Australian Charities and Not-for-profits Commission Legislative Review 2018

Treasury has released the Report of the Australian Charities and Not-for-profits Commission Legislative Review.

The Review Panel was asked to review the first five years of operation of the ACNC Acts and in particular to inquire into, and make recommendations on appropriate reforms to ensure that the regulatory environment established by the ACNC Acts continues to be relevant, that the ACNC Acts deliver on their policy objectives, that the powers and the functions of the Commissioner of the Australian Charities and Not-for-profits Commission in the ACNC Acts are sufficient and to consider whether any amendments to the ACNC Acts are required.

The final report makes 30 recommendations

A national scheme?
Among the recommendations and conclusions, a common theme is a need for a national scheme for the sector, requiring a referral of powers from the States to the Commonwealth.

Australia currently has eight separate jurisdictions whose regulatory regimes impact upon charities and not-for-profits, with the Commonwealth Government’s regulatory requirements, through the ACNC Acts and the tax system, overlaying each of these. This results in inconsistency, complexity, and inefficiency for charities. The Panel is of the view that a national scheme is the best option for the sector, especially in areas such as governance, fundraising, and registration.

In the short term, the Report recommends the harmonising of fundraising laws for charities and that all responsibility for the incorporation and regulation of companies which are registered entities, be transferred from ASIC to the ACNC, except for criminal offences.

Other recommendations

  • The Panel concluded that the objects in the ACNC Act continue to be relevant and it is unnecessary for the objects to be either expanded or prioritised.
  • The Panel recommends inserting functions and duties of the Commissioner into the ACNC Act.
  • The Panel considers that the Commissioner’s powers are adequate and do not need to be increased. In relation to federally regulated entities (FREs), the powers of the Commissioner should not be any more than those of regulators overseeing other entities. In this regard, the Panel recommends the removal of the Commissioner’s powers to replace responsible persons of a registered entity and be replaced with the Commissioner only having the powers of comparable regulators.
  • Director’s duties and other provisions ‘turned off’ under the Corporations Act 2001 (Cth) should be ‘turned on’.
  • The current revenue thresholds for determining a registered entity’s size, and the minimum reporting requirements for registered entities, are too low and have led to an increase in red tape for some registered entities. The Panel recommends that the revenue thresholds be increased to less than $1 million for a small registered entity, from $1 million to less than $5 million for a medium registered entity and $5 million or more for a large registered entity, and determined on rolling three-year revenue. The revised thresholds and minimum reporting requirements should take effect from 1 July 2019.
  • The Panel recommends greater disclosure of related party transactions and remuneration practices to improve public trust and confidence in the sector. The disclosure of remuneration practices should only be required of large registered entities.
  • The Panel supports the role of charities in advocacy to promote or oppose changes to any matter of law, policy or practice that is linked to their charitable purpose. However, there is ambiguity around the threshold between issues-based advocacy linked to a charitable purpose and political advocacy that may constitute a disqualifying purpose.
  • The ACNC regulatory framework could be extended beyond charities to include some not-for-profits. The Panel takes the view that risk, based on revenue, should be used to decide which entities should be migrated first. Based on information from the ATO, the Panel considers it appropriate to migrate a small number of income tax exempt not-for-profits with annual revenue of $5 million or more to the ACNC Register.
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