David Locke, Chief Adviser to the Australian Charities and Not-for-profits Commission Implementation Taskforce, recently spoke at Russell Kennedy on the proposed new system for the not-for-profits sector. Some of the key issues arising from the adoption of a new system are outlined below.
The registration of new charities with the ACNC will commence from 1 October 2012 (being an extension from 1 July).
In the first instance the activities of the ACNC will be confined to charities rather than the broader not-for-profits sector. Any expansion into the not-for-profits sector is not assured and would appear unlikely before 2014.
Defining a Charity
The current expectation is that the adoption of a statutory definition of ‘charity’ from 1 July 2013 will have minimal impact (consistent with the experience in other countries, such as the United Kingdom and New Zealand). In some cases charities may have to modernise their objects or statement of purposes.
Although the reporting framework and public information portal is still under development, the expectation is that from 1 July 2013 all charities will submit annual statements to the ACNC under a ‘report once, use often’ model, with the public being able to search financial and non-financial information. Reporting requirements will be tiered, based on a ‘small, medium and large’ platform.
Proposed Reporting Tiers
The proposed reporting tiers are: small – revenue of less than $250,000 pa and not a deductible gift recipient (DGR); medium – a DGR with revenue up to $1 million pa or a non-DGR with revenue between $250,000 and $1 million pa; and large – revenue over $1 million pa. The underlying theme of the reporting process will be identifying where funds come from and where they go.
Dealing with ASIC
From 1 July 2013 charities registered under the Corporations Act will no longer report directly to the Australian Securities and Investments Commission (ASIC), on the basis that ASIC will obtain information from the ACNC (eg, financial information, particulars of Directors, notification of changes to Constitution).
Input Into Public Statements
Charities will be able to use the ACNC database to communicate with the public. In addition, charities will have input into the statements that accompany information made public by the ACNC (eg, give narrative to accounts, consistent with the activities of the Charity Commission for England and Wales ).
Requests for Charities to Update Details
Existing charities will soon be asked by the Australian Taxation Office (ATO) to check that their details are up-to-date (e.g. trading name and particulars of Directors). The information obtained by the ATO will form the basis of the ACNC database. Once the information portal is fully operational charities should check that there details are accurate.
Commonwealth Tax Concessions
If a new charity is registered with the ACNC the ACNC will then pass on the charity’s details for the ATO to consider whether Commonwealth tax concessions apply (e.g. income tax and GST). Charities currently endorsed by the ATO will be automatically registered with the ACNC with ongoing eligibility to reviewed by the ACNC from 2013 (given the practical limits on the number of charities who could be reviewed at any one time, many charities may not be reviewed for a number of years).
State and Territory Tax Concessions (Fundraising)
At this stage there is no agreement on the ACNC interacting with State and Territory authorities on State and Territory based endorsements, such as fundraising approvals and stamp duty exemptions. Full harmonisation seems some way off.
Although minimum governance requirements are still under review, they are expected to deal with matters such as the management of conflicts of interest and risk management procedures.
It is anticipated that the ACNC will take a supportive approach to regulating charities, allowing charities to self correct (so long as there hasn’t been fraud or serious misconduct). Greater clarification on the threshold for intervention is anticipated.
Further information on the new system can be found at: http://acnctaskforce.treasury.gov.au/