Senators of the committee believe the reduction of red tape should be a priority issue where any reform of the NFP space is concerned, and it is our contention that these bills will have a detrimental impact on achieving this objective and in fact will impose additional duplication and red tape on the sector.

Powers and Penalties

Stakeholders have expressed concerns that the powers and penalties contained within these bills are heavy handed and may deter members of the public from taking up voluntary roles within the sector.

Sector agencies have raised issues that the reporting requirements, governance standards and the ACNC enforcement powers are inconsistent with or overlap the common law of trusts and state and territory trustee legislation, inconsistent with or overlap the Corporations Law and ASIC's regulatory role, inconsistent with or overlap the ATO's guidelines on public and private ancillary funds, are possibly inconsistent with the Australian Constitution, and inconsistent with the overarching purpose of the ACNC draft legislation.

World Vision Australia’s submission said:

...in most instances, under the Corporations Act 2001 (Cth), ASIC must seek a court order before a director can be disqualified from managing a corporation. WVA suggests this is a more appropriate model and can see no case for why a different approach should be taken in respect of registered NFP entities.[6]

The Fundraising Institute Australia in its submission said:

While FIA recognises the need to ensure compliance with the draft Bill, FIA is disappointed and expresses concern that the Bill emphasises investigation of NFPs and enforcement of compliance with the Bill by criminal sanctions, rather than risk management and education for charities and NFPs about compliance and government. 

FIA urges ACNC to prefer the educational and guidance approach to compliance and governance over the punitive approach set out in Chapter 4.[7]

YouthCARE Inc in its submission said:

YouthCARE notes the concerns raised by the Australian Institute of Company Directors stated in the report at Point 2.107 that the Bill in its current form would place responsibilities and penalties on not-for-profit and charity board members that would be greater than those found under the Corporations Law.[8]

Coalition Senators note the shared views of World Vision Australia, the Baptist Union of Australia, World Vision Australia and Anglicare. The heavy-handedness of the enforcement powers were expressed by World Vision Australia:

...the tone and structure of the enforcement powers continue to suggest a heavy-handed approach weighted against the interests of registered entities and responsible entities. Further efforts should be made to ensure that the powers are better targeted, fairer, not used to inappropriately interfere with an organisation's legitimate operations and do not impose undue costs on an entity in taking action against the ACNC.[9]

Lack of certainty

Stakeholders remain concerned that the bills create uncertainty with regard to the obligations and responsibilities of both the entity and those charged with governance of the entity.

This issue arises due to the fact that the requirements of the financial report and the requirements of those charged with governance with respect to financial reports are not presently specified, with these provisions to be enacted by regulation by the Minister. The sector is concerned that this will lead to a situation where NFP agencies have limited input into decisions regarding how they are to be governed. Moreover, it exposes the risk that these standards can be subject to change frequently and at the whim of the Minister or the government of the day.

The Australian Centre for Philanthropy and Nonprofit Studies in its submission said:

Commonwealth legislative drafters have produced some excellent plain English statutes. Given the complexity of issues involved, the GST legislation and the Corporations Act (particularly the plain English guide for small scale enterprises) are excellent pieces of drafting. The same standard should be reached in these instruments, given that they will affect and will need to be used by ordinary citizens who volunteer their time for the public good. Terms such as ‘responsible entity’ and ‘registered entity’ are likely to confuse and confound many ordinary people, and make the task of ACNC staff all the more difficult, time-consuming and costly.[10]

CPA Australia Ltd in its submission said:

CPA Australia remains concerned that with the regulations incomplete, some charities may find it difficult to determine what if any new practices they will need to implement to enable them to lodge the financial report with the ACNC for the year ended 30 June 2014 and which must include comparative information for the year ended 30 June 2013. Importantly, the start date of the comparative year information was 1 July 2012.

Without the complete regulations, we suggest the Senate Community Affairs Legislation Committee recommend a further delay by 12 months to the commencement date of that part of the legislation to require charitable entities to lodge their financial report with the ACNC. Therefore, charities would lodge their financial report with the ACNC for the year ended 30 June 2015 and include comparative information for the year ended 30 June 2014.[11]

YouthCARE Inc in its submission said:

Specifically of concern for incorporated associations is the lack of information regarding the winding back of relevant state and territory legislation in addition to harmonization with reporting to state and federal government agencies which already takes place.[12]

Privacy

Concerns were raised about the privacy provisions. Mr David Crosbie, Chief Executive Officer, Community Council for Australia said in evidence September 4:

...there have been clear indications given to people on the reform council and elsewhere that the privacy of personal details in private ancillary funds would compromise philanthropy if they were made public.[13]

Philanthropy Australia in its submission said:

Philanthropy Australia is vigorously opposed to proposals which are likely to be detrimental to the growing culture of philanthropy and giving, such as the public release of private information relating to some private givers. Australia needs both public and private giving.[14]

Consultation process

Coalition senators support meaningful and appropriate consultation in effective policy development. Key stakeholders have continually expressed concerns that the consultation process for the ACNC has been excessively secretive and unnecessarily rushed, with not-for-profit agencies being provided as little as nine working days in some cases to make submissions on important aspects of the Exposure Draft.

YouthCARE Inc in its submission said:

The Report shows a lack of consultation with state and federal departments on the administration of the ACNC reporting requirements and how this would impact on any government department’s current arrangements with the sector. It fails to resolve the question of how the proposed ACNC framework will co-exist with overlapping existing legislation.[15]

Mission Australia in its submission said:

Mission Australia remains concerned that the bills as drafted are more prescriptive in certain key areas than had been foreshadowed and do not reflect that sufficient work has been done with Federal agencies and with State Governments and agencies with responsibilities in the charitable sector to reduce red tape and duplication. In addition, greater attention should be given to ensuring the independence of the charity and not-for-profit sector.[16]

Coalition senators share the concerns expressed by various submitters about timelines associated with implementation of these reforms. Concern was expressed with particular regards to the financial reporting requirements. The Coalition senators share the concerns of the Institute of Chartered Accountants Australia, which said in its submission:

[I]n its current form we do not believe the draft legislation is ready to be passed through the Parliament. Two fundamental pieces of the NFP reform are not yet available for review or consultation – the governance requirements and the reporting framework. We consider that these requirements are integral to the reform process and should be made available before the legislation is passed by Parliament. These areas do have the potential to increase the burden on many charities, so it is important that they are clarified up-front and time given so their impact can be assessed appropriately.

We accept that as a consequence of this recommendation the start date of the regulator may need to be delayed. We consider a short delay (perhaps two to three months) acceptable.[17]

Conclusion

The bills do not meet their objects.  The Coalition will not support the creation of a large regulatory body that will add to the red tape burden for NFPs and simply duplicate existing State and Territory regulation.

These bills introduce complexity, uncertainty and further regulation to a sector that is already struggling with high administrative costs and red tape.

These additional burdens distract charities and NFPs from their primary community role.

Recommendation

That the bills not be passed in their current form.

Senator Bridget McKenzie                               Senator Dean Smith

Victoria                                                              Western Australia

Senator Sue Boyce

Queensland

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