In line with its election promise to abolish the Australian Charities and Not-for-profits Commission (ACNC), the Abbott Government has now released Options Paper, Australia’s Charities and Not-for-profits which seeks feedback on its proposed arrangements for charities in Australia. The Government’s proposed arrangements attempt to balance the administrative burden of reporting with the need for organisations receiving concessional tax treatment to be publicly accountable.

This approach is consistent with the Government’s agenda for deregulation which it says will boost productivity and reduce costs for business, community organisations and individuals by at least $1 billion annually.

Compliance framework

When the ACNC and the ACNC Commissioner were established, they were given extensive powers to collect information and monitor charitable organisations. While registration with the ACNC is voluntary, changes in legislation have inadvertently forced charities to register by making registration a precondition to receiving tax concessions.

The Government considers the existing powers given to Australian Securities and Investments Commission (ASIC), the ATO and State and Commonwealth Government are adequate to provide an appropriate compliance framework for larger, incorporated charities. Without the ACNC, the powers to collect information for monitoring and compliance functions in respect of small unincorporated charities will effectively be abolished.

The states and territories do, however, have laws in place to prevent misuse of public funds and any fraudulent activity of charities.

Disclosure of information

The Government’s view is that the charitable sector should be permitted, to a large extent, to self-manage.  As charities rely upon public donations and government funding, it is in their interest to instil confidence in potential donors by having a transparent governance structure and operating in accordance with their stated chartable purpose.

The Options Paper is, therefore, premised on the Government’s view that charities work hard to build the trust of the Australian public and their longevity relies on this trust.  If the proposals in the Options Paper are adopted, all charities will be required to maintain an accessible website that provides access to:

  • the names of responsible persons;
  • details of all government funding;
  • financial reports; and
  • such additional information as the charity chooses to make public.

It is believed that publishing this information will provide accountability through giving the public an insight into how charities spend their public funding and enable potential donors to make an assessment of the charity’s objectives, compliance framework and activities before making a donation.

Charitable status

The Options Paper proposes that the Australian Taxation Office (ATO) will be responsible for determining charitable status and tax concessions. To alleviate concerns that the ATO’s revenue-raising role is inherently conflicted with granting tax concessions, two options are proposed:

  1. An independent panel of experts be established to advise the ATO where a charity objects to the ATO’s assessment of its charitable status; or
  2. A separate area within the ATO be given responsibility for determining outcomes for charities which object to determinations of charitable status and related tax concessions.

If a charity remains dissatisfied after the determination, they will have a right to appeal to the Administrative Appeals Tribunal.

What now?

The ACNC will continue to regulate the charitable sector until the new arrangements are finalised. For now, all registered charities are still required to submit an annual statement and charities seeking registration will need to apply to the ACNC. It is expected that legislation setting up the proposed arrangements will be introduced into Parliament later this year.

If you would like further information or to make a submission please contact:

Melanie Twomey
Senior Associate
Harwood Andrews
T: 03 5225 5238