Basic Religious Charities
As we discussed in our April 2018 newsletter edition, a statutorily imposed review of the ACNC legislation by a panel appointed by the Federal Government was then underway.
On 31 May 2018 the panel released its final Report and Recommendations, which contained discussion of particular interest, and relevance, to Basic Religious Charities. As we foreshadowed in our previous commentary on submissions made to the panel, the future of Basic Religious Charities following the handing down of the Report remains uncertain.
Proposal One: review financial reporting exemption
Currently, Basic Religious Charities are exempt from providing financial information on their Annual Information Statement and are not required to submit financial reports to the ACNC. However, the authors of the Report note that if the following recommendations are adopted, then “the necessity for the exemption from financial reporting for basic religious charities be reviewed”:
Registered entities be required to report based on size, determined on rolling three-year revenue, with thresholds of less than $1 million for a small entity, from $1 million to less than $5 million for a medium entity and $5 million or more for a large entity.
Minimum reporting requirements for small registered entities be amended to allow in an Annual Information Statement (AIS) an option to provide a simplified balance sheet or a statement of resources.
In the Report, the Panel notes that “most [Basic Religious Charities] are unincorporated parishes and congregations served by volunteers and raise donations from members (rather than the public)” and, accordingly, at least one submission “questioned the benefit to the public of requiring financial reporting by those parishes and congregations”.
Other submissions to the panel “question[ed] why [Basic Religious Charities] should be exempt from financial reporting”, primarily for reasons of accountability:
- “an exemption from income tax based on registration under the ACNC Act is a public benefit (through tax forgone) that warrants public accountability”
- “many BRCs control significant assets and their exclusion from the reporting framework is at odds with appropriate accountability and transparency”.
The authors of the Report noted that “improved transparency and accountability” emerged as an area for improvement for religious institutions identified by the Royal Commission into Institutional Reponses to Child Sexual Abuse.
Proposal Two: review all exemptions
Under the current legislative regime the ACNC does not have the power to suspend or remove a responsible person from a Basic Religious Charity’s governing body. Furthermore, Basic Religious Charities do not need to comply with the ACNC governance standards.
The authors of the Report note that if the following recommendations are adopted, in addition to recommendations 12 and 13, then “all exemptions to basic religious charities” will need to be reviewed:
The powers of the Commissioner to replace a responsible person be removed.
A registered entity be presumed to comply with the ACNC governance standards if it already complies with other comparable governance requirements.
The authors of the Report note that “The removal of the exemption from the ACNC governance standards is a matter of significant concern to established religious denominations”. In its submission, the Uniting Church in Australia Assembly urged changes not be made to the exemptions for Basic Religious Charities because “Any changes to these bodies could have dire impacts on the life of the Church in Australia and the freedom of many religious communities”.
Justice Connect stand by their call, which we reported in our April 2018 newsletter, to abolish the Basic Religious Charity category. However, in light of the Report, Justice Connect’s head of not-for-profit law, Sue Woodward, has commented that “The panel have proposed a package of four reforms to underpin a ‘review’ of the [Basic Religious Charity] exemption. If ‘review’ means removal of the exemption, then this package might be a palatable compromise as it would ensure all small charities are treated in a similar way no matter what their charitable purpose.”
We await a response from Parliament on whether the panel’s recommendations will be legislated. Overall, the emphasis will be on considering all panel recommendations and weighing the improvement the legislature perceives against the difficulty of implementation.
As an aside, the report authors received many requests that the fund raising regimes applying in each state and territory be brought into conformity, or a national law apply: sadly, such requests, were beyond the panel’s remit, so, no recommendations on this vexing issue are contained in the Report.