Not-For-Profit Newsletter – August 2012
Published on August 15, 2012 by Josephine Heesh and Patricia Monemvasitis
ACNC Update
House of Representatives Economics Committee hearings into the second draft ACNC Bill were held in the last week of July and revealed the following significant issues are still bothering the sector
- That the ACNC Bill does not appear to have reduced any red tape (that being one of the main reasons for the Commission’s creation)
- The lack of uniformity which will persist between the Commonwealth and the States and Territories until either the States cede their powers or recognise the ACNC regime as satisfying any State based regime requirements
- Uncertainty about the concept of maintaining “public trust and confidence”, an expressed object of the ACNC Act, and used frequently throughout the ACNC Bill, but not defined
- Uncertainty as to what governance rules will be passed by later regulation: the preference is to have those rules within the Act, before the Act commences
- Confusion between the role and responsibilities of board members against the role and responsibilities of the charitable entity: there is a risk that the corporate veil will be lifted; that the duties of voluntary board members will be higher than those on for-profit boards
- That the Bill purports to cover a range of entities which will also be covered by other legislation, for example the Corporations Act, theAssociations Incorporation Act. etc and uncertainty as to how they will interrelate
- General haste with which the legislation is proposed to be introduced
- Inability of the current Bill to sustain “a robust vibrant and independent” sector: another of the objects expressed in the Bill
With respect to point 4, one of the potentially onerous aspects of the ACNC will be the Commission’s role in ensuring that a registered charity continues to conduct itself in accordance with its constitution and objects or risk losing charitable status.
While we cannot gauge the effect of this power or even know whether the final version of the governance rules will maintain that provision (though it seems likely), it is still helpful to look at other jurisdictions which the Australian legislators are using as a model for some guidance.
For instance, the British equivalent, the Charity Commission for England and Wales, has demonstrated its ability to prevent a change in constitution in a 2010 decision which went all the way to the High Court before being referred back to the Commission.
Catholic Care (Diocese of Leeds) was seeking to alter its objects to restrict the adoption of children in their care to heterosexual couples only. The application was ultimately unsuccessful with the Commission ruling that “discriminating on the ground of sexual orientation is generally unacceptable and can only be justified by particularly convincing and weighty reasons”, which the charity did not have. You can read the full decision here http://www.charity-commission.gov.uk/Library/about_us/catholic_care.pdf
After setting out the features of a basic religious charity in our last newsletter, some religious charities may be interested in the points discussed below. As there is no guarantee, that the Act will reflect the current draft Bill, the points are tentative, but are suggested by the narrow definition which, if unchanged, may result in some religious charities inadvertently disqualifying themselves from the benefits available to a basic religious charity.
Our last newsletter listed the benefits, but in summary the two main ones are:
- exemption from filing annual audited accounts, irrespective of annual revenue over $1m: or exemption from filing reviewed accounts irrespective of revenue over $250,000; and
- exemption from compliance with governance standards (as yet unpublished), but likely to cover proving adequate risk management, avoidance of conflict of interest and responsibility and qualifications of persons managing etc
Matters for consideration include:
- Companies limited by guarantee and incorporated associations cannot be basic religious charities: if any religious work having the sole object of advancing religion, operates using either of these corporate structures, perhaps the charity should consider whether that work requires a separate corporate entity, or whether it could easily be merged with other religious work of the charity.
- Basic religious charities which join with their related entities to provide their annual information statement or annual financial statements will lose their “basic religious charity” status: small groups should consider separating their accounting records from their larger organisation.
- A basic religious charity cannot be a DGR or operate a DGR: parishes operating school building funds would need to separate the operation of the fund from other parish activities. The Australian Catholic Bishops Conference (ACBC) has called for those building funds with annual revenue less than $250,000 not to disentitle the parish from basic religious charity status.
- A basic religious charity cannot receive government grants: the ACBC has argued that small grants should be disregarded.
- A basic religious charity must restrict its purposes to the advancement of religion: the ACBC has called for a charity to retain its “basic” character, even if it is involved in another charitable work eg running a school or a welfare program.
These points are mentioned purely for informal consideration at this stage. Once the Bill enters the parliament, which we anticipate any day now, we will update you on developments. The ACNC implementation task force website at www.acnctaskforce.treasury.gov.au is a useful resource.
Save the date
We will be hosting a Not- for-profit Sector half day seminar at
