Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
AUSTRALIAN CHARITIES AND NOT-FOR-PROFITS COMMISSION BILL 2012
AUSTRALIAN CHARITIES AND NOT-FOR-PROFITS COMMISSION
(CONSEQUENTIAL AND TRANSITIONAL) BILL 2012
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Background.................................................................... 7
Chapter 2 Constitutional basis for the Bill ..................................... 23
Chapter 3 Registration.................................................................. 29
Chapter 4 Australian Charities and Not-for-profits Register ......... 51
Chapter 5 Governance standards and external conduct
standards .................................................................... 57
Chapter 6 Reporting and record keeping ..................................... 69
Chapter 7 Duty to notify ................................................................ 87
Chapter 8 Information gathering and monitoring powers.............. 95
Chapter 9 Education, compliance and enforcement ................... 117
Chapter 10 The Commission and the Advisory Board.................. 163
Chapter 11 Secrecy framework .................................................... 177
Chapter 12 Reviews and appeals ................................................. 195
Chapter 13 Miscellaneous ............................................................ 211
Chapter 14 Transitional provisions ............................................... 239
Chapter 15 Consequential amendments ...................................... 253
Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
Chapter 16 Regulatory Impact Statement: establishing a
regulator for the not-for-profit sector ......................... 265
Chapter 17 Statement of Compatibility with Human Rights .......... 301
Index ................................................................................................... 307
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
AASB Australian Accounting Standards Board
AAT Administrative Appeals Tribunal
ABN Australian Business Number
ACCC Australian Competition and Consumer
Commission
ACN Register Australian Charities Not-for-profits Register
ACNC Australian Charities and Not-for-profits
Commission
AFTS Australia's Future Tax System
ANA Australian NFP Administrator
ASIC Australian Securities and Investments
Commission
APRA Australian Prudential Regulation Authority
APS Australian Public Service
ATO Australian Taxation Office
CCC Charities Consultative Committee
CCF Clubs Consultative Forum
COAG Council of Australian Governments
DGR Deductible gift recipient
FATF Financial Action Task Force
FBTAA Fringe Benefits Tax Assessment Act 1986
FMA Act Financial Management and Accountability
Act 1997
FRE Federally regulated entity
ICCPR International Covenant on Civil and Political
Rights
ITAA 1997 Income Tax Assessment Act 1997
ITSA Insolvency and Trustee Service Australia
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
TEQSA Tertiary Education Quality and Standards
Agency
MOU Memorandum of understanding
NFP Not-for-profit
PBIs Public benevolent institutions
PC Report Productivity Commission's Report on the
Contribution of the Not-for-profit Sector
2010
RIS Regulatory Impact Statement
SES Senior Executive Service
Special Account Australian Charities and Not-for-profits
Commission Special Account
SR VIII Special Recommendation VIII
2
General outline and financial impact
Australian Charities and Not-for-profits Commission
The Australian Charities and Not-for-profits Commission Bill 2012
establishes a new independent statutory office, the Australian Charities
and Not-for-profits Commission (ACNC) which will be the
Commonwealth level regulator for the not-for-profit (NFP) sector. The
exposure draft also establishes a new regulatory framework for the NFP
sector.
Date of effect: The ACNC will commence operations on 1 October 2012.
Proposal announced: This reform was announced by the then Assistant
Treasurer and Minister for Financial Services and Superannuation and the
then Minister for Human Services and Social Inclusion's joint Media
Release No. 77 of 10 May 2011.
Financial impact: Establishing the ACNC and the resulting structural
changes to the Australian Taxation Office (ATO) has resulted in the
following fiscal impact:
2011-12 2012-13 2013-14 2014-15
Expense $8.6m $14.8m $10.0m $10.1m
Revenue $8.0m $10.0m $10.0m $13.0m
Capital $1.0m $9.1m - -
Human rights implications: This Bill does not raise any human rights
issue. See Statement of Compatibility with Human Rights -- Chapter 17,
paragraphs 17.1 to 17.41.
Compliance cost impact: The establishment of the ACNC and related
regulatory framework could result in minor transitional compliance costs
for the registered charities that will come within the scope of the ACNC.
However, the introduction of a streamlined regulatory framework for the
NFP sector, which includes a `report-once, use-often' reporting
framework, is expected to reduce compliance costs over the medium to
long term.
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
Summary of regulation impact statement
Regulation impact on business
Impact: Registered charities that will come within the scope of the
ACNC could experience transitional compliance costs.
Once the sector's new regulatory system is in place, the Regulatory
Impact Statement finds that it will lead to a reduction in compliance costs
and red tape faced by the sector. Small entities that currently have no
reporting obligations are a minor exception. These entities would be
required to report to the ACNC and may therefore experience a minor
increase in compliance burden. However, they may benefit through other
aspects, such as more easily accessing Commonwealth exemptions,
concessions and benefits, and by having additional public exposure
through a page on the ACNC website at no cost.
Main points:
· The ACNC Bill establishes a new regulatory framework for
the sector and creates the ACNC as the Commonwealth level
regulator responsible for administering the ACNC Bill.
· The sector's new regulatory system will establish:
- a robust and streamlined regulatory framework for the
NFP sector, including a `report-once, use-often' reporting
framework;
- strengthen the sector's transparency, governance and
accountability; and
- provide the public with information on the sector
commensurate to the level of support provided to the
sector by the public.
· The ACNC will create a `one-stop shop' for ACNC
registration, tax concessions, and accessing Australian
Government services and concessions. Registered entities
that are involved in a range of activities would only have to
apply and report to the ACNC.
· The move to the `report-once, use-often' approach would
reduce the compliance burden associated with duplicative,
ad hoc and inconsistent reporting.
4
General outline and financial impact
· Smaller entities with no reporting obligations may have to
provide some basic reports, with the level of reporting based
on the entity's annual revenue turnover. This reporting
requirement may introduce a minor compliance burden for
these small entities.
· The compliance savings from introducing the ACNC and a
new regulatory framework are hard to quantify, particularly
for this sector, due to limited data availability.
· During consultation with the sector stakeholders indicated
that a move toward a `report-once, use-often' approach
would lead to `huge' savings in administrative and
compliance costs.
· The Regulatory Impact Statement also finds that a truly
national NFP regulator would provide the greatest benefits in
terms of reducing regulatory overlap, red tape and
compliance costs for the sector.
5
Chapter 1
Background
Outline of chapter
1.1 This Chapter explains the background to the Australian Charities
and Not-for-profits Commission Bill 2012 (Bill) and the context for
reform.
1.2 The Bill establishes a national regulator, and a national
regulatory framework for the not-for-profit (NFP) sector.
1.3 Initially, only tax endorsed charities will be regulated by the
Australian Charities and Not-for-profits Commission (ACNC). However,
the Bill establishes a regulatory framework that can be extended to all
NFP entities in the future.
1.4 The Bill:
· establishes the ACNC;
· charges the ACNC with registering NFP entities (initially
charities) and maintaining a register;
· provides for the powers of the ACNC Commissioner in
relation to the regulation of registered entities; and
· sets out the obligations and responsibilities of registered
entities.
Context of reform
The not-for-profit sector
1.5 The NFP sector broadly consists of entities that seek to achieve a
community, altruistic or philanthropic purpose.
1.6 The NFP sector is diverse, with entities ranging from
micro-sized sporting and recreational clubs to large national and
multinational charitable organisations.
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
1.7 NFP entities play a unique role in Australian society. In
recognition of this important role, NFP entities are exempted from a range
of regulatory requirements and are funded by governments, both directly
and through tax concessions, and by donations from members of the
public.
1.8 NFP entities differ from other entity types which may be
accountable to their members or stakeholders. NFP entities also need to
be accountable to the public, including donors, members and volunteers.
1.9 Maintaining, protecting and enhancing public trust and
confidence in the sector is essential to its ongoing sustainability, including
the ability to provide the services that it delivers to the public.
1.10 A national regulatory system that promotes good governance,
accountability and transparency for NFP entities will help to maintain,
protect and enhance the public trust and confidence that underpins the
sector.
1.11 The ACNC will play a key role in providing information and
education to the public about the NFP sector. The educational role of the
ACNC will help to improve public understanding of, and engagement
with, the important work of the sector.
1.12 The ACNC will administer a new system of smarter regulation.
The regulation will be proportional to size and risk in order to minimise
regulatory duplication and compliance costs, and to allow registered
entities to focus on achieving their mission.
1.13 The ACNC will prioritise working with other regulators to
minimise regulatory requirements for the NFP sector wherever possible.
1.14 The establishment of a regulatory framework that reflects the
unique structures, funding arrangements and goals of NFP entities will
support and sustain a robust, vibrant, independent and innovative
Australian NFP sector.
Outline of existing regulatory arrangements
1.15 Currently, no single institution is responsible for the regulation
of the NFP sector.
1.16 At present, Commonwealth, State, Territory and local
governments regulate different parts of the NFP sector for both different
and overlapping purposes. For example, these laws provide tax
concessions, exemptions from registration and permit requirements,
8
Background
exemptions or limitations on legal liability, and impose fundraising and
lottery regulations.
1.17 At the Commonwealth level, regulation is undertaken to access
Commonwealth taxation concessions and in relation to certain entity
types, such as companies limited by guarantee, Indigenous corporations,
and some corporate trustees.
1.18 In the absence of a registration regime, the role of de facto
regulator for the NFP sector at the Commonwealth level has generally
been shared between the Australian Taxation Office (ATO) and the
Australian Securities and Investments Commission (ASIC).
1.19 The ATO acts as a regulator for NFPs that access tax
concessions including an income tax exemption, deductible gift recipient
(DGR) status, refundable franking credits, and fringe benefits tax (FBT)
and goods and services tax (GST) concessions.
1.20 The current law requires charities to be endorsed by the ATO
before they can access NFP tax concessions. Hence, the ATO, by default,
is also responsible for determining charitable status.
1.21 Currently, the ATO's endorsement process requires applicants to
provide information on eligibility for tax concessions, including
operational and governance frameworks, and financial position.
1.22 NFP entities other than charities are generally able to self-assess
their access to income tax concessions, and are therefore not regulated by
any agency in an ongoing manner.
1.23 There are approximately 600,000 entities in the NFP sector, of
which it is estimated around 400,000 may access Commonwealth tax
concessions, either through the ATO endorsement process or by
self-assessment.
1.24 ASIC has a smaller role in the regulation of the NFP sector at
the Commonwealth level.
1.25 ASIC is currently responsible for regulating approximately
11,000 NFP entities incorporated as companies limited by guarantee under
the Corporations Act 2001. ASIC also regulates professional trustee
companies as well as some charities which are incorporated as other types
of companies under the Corporations Act 2001.
1.26 ASIC also has responsibility for the registration of incorporated
associations and cooperatives if they wish to operate outside their home
jurisdiction.
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
1.27 The Office of the Registrar of Indigenous Corporations (ORIC)
is an independent statutory office that regulates NFP Indigenous
corporations registered under the Corporations (Aboriginal and Torres
Strait Islander) Act 2006.
1.28 The States and Territories regulate incorporated associations and
charitable trusts (although public and private ancillary funds are regulated
at the Commonwealth level), as well as fundraising activities, and impose
reporting and governance requirements on entities that receive State and
Territory government funding.
1.29 Current reporting requirements across the sector are
inconsistent; there is minimal reporting for some organisations and
complex and burdensome reporting for others. There is also no single
reference point for the NFP sector to access information, education or
guidance.
1.30 There is limited easily-accessible information available to the
public on the activities of NFP entities. The current lack of information
available to the public acts as a barrier to the optimal allocation of
resources, thus undermining philanthropic engagement and potentially
weakening the generosity of donors.
History
Reviews and Inquiries
1.31 There have been several reviews into the regulation and taxation
of the NFP sector in Australia over the last 17 years.
1.32 A consistent theme that emerged from these reviews is that the
regulation of the NFP sector would be significantly improved by
establishing a national regulator and harmonising and simplifying
regulatory and taxation arrangements.
1.33 The 1995 Industry Commission Inquiry Report, Charitable
Organisations in Australia, recommended a sector wide focus on best
practice to strengthen the contribution the charitable sector makes to
Australian society.
1.34 The 2001 Report of the Inquiry into the Definition of Charities
and Related Organisations recommended that establishing a
comprehensive national administrative framework for the charitable and
related sector and an independent administrative body for charities and
related entities, be considered.
10
Background
1.35 The 2008 Senate Economics Committee Inquiry into Disclosure
Regimes for Charities and Not-for-profit Organisations recommended the
establishment of a single independent national regulator for NFP
organisations. The Committee recommended a broad role for the
regulator, including registering NFP organisations, educating the sector
and encouraging compliance and developing and maintaining an
accessible, searchable public information portal.
1.36 The 2010 Review into Australia's Future Tax System (The 2010
AFTS Review) recommended that a national charities commission should
be established to monitor, regulate and provide advice to all NFP
organisations.
1.37 The 2010 Productivity Commission Report on the Contribution
of the Not-for-profit Sector (2010 PC Report), recommended the
establishment of a `one-stop shop' for Commonwealth regulation by
consolidating various regulatory functions into a new national registrar.
The report recommended that the regulator undertake a variety of
functions, including assessing organisations for Commonwealth tax
concession status, providing a single reporting portal for corporate and
financial information, and investigating compliance with regulatory
requirements.
1.38 The 2010 Senate Economic Legislation Committee in its Inquiry
into the Tax Laws Amendment (Public Benefit Test) Bill 2010
recommended the establishment of a single independent national
commission for NFP organisations.
Scoping study for a national regulator
1.39 A scoping study for a national NFP regulator was undertaken to
determine the role, functions, feasibility and design options for a `one-stop
shop' NFP regulator.
1.40 The Government released a consultation paper in January 2011
to ascertain the views of the NFP sector on the goals of national
regulation, the scope of national regulation and the functions and form of
a national regulator. The consultation process demonstrated significant
support for a national regulator and national regulation, and for NFP
reform to be undertaken as a matter of priority.
1.41 The Final Report on the Scoping Study for a National
Not-for-profit Regulator (Final Report), produced by the Treasury,
presented the findings of the scoping study and provided a blueprint for
implementing a national NFP regulator.
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
1.42 The Final Report recommended that a single regulator should be
established for the purposes of governance, accountability and
transparency of NFPs and that the regulator should, as far as possible, be
responsible for regulating all NFPs.
1.43 The report also recommended that the regulator should
administer a principles-based regulatory framework to apply broadly
across the NFP sector, although regulation should be proportional and
tailored to address the specific needs and size of NFPs.
Budget announcement
1.44 As part of the 2011-12 Budget, the Government announced the
first stage of an ambitious reform agenda for the NFP sector.
1.45 To progress its NFP reform agenda, the Government announced
that it would:
· establish the ACNC as a `one-stop shop' regulator for the
NFP sector;
· introduce a statutory definition of `charity';
· introduce a general reporting framework and the
establishment of a public information portal;
· better target NFP tax concessions to ensure they are targeted
only at those activities that directly further an NFP's
altruistic purposes; and
· undertake a number of further reviews into the sector.
1.46 The Government further announced that the ACNC would:
· be headed by an independent statutory office holder, the
Australian Charities and Not-for-profits Commission
Commissioner (ACNC Commissioner);
· administer a regulatory framework to simplify the NFP
sector's interactions with the Australian government;
· initially be responsible for determining the legal status of
entities seeking charitable status, including public benevolent
institution (PBI) status, on behalf of all Commonwealth
agencies;
12
Background
· maintain a register of registered entities and, through its
website, provide an information portal which will act as the
central reference point for information about and for the NFP
sector;
· provide NFPs (particularly small and newly established
NFPs) with a first point of call for accessing information and
educational materials to answer questions through its
website;
· administer a single Commonwealth governance and
regulatory framework for NFPs; and
· administer a `report-once, use-often' general reporting
framework, to simplify reporting arrangements for registered
entities.
1.47 The Government also announced the establishment of an
Advisory Board of NFP sector experts to provide advice to the ACNC
Commissioner.
1.48 In the long term, the role of the ACNC will expand to include
responsibility for the regulation of all NFP entities which access tax
concessions or other Australian government benefits, regardless of their
legal form.
1.49 The ACNC may also take additional roles in the future pending
the outcome of any reviews into the NFP sector.
1.50 To take this into account, this Bill, which establishes the ACNC,
makes provision for additions to its regulatory responsibilities over time.
1.51 The Explanatory Materials uses the term NFP when general
reference is made to the sector and in expectation of the future expansion
of the regulatory responsibilities of the ACNC, although the application of
the Bill is currently limited to charities.
Benefits of reform
1.52 The Government's NFP reform agenda will implement the most
significant reforms the sector has experienced over the last century.
1.53 The reforms recognise the vital services and benefits that the
NFP sector provides to communities throughout Australia.
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
1.54 These reforms take into consideration the matters outlined in the
Final Report, and the recommendations of the 2010 Productivity
Commission Report and the 2010 AFTS Review.
1.55 As stated in the Final Report the current ad hoc approach has
resulted in `significant disadvantages in having multiple regulators of the
NFP sector. Specifically, it results in complex, overlapping and
duplicative regulation, and a lack of transparency, making it difficult for
the public to understand the NFP sector. Ultimately it leads to an
unnecessarily high regulatory burden for NFPs'.
1.56 The establishment of a regulatory system for NFP entities will
provide significant benefits to the NFP sector by:
· reducing red tape through processes to avoid or minimise
duplication where possible;
· improving public engagement with the NFP sector through a
public information portal;
· providing the sector with better protection from possible
breaches of trust and confidence by a few;
· offering information to help the public understand the work
of the sector; and
· providing information and guidance to the sector to assist
registered entities to comply with their regulatory obligations
and to fulfil their diverse and important goals.
Staged approach to reform
1.57 NFP entities generally operate for the broad public benefit, and
are relied on by many Australians, often by the most vulnerable in our
community.
1.58 NFP entities play a unique role in Australia for which they are
given funding from governments, both directly and indirectly, and from
donations from members of the public. This unique and important role
means that governments often afford them exemptions, concessions and
benefits under a range of laws and fee structures.
1.59 The Government announced on 17 May 2012 that the financial
reporting framework and governance standards, including the external
conduct standards, will commence on 1 July 2013.
14
Background
1.60 The Government will consult on the content of financial reports
and the governance and external conduct standards, including with key
stakeholders and advisory bodies such as the NFP Sector Reform Council
and the public more broadly.
1.61 The two-staged approach means that the financial reporting
requirements and governance standards for registered charities will not
come into effect until 1 July 2013. The extended start dates will give
more time for charities to transition to the new regulatory framework and
for the ACNC to provide guidance materials to help with the transition.
The first financial reports will not need to be lodged with the ACNC until
31 December 2014.
Consultation
1.62 The Government has undertaken extensive consultation on the
ACNC legislation and the establishment of the ACNC. These
consultation processes build upon the findings of past reviews and
inquiries, as discussed earlier in this chapter.
1.63 The consultation process included a consultation paper on the
Scoping Study for a National NFP Regulator, which was released on
21 January 2011. Consultation on the paper closed on 25 February 2011,
and over 160 submissions were received from stakeholders.
1.64 An exposure draft of legislation to establish the ACNC, along
with related explanatory materials, was released on 9 December 2011
following almost a year of detailed consultations and discussions.
Consultations on the exposure draft closed on 27 January 2012.
1.65 A wide range of stakeholders participated in the consultation
process, including NFP entities, academics, accounting and legal experts,
and representatives of States and Territories.
1.66 The Government also consulted with peak advisory bodies, such
as the NFP Sector Reform Council, the Charities Consultative Committee,
and the Clubs Consultative Forum.
1.67 The Government has taken these comments into consideration in
developing the draft legislation.
1.68 In addition, the Government undertook targeted consultation on
the draft legislation in May 2012 with a wide range of NFP
representatives including the Charities Consultative Committee, the Clubs
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
Consultative Forum, the NFP Sector Reform Council, NFP sector experts
and representatives of the States and Territories.
1.69 A series of ACNC Implementation Taskforce community
consultation sessions were held in all Australian capital cities and
Townsville, and concluded in February 2012. These sessions were
attended by around 1,600 people, and provided an opportunity for
stakeholders to provide comments and seek clarity over various aspects of
the reform.
1.70 The Government referred a draft version of the ACNC Bill to
the House of Representatives Standing Committee on Economics for an
inquiry over the Winter 2012 Parliamentary recess.
1.71 The Treasury made an initial submission to the House of
Representatives Committee, and also made an additional submission
following the Committee Hearing process.
1.72 The Committee's comments, as well as issues raised during the
inquiry process, have been taken into consideration in the final
preparation of the Bill and this Explanatory Memorandum.
The ACNC Commissioner's functions under the Bill
1.73 The ACNC Commissioner has the general administration of the
Australian Charities and Not-for-profits Commission Bill 2012. The
ACNC Commissioner therefore has all the rights, powers, responsibilities
and obligations provided to the administrator of such laws under statute
and common law.
1.74 As such, the ACNC Commissioner's role will include providing
guidance material to the sector, educating the sector and the public,
running a website and communicating with the public as well as
administering the powers contained in the Bill such as those relating to
registration, collecting reports, enforcement and monitoring.
1.75 The ACNC Commissioner will primarily achieve the objects of
the Bill by providing the NFP sector with guidance and educative
materials to assist the sector to understand and comply with regulatory
obligations. This is specifically provided for in the ACNC
Commissioner's education function in the Bill.
1.76 The Bill contains a wide spectrum of enforcement powers
reflecting that the ACNC would not have powers of enforcement unless
specifically provided for in legislation.
16
Background
1.77 Importantly, the legislation also provides for appropriate
limitations on these powers and considerations for the ACNC
Commissioner to consider in any exercise of these powers.
1.78 The ACNC Commissioner's enforcement powers are expected
to be exercised in a small number of serious cases where the
circumstances require it.
1.79 However, where enforcement action is required, the ACNC
Commissioner's range of enforcement powers allows the ACNC
Commissioner to provide a proportionate, balanced and effective
regulatory response.
Objects of the Bill
1.80 The objects of the Bill are: to maintain, protect and enhance the
public trust and confidence in the NFP sector; to support and sustain a
robust, vibrant, independent and innovative NFP sector; and to promote
the reduction of unnecessary regulatory obligations on the NFP sector.
[Subsection 15-5(1)]
1.81 These objects will be pursued through:
· the establishment of a national regulatory framework
specifically focussed on NFP entities to reflect the unique
goals, structures and funding arrangements of NFPs;
· the establishment of the ACNC Commissioner who will be
responsible for:
- registration of entities according to type and subtypes;
- administering the national regulatory framework; and
- assisting registered entities to comply with and understand
their regulatory obligations.
[Subsection 15-5(2)]
1.82 Registration with the ACNC is voluntary. However, NFP
entities must be registered with the ACNC in order to access certain
Commonwealth concessions, exemptions and benefits which are
contingent on registration. [Subsections 15-5(3)]
1.83 Registration is a necessary prerequisite for access to
Commonwealth tax concessions. Registration may also be necessary for
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
NFPs to access other concessions, exemptions and benefits.
[Subsections 15-5(3) and (4)]
1.84 Registration is explained in Chapter 3 -- Registration.
Public trust and confidence
1.85 The terms `public trust' and `confidence' have their ordinary
meaning and are used throughout this Bill to refer to the positive ways in
which the Australian public views the NFP sector.
1.86 The NFP sector is held in high regard by the Australian
community, as it provides vital services, assists the needy and contributes
to creating vibrant and diverse communities across the country.
1.87 This Bill aims to support public trust and confidence in the NFP
sector into the future. It does so in a variety of ways, including by
establishing a national regulatory framework for the sector, by creating a
publicly available Register, and by ensuring that entities meet principles-
based governance standards.
1.88 High levels of public trust and confidence in the NFP sector
encourage philanthropic giving, volunteerism and public engagement with
the sector.
1.89 Public trust and confidence is strengthened by information,
transparency, accountability, openness and effectiveness. It may be
weakened by misconduct, opacity, misinformation and illegality.
1.90 Just as the positive actions of one NFP entity can reflect
positively on the sector, the negative actions of one NFP entity can reflect
negatively on the sector.
Promoting the reduction of unnecessary regulatory obligations on NFPs
1.91 The ACNC will work with other regulators and cooperate with
other government agencies to promote the reduction of unnecessary
regulatory obligations on the NFP sector. [Section 15-5(1)(c)]
1.92 The regulatory framework set out in this Bill establishes the
ACNC with sufficient powers to enable it to take the central regulatory
role for the NFP sector, undertaking functions that were previously
performed by the ATO or ASIC.
1.93 The Bill also provides the ACNC with broad powers to share
information with other government agencies (subject to the protections on
18
Background
personal and confidential information, explained in Chapter 11) in order
to facilitate regulatory cooperation.
1.94 The ACNC will work collaboratively to ensure that NFPs are
regulated appropriately in a balanced manner which maintains an
appropriate level of oversight but does not unnecessarily burden the
sector.
1.95 The Bill establishes the ACNC as a single interface for core
matters minimising the interactions that NFPs must engage in with
government.
1.96 The ACNC will cooperate with other regulators, including the
development of memoranda of understanding that will govern the way
that regulators will work together. The ACNC will also work to put in
place administrative practices to ensure appropriate levels of regulatory
supervision without the imposition of unnecessary procedural
requirements including administrative procedures and practices.
1.97 As a regulator, the ACNC will co-operate and work with other
agencies to consolidate and standardise information that is sought from
NFPs to minimise the burden which repeatedly seeking the same
information would impose on NFPs.
1.98 The ACNC will advance initiatives to reduce unnecessary
reporting, including implementing a "report-once, use-often" framework
and developing the charity passport (which is a collection of core
information that has already been gathered by the ACNC as part of the
registration process or annual information statement) which can then be
provided to other government agencies negating the need for other
agencies to collect that information, minimising the interactions that NFPs
need to have with government.
1.99 This framework will promote better regulation of the NFP
sector, minimising the regulatory burden on NFPs while allowing for the
better and less resource intensive management of risk through coordinated
action.
Furthering the objects of the Bill
1.100 In undertaking his or her role, the ACNC Commissioner will
have regard to a number of factors to ensure that he or she considers all
stakeholders (for example, the public and NFPs) in exercising his or her
powers and functions, and that the ACNC Commissioner pursues best
practice regulation. [Section 15-10]
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
1.101 In undertaking his or her role, the ACNC Commissioner will
have regard to:
· the maintenance, protection and enhancement of public trust
and confidence in the NFP sector;
· the need for transparency and accountability of the NFP
sector to the public (including donors, members and
beneficiaries) by ensuring they have access to information
about NFP entities;
· the benefits of providing information to the public about NFP
entities;
· the maintenance and promotion of the effectiveness and
sustainability of the sector;
· the upholding of principles relating to regulatory necessity,
risk and proportionality;
· the need to cooperate with other Australian government
agencies, including in order to minimise procedural
requirements and procedural duplication;
· the effective administration of the laws that confer functions
and powers on the ACNC Commissioner;
· the benefits derived from assisting NFP entities with their
obligations under the Bill, including through the provision of
education and guidance to NFP entities; and
· the diversity of the NFP sector.
[Section 15-10]
1.102 The list of factors that the ACNC Commissioner will have
regard to is similar to those provided for other Commonwealth regulators
such as ASIC and the Tertiary Education Quality and Standards Agency
(TEQSA).
1.103 As they do for ASIC and TEQSA, this list of factors sets out
how the ACNC should approach all its activities so that they are in line
with the objects of the Bill.
1.104 While the nature of these factors means that there will be some
overlap between them, each factor is integral to guiding the ACNC's
approach to regulation.
20
Background
1.105 The ACNC Commissioner will have regard to issues of
regulatory necessity, risk and proportionality to ensure that his or her
actions are suitable and relative to individual circumstances. These
concepts involve ensuring that regulatory responses give consideration to
the different circumstances of different entities, including entity size,
revenue and donations received from the public.
1.106 In furthering the objects of this Bill, the ACNC will work to
ensure cooperation with other regulators so as to ensure that procedural
requirements and duplication are minimised where possible. The ACNC
will also work to educate the sector about regulatory requirements.
1.107 The ACNC Commissioner will have regard to the need to ensure
that the law is administered effectively, and that it imposes a minimum of
procedural requirements on registered entities.
1.108 The ACNC's approach will take into account the size, level of
risk and history of each registered entity. This means that the ACNC
Commissioner will have regard to the diversity of the NFP sector, and will
respond accordingly.
1.109 The ACNC will also provide education to the sector and to the
public about the NFP sector. The ACNC will thus be a platform for
greater engagement between the NFP sector and the public and vice versa.
1.110 The Bill does not allow the Commissioner to collect fees for
providing information, or for other purposes. Therefore, guidance and
education provided by the ACNC must be provided for free.
1.111 Taking these factors into account will ensure that when
undertaking its role, the ACNC balances these important considerations to
provide a regulatory framework which underpins a strong and vibrant
NFP sector.
21
Chapter 2
Constitutional basis for the Bill
Outline of chapter
2.1 This Chapter explains the constitutional basis for the Australian
Charities and Not-for-Profits Commission Bill 2012 (Bill).
Detailed explanation of new law
2.2 Under The Constitution, the Commonwealth does not have any
legislative power specifically to regulate the not-for-profit (NFP) sector.
As a result, different Commonwealth powers support different aspects of
the Bill.
Taxation power
2.3 Paragraph 51(ii) of the The Constitution (the taxation power)
allows the Commonwealth to make laws with respect to taxation. The
taxation power supports the provisions of the Bill that:
· establish a registration scheme as a prerequisite for NFPs to
access certain Commonwealth tax concessions (Part 2-1);
· empower the Governor-General to make regulations
prescribing particular standards that entities need to meet as a
prerequisite for being registered and remaining entitled to be
registered (Part 3-1);
· set out the record keeping and reporting obligations
applicable to registered entities -- to the extent that these are
imposed in order to enable an assessment of an entity's
entitlement to registration, compliance with the parts of the
Bill or the regulations supported by the taxation power, or
compliance with any taxation law as defined in the Income
Tax Assessment Act 1997 (Part 3-2);
· require registered entities to notify the Australian Charities
and Not-for-profits Commission Commissioner (ACNC)
Commissioner (ACNC Commissioner) of certain matters in
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
circumstances where those matters may affect their
entitlement to registration (Division 65);
· empower the ACNC Commissioner to obtain information for
the purpose of determining whether a registered entity has
complied with certain provisions of the Bill (or legislative
instruments made under the Bill) supported by the taxation
power (Division 70);
· empower the ACNC Commissioner to obtain information for
the purpose of determining whether information given in
compliance or purported compliance with provisions of the
Bill (or legislative instruments made under the Bill)
supported by the taxation power is correct (Division 70);
· empower ACNC officers to monitor whether certain
provisions of the Bill (or legislative instruments made under
the Bill) supported by the taxation power have been complied
with (Division 75); and
· empower ACNC officers to monitor whether information
given in compliance or purported compliance with provisions
of the Bill (or legislative instruments made under the Bill)
supported by the taxation power is correct (Division 75).
2.4 The provisions of the Bill supported by the taxation power will
apply in relation to all registered entities.
Communications power
2.5 Paragraph 51(v) of the The Constitution (the communications
power) allows the Commonwealth to make laws with respect to `postal,
telegraphic, telephonic, and other like services' -- including electronic
communications. The communications power supports the provisions of
the Bill that require the ACNC Commissioner to maintain the Australian
Charities and Not-for-profits Register, an electronic database that must be
made available for public inspection on the internet (Part 2-2).
2.6 The communications power also supports the provisions of the
Bill that:
· empower the ACNC Commissioner to obtain information for
the purpose of determining whether information provided to
the ACNC Commissioner by an entity, and included on the
Register in accordance with Division 40, is correct
(Division 70); and
24
Constitutional basis for the Bill
· empower ACNC officers to monitor whether such
information is correct (Division 75).
Corporations power and Territories power
2.7 Certain parts of the Bill only apply in relation to `federally
regulated entities' (FREs), which are essentially entities that the
Commonwealth has power to regulate under paragraph 51(xx) of The
Constitution (the corporations power) or section 122 of The Constitution
(the Territories power). The corporations power allows the
Commonwealth to make laws with respect to certain types of corporations
(paragraph 51(xx) corporations). The Territories power allows the
Commonwealth to make laws for the government of any Territory.
2.8 Where a registered entity is an FRE because it is a
paragraph 51(xx) corporation or a trust whose trustees are all
paragraph 51(xx) corporations, the corporations power supports the
provisions of the Bill that empower the ACNC Commissioner to:
· give warnings and directions to that FRE (Divisions 80
and 85);
· accept and seek Court enforcement of certain undertakings
made by that FRE (Division 90);
· seek, and a Court to grant, injunctions relating to that FRE
(Division 95); and
· suspend or remove a responsible entity of that FRE, and
appoint acting responsible entities (Division 100).
2.9 The Territories power supports these provisions of the Bill in
their application to each registered entity that is an FRE because it is a
body corporate incorporated in a Territory, a trust whose trustees are all
bodies corporate incorporated in a Territory, a body corporate taken to be
registered in a Territory under section 119A of the Corporations Act 2001,
or an entity connected to a Territory in the manner described in
paragraphs (d) or (e) of the definition of FRE in section 205-15 of the Bill.
2.10 Additionally, the corporations power and the Territories power
respectively support the provisions of the Bill that:
· set out the record keeping and reporting obligations
applicable to registered entities -- to the extent that these are
imposed in order to enable an assessment of an entity's
compliance with the parts of the Bill or the regulations
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
supported by the corporations power / Territories power
(Part 3-2);
· empower the ACNC Commissioner to obtain information for
the purpose of determining whether a registered entity has
complied with certain provisions of the Bill (or legislative
instruments made under the Bill) supported by the
corporations power / Territories power (Division 70);
· empower the ACNC Commissioner to obtain information for
the purpose of determining whether information given in
compliance or purported compliance with provisions of the
Bill (or legislative instruments made under the Bill)
supported by the corporations power / Territories power is
correct (Division 70);
· empower ACNC officers to monitor whether certain
provisions of the Bill (or legislative instruments made under
the Bill) supported by the corporations power / Territories
power have been complied with (Division 75); and
· empower ACNC officers to monitor whether information
given in compliance or purported compliance with provisions
of the Bill (or legislative instruments made under the Bill)
supported by the corporations power / Territories power is
correct (Division 75).
External affairs power
2.11 Paragraph 51(xxix) of The Constitution (the external affairs
power) allows the Commonwealth to make laws with respect to external
affairs. `External affairs' in this context includes persons, places, matters
or things outside the geographical limits of Australia.
2.12 The external affairs power supports section 50-10 of the Bill in
Part 3-1, which empowers the Governor-General to make regulations,
specifying the `external conduct standards', for the purpose of regulating
funds sent by NFPs outside Australia and activities engaged in by such
entities outside Australia.
2.13 Additionally, the external affairs power supports the provisions
of the Bill that empower the ACNC Commissioner to take enforcement
action in relation to any registered entity in certain circumstances
involving the external conduct standards. In these circumstances, the
ACNC Commissioner has power to exercise the same enforcement
26
Constitutional basis for the Bill
powers as are available in relation to registered entities that are FREs. In
other words, the ACNC Commissioner may:
· give warnings and directions to a registered entity
(Divisions 80 and 85);
· accept and seek Court enforcement of certain undertakings
made by a registered entity (Division 90);
· seek injunctions from a Court (Division 95); and
· suspend or remove a responsible entity of a registered entity,
and appoint acting responsible entities (Division 100).
2.14 The external affairs power also supports the provisions of the
Bill that:
· set out the record keeping and reporting obligations
applicable to registered entities -- to the extent that these are
imposed in order to enable an assessment of an entity's
compliance with the parts of the Bill or the regulations
supported by the external affairs power (Part 3-2);
· empower the ACNC Commissioner to:
- obtain information for the purpose of determining whether
a registered entity has complied with certain provisions of
the Bill (or legislative instruments made under the Bill)
supported by the external affairs power (Division 70); and
- obtain information for the purpose of determining whether
information given in compliance or purported compliance
with provisions of the Bill (or legislative instruments
made under the Bill) supported by the external affairs
power is correct (Division 70);
· empower ACNC officers to:
- monitor whether certain provisions of the Bill (or
legislative instruments made under the Bill) supported by
the external affairs power have been complied with
(Division 75); and monitor whether information given in
compliance or purported compliance with provisions of
the Bill (or legislative instruments made under the Bill)
supported by the external affairs power is correct
(Division 75).
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
Mixture of powers
2.15 Other parts of the Bill that comprise overarching or machinery
provisions of the ACNC scheme also rely on all of the Commonwealth
powers listed above. These parts of the Bill are supported by different
powers depending on the particular function or power being exercised
under the Bill, the circumstances of its exercise, or the substantive
provision of the Bill to which the particular machinery provision relates.
2.16 The parts of the Bill relying on a mix of powers are the
provisions that:
· establish the ACNC (Chapter 5) and the Advisory Board
(Chapter 6);
· impose secrecy obligations in relation to information
obtained under or for the purposes of the Bill, and authorise
disclosure of this information in particular circumstances
(Part 7-1);
· provide for reviews and appeals of decisions made under the
Bill (Part 7-2);
· set out the administrative penalties applicable for making
false or misleading statements or failing to lodge documents
on time under the Bill (Part 7-3);
· extend the application of the obligations, liabilities and
offences of entities under the Bill to the responsible entities
of those entities (Part 7-4);
· govern administrative matters relating to the process for
providing material to the ACNC Commissioner
(Divisions 190 to 195); and
· empower the Governor-General to make regulations
prescribing certain matters (Division 200).
2.17 Finally, some Commonwealth powers not mentioned above
provide support for discrete aspects of the Bill. For example, to the extent
that the information-gathering and monitoring powers in Divisions 70
and 75 relate to provisions of the Crimes Act 1914 or Criminal Code,
these powers rely on the Commonwealth powers supporting those
criminal laws.
28
Chapter 3
Registration
Outline of chapter
3.1 This Bill provides the Australian Charities and Not-for-profits
Commission Commissioner (ACNC Commissioner) with the power to
register entities as particular types and subtypes of not-for-profit (NFP)
entities.
3.2 Such registration is a prerequisite for an entity to access certain
Commonwealth tax concessions. The Bill ensures that these tax
concessions are available only to entities that are governed and regulated
in accordance with the Bill.
3.3 Initially, registration with the ACNC is limited to charities.
However, the ACNC's role is expected to expand over time to include all
NFPs. Further explanation can be found in Chapter 1 -- Background.
3.4 This Chapter explains the registration processes and eligibility
requirements for entities that wish to be registered by the ACNC
Commissioner.
3.5 It also explains the processes and grounds for the revocation of
registration by the ACNC Commissioner and the consequences of having
registration revoked.
Rationale for registration rules
3.6 The Final Report on the Scoping Study for a National NFP
Regulator recommended that a government body should be given the
responsibility to endorse and register NFP entities.
3.7 It also recommended that registration should be recognised by
all agencies at the Commonwealth level.
3.8 The Government announced in the 2011-12 Budget that it would
charge the ACNC Commissioner with responsibility for registering NFP
entities.
3.9 The ACNC Commissioner's responsibilities also include
collecting relevant information on NFP entities and using this information
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
as a basis for registering an entity under a type and subtype(s) and
monitoring the entity's ongoing eligibility for registration.
3.10 Registration is voluntary. However, registration is a prerequisite
for access to certain Commonwealth tax concessions. As such, these tax
concessions can only be accessed by those entities registered and
regulated under this law.
3.11 Other Commonwealth concessions, exemptions or benefits may
also be contingent on registration.
3.12 While registration is voluntary, NFP entities accept
responsibilities from being registered and the consequences that may
follow from having their registration revoked.
Summary of new law
3.13 The Bill provides the ACNC Commissioner with the power to
register NFP entities under their type and subtype.
3.14 Registration by the ACNC Commissioner allows NFP entities to
access support in the form of Commonwealth exemptions, concessions
and benefits (including tax concessions).
3.15 To be registered by the ACNC Commissioner and to maintain
this registration, charities must: apply directly to the ACNC for
registration; operate consistently with the definition of charity specified in
Australian law, or the requirements of any other type or subtype; and
comply with prescribed registration conditions and requirements.
3.16 Transitional rules apply in relation to charities that are endorsed
by the Australian Taxation Office (ATO), ensuring a smooth transition to
the ACNC. These rules are explained in detail in Chapter 14 --
Transitional provisions.
3.17 The Bill also provides the ACNC Commissioner with the power
to revoke the registration of entities. The ACNC Commissioner may
revoke an entity's registration as a type of entity and as a subtype of entity
in certain circumstances.
3.18 The ACNC Commissioner must consider a range of factors
before making a decision about revoking an entity's registration.
30
Registration
Detailed explanation of new law
3.19 The Bill provides for the ACNC Commissioner to register
entities as particular types and subtypes of NFP entities. [Subsection 20-5(1)]
3.20 The Bill also provides for the Commissioner to revoke the
registration of registered entities, in certain circumstances.
[Subsection 20-5(1)]
3.21 Registration with the ACNC is a prerequisite for access to
certain Commonwealth tax concessions. [Subsection 20-5(2)]
3.22 Registration may also be a prerequisite for other exemptions,
benefits and concessions provided under Australian laws.
[Subsection 20-5(3)]
Registration limited to charities
3.23 Registration is initially limited to charities. Charities may be
registered according to their subtypes, including public benevolent
institutions (PBIs) and health promotion charities. The ACNC's role may
expand over time to the registration of all NFP entities.
Entitlement to registration
3.24 An entity is entitled to be registered by the ACNC if it:
· meets the description of the relevant type or subtype;
· is a NFP;
· meets the governance standards and external conduct
standards;
· has a current ABN; and
· is not characterised as engaging in, or supporting, terrorist or
other criminal activities under an Australian law.
3.25 If the entity has previously been a registered entity, but its
registration as a type of entity has been revoked, that entity is entitled to
be re- registered if the ACNC Commissioner is satisfied that the matters
which led to the revocation have been dealt with, such that the re-
registration of the entity would not conflict with the objects of this Bill.
[Subsections 25-5(1), 25-5(2) and 25-5(3)]
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
3.26 An entity is entitled to registration if it meets the description of
the relevant type or subtype. [Paragraphs 25-5(1)(b) and 25-5(2)(b)]
3.27 Initially, the ACNC will only register charities. Therefore, in
order to be entitled to registration as a type of registered entity, an entity
must be a charity. [Paragraph 25-5(1)(b)]
3.28 The determination of charitable purpose is to be undertaken in
accordance with the common law meaning of the term, as affected by the
Extension of Charitable Purpose Act 2004. [Subsections 25-5(5) and (6)]
3.29 To be registered as a subtype of an entity the entity must meet
the description of that subtype. [Paragraph 25-5(2)(b)]
3.30 The ACNC Commissioner will also use the common law
definitions of the relevant subtypes to ensure that an entity meets the
requirements.
3.31 Registration as a type or subtype is voluntary. However, only an
entity that is so registered can access certain types of support provided by
the Commonwealth Government.
3.32 To be entitled to registration, an entity must be a NFP entity.
[Paragraph 25-5(3)(a)]
3.33 A NFP entity is generally an entity that is not operating for the
profit or gain of its individual members, whether these gains are direct or
indirect. This applies both while the entity is operating and when the
entity winds up.
3.34 Additionally, an NFP entity is one that does not provide any
private benefit, directly or indirectly, to a related party such as a trustee,
member, director, employee, agent or officer of a trustee, donor, founder,
or to an associate of any of these entities (other than reasonable
remuneration for services provided or re-imbursement of related costs).
3.35 However, the fact that a NFP entity may make a profit does not
negate its NFP status so long as any surplus is applied to the NFP
purposes of the entity and the profit does not accrue to the benefit of
identifiable members either directly or indirectly.
3.36 An entity is entitled to registration if it meets the governance and
external conduct standards. [Paragraph 25-5(3)(b)]
3.37 Further explanation of these standards can be found in Chapter 5
-- Governance and external conduct standards.
32
Registration
3.38 An entity is entitled to registration if it has a current ABN.
[Paragraph 25-5(3)(c)]
3.39 An entity must have its own ABN to register as a type or
subtype. A group of entities cannot register with the ACNC as a single
entity.
3.40 An entity is entitled to registration if it is not characterised as
engaging in, or supporting, terrorist or other criminal activities under an
Australian law. [Paragraph 25-5(3)(d)]
3.41 An entity is characterised as engaging in, or supporting, terrorist
or other criminal activities if it is covered by an instrument made by an
Australian government agency under an Australian law, such as the
Crimes (Controlled Operations) Act 2008 of the Australian Capital
Territory.
3.42 An entity which was formerly registered with the ACNC and has
had their registration revoked may be registered again if, and only if, in
the opinion of the ACNC Commissioner, the matters that led to the
revocation of the entity's registration have been remedied, such that
registration of the entity would not cause harm to, or jeopardise, public
trust and confidence in the NFP sector. [Paragraph 25-5(1)(c)]
3.43 Where the ACNC Commissioner registers an entity which has
previously had its registration revoked, the second registration does not
rescind the ACNC Commissioner's decision to revoke the first
registration of that entity. That is, the registered entity will lose access to
any concessions, exemptions or benefits that are contingent on registration
as a consequence of revocation between the period in which the entity's
registration was revoked and the entity being registered again.
[Paragraph 25-5(1)(c) note]
Example 3.1
The Moments Foundation's registration was revoked in 2014 and its
managing director was convicted of fraud. Two years later the
foundation seeks re-registration with the ACNC. It has put in place a
new management team and governing board and has a comprehensive
risk management plan. The ACNC Commissioner is satisfied that
registration is consistent with the object of the Bill, including the
maintenance, protection and enhancement of public trust and
confidence in the NFP sector. Accordingly, the ACNC Commissioner
registers the foundation.
The Moments Foundation's registration remains revoked during the
period between revocation in 2014 and re-registration in 2016. The
Moments Foundation will not be eligible to access any Commonwealth
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
tax concessions, exemptions or benefits contingent on registration with
the ACNC during the period that it was not registered.
3.44 An entity may be registered as both a type and subtype of entity.
It may also be registered as multiple subtypes of an entity provided that it
meets the description of the entity subtype in the table in section 5-10(5).
However, an entity cannot be registered only as a subtype, it must also be
registered as a type of entity. [Subsection 25-5(4)]
3.45 Entities are able to apply for registration under multiple
subtypes, provided their activities meet the necessary conditions for
registration and the requirements of the subtypes do not conflict.
[Subsection 25-5(4)]
3.46 Some tax concessions are only provided to entities registered as
a particular subtype.
Example 3.2
The Mockingbird organisation is registered as an entity with the
ACNC as the type -- charity and as the subtype -- public benevolent
institution (PBI). It is able to access the Commonwealth tax
concessions available to charities and PBIs, including an income tax
exemption and goods and services tax and fringe benefits tax
concessions.
The Mockingbird organisation could also register as the type -- charity
and both the subtype -- the relief of poverty, sickness or the needs of
the aged and the subtype -- public benevolent institution.
If the Mockingbird organisation was registered only as an entity with
the type -- charity, and did not register as a subtype of entity, it would
not be able to access Commonwealth tax concessions that are only
available to PBIs, such as fringe benefits tax concessions.
Types and subtypes
3.47 A table has been included in the Bill to explain the types and
subtypes of entity that may register with the ACNC. [Subsection 25-5(5)]
3.48 The table lists item numbers, type of entity and subtypes of
entity.
3.49 In column one, the table currently lists only one type of entity
that is entitled to register. This is an entity that is a charity. The table
may be expanded in the future to list other types of entities.
34
Registration
3.50 The ACNC Commissioner's determination of an entity's
charitable purpose is based on traditional definitions of charity found in
the common law as affected by the Extension of Charitable Purpose
Act 2004. [Subsections 25-5(5) and 25-5(6)]
3.51 The ACNC Bill does not change the existing common law
definition of charity, nor does it make any changes to the public benefit
test that forms part of that definition.
3.52 The ACNC Commissioner's determination of an entity's
charitable status must be accepted by all other Commonwealth
Government agencies, including the ATO.
3.53 However, being registered as a charity with the ACNC does not
necessarily mean that an entity qualifies as being charitable for State or
Territory purposes.
3.54 Column two lists subtypes of entities that are entitled to
registration. Items one to four in column two are the heads of charity as
recognised in Commissioners for Special Purposes of Income Tax v.
Pemsel (1891). These are: the relief of poverty, sickness or the needs of
the aged; the advancement of education; the advancement of religion; and
purposes that are beneficial to the community. Item five is the tax law
definition of a health promotion charity.
3.55 Items five and six (institution whose principal activity is to
promote the prevention or control of diseases in human beings and PBIs)
have been included as separate items in column two in recognition of the
different Commonwealth tax concessions that these subtypes of entities
are eligible to receive. Generally entities with these subtypes will also be
eligible to register under subtype one (relief of poverty, sickness or the
needs of the aged) in column two. [Subsection 25-5(5)]
3.56 Item seven has been included as a subtype to recognise that the
Extension of Charitable Purpose Act 2004 extended the definition of
charity to include the provision of NFP childcare services.
[Subsection 25-5(5)]
3.57 An entity may register as a type of charity, and as a subtype of
charity.
3.58 An entity may also register as more than one subtype. For
example, an entity that has PBI status may register with the type --
charity and with the subtype -- entity with a purpose that is the relief of
poverty, sickness or the needs of the aged and the subtype -- public
benevolent institution. [Subsection 25-5(4)]
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
3.59 An entity may register with one subtype at one point in time, and
register as another subtype at a later point in time.
3.60 For example, an entity may register as the type charity with the
subtype - entity with a purpose that is the advancement of religion at one
point in time. That entity may later register with the subtype - entity with
a purpose that is the advancement of education, in addition to its first
subtype registration so long as it meets the requirements for both subtype
registrations.
3.61 An entity may not register with more than one subtype where the
requirements of those subtypes conflict.
3.62 For example, in order to meet the requirements of the subtype -
public benevolent institution, an entity could not meet the requirements of
the subtype - entity with a charitable purpose described in section 4 of the
Extension of Charitable Purpose Act 2004 (provision of child care
services).
3.63 An entity may not register only as a subtype. An entity must
register as a type in order to register as a subtype.
3.64 Registration as a type or subtype is at the entity level. This is
the same as the current ATO registration process. As described above, an
entity must have its own ABN to register as a type or subtype.
3.65 Entities registered separately may be able to report together. See
Chapter 6 -- Reporting and record keeping for more information.
Process of registration
3.66 Entities may apply to the ACNC Commissioner for registration
as a type or subtype. [Section 30-5 and subsection 30-10(1)]
3.67 An application for registration must be in the form approved by
the ACNC Commissioner and accompanied by any documents that the
ACNC Commissioner requires. The approved form requirements are
explained in Chapter 13 -- Miscellaneous. [Subsection 30-10(2)]
3.68 The ACNC Commissioner may require an applicant to provide
additional information where that information is necessary to decide
whether the applicant is entitled to registration. In particular, the ACNC
Commissioner may require documents that provide proof of identity to be
supplied. [Subsection 30-15(1)]
36
Registration
3.69 This additional information could include, for example,
clarification of responses in applications, certified copies of the governing
rules of the entity or further details about responsible entities.
Dealing with an application for registration
3.70 If the ACNC Commissioner is satisfied that the applicant meets
all of the requirements for registration, then the ACNC Commissioner
must register an entity and specify the type and, where relevant, subtype
of entity. Otherwise, the ACNC Commissioner must reject the application
for registration. [Section 30-20]
3.71 The ACNC Commissioner must provide the applicant entity
with written notice of his or her decision. [Section 30-25]
3.72 The registration has effect from the date specified by the ACNC
Commissioner. This date can be retrospective, subject to limitations
expressed in the Bill. [Subsection 30-30]
3.73 Where the ACNC Commissioner has not made a decision on an
application for registration within 60 days of receiving it, the applicant
entity may give the ACNC Commissioner written notice, in the approved
form, that the entity wishes to treat the application for registration as
rejected. [Subsection 30-15(2)]
3.74 If an entity gives such notice, the ACNC Commissioner is taken
to have refused the application on the day in which the notice is given.
[Subsection 30-15(4)]
3.75 This ensures that entities have recourse if a decision is not made
in the set time and ensures that entities can have the decision reviewed
where appropriate.
3.76 If the ACNC Commissioner requests additional information, the
application can be taken to have been refused on the later of:
· the end of the 28th day after the last day on which the
applicant gives the ACNC Commissioner additional
information as required; or
· the end of the 60th day after the application was made.
[Subsection 30-15(3)]
Example 3.3
The Mosies Foundation applies for registration on 1 March 2013. On
20 April 2013, the ACNC Commissioner requests that further details
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
about responsible entities (in this case, the directors of the Foundation)
be provided. The Mosies Foundation provides this information on
1 May 2013. If the ACNC Commissioner does not notify the
foundation of his or her decision by 29 May 2013, the Foundation is
entitled to treat the application as refused provided that it gives written
notice to the ACNC Commissioner.
Review rights
3.77 The ACNC Commissioner's decision to reject an application
for registration is a reviewable decision. [Section 30-35]
3.78 The entity has the right to object to a decision in line with the
review and appeals provisions. These are explained in Chapter 12 --
Reviews and appeals.
Revocation of registration
3.79 In certain circumstances, the ACNC Commissioner may revoke
the registration of a registered entity. This power is necessary to ensure
that entities accessing public monies operate transparently and in line with
the regulatory requirements, and to ensure that public monies are used
appropriately.
3.80 The ACNC Commissioner is able to revoke an entity's
registration as a type or subtype of entity if the ACNC Commissioner is
satisfied that certain circumstances are present, having considered a
number of factors. If the ACNC Commissioner revokes an entity's
registration as a type of entity, it must also revoke its registration as a
particular subtype. [Section 35-5]
Example 3.4
Better People is a registered entity. Better People is registered with a
type -- charity and the corresponding subtypes -- public benevolent
institution and entity with a purpose that is the relief of poverty,
sickness or the needs of the aged. Better People changes its activities
so that it no longer meets the requirements of the subtype -- public
benevolent institution.
The ACNC Commissioner revokes Better People's registration as a
subtype -- public benevolent institution, but leaves its registration as a
subtype -- entity with a purpose that is the relief of poverty, sickness
or the needs of the aged.
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Registration
Grounds for revocation of registration
3.81 The ACNC Commissioner may only revoke the registration of
the entity if he or she is satisfied that at least one of the following
conditions is met:
· at any time after the entity's registration, the registered entity
was not entitled to be registered as that type of entity (or as
the subtype of entity) [paragraph 35-10(1)(a)];
· the registered entity provided information that was false or
misleading in a material particular in connection with its
application for registration [paragraph 35-10(1)(b)];
· the registered entity has contravened, or is more likely than
not to contravene a provision of this law, or has not
complied, or is more likely than not to not comply with a
governance standard or an external conduct standard
[paragraph 35-10(1)(c)];
· the registered entity has a trustee in bankruptcy, a liquidator,
or a person authorised to manage the affairs of the entity
under an Australian law because it is unable to pay all its
debts when they become due and payable
[paragraph 35-10(1)(d)]; or
· the entity has made a request to the ACNC Commissioner
that its registration as a type or subtype of entity be revoked
[paragraph 35-10(1)(e)].
3.82 The ACNC Commissioner may only revoke an entity's
registration where one of these grounds is met following consideration of
a number of factors.
3.83 The ACNC Commissioner may revoke the registration of an
entity, if, at any time after the entity's registration, the entity has lost its
entitlement to be registered in accordance with section 5-10 of the Bill.
[Paragraph 35-10(1)(a)]
Example 3.5
The MED organisation is no longer undertaking charitable activities
and is not operating on an NFP basis. It is no longer entitled to
registration and its registration can be revoked.
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
Example 3.6
The registration of the Green Apple organisation as an entity whose
principal activity is to promote the prevention or the control of diseases
in human beings is revoked because it no longer meets the
requirements of this subtype, however, it still has charitable purposes
and remains registered as a charity.
3.84 Revocation of registration can also occur where information that
was false or misleading in a material particular has been provided in
connection with a registered entity's application for registration. This
ground for revocation ensures that entities do not fraudulently obtain
registration by providing misleading information in their applications for
registration. [Paragraph 35-10(1)(b)]
Example 3.7
The KIO Trust is registered with the ACNC. It is brought to the
attention of the ACNC Commissioner that the trust provided false
information in its application for registration, including making
misleading statements about the identity of responsible entities and
providing misleading information about the nature of its purpose and
activities. The trust's registration can be revoked by the ACNC
Commissioner.
3.85 Registration may also be revoked where an entity has
contravened, or is more likely than not to contravene a provision of the
Bill, or has not complied, or is more likely than not to not comply, with a
governance standard or external conduct standard. [Paragraph 35-10(1)(c)]
3.86 The ACNC Commissioner will aim to use education and
guidance to assist registered entities to understand and comply with their
obligations under this Bill.
3.87 However, where enforcement action is required the ACNC
Commissioner will have a range of enforcement powers, including the
power to revoke registration, to ensure he or she can provide appropriate
and effective regulatory responses in a range of circumstances. Further
information on the compliance approach of the ACNC Commissioner can
be found in the June 2012 Australian Charities and Not-for-profits
Commission Taskforce Implementation Report.
Example 3.8
The FM Foundation contravenes the Bill by not notifying the ACNC
Commissioner of a change to the responsible entities of the
Foundation. The change in the responsible entity is brought to the
ACNC Commissioner's attention when that responsible entity commits
fraud by entering into a contract with a spouse to acquire assets at a
40
Registration
substantial discount. The ACNC Commissioner directs the foundation
not to perform the contract. The FM Foundation fails to comply with
the direction. The ACNC Commissioner may revoke the registration
of the Foundation.
3.88 This ground of revocation allows the Commissioner to consider
both contraventions and cases where it is more likely than not that an
entity will contravene a provision of the Bill and both non-compliance and
cases where it more likely than not that the registered entity will not
comply with the governance and external conduct standards.
3.89 This ground only covers a situation where there is a substantial
or significant likelihood of a contravention or non-compliance and would
not extend to a situation where there was only a small chance of a
contravention or non-compliance occurring.
3.90 In determining whether an entity is more likely than not to
contravene a provision of this law or is more likely than not to not comply
with a governance standard or external conduct standard, the ACNC
Commissioner must have sufficient, reliable and accurate evidence which
clearly indicates that there will be a contravention.
3.91 A mere suspicion, rumour or possibility of a likely contravention
or likely non-compliance is insufficient for the ACNC Commissioner to
take action.
3.92 In addition, a `reasonably believes' test needs to be satisfied
which ensures that the ACNC Commissioner will only revoke registration
for likely contraventions where a reasonable individual, provided with the
set of information available to the ACNC Commissioner, would conclude
that it is more likely than not that a registered entity will contravene a
provision of the Bill.
3.93 An example of a more likely than not contravention is when a
registered entity enters into a contract, the terms of which contravene a
provision of this Bill by providing for the transfer of assets contrary to the
entity's charitable purpose. Until the registered entity performs the
contract, it may not have contravened the Bill. Yet, a contract that has not
yet been performed is sufficient evidence that a registered entity is likely
to contravene the Bill. This enables the Commissioner to intervene to
prevent the breach from occurring, and proactively protect the charity's
assets before they may be depleted.
3.94 Where a registered entity has a trustee in bankruptcy, a
liquidator or a person authorised to manage its affairs because it is unable
to pay all its debts as and when they become due and payable, that entity's
registration may be revoked. [Paragraph 35-10(1)(d)]
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
3.95 This condition ensures that the ACNC Commissioner is able to
act, if it is necessary, where significant charitable assets may be at risk
due to the insolvency of the entity and to ensure that the public can rely on
their donations to a registered entity being used for NFP purposes.
3.96 The ACNC Commissioner may also revoke the registration of an
entity that wishes to have its registration revoked as a type or subtype of
entity. For instance, where an entity wishes to change its purpose such
that its current subtype is no longer appropriate. [Paragraph 35-10(1)(e)]
Example 3.9
The Fairsight Foundation is registered as a charity and is registered
under the subtypes -- entity with a purpose that is the advancement of
religion and entity with a purpose that is the relief of poverty, sickness,
or the needs of the aged. The Foundation changes its activities so that
it no longer meets the requirements of the subtype -- entity with a
purpose that is the relief of poverty, sickness, or the needs of the aged.
The Foundation requests that its registration as the subtype -- entity
with a purpose that is the relief of poverty, sickness, or the needs of the
aged be revoked. The ACNC Commissioner may revoke the Fairsight
Foundation's registration as a subtype. The Fairsight Foundation
continues to be registered with the subtype -- entity with a purpose
that is the advancement of religion.
Example 3.10
The Fairsight Foundation, as described above, is registered with two
subtypes. The Fairsight Foundation merges with another entity and
requests that its registration be revoked. The Foundation's registration
(as both a type and subtypes) can be revoked by the ACNC
Commissioner.
Considerations for revocation of registration
3.97 The new law provides for a list of factors that the ACNC
Commissioner must consider before deciding to revoke the registration of
an entity. These factors require the ACNC Commissioner to balance
different considerations to ensure that any decision to revoke an entity's
registration is proportional and appropriate in all circumstances.
[Subsection 35-10(2)]
3.98 The ACNC Commissioner's education and guidance will assist
registered entities to understand and comply with their obligations under
this Bill. However, where enforcement action is required the ACNC
Commissioner has a range of enforcement powers, including the power to
issue directions, so that the ACNC Commissioner can provide a
proportionate and effective regulatory response.
42
Registration
3.99 The considerations include factors to ensure that, wherever
possible, other options to help promote compliance, such as education, are
considered before an entity's registration is revoked.
3.100 In some situations, such as in relation to minor non-compliance
and where other measures such as warning notices or enforceable
undertakings are available, it would not be appropriate to revoke an
entity's registration.
3.101 In other situations revocation will be necessary, even where
other enforcement actions are available to the ACNC Commissioner and
have not been taken.
3.102 Revocation of registration will only be used as a last resort, but
it is a necessary power to ensure that the ACNC Commissioner can act in
circumstances of serious non-compliance where it would be inappropriate
for an entity to remain registered.
3.103 In deciding whether or not to revoke an entity's registration, the
ACNC Commissioner must consider:
· the nature, significance and persistence of any contravention
or non-compliance [paragraph 35-10(2)(a)];
· what action the ACNC Commissioner, the registered entity,
or any of the responsible entities could have or have taken:
- to address any contravention or non-compliance (or
prevent any such contravention or non-compliance that is
more likely than not); or
- to prevent any similar contravention or non-compliance
[paragraph 35-10(2)(b)];
· the desirability of ensuring that contributions made to the
registered entity are applied consistently with the NFP nature
and the purpose of the registered entity [paragraph 35-10(2)(c)];
· the objects of any Commonwealth laws that refer to
registration under this Bill [paragraph 35-10(2)(d)];
· the extent (if any) to which the registered entity is conducting
its affairs in a way that may cause harm to or jeopardise the
public trust and confidence in the NFP sector
[paragraph 35-10(2)(e)];
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
· the welfare of members of the community (if any) that
receive direct benefits from the registered entity; and
[paragraph 35-10(2)(f)]
· any other matter that the ACNC Commissioner considers
relevant [paragraph 35-10(2)(g)].
3.104 This list of factors should be considered in its entirety and a
decision should be made by balancing each of the factors.
3.105 Using this list of factors, the ACNC Commissioner must
consider the nature, significance and persistence of any contravention or
non-compliance. Accordingly, the ACNC Commissioner would consider
differences in the case for revocation for an entity that has committed a
single contravention that is of low significance and the case for an entity
that has repeatedly and significantly contravened the Bill.
[Paragraph 35-10(2)(a)]
3.106 The ACNC Commissioner must also consider what action could
have been taken or could be taken to address or prevent the contravention
or non-compliance by the ACNC Commissioner, the registered entity or
any of the responsible entities. [Paragraph 35-10(2)(b)]
3.107 This factor ensures that the ACNC Commissioner considers the
options available to address or prevent the contravention or
non-compliance (for example education or an enforceable undertaking),
and what action has been taken.
3.108 This allows the ACNC Commissioner to acknowledge
differences between a registered entity that took steps to prevent or
address non-compliance or contravention and one that did nothing or was
deceptive.
3.109 This factor also allows the ACNC Commissioner to consider
what action has been taken by the registered entity, responsible entity or
ACNC Commissioner themselves, to address the contravention or
non-compliance since it was made known.
3.110 Furthermore, this factor also requires the ACNC Commissioner
to consider the range of their enforcement powers to ensure they choose
the most appropriate response to remedy the issue in the circumstances.
3.111 The ACNC Commissioner must also consider the desirability of
ensuring that contributions made to the registered entity are applied
consistently with the NFP nature and purpose of the entity.
[Paragraph 35-10(2)(c)]
44
Registration
3.112 This factor ensures that where contributions have been made by
donors, volunteers, funding bodies etc. For a registered entity to carry out
a particular activity or to pursue a charitable purpose, the ACNC
Commissioner can act to protect their interests. This factor also ensures
that the ACNC Commissioner can consider whether there is a risk of fraud
or misapplication of those contributions, which in the context of NFPs
would be a very serious compliance issue.
3.113 This factor further allows the ACNC Commissioner to consider
the need to ensure the proper application of a registered entity's assets.
3.114 A contribution to a registered entity is defined as the provision
of money, property or any other benefit to the entity and includes the
following:
· the provision by an individual of her or his time or reputation
to the entity; and
· the provision by a government of tax concessions or other
forms of government support to the entity.
[Section 205-40]
3.115 The ACNC Commissioner is also required to consider the
objects of other Commonwealth laws that refer to registration with the
ACNC in deciding whether revocation is appropriate. For instance, it will
be necessary to consider the taxation consequences of continuing or
revoking the registration of an entity, including the integrity of the tax
system. [Paragraph 35-10(2)(d)]
3.116 The ACNC Commissioner must consider the extent (if any) to
which the registered entity is conducting its affairs in a way that may
cause harm to or jeopardise the public trust and confidence in the NFP
sector. [Paragraph 35-10(2)(e)]
3.117 This factor allows the ACNC Commissioner to consider whether
or not the contravention or non-compliance has harmed or will harm the
public trust and confidence in the NFP sector, and accordingly, if
revocation of registration is an appropriate consequence.
3.118 This factor recognises the role of the ACNC Commissioner as
the regulator for the whole of the NFP sector.
3.119 Public trust and confidence, and the ways in which public trust
and confidence can be strengthened and weakened are discussed in
Chapter 1 - Background.
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
3.120 The ACNC Commissioner must consider the impact of one
registered entity's actions on other NFPs, for example, where one entity's
misdeeds cause a loss of confidence and could affect the whole sector,
particularly its ability to access funding.
Example 3.11
Sweeland Inc is registered with the subtypes -- public benevolent
institution and entity with a purpose that is the relief of poverty,
sickness or the needs of the aged. Sweeland Inc changes its activities
so that it no longer meets the requirements of the subtype - public
benevolent institution. It continues to conduct charitable activities that
help to relieve poverty. It requests that the ACNC Commissioner
revoke its subtype registration as a public benevolent institution.
The ACNC Commissioner considers that this revocation will not
jeopardise the public trust and confidence in the NFP sector, as
Sweeland Inc still effectively conducts its relief of poverty activities
and meets all its other regulatory obligations. Considering all the
factors listed above, the Commissioner decides to revoke Sweeland
Inc's subtype registration as a public benevolent institution.
Example 3.12
Monroe Kids is registered with the ACNC as a charity. When it first
registered it helped to relieve the poverty of teenagers in disadvantaged
areas. It comes to the ACNC Commissioner's attention that Monroe
Kids no longer helps disadvantaged teenagers in poverty, but runs a
reputable after-school sports program for all teenagers in the area. As
such, Monroe Kids is no longer entitled to registration as a charity, as
after-school sports programs are not considered charitable according to
the common law definition.
The ACNC Commissioner considers that the public trust and
confidence in the sector is not at risk, as Monroe Kids is still
conducting beneficial activities in the area. However, considering all
the other factors, the ACNC Commissioner decides to revoke the
registration of Monroe Kids.
Example 3.13
Core Pursuits is registered with the ACNC. It comes to the
Commissioner's attention that the management of Core Pursuits has
been using deductible gift recipient (DGR) funds to purchase lavish
properties for their own personal use.
This action may cause future donors to doubt that their donations will
be used to further an organisation's NFP purpose, and may lead to a
reduction in philanthropic giving across the sector. Core Pursuit's
actions place the public trust and confidence in the sector in jeopardy.
46
Registration
Having regard to the other factors listed above, the Commissioner
decides to revoke Core Pursuit's registration.
3.121 The ACNC Commissioner must consider the welfare of
members of the community (if any) that receive direct benefits from the
registered entity. This means that the ACNC Commissioner must
consider whether the wellbeing of recipients of charitable services may be
improved or worsened by an entity's registration being revoked.
[Paragraph 35-10(2)(f)]
3.122 The ACNC Commissioner must also consider any other matter
that he or she considers relevant. [Paragraph 35-10(2)(g)]
Example 3.14
The Orange Book Foundation is a registered entity that purports to
provide assistance to needy people in urban centres, however, it has
merely been used for money laundering purposes. This is a significant
contravention of the Bill with the potential to severely jeopardise
public trust and confidence in the NFP sector. In considering all the
required factors, it would be reasonable for the ACNC Commissioner
to revoke the entity's registration even though it is the only instance of
non-compliance and no other enforcement action has been taken.
Example 3.15
The Human Charity is a federally regulated entity that is registered
with the ACNC. A responsible entity on the Board of the Human
Charity is charged with fraud. The other responsible entities act
quickly to notify the ACNC Commissioner and remove the responsible
entity from the Board.
In this case, while the contravention of the Bill is serious, the ACNC
Commissioner could consider that the other board members acted
quickly and appropriately to address the contravention, and that this
was a single contravention of the Bill. The issue has been addressed so
there is no need for enforcement action or revocation of registration.
Example 3.16
Aloe Wishes is a federally regulated entity that is registered with the
ACNC. Aloe Wishes enters into a related party transaction, the terms
of which contravene the Bill. Aloe Wishes has yet to complete the
transaction and, prior to this, has never contravened the Bill. Taking
into account the list of factors described above, the ACNC
Commissioner decides that issuing a direction to the entity not to
perform the related party transaction is the most appropriate
enforcement action in a situation where the entity appears not to wish
to take voluntary action.
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
3.123 If the ACNC Commissioner decides to revoke the registration of
an entity, the ACNC Commissioner must give the entity written notice
(and within that notice provide a statement of reasons) within 14 days of
the decision to revoke registration which clearly specifies the day on
which the revocation takes effect. [Subsection 35-10(4)]
3.124 If the reason the ACNC Commissioner revokes an entity's
registration is that the entity is not entitled to be registered, the revocation
may take effect from the day the entity first ceased to be entitled or a later
day, as specified by the ACNC Commissioner. [Paragraph 35-10(3)(a)]
3.125 If the reason the ACNC Commissioner revokes an entity's
registration is that the registered entity provided, in connection with its
application for registration, information that was false or misleading in a
material particular, the revocation may take effect from the day on which
the registration took effect, or a later day as determined by the ACNC
Commissioner. [Paragraph 35-10(3)(b)]
3.126 In all other circumstances, the revocation takes effect on the day
the ACNC Commissioner decides to revoke an entity's registration or on a
later day specified by the ACNC Commissioner. [Paragraph 35-10(3)(c)]
Show cause notices
3.127 In general, the ACNC Commissioner will pursue all other
avenues to address issues before considering revocation of registration.
Where the ACNC Commissioner believes on reasonable grounds that a
registered entity is not entitled to registration then prior to taking any
revocation action, the ACNC Commissioner is required to give an entity a
notice to show cause why an entity's registration should not be revoked.
[Subsection 35-15(1)]
3.128 The show cause notice must state the grounds on which the
notice is given and invite the registered entity to respond in writing within
28 days after the day the notice is given. [Subsection 35-15(2)]
3.129 The notice provides the entity with the opportunity to give the
ACNC Commissioner, within 28 business days, a written statement
showing cause why the ACNC Commissioner should not revoke its
registration. [Paragraph 35-15(2)(b)]
3.130 This ensures that prior to the revocation of the registration of an
entity, the registered entity has the opportunity to respond to the ACNC
Commissioner and explain why its registration should not be revoked.
While the ACNC Commissioner will, as a matter of practice, provide
education and other opportunities to remedy any problems in advance of
such a notice being issued, this mechanism allows for a final opportunity
48
Registration
to ensure that entities have an opportunity to state their case prior to
revocation.
3.131 In certain very serious cases where the Commissioner believes
the circumstances warrant more immediate action, the ACNC
Commissioner is not required to issue a show cause notice, or to wait for a
response to a show cause notice. [Subsection 35-15(3)]
3.132 In such circumstances, and having regard to the factors listed in
subsection 35-10(2), the ACNC Commissioner may revoke an entity's
registration where no show cause notice has been issued, and where a
show cause notice has been issued, where no response has yet been
received. [Subsection 35-15(3)]
3.133 In all other circumstances, the ACNC Commissioner is required
to issue a show cause notice before an entity's registration can be revoked.
3.134 This ensures that in very serious circumstances the ACNC
Commissioner is not constrained from taking immediate action where a
failure to do so would have very serious implications for public trust and
confidence in the NFP sector and the interests of innocent third parties
who are relying on the ACNC Commissioner's continued registration of
the entity, for example, donors, volunteers and other government
agencies.
Example 3.17
The CD Foundation is a registered entity which purports to pursue
charitable purposes. However, it has merely been acting as a conduit
for a terrorist organisation. It would be reasonable for the ACNC
Commissioner to revoke the entity's registration even though no show
cause notice has been issued.
Review rights
3.135 The ACNC Commissioner's decision to revoke the registration
of a registered entity is a reviewable decision. [Section 35-20]
3.136 The entity has the right to object to a decision in line with the
review and appeals provisions. These are explained in Chapter 12 --
Reviews and appeals.
49
Chapter 4
Australian Charities and Not-for-profits
Register
Outline of chapter
4.1 The Bill provides for the Australian Charities and
Not-for-profits Register (the ACN Register) and specifies the information
that the ACNC Commissioner is to maintain in the ACN Register about
each registered, and formerly registered, entity.
4.2 The ACN Register is to be made available on the internet.
4.3 The ACNC Commissioner may remove or withhold information
from the ACN Register in specified circumstances, subject to a public
interest test.
Summary of new law
4.4 The ACNC Commissioner is to maintain the ACN Register and
include specified information about each registered, and formerly
registered, entity.
4.5 The specified information includes name, contact and
identifying details for each entity, the type and subtype of registration,
governing rules, responsible entities, information from financial and
information statements, details of any enforcement action taken under
Chapter 4 of the Bill and any resolution or response to such a matter and
any other information prescribed in regulations.
4.6 The ACN Register is to be maintained electronically and made
available on the internet.
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
Detailed explanation of new law
ACNC Commissioner to maintain the ACN Register
4.7 Currently there is no single source of standardised information
where the public can easily obtain information about not-for-profit (NFP)
entities.
4.8 The Bill provides for a single source of easily accessible public
information to increase transparency, enable NFP entities to demonstrate
appropriate levels of accountability and governance, provide information
to the public about registered entities and promote public confidence,
informed choices and philanthropy.
4.9 The information to be included on the ACN Register is
consistent with information made available on the internet sites of
regulators of charities in overseas jurisdictions.
4.10 The ACNC Commissioner is to maintain the ACN Register
which will include specified information. [Subsection 40-5(1)]
4.11 The information includes the contact and identifying details of
registered and formerly registered entities. This includes the entity's
name, contact details (including address for service) and the entity's
Australian Business Number (ABN). [Subparagraphs 40-5(1)(a)(i) to (iii)
and 40-5(1)(b)(i) and (ii)]
4.12 The ACN Register must also provide information about the
registration status of entities. This includes, the type and subtypes under
which entities are (or were) registered and the dates of effect of each
registration. [Subparagraphs 40-5(1)(a)(iv) to (vi) and 40-5(1)(b)(iii) to (v)]
4.13 The information also includes the entity's governing rules (as
explained in Chapter 13 -- Miscellaneous) and the name of each
responsible entity and the position held by that responsible entity.
[Subparagraphs 40-5(1)(a)(vii) and 40-5(1)(b)(vi) and paragraph 40-5(1)(c)]
4.14 The ACN Register contains information statements and financial
reports (including any accompanying audit or review report that the
registered entity has provided). The information contained in the
information statements and financial reports is explained in Chapter 6 --
Reporting. [Paragraphs 40-5(1)(d) and (e)]
4.15 The details of any enforcement action taken by the ACNC
Commissioner and any resolution of those matters or response that the
entity has made to those matters, as well as any other information
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Australian Charities and Not-for-profits Register
prescribed in the regulations is included on the ACN Register.
[Paragraphs 40-5(1)(f) and (g)]
4.16 The ACNC Commissioner must allow a registered entity 14
days to respond to any enforcement action before the details of the
enforcement action are published on the ACN Register, unless the ACNC
Commissioner considers that the public interest requires the information
to be included on the ACN Register earlier. [Subsection 40-5(2)]
4.17 This provides registered entities with an opportunity to respond
to the action, and to make the ACNC Commissioner aware of any factors
that he or she may not have otherwise been aware of, before information
about the enforcement action is made publicly available.
4.18 This ensures that serious enforcement issues are not kept hidden
from innocent third parties such as donors and volunteers while ensuring
that appropriate context is provided on the ACN Register, both in terms of
allowing any response from the entity to be provided and ensuring that the
resolution of these matters is also provided. [Paragraph 40-5(1)(f)]
Example 4.1
The SSSF Foundation is registered with the ACNC. It comes to the
Commissioner's attention that two directors of SSSF have been using
deductible gift recipient (DGR) funds to purchase vehicles for their
own personal use.
The Commissioner removes each director from their position. This
misuse of DGR funds is a serious matter and if the Commissioner did
not immediately publish that information on the Register, then
innocent third parties such as individual donors would be
disadvantaged were they to look on the ACN Register and see no
problems with SSSF. Donors may be misled and disadvantaged if they
were to make donations based on an incomplete ACN Register.
Having regard to the other factors listed above, the Commissioner
decides to immediately publish these details on the ACN Register.
4.19 Some of the information provided by entities as part of the
information statement may not be required to be published on the ACN
Register. The Bill ensures that the information is treated appropriately by
providing that information which is classified as "not for publication" is
not published on the ACN Register. [Paragraph 40-5(1)(f)]
4.20 The ACNC Commissioner sets forms in accordance with the
approved form rules explained in Chapter 13 -- Miscellaneous.
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
4.21 The ACNC Commissioner may also publish any other
information that is specified in the regulations and that the ACNC
Commissioner is authorised to collect under a provision of the Bill.
[Paragraph 40-5(1)(g)]
4.22 The ACN Register is to be maintained by electronic means and
made available for public inspection on the internet. Internet availability
assists the public to access and search the information easily.
[Subsections 40-5(3) and (4)]
4.23 The ACNC Commissioner can make protected Commission
information available only in accordance with the secrecy disclosure
regime explained in Chapter 11 -- Secrecy. [Subsection 40-5(4) (note)]
The ACNC Commissioner may withhold or remove
information from the ACN Register
4.24 The ACN Register is intended to support the transparency of the
NFP sector and enhance public confidence. Therefore the information
specified should generally be provided for all registered entities.
4.25 However, the Bill provides the ACNC Commissioner with the
authority to withhold, or remove, information from the ACN Register
under specified circumstances. [Section 40-10]
4.26 This authority assists the ACNC Commissioner to provide
information that is factually correct and genuinely informative, is not
offensive and does not raise public safety concerns.
Sensitive commercial information
4.27 The circumstances in which the Commissioner may withhold or
remove information include that the public release of the information may
cause detriment to the entity because it is sensitive commercial
information. [Paragraph 40-10(2)(a)]
4.28 For example, in considering whether to release information that
may be commercially sensitive, the ACNC Commissioner may consider
the implications of not releasing this information, including the effect that
this would have on the public interest.
4.29 The ACNC Commissioner may also consider the implications of
releasing the information on the registered entity.
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Australian Charities and Not-for-profits Register
Example 4.2
XYZ Organisation is accumulating reserves to purchase property. The
ACNC Commissioner may consider whether releasing the financial
information would disadvantage the entity commercially. The
information may be withheld on a temporary basis, with disclosure
being postponed until the period of sensitivity has passed.
Inaccurate, confusing or misleading
4.30 To ensure the integrity and reliability of the ACN Register, the
ACNC Commissioner may decline to include information if it is
considered inaccurate or likely to be confusing or misleading, or may be
offensive to a reasonable individual. [Paragraphs 40-10(2)(b) and (c)]
Public safety concerns
4.31 The Bill provides grounds to exclude information from the ACN
Register if it may endanger public safety. [Paragraph 40-10(2)(d)]
Example 4.3
The West Women's Shelter does not publish its address to protect its
clients. The ACNC Commissioner may withhold the entity's address
from the ACN Register.
4.32 The Commissioner would always consider the publication of an
address of a women's shelter, or similar organisation, as endangering
public safety and it would therefore, not be published on the ACN
Register. In such a serious case it would not be possible for the
Commissioner to reasonably conclude that a public interest in the
publication of that information outweighed the safety concerns.
Regulations
4.33 The Bill provides that regulations may allow for other
circumstances in which information may be withheld from the ACN
Register. This allows for any circumstances that arise to be addressed to
ensure that the ACN Register provides accurate and reliable information
while catering for those circumstances in which publication of
information would not be appropriate. [Paragraph 40-10(2)(e)]
4.34 The Bill provides for two types of regulation making powers.
Regulations may be made which would prescribe information that should
not be published on the ACN Register, this type of information is not
subject to a public interest test. [Subsection 40-10(1)]
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
4.35 The Bill also provides for a regulation making power that allows
for prescribed information to be withheld or removed from the ACN
Register, subject to a public interest test. This addresses the types of
information where it is appropriate for the Commissioner to balance any
adverse effect that may result from the publication of the information
against the public interest. [Subsections 40-10(2) and 40-10(3)]
4.36 The Governor-General may make regulations to address unique
circumstances where it may not be appropriate for information or classes
of information to be disclosed. [Subsections 40-10(1) and(2)]
4.37 For example, the regulations could prescribe that certain classes
of information should not be published on the ACN register where the
information could adversely affect the privacy of individual donors or
significantly overburden a charity with administrative costs of responding
to members of the public. The regulations may do this by allowing certain
information to be withheld in part, by removing or withholding annual
reports in full from publication or by withholding information about
certain responsible entities.
4.38 During consultation a number of consultees raised concerns with
publishing certain types of information about private ancillary funds and
that this may adversely affect the privacy of individual donors and could
potentially reduce philanthropic engagement. The Governor-General will
be able to make regulations addressing these concerns in the ways set out
in this Chapter.
4.39 This provides an additional safeguard mechanism to ensure that
inappropriate information would not be published on the ACN Register.
Public interest test
4.40 The ACNC Commissioner may include the information on the
ACN Register or decline to remove the information from the ACN
Register if the ACNC Commissioner considers the public interest in the
ACN Register including that information, outweighs any potential adverse
effect associated with the release of the information in question.
[Subsection 40-10(3)]
4.41 The ACNC Commissioner may remove information from the
ACN Register if the information has been on the ACN Register for more
than 5 years, and the ACNC Commissioner considers that the public
interest does not require the information to be retained on the ACN
Register. [Subsection 40-10(4)]
56
Chapter 5
Governance standards and external
conduct standards
Outline of chapter
5.1 This Chapter sets up the framework for:
the minimum governance standards an entity must satisfy to
be and remain a registered entity; and
the minimum external conduct standards an entity must satisfy
to be and remain a registered entity.
5.2 The Governor-General may make regulations relating to the
governance standards and external conduct standards.
5.3 The Governor-General is expected to make the standards
principle-based, specifying the outcome to be achieved, rather than
detailing how an entity must meet the standards in its particular situation.
5.4 The implications of the governance standards and external
conduct standards will vary according to the circumstances of a particular
registered entity. What a large entity must do to satisfy the requirements
will be different from what a small entity must do to satisfy the same
requirements.
Summary of new law
5.5 `Governance' is the set of practices and procedures in place to
ensure that an entity operates to achieve its objectives in an effective and
transparent manner.
5.6 Governance requirements may be included in:
existing governing rules, such as constitutions, association
rules, cooperative rules, memorandum and articles of
association, trust deeds, church laws and statutes;
contracts that governments enter into with some not-for-profit
(NFP) entities; and
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regulatory laws.
5.7 The current governance requirements of a NFP entity depend on:
the type of entity -- such as whether it is unincorporated, a
trust or a company limited by guarantee, subject to the
legislation governing that entity type;
whether the entity is affiliated with a peak body -- such as the
Australian Council for International Development that has a
code of conduct for its members; and
the sector in which the NFP operates -- such as the health and
education sectors, which have certain governance
requirements that must be complied with for an entity to
operate in that sector.
5.8 Some NFP entities are currently regulated by Commonwealth
legislation, such as companies limited by guarantee, and some are
regulated by the States and Territories, such as incorporated associations
and charitable trusts. Most are regulated by a combination of
Commonwealth and State laws.
5.9 In the absence of a registration regime, the role of de facto
regulator for the NFP sector at the Commonwealth level has generally
been shared between the ATO and ASIC, as discussed in Chapter 1 --
Background.
5.10 The Bill sets up the framework for:
a set of governance standards which apply to most registered
entities, and
a set of external conduct standards which apply to all
registered entities, regardless of entity type,
and allows the Governor-General to make regulations relating to
governance standards and external conduct standards.
5.11 These standards can cover such things as:
the content of a registered entity's governing rules;
the conduct of the registered entity; and
the processes that the registered entity must have in place.
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Governance standards and external conduct standards
5.12 There may be specific governance standards that apply
differently to different groups of entities (such as those with members).
5.13 There may also be governance standards that do not apply to
specified kinds of registered entity.
5.14 The governance standards will not apply to entities that are basic
religious charities (see Chapter 13 -- Miscellaneous for a definition of
`basic religious charity').
5.15 The external conduct standards will apply to all registered
entities.
5.16 Only registered entities will have access to certain
Commonwealth concessions, exemptions and benefits, including tax
concessions.
5.17 To be registered, most entities will be required to meet (both
initially, to the extent that they can, and on an ongoing basis) the
governance standards established in the regulations.
5.18 To be registered, an entity is required to meet (both initially, to
the extent that they can, and on an ongoing basis) the external conduct
standards established in the regulations.
5.19 When an entity applies to the Australian Charities and
Not-for-profits Commission (ACNC) to become a registered charity, they
will initially be required to meet any governance standards which require
entities to have certain things in their governing rules in order to be
registered, and to show that they have required processes in place. Any
governance standards which require certain conduct from registered
entities may not be able to be demonstrated or met initially, but are to be
met on an ongoing basis.
5.20 The governance and external conduct standards will set a
minimum level of behaviour for all entities registered with the ACNC. As
a result, the public can be confident that the funds the community gives to
registered entities are being put to an appropriate use.
5.21 The standards will provide assurance that registered entities
meet community expectations about the use of public monies, volunteer
time and donations (such as using their resources efficiently), and
minimise the risk of mismanagement and misappropriation.
5.22 Further, the standards will create a framework to protect entities
and their mission or purpose from mismanagement, and will ensure that
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
the entity is focussed on its mission, and not the goals or interests of
others.
5.23 The standards are expected to be principle-based, specifying the
outcome to be achieved, rather than detailing how an entity must meet the
standards, in its particular situation.
5.24 A registered entity's prolonged non-compliance with a
governance or external conduct standard could lead to the Australian
Charities and Not-for-profits Commission Commissioner (ACNC
Commissioner) revoking an entity's registration. See paragraphs 5.71 to
5.81.
5.25 For certain entities, the ACNC Commissioner may invoke the
enforcement provisions in relation to non-compliance of the governance
standards. For all entities, the ACNC Commissioner may invoke the
enforcement provisions in relation to non-compliance of the external
conduct standards (except to remove or suspend the responsible entity of a
basic religious charity).
5.26 The ACNC Commissioner's education and guidance will assist
registered entities to understand and comply with their obligations under
the Bill. However, where enforcement action is required the ACNC
Commissioner has a range of enforcement powers, including the power to
issue directions, so that the ACNC Commissioner can provide a
proportionate and effective regulatory response.
5.27 For example, the ACNC Commissioner may suspend a director
if the ACNC Commissioner has reason to believe the entity has not
complied with the governance standards or external conduct standards,
and the removal of that director is necessary to address the breach. See
Chapter 9 -- Education, compliance and enforcement.
5.28 Transitional arrangements will be put in place in the regulations
to allow registered entities time to make any necessary changes (for
example, to internal procedures or their governing rules), to meet the
governance standards and external conduct standards when they are
established.
5.29 Registered entities must comply with the governance standards
and external conduct standards as far as possible during the transition
period without breaching their governing rules.
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Governance standards and external conduct standards
Detailed explanation of new law
Governance standards
5.30 The Bill sets up a framework for a set of principle-based
minimum governance standards applying to most registered entities,
regardless of entity type. Registered entities must comply with these
standards in order to become registered (to the extent that they can, see
paragraph 5.19), and to remain entitled to be registered. [Subsection 45-5(2)]
5.31 The Governor-General may make regulations establishing
governance standards. [Subsection 45-10(1)]
5.32 These standards must by prospective see subsection 12(2) of the
Legislative Instruments Act 2003.
5.33 The standards can introduce principles that an entity must meet
about such things as:
ensuring that its governing rules provide for a specified
matter;
acting, or not acting, in a specified manner; or
establishing and maintaining processes for the purpose of
ensuring certain matters,
in order to be and to remain entitled to be registered.
[Subsection 45-10(2)]
5.34 To be registered, most entities will be required to meet (both
initially, to the extent that they can, and on an ongoing basis) the
governance standards established in the regulations -- see Chapter 3 --
Registration.
5.35 There may be standards that do not apply to specified kinds of
registered entity. [Subsection 45-10(3)]
5.36 The governance standards will not apply to entities that are basic
religious charities (see Chapter 13 -- Miscellaneous for a definition of
`basic religious charity'). [Subsection 45-10(5)]
5.37 In addition, there may also be specific governance standards that
apply differently to different groups of entities (such as those with
members or Indigenous charities). [Subsection 45-10(4)]
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
5.38 This could include the regulations requiring members of certain
bodies to meet sector developed codes of conduct. In such a case, a
prescribed sector developed code of conduct would be binding only on
those members of an association or organisation that are signatories to the
code, and a breach of the prescribed sector developed code of conduct
would be a breach of the ACNC Bill. By allowing for the adoption of
sector developed codes of conduct, the Government can utilise a co-
regulatory model of governance where the sector is interested in
developing such an approach.
5.39 Further, the ACNC Commissioner can endorse other codes of
conduct, for entities who are members of certain bodies, as meeting the
requirements of the governance standards.
5.40 The governance standards will ensure a minimum level of
accountability across the sector.
5.41 If an entity is meeting the governance and external conduct
requirements as established in the regulations, it does not mean that they
are meeting best practice governance outcomes (although they may be).
5.42 The governance standards will give members, donors and
volunteers of registered entities, and the rest of the public, confidence that
a registered entity is operating openly, accountably and transparently, for
its stated purpose, and in an effective and efficient manner, and is
minimising the risk of mismanagement and misappropriation.
[Subsection 45-5(1)]
Satisfying the standards
5.43 The standards are expected to be principle-based, specifying the
outcome to be achieved, rather than detailing how an entity must meet the
standards, in its particular situation.
5.44 The implications of the governance standards are expected to
vary according to the circumstances of a particular registered entity.
5.45 Registered entities cannot choose whether to meet the standards
in the regulations, but they can choose how they meet the standards,
taking into account their specific situation.
5.46 In deciding what processes are reasonable for the entity to
implement to satisfy the requirements, the registered entity would
consider its size, the extent to which it receives donations, grants and
other monies from governments or the public, the number of beneficiaries
and the potential impact on them.
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Governance standards and external conduct standards
5.47 What a large entity must implement to satisfy the requirements
will be different from what a small entity must do to satisfy the same
requirements.
5.48 The larger an entity, and the more public monies it receives, the
higher the community expectation that the entity is operating efficiently,
effectively and consistently with its stated purposes, and therefore the
more the entity can be expected to do to meet that expectation.
5.49 Smaller entities are not expected to be less transparent; however,
their smaller nature usually means the risk of misuse of funds would be
less than for a larger entity.
5.50 A smaller entity would usually have a smaller risk of funds
being mismanaged or misappropriated, as both the value and the volume
of transactions would usually be less, and the members would usually be
running the entity. As such, the processes the entity would need to
implement to safeguard against mismanagement and to operate openly
and transparently would typically be less.
5.51 In addition, smaller entities will often have more limited
resources to develop detailed and prescriptive governance policies.
5.52 The ACNC Commissioner will release guidance material to
assist entities to determine how to comply with the governance standards.
External conduct standards
5.53 The Bill sets up a framework for a set of principle-based
minimum external conduct standards applying to all registered entities,
regardless of entity type, to regulate funds sent by registered entities
outside Australia, and activities engaged in by these entities outside
Australia. Registered entities must comply with these standards in order
to become registered (to the extent that they can, see paragraph 5.19), and
to remain entitled to be registered. [Subsection 50-5(2)]
5.54 The Governor-General may make regulations establishing
external conduct standards. [Subsection 50-10(1)]
5.55 The standards can introduce principles that an entity must meet
about such things as:
ensuring that its governing rules provide for a specified
matter;
acting, or not acting, in a specified manner; or
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
establishing and maintaining processes for the purpose of
ensuring certain matters,
in order to be and to remain entitled to be registered.
[Subsection 50-10(2)]
5.56 The external conduct standards can only relate to matters that
are external to Australia, or to matters that are not external to Australia but
that are closely related to, or have or will have a significant impact on,
entities, things or matters outside Australia. [Subsection 50-10(3)]
5.57 Australian NFP entities in the past have sometimes provided
support for terrorist and other criminal activities. Often they did so
unknowingly but occasionally did so deliberately, whether to directly help
the organisations conducting those illegal activities or as a means to
achieving their legitimate charitable ends.
5.58 The purpose of these external conduct standards is to prevent
Australian registered entities providing support in the future and so
promote transparency and confidence across the sector and the general
public that charitable funds and services are applied for legitimate
purposes, and are not contributing to terrorist or other criminal activities
(from an Australian perspective). [Subsection 50-5(1)]
5.59 The external conduct standards are expected to be based on the
requirements of the Financial Action Task Force's (FATF) Special
Recommendation VIII (SR VIII), and help combat the terrorist and
criminal activities covered in the FATF recommendation
5.60 The FATF is an inter-governmental body established in 1989 to
promote measures for combatting money laundering, terrorist financing
and related threats to the integrity of the international financial system.
5.61 As a member of the FATF, Australia has agreed to comply with
the FATF recommendations.
5.62 FATF SR VIII requires FATF members to `combat the misuse
of NPOs (nonprofit organisations, that is, NFP entities) for the purpose of
terrorism financing'. In FATF's last review of Australia's progress in
2005, it found that Australia was only partially compliant with SR VIII.
5.63 Protecting the NFP sector from misuse by terrorist organisations
is both a critical component of the global fight against terrorism and a
necessary step to preserving the integrity of Australia's NFP sector.
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Governance standards and external conduct standards
5.64 The NFP sector enjoys the trust of the public and has access to a
considerable source of funds. Some entities have a global presence that
provides a framework for national and international operations and
financial transactions, often within or near areas that are highly exposed to
terrorist activity.
5.65 Depending on the legal form of the entity and the country they
are operating in, entities may be subject to little or no governmental
oversight of their overseas activities. There may also be few formalities
required for their creation (for example, there may be no skills or starting
capital required, and no background checks necessary for employees).
5.66 Terrorist organisations may take advantage of these
characteristics to infiltrate the NFP sector and misuse funds and
operations to provide cover for or support of terrorist activities. Other
criminal organisations can also use NFP entities for similar purposes. The
FATF recommendation covers both these situations.
5.67 The external conduct standards will promote transparency and
greater confidence in the sector, across the donor community, and with the
general public that charitable funds sent, and services provided, overseas
are reaching legitimate beneficiaries and being used for legitimate
purposes.
5.68 Systems that promote a high degree of transparency, integrity
and public confidence in the management and functioning of all NFP
entities are integral to ensuring the sector cannot be misused for terrorist
financing.
5.69 Similar to the governance standards, the external conduct
standards are expected to be principle-based, specifying the outcome to be
achieved, rather than detailing how an entity must meet the standards, in
its particular situation. What a large entity must implement to satisfy the
requirements will be different from what a small entity must do to satisfy
the same requirements.
5.70 In deciding what processes are reasonable, the registered entity
should consider not only its size (see paragraphs 5.46 and 5.51), but also
the extent to which it receives donations, grants and other monies from the
public (directly or via their governments), the number of beneficiaries and
the potential impact on them.
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
Non-compliance with the governance standards and external conduct
standards
Governance standards
5.71 Compliance with the governance standards is a condition of
registration.
5.72 Prolonged non-compliance with a governance standard may
result in the ACNC Commissioner revoking the registration of the
entity -- see Chapter 3 -- Registration.
5.73 The ACNC Commissioner's education and guidance will assist
registered entities to understand and comply with their obligations under
this Bill. Prior to revoking an entity's registration, the ACNC
Commissioner would be expected to assist the entity in complying with
the standard. Revocation of registration is expected to be a last resort
outcome.
5.74 However, where enforcement action is required the ACNC
Commissioner has a range of enforcement powers, including the power to
issue directions, so that the ACNC Commissioner can provide a
proportionate and effective regulatory response. The type of enforcement
power used by the ACNC Commissioner will ultimately depend on the
seriousness of the situation and the particular circumstance that the ACNC
Commissioner is addressing.
5.75 If a non-complying entity is a federally regulated entity (see
Chapter 9 -- Education, compliance and enforcement for the definition of
`federally regulated entity'), the ACNC Commissioner may issue a
warning notice or direction to the entity if the ACNC Commissioner
considers that the entity is not meeting the governance standards.
5.76 For example, the ACNC Commissioner may suspend a director
if the ACNC Commissioner has reason to believe the entity has not
complied with the governance standards, and the removal of that director
is necessary to address the breach.
5.77 The ACNC Commissioner cannot remove or suspend a
responsible entity of a basic religious charity.
5.78 See Chapter 9 -- Education, compliance and enforcement for
further information on the situations that the ACNC Commissioner can
use these powers, and the extent of the powers.
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Governance standards and external conduct standards
External conduct standards
5.79 Compliance with the external conduct standards is a condition of
registration for all registered entities.
5.80 The ACNC Commissioner may use enforcement powers (such
as issuing a warning notice, injunction or suspending a director) on any
entity if the ACNC Commissioner considers that that an entity is not
meeting the external governance standards (except to remove or suspend
the responsible entity of a basic religious charity). This is different to the
governance standards, where the ACNC Commissioner may only use the
enforcement powers if the non-complying entity is a federally regulated
entity.
5.81 See Chapter 9 -- Education, compliance and enforcement for
further information on the situations that the ACNC Commissioner can
use these powers, and the extent of the powers.
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Chapter 6
Reporting and record keeping
Outline of chapter
6.1 This Chapter outlines a new `report-once, use-often' general
reporting framework for registered entities.
6.2 This Chapter explains:
· the record keeping obligations of registered entities; and
· the reporting requirements that apply to registered entities.
Summary of new law
6.3 ACNC will be responsible for regulating charities from
1 October 2012. One element of this is a new general reporting
framework.
6.4 All registered entities will be required to provide an annual
information statement. The first annual information statement will be in
respect of the 2012-13 financial year, and will need to be lodged with the
ACNC by 31 December 2013, unless a substituted accounting period
applies.
6.5 Only medium and large entities will be required to provide
annual financial reports to the ACNC. Large entities will be required to
have their financial reports audited, while medium entities can choose to
either have a review or an audit.
6.6 The proposed framework will strike a balance between
minimising the compliance burden placed on registered entities, while
ensuring appropriate accountability and transparency.
6.7 The Government will consult further on the content
requirements of financial reports and implement these through
regulations. Registered entities will be required to prepare their first
financial reports for the 2013-14 financial year, with the first financial
reports due by 31 December 2014, unless a substituted accounting period
applies.
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Detailed explanation of new law
Reporting requirements for registered entities
Record-keeping
6.8 Registered entities are required to keep records that correctly
record and explain its transactions, and the financial position and
performance of the entity. [Subsection 55-5(1)]
6.9 These records must be thorough enough to enable true and fair
financial statements to be prepared and audited. [Paragraph 55-5(1)(b)]
6.10 Registered entities must also keep records that correctly record
its operations. [Subsection 55-5(2)]
6.11 These records must enable a proper assessment of the entity's:
· entitlement to be, and to remain, registered as a type or
sub-type. This assessment is undertaken by the Australian
ACNC Commissioner;
· the entity's compliance with the Bill and regulations. This
assessment is undertaken by the ACNC Commissioner; and
· compliance with any taxation law. This assessment is
undertaken by the Commissioner of Taxation.
6.12 This assessment is known as a recognised assessment activity.
The requirements in the Bill that entities keep records, and report on the
basis of these records, are to enable such assessments to be conducted.
[Section 55-10]
6.13 In undertaking such an assessment, the ACNC Commissioner
will assess the adequacy of records maintained to enable an assessment of
compliance with any taxation law. However, the ACNC Commissioner is
not required to assess compliance with any taxation law, as this function
will continue to be performed by the Commissioner of Taxation.
6.14 The records must be in English, or readily accessible and easily
convertible into English. That is, if the records are not in written form
(for example, if they are in an electronic medium such as a computer disc
or USB), they must be in a form which is readily accessible and
convertible into English by way of a computer program. [Subsection 55-5(3)]
6.15 This allows registered entities to store their records
electronically.
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Reporting and record keeping
6.16 Entities should ensure the conversion of electronic records to a
compatible format when upgrading or changing data-processing
capabilities.
6.17 These records must be retained by the entity for seven years
after the transactions, operations or acts covered by the records are
completed (unless the ACNC Commissioner notifies the entity that they
do not need to retain their records). [Subsections 55-5(4) and (5)]
6.18 Failure of the entity to maintain and keep adequate records
constitutes an offence by the registered entity, and carries a penalty of
20 penalty units. [Subsection 55-5(6)]
6.19 The offence is one of strict liability. Strict liability is the legal
responsibility for damages, or injury, even if the person found strictly
liable was not at fault or negligent. [Subsection 55-5(7)]
6.20 The use of strict liability for penalties is consistent with the
Commonwealth guide for framing offences. Strict liability penalties
provide a strong incentive to adopt measures to comply with the
requirements. In this case, imposing strict liability is an effective way of
ensuring compliance with an obligation to keep financial records.
6.21 The penalty of 20 penalty units is comparatively low when
compared to penalties imposed on for-profit entities for similar offences.
6.22 Twenty penalty units currently equates to $2,200.
Proportional reporting requirements - revenue thresholds
6.23 In order to minimise the compliance burden placed on registered
entities, reporting requirements under the Bill are proportional to the size
of registered entities, based on a revenue threshold. There are three tiers
for small, medium and large entities.
6.24 A small registered entity is an entity with annual revenue of less
than $250,000. [Subsection 205-25(1)]
6.25 A medium registered entity is an entity with annual revenue of
less than $1 million that is not a small registered entity.
[Subsection 205-25(2)]
6.26 A large registered entity is an entity with annual revenue of
$1 million or more. [Subsection 205-25(3)]
6.27 Revenue is calculated in accordance with the relevant
accounting standards issued by the Australian Accounting Standards
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
Board [subsection 205-25(4)]. More information on the accounting standards
can be found at www.aasb.gov.au.
6.28 The ACNC Commissioner has the discretion to treat an entity as
either small, medium or large for a financial year. [Subsection 205-25(5)]
6.29 To exercise this discretion the ACNC Commissioner must be of
the opinion that the entity, while not that size for one financial year, has
been that size in the past, and is likely to return to that size in following
financial years.
6.30 This allows the ACNC Commissioner to take a flexible
approach, where, for example, a one-off financial event would require an
entity to meet the reporting requirements of a higher tier for a single year.
This ensures that an unnecessary compliance burden is not placed on
registered entities.
Example 6.1
For the past ten years the Food Fabulous Foundation has had annual
revenue of between $400,000 and $500,000 per year, and as such has
reported as a medium entity every year.
The Foundation receives a bequest of $900,000 in one financial year,
meaning that it would fall under the definition of a large entity for that
year.
Under these rules, the ACNC Commissioner may exercise his or her
discretion and allow Food Fabulous to report in line with the
requirements for a medium entity for that year, including having its
report reviewed rather than audited.
In the following financial year the Foundation has annual revenue of
$415,000 and reports as a medium entity.
Information statements
6.31 NFP entities generally operate for a broad public benefit, and are
relied on by many Australians, often by those individuals who are the
most vulnerable in our community.
6.32 NFPs play a unique role in Australia, and as a result are funded
by governments, both directly and indirectly, and by donations from
members of the public. This unique role means that governments often
afford them special treatment by way of exemptions, concessions and
benefits from a range of laws and fees.
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6.33 It is therefore appropriate that registered entities have some level
of accountability to the public and meet community expectations about the
behaviour of entities in receipt of public monies and support.
6.34 All registered entities will be required to provide the ACNC
Commissioner with an information statement for each financial year
[Subsection 60-5(1)]. The first annual information statement will be in
respect of the 2012-13 financial year, and will need to be lodged with the
ACNC by 31 December 2013, unless a substituted accounting period
applies (further information on substituted accounting periods is provided
below).
6.35 The information will be used to carry out recognised assessment
activities, including whether entities remain entitled to be registered by
the ACNC, and can continue to access exemptions, concessions and other
benefits for which registration is a necessary pre-condition (for example,
tax concessions).
6.36 Information statements must be submitted in the approved form.
This means that the ACNC Commissioner can decide what information
needs to be provided and the way it needs to be provided. [Section 60-5]
6.37 The ACNC can be expected to require information relating to
such things as governance, finances, activities, purposes, objects and
beneficiaries of the registered entity.
6.38 The information statement may be proportional, with the ACNC
Commissioner able to approve different forms for small, medium and
large registered entities. [Subsection 60-5(1)(note)]
6.39 The information statement must be prepared and lodged with the
ACNC Commissioner no later than six months after the registered entity's
reporting year. This requirement aligns with the maximum times for
lodgement of such reports under existing NFP regulation, to facilitate a
smooth transition for charities to the ACNC. The ACNC Commissioner
may defer the lodgement date if the circumstances require it.
[Subsection 60-5(2) and section 190-15]
6.40 Failure to provide an information statement to the ACNC
Commissioner by the due date may result in administrative penalties being
applied to the entity. Administrative penalties are explained in detail in
Chapter 13 -- Miscellaneous.
6.41 Information statements submitted by registered entities will be
available to the public, except for those parts that are classified as `not for
publication' in the approved form [paragraph 40-5(1)(d)]. The publication of
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
the information statements will assist in increasing transparency of the
sector's operations and activities.
6.42 To ensure the ACNC is able to fulfil its role to act as a `one-stop
shop' regulator and to support transparency and accountability for the
NFP sector, disclosure of information held by the ACNC is permitted in
certain circumstances where authorised under the secrecy framework in
Part 7-1 of the Bill.
6.43 Under the secrecy framework, an ACNC officer is prohibited
from disclosing any personal information except where consent is given
by the responsible entity to which the information relates or where the
disclosure is for the purpose of including it on the ACN Register and it is
necessary to achieve the objects of the Bill.
6.44 The Bill provides a comprehensive secrecy regime to ensure that
the ACNC appropriately manages the information provided to it. For
further information on protected information, secrecy and disclosure of
information, see Chapter 11.
6.45 If a large or medium registered entity identifies a material error
in its information statement, it must give the ACNC Commissioner a
corrected statement within 28 days of the error being identified.
[Subsections 60-65(1) and (2)]
6.46 If a small registered entity identifies a material error in its
information statement, it must give the ACNC Commissioner a corrected
statement within 60 days of the error being identified. [Subsections 60-65(1)
and (2)]
6.47 Failure to re-lodge an information statement within the required
time period may result in administrative penalties being applied to the
entity.
6.48 This ensures that the public and the ACNC have access to the
latest and most accurate information and ensures the protection and
enhancement of public confidence and trust.
Annual financial reports
6.49 In addition to the annual information statement, medium and
large registered entities must prepare and submit an annual financial
report. [Section 60-10]
6.50 This is not a mandatory requirement for a basic religious charity
(see Chapter 13 for the definition of basic religious charity). However, if
a basic religious charity chooses to lodge a financial report, it must
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Reporting and record keeping
comply with Subdivision 60-C and any associated regulations.
[Section 60-60]
6.51 The financial report must comply with the content requirements
in the regulations. [Subsection 60-15(1)]
6.52 The regulations will be the subject of further consultation. The
regulations may provide that, in most cases, the financial report will be
based on accounting standards issued by the Australian Accounting
Standards Board (AASB), although as noted above, these requirements
will be finalised following further consultation.
6.53 Financial reports must be prepared and lodged with the ACNC
Commissioner no later than six months following the end of the entity's
reporting year. [Subsection 60-10(2)]
6.54 The ACNC Commissioner has the discretion to extend this
period. [Subsection 60-10(2)]
Substituted accounting periods
6.55 The ACNC Commissioner may approve a substituted
accounting period, in lieu of a financial year ending 30 June, for a
registered entity. [Section 60-85]
6.56 Entities that want to seek approval from the ACNC
Commissioner to report using a substituted accounting period must apply
in the approved form. [Subsection 60-85(3)]
6.57 Entities that notify the ACNC Commissioner, within six months
of the commencement date, that they currently report under an Australian
law for a period other than a financial year ending 30 June, will be taken
to have been approved by the ACNC Commissioner (on an ongoing basis)
to lodge their financial report to the ACNC on the basis of that other
period. That is, existing substituted accounting periods will be
grandfathered for such entities, and the ACNC Commissioner's approval
to adopt the alternate accounting period will not be required in these
cases. For further information, see Chapter 14 -- Transitional provisions.
6.58 Registered entities which report using a substituted accounting
period will still report annually. Instead of 31 December, these entities
will be required to provide their financial reports to the ACNC
Commissioner six months after the last day of their accounting period.
[Subsection 60-85(2)]
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
6.59 To ensure a smooth transition from one accounting period to
another, the ACNC Commissioner has the power to impose any
conditions that are necessary for this transition. [Subsection 60-90]
Mistakes and errors in information statements and financial reports
6.60 If a registered entity identifies a material error in their financial
report, the registered entity must supply the ACNC Commissioner with a
corrected report within 28 days of the error being identified. [Section 60-65]
6.61 This ensures that the information within the public domain is
up-to-date and accurate, and reflects the true position of the entity. This
will help promote public confidence and trust in sector.
6.62 Failure to re-lodge a corrected financial report within the
required time period may result in administrative penalties being applied
to the entity. Administrative penalties are explained in Chapter 13 -
Miscellaneous provisions.
6.63 This ensures that the public and the ACNC have access to the
latest and most accurate information.
Additional reporting requirements where ACNC Commissioner requires
6.64 The ACNC Commissioner has the authority to require a
registered entity, or a class of registered entities, to provide additional
information in the financial report or information statement, and to lodge
additional reports, by making a written determination. [Subdivision 60-E]
6.65 Any such reports would be used by the ACNC to meet any
information requirements that extend beyond the information contained in
the financial report or the annual information statement. This type of
additional reporting will only be used where necessary, for example,
where there is reason to believe that a registered entity has contravened
the Bill.
6.66 The ACNC Commissioner must set out the additional
information or requirements. [Sections 60-75and 60-80]
6.67 The information requested may be in relation to past or future
periods, but may not relate to a period more than six years ago.
[Subsections 60-75(6) and 60-80(6)]
6.68 Depending on the circumstances, the additional report or
information sought by the ACNC Commissioner may diverge from
particular accounting standards. In such cases, the regulations may
require registered entities to apply all relevant accounting standards,
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Reporting and record keeping
except for any that are inconsistent with the ACNC Commissioner's
determination. However, as noted above, this will be subject to further
consultation.
6.69 The ACNC Commissioner's power to require additional
information applies to basic religious charities, consistent with existing
obligations under the tax law to provide the Commissioner of Taxation
with additional information.
Collective and joint reporting
6.70 The Bill provides the ACNC Commissioner with discretion to
allow entities to provide collective or joint reports, in certain
circumstances. [Section 60-95]
6.71 Two or more entities which provide either joint or collective
reports are known as a reporting group. [Section 60-95]
6.72 A reporting group may lodge a single information statement, and
if required, a single financial report for a financial year. This is referred to
as joint reporting. [Subsection 60-95(1)]
6.73 A reporting group may also prepare one or more information
statements, and if required, financial reports for a financial year, on a
basis other than an entity-by-entity basis. This is referred to as collective
reporting. [Subsection 60-95(2)]
6.74 This will allow, for example, reporting along certain lines of
activity, rather than on an entity-by-entity basis, where the ACNC
Commissioner approves such reporting.
6.75 For instance, the ACNC Commissioner could authorise a group
of related entities which are engaged in two distinct types of charitable
work to report based on the type of activities that they undertake.
[Section 60-95(2)]
6.76 Entities can seek the ACNC Commissioner's approval, in the
approved form, to prepare collective or joint reports. [Subsection 60-95(3)]
6.77 Before making a decision to allow registered entities to report as
a reporting group the ACNC Commissioner must consider a list of factors
in order to ensure that the reporting group will represent the most
appropriate form of report and will meet the needs of all users, including
the public, the entities and regulators. [Subsection 60-95(4)]
6.78 In deciding whether to allow two or more registered entities to
form a reporting group, the ACNC Commissioner must consider:
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
· how the public interest in the transparency and accountability
of the registered entities is best served, including the possible
effect on:
- the public's understanding of the activities of the
registered entities and the information provided in the
information statement or financial report; and
- the public's ability to rely upon the information provided
in the information statement or financial report;
· how the altered reporting arrangements would affect the
ACNC Commissioner's ability to conduct recognised
assessment activities;
· whether members of the reporting group have access to the
same or different taxation concessions;
· how the altered reporting arrangements may affect the
Commissioner of Taxation's ability to assess the registered
entity's compliance with taxation laws;
· the possible effect on the compliance and administrative
costs of registered entities proposed to be included in the
reporting group;
· the degree of the affiliation, control and proximity of
registered entities proposed to be included in the reporting
group;
· the objects of the Bill; and
· any other matter that the ACNC Commissioner considers
relevant.
[Subsection 60-95(4)]
6.79 In making a decision to allow registered entities to form a
reporting group the ACNC Commissioner must consider all of these
factors.
6.80 This assessment could involve weighing competing
considerations. For instance, the ACNC Commissioner may believe that
allowing closely related entities with similar purposes to form a reporting
group would best serve the public interest in accountability and
transparency and would allow recognised assessment activities to be
undertaken. On the other hand, the entities may access different taxation
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Reporting and record keeping
concessions and allowing the entities to form a reporting group may
reduce transparency and increase compliance costs for the entities.
6.81 Furthermore, in a case where a group of closely related,
centrally controlled entities which all access the same tax concessions
wish to form a reporting group, and this consolidation would be expected
to reduce compliance costs, the ACNC Commissioner may refuse to grant
this request if allowing the entities to form a reporting group might allow
the registered entities to reduce transparency and accountability,
particularly in relation to public understanding of the activities of the
entities.
6.82 In considering the degree of affiliation, control and proximity of
registered entities proposed to be included in a reporting group the ACNC
Commissioner would consider such factors as the extent to which the
group acts like a group, how they interact together and how close each of
their activities are to one another. [Paragraph 60-95(4)(f)]
Example 6.2 An entity that is unlikely to be approved
Youth Help is a youth development organisation that operates in NSW
and Victoria. Its purpose is to advance the education of disadvantaged
youth and to reduce youth unemployment and crime. The organisation
operates in 20 branches in locations with high numbers of
disadvantaged youths across NSW and Victoria.
The central branch of Youth Help is located in Melbourne and has a
high level of affiliation with each of the other branches. There is one
common binding set of governing rules.
However, each branch is able to make decisions about its own day to
day activities, structure and management, in keeping with the overall
purpose of Youth Help.
Each branch receives different tax concessions from the
Commonwealth Government in recognition of their various NFP
activities.
One branch of Youth Help operates a band night each Friday night to
provide a place for youths to go at night, and to raise funds for its other
activities. Local businesses and individuals donate food, time and
services for the band nights, and the branch uses the Band Nights to
run raffles to raise funds for its other activities. The Band Nights are
well attended by the local community.
Another branch of Youth Help runs an op-shop to sell donated clothes,
books and furniture. It uses the funds raised from selling donated
goods to provide on the job training to disadvantaged youths.
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
One of the branches of Youth Help donates funds to an overseas youth
development organisation using monies collected from youth group
attendees.
Seven branches of Youth Help are registered as public benevolent
institutions and hold DGR status for their youth development activities.
Another branch of Youth Help receives large sums of money from a
testamentary trust set up by the mother of a child who benefitted from
their help in the past. The branch receives money from the trust on a
quarterly basis and the letter of wishes states that the funds are to be
used only for the activities of that particular branch of Youth Help.
In considering whether to approve collective reporting in this case, the
ACNC Commissioner would have regard to that fact that the
organisation is in receipt of large amounts of public monies from its
multiple and varied fundraising activities, and donations from the
testamentary trust. This indicates that a high level of accountability
and transparency to the public is necessary.
The ACNC Commissioner would also have regard to the fact that
while the governing rules are held at the central branch level, each
branch has decision making authority and is responsible for the
management of day -- to -- day activities.
The ACNC Commissioner would also have regard to the fact that one
branch of the organisation sends money overseas.
These factors together mean that Youth Help may not be approved for
collective reporting.
6.83 The Bill does not prevent a representative member of the
reporting group from lodging the report or statement on behalf of the
reporting group. However, the obligation will still remain on each
individual entity to comply with their reporting obligations. This ensures
that registered entities do not attempt to use grouping arrangements to
avoid individual responsibilities.
6.84 A failure to comply with the reporting requirements could result
in the imposition of administrative penalties for each entity that fails to
report in the reporting group. However, the ACNC Commissioner is
likely to use their discretion to not impose multiple penalties in such
cases, unless the circumstances dictate that as an appropriate response.
Example 6.3 An entity that is likely to be approved
The Red Hat Trust is a youth development organisation that operates in
NSW and Queensland. Its purpose is to advance the education of
disadvantaged youths and to reduce youth unemployment and crime.
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Reporting and record keeping
The organisation operates in 20 branches in locations with high
numbers of disadvantaged youths across NSW and Queensland.
The central branch of Red Hat Trust is located in Brisbane and has a
high level of affiliation with each of the other branches. The central
branch holds the documents that govern the whole organisation. The
central branch is responsible for the day-to-day management and
decision making for each branch.
Half of the branches are registered as public benevolent institutions.
As such, they have DGR status and access to tax concessions such as
FBT exemptions and income tax exemptions. The other half of the
branches receive different charitable tax concessions.
Five branches of The Red Hat Trust operate single store op-shops to
raise funds from the sale of books, clothes and used furniture.
In considering whether to approve collective reporting in this case, the
ACNC Commissioner would have regard to common fundraising,
accounting and reporting practices of Red Hat Trust.
The ACNC Commissioner would further note that the central branch
has decision making power over each of the 20 branches.
The ACNC Commissioner would also consider the common purpose
of the organisations and the lack of complexity of financial
arrangements which could create a lack of transparency.
These factors together mean that Red Hat Trust may be approved for
collective reporting.
6.85 Depending on the circumstances, joint and collective reporting
may diverge from particular accounting standards, such as accounting
standard AASB 10 Consolidated Financial Statements. In such cases, the
regulations may require registered entities to apply all relevant accounting
standards, except for those which are inconsistent with this type of
reporting. However, as noted above, this will be the subject of further
consultation.
6.86 The relevant reporting tier that should be applied to joint and
collective reports is the tier applying to the largest registered entity that is
included in the reporting group. [Section 60-105]
6.87 For example, if a small and medium entity combine to form a
reporting group which is considered large, then the joint report can be
prepared on the basis of the medium tier requirements (that is, they would
be permitted to have a review rather than an audit).
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
6.88 Continuing with this example, if the large combined entity seeks
to disaggregate into five entities that would each be considered small, and
prepare five collective reports, each collective report would be prepared
on the basis of the medium tier requirements, as this is the tier applying to
the largest entity that is included to form the reporting group. This will
ensure that entities cannot avoid their reporting obligations by
disaggregating into smaller entities that would otherwise be exempt from
reporting due to their size.
6.89 Where the ACNC Commissioner approves a request to allow
registered entities to form a reporting group the ACNC Commissioner
may impose conditions on members of the reporting group. [Section 60-100]
6.90 For example, the ACNC Commissioner may impose a condition
that certain items be separately identified or explained in the financial
reports and notes to the financial reports. [Paragraphs 60-100(3)(a) and (b)]
6.91 The ACNC Commissioner may also impose conditions relating
to the structure of financial reports. [Paragraph 60-100(3)(c)]
6.92 For example, the ACNC Commissioner may require certain
matters, such as the donations received by a DGR which is a member of
the reporting group, to be separately reported.
Audits and reviews
6.93 Large entities must have their financial report audited and obtain
an auditor's report. [Section 60-25]
6.94 Medium entities can choose to have their financial report
reviewed, instead of being audited, unless they are expressly directed by
the ACNC Commissioner to have their financial report audited.
[Section 60-20]
6.95 The ACNC Commissioner would only be expected to direct a
medium entity to have their financial report audited in particular cases, for
example, where there had been previous problems or non-compliance by
the entity.
6.96 A review, in contrast to an audit, is not designed to provide
assurance that the financial information reported by the entity is free from
material misstatement.
6.97 A review consists of making enquiries, primarily of individuals
responsible for financial and accounting matters, and applying analytical
and other review procedures. In contrast, an audit requires undertaking
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Reporting and record keeping
audit procedures, in order to detect material misstatements and carry out
specific procedures to reduce fraud risk.
6.98 A review may bring significant matters affecting the financial
information to the assurance individual's attention, but it does not provide
all of the evidence that would be required in an audit.
6.99 The objective of an audit of a financial report is to enable the
auditor to express an opinion on whether the financial report is prepared,
in all material respects, in accordance with an applicable financial
reporting framework. When forming an opinion on the financial report
the auditor needs to evaluate whether, based on the audit evidence
obtained, there is reasonable assurance about whether the financial report
taken as a whole is free from material misstatement.
6.100 An audit must be undertaken by a `registered company auditor',
an audit firm or an authorised audit company, within the meaning of the
Corporations Act 2001. [Subsection 60-30(1)]
6.101 The regulations may also prescribe other entities that can
undertake an audit. [Paragraph 60-30(1)(d)]
6.102 However, reviews can be performed by a wider class of
individuals. In addition to registered company auditors, audit firms and
authorised audit companies, a member of a professional body may
conduct a review provided they hold the relevant designation of that
professional body [subsection 60-30(2)]. These designations will be
prescribed by the Corporations Regulations 2001.
6.103 For example, a member of the Institute of Chartered
Accountants (CA) in Australia must have CA designation to perform a
review of a registered entity. Similarly, a member of Certified Practising
Accountants Australia (CPA Australia) must have CPA designation.
6.104 This effectively allows a broad class of individuals to undertake
reviews with some limitations to ensure that reviewers are subject to
appropriate professional standards.
6.105 In practice this means that a reviewer must be a member of a
professional accounting body who is not a student member and who is
subject to certain minimum standards, such as continuous professional
development, in line with the requirements of the professional accounting
bodies.
6.106 The audit report or review report must contain a statement from
the auditor or reviewer which provides their opinion or conclusion about
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Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
certain key matters. The auditor or reviewer must form an opinion (in the
case of an audit) or conclusion (in the case of a review) about whether:
· in the case of an audit, the financial report meets all the
requirements in the Bill [subsections 60-30(3) and (4)];
· in the case of a review, anything has come to the reviewer's
attention that causes the reviewer to believe that the financial
report does not meet all the requirements in the Bill
[subsections 60-30(3) and (4)]; and
· all information, explanation and assistance necessary for the
conduct of the audit or review has been provided
[subsections 60-30(3) and (4)]; and
· the registered entity has kept sufficient financial records for a
financial report to be prepared and audited
[subsections 60-30(3) and (4)]; and
· the registered entity has kept other records as required by the
reporting requirements in the Bill [subsections 60-30(3) and (4)].
6.107 The audit or review must be conducted in accordance with
auditing standards. [Section 60-35]
6.108 A registered entity must obtain from its auditor or reviewer:
· a written, signed, declaration to the responsible entities of the
registered entity stating that, to the best of their knowledge,
there have been no contraventions of any applicable code of
professional conduct in relation to the audit or review; or
· a written, signed, declaration to the responsible entities of the
registered entity stating that, to the best of their knowledge,
the only contraventions of any applicable code of
professional conduct in relation to the audit or review are
those detailed in the signed declaration.
[Section 60-40]
6.109 This ensures the audit or review is prepared without bias,
conflict of interest, or the undue influence of others, and allows the public
to have faith that the audit has been done to a high objective standard.
6.110 An explanation must be given if the auditor or reviewer does not
believe that the financial report is in accordance with Division 60 of the
Bill. The auditor's report or reviewer's report must quantify the effect
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Reporting and record keeping
that non-compliance has on the financial report. If quantifying the effect
is not possible, the report must explain why. [Sections 60-45 and 60-50]
6.111 The auditor's report or the reviewer's report must describe any
material defects or irregularities in the financial report, and any
deficiencies, failures or shortcomings in respect of:
· whether the auditor has been given all information,
explanation and assistance necessary for the conduct of the
audit or review;
· whether the registered entity has kept financial records
sufficient to enable a financial report to be prepared and
audited; and
· whether the registered entity has kept the other records
required by the Bill.
[Subsections 60-45(3) and 60-50(3)]
6.112 The auditor's report or reviewer's report is also required to
include any statements or disclosures that the auditing standards require.
[Subsections 60-45(4) and 60-50(4)]
6.113 A registered entity must ensure that the auditor or reviewer has
access to and is given all information that is reasonably requested.
[Section 60-55]
6.114 Further information on auditing requirements can be found at the
Auditing and Assurance Standards Board website at www.auasb.gov.au.
85
Chapter 7
Duty to notify
Outline of chapter
7.1 This Chapter explains the obligations of entities to notify the
Australian Charities and Not-for-profits Commission (ACNC)
Commissioner (ACNC Commissioner) of certain matters.
Summary of new law
7.2 The new law requires registered entities to notify the ACNC
Commissioner of certain matters, in particular certain changes to the
entity's details or matters that may affect its entitlement to registration.
7.3 In order to ensure that the ACNC Commissioner and public are
informed of those matters which may affect an entity's entitlement to
registration it is necessary that the ACNC Commissioner is informed of
certain changes to registered entities.
7.4 The duty to notify the ACNC Commissioner of certain matters is
also important to ensure that the information about entities that is
displayed on the ACN Register is accurate and up to date. Having the
register accurate and up-to-date is necessary for the public to be able to
rely on that information when making decisions.
7.5 Registered entities with similar obligations to notify other
Commonwealth Government agencies of some information will no longer
be required to notify those other agencies, for example, the ATO or the
ASIC.
Detailed explanation of new law
Certain matters must be notified to the ACNC Commissioner
7.6 Registered entities have a duty to notify the ACNC
Commissioner of certain matters. [Section 65-5]
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Not-for-profits Commission (Consequential and Transitional) Bill 2012
Changes to entity information
7.7 A registered entity must notify the ACNC Commissioner, in the
approved form, if the entity changes its name or address for service.
[Paragraphs 65-5(1)(a) and (b)]
7.8 A registered entity must notify the ACNC Commissioner, in the
approved form, if an entity has ceased to be, or has become, a responsible
entity of the registered entity. [Paragraph 65-5(1)(c)]
7.9 This ensures that the details of the entity and contact details are
current so that the ACN Register reflects the correct names of entities and
that the ACNC Commissioner can contact registered entities or serve
documents on them knowing that those documents will be received by the
entity.
7.10 Keeping this information up-to-date also ensures that registered
entities can receive documents and meet their regulatory obligations under
the Bill.
7.11 A registered entity must notify the ACNC Commissioner of a
change to its governing rules. [Paragraph 65-5(1)(d)]
7.12 If a group of entities make changes to a common set of
governing rules, it is sufficient that the ACNC Commissioner is notified
by one of the entities of the changes affecting them all.
7.13 The Bill allows the ACNC Commissioner to approve a form
allowing one authorised entity to notify of changes on behalf of all entities
in a `group'.
7.14 However, notifying as a group does not mitigate the
responsibility of each entity to notify the ACNC Commissioner of certain
matters. That is to say, if the authorised entity fails to notify on behalf of
the group, each entity in the group is responsible for failing to notify the
ACNC. This ensures that registered entities do not attempt to use
grouping arrangements to avoid individual responsibilities.
7.15 However, the ACNC Commissioner is likely to use their
discretion to not impose multiple penalties in such cases, unless the
circumstances dictate that as an appropriate response.
Other matters for which a duty to notify arises
7.16 Registered entities must notify the ACNC Commissioner of any
fact or circumstance that may affect their entitlement to registration as a
type or as a subtype of entity. [Subsection 65-5(2) and paragraph 65-5(1)(e)]
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Duty to notify
Example 7.1
The Gauge organisation has changed its activities and is no longer
entitled to be registered as a charity. It does not meet the description
of the relevant entity type and must notify the ACNC Commissioner of
this change.
7.17 A registered entity must notify the ACNC Commissioner if it
contravenes the Bill or does not comply with a governance standard or
external conduct standard, and that contravention or non-compliance is
significant. [Paragraphs 65-5(2)(a) and (b)]
7.18 A significant contravention is one that would affect an entity's
entitlement to registration. [Paragraph 65-5(2)(c)]
Example 7.2
The responsible entities of the Blue Glass Foundation discover that
substantial funds are being sent overseas without being accounted for.
The Foundation must notify the ACNC Commissioner of this matter.
7.19 There is a difference between entitlement to registration and
revocation of registration. Before revoking registration the ACNC
Commissioner must consider a range of factors as detailed in Chapter 3 --
Registration.
7.20 The requirements for an entity to maintain registration are
explained in Chapter 3 -- Registration and Chapter 5 -- Governance
standards and external conduct standards.
7.21 In determining the significance of a contravention or
non-compliance, the registered entity should consider:
· the nature, significance and persistence of any contravention
or non-compliance; and
· the desirability of ensuring that contributions to the registered
entity are applied consistently with the NFP nature, and the
purpose of the registered entity. [Subsection 65-5(3)]
7.22 The meaning of the term contribution is explained in
Chapter 3 -- Registration.
Example 7.3
Map It Inc, a registered entity, discovers gross errors in the entity's
financial records for the previous two years. There is a risk that money
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has been misapplied. This is a significant contravention of the Bill and
Map It Inc must notify the ACNC Commissioner.
7.23 The matters which must be notified to the ACNC Commissioner
are based on notification provisions of other Commonwealth regulators,
including:
· the change of company details provisions of the
Corporations Act 2001;
· Division 426 in Schedule 1 to the Taxation Administration
Act 1953; and
· the breach reporting requirements of the Banking Act 1959.
Timing
7.24 The duty to notify arises as soon as the registered entity becomes
aware of the matter. [Section 65-5(4)]
7.25 The entity must notify the ACNC Commissioner as soon as
practicable after the registered entity first has knowledge of the matter.
[Paragraph 65-5(4)(a)]
7.26 Entities registered as large or medium entities must give notice
to the ACNC Commissioner as soon as possible, but no later than the end
of 28 days. [Paragraph 65-5(4)(b)]
Example 7.4
Hands to Help is a medium registered entity. Hands to Help makes a
change to its governing rules on 1 January 2013. Hands to Help must
notify the ACNC Commissioner as soon as possible and no later than
29 January 2013.
7.27 Entities registered as small entities must give notice to the
ACNC Commissioner as soon as possible, but no later than the end of 60
days for all matters except for significant contraventions of the Bill.
[Paragraph 65-5(4)(c)]
Example 7.5
Small Helpers is a small registered entity. Small Helpers changes its
name to Big Help on 1 December 2012. The entity has until the end of
60 days from 1 December 2012 to notify the ACNC Commissioner of
the change. As such, the entity must notify the ACNC Commissioner
by the end of 30 January 2013.
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7.28 Entities registered as small entities must give notice of
significant contraventions of the Bill as soon as possible, but no later than
the end of 28 days. [Paragraph 65-5(4)(b)]
7.29 If multiple notifications arise at the same time in relation to one
or more matters then only one notification of all matters needs to be made.
[Subsection 65-5(5)]
Example 7.6
The Big Plan, a registered entity, moves premises and changes its
name to Small Steps on the same day. The entity may give one
notification that notifies the ACNC Commissioner of both changes.
7.30 The notice must be given to the ACNC Commissioner in the
approved form [Section 65-5(1)]. The approved form rules are explained in
Chapter 13 -- Miscellaneous.
Incentives to notify the ACNC Commissioner early
7.31 All registered entities must notify the ACNC Commissioner of
the matters described in the sections above.
7.32 There are penalties for failing to notify the ACNC
Commissioner of the matters outlined above, or for giving notice to the
ACNC Commissioner late. [note in subsection 65-5(1)]
7.33 The administrative penalties regime is proportional and
dynamic. As such, there are more severe penalties for prolonged lateness,
attempts to mislead the ACNC Commissioner and for providing
deliberately false information. Conversely, penalties are more lenient
where an entity innocently provides incorrect information and discloses
this to the ACNC. Further information can be found in Chapter 13 --
Miscellaneous.
Example 7.7
J U Crowd Inc moves premises on 15 November 2012. J U Crowd Inc
notifies the ACNC Commissioner of the change to its address for
service on 10 December 2012. J U Crowd Inc has fulfilled its
obligations under the Bill.
Example 7.8
Following on from the example above, J U Crowd does not notify the
ACNC Commissioner of the change to its address for service. The
ACNC Commissioner finds out that the entity's address for service has
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changed on 15 January 2012. J U Crowd may be liable for an
administrative penalty.
7.34 The ACNC Commissioner must consider the actions that an
entity could have taken, or has taken, before undertaking any enforcement
action, including revocation of registration.
7.35 The duty to notify is a part of encouraging cooperation between
the ACNC Commissioner and the NFP sector. The duty to notify allows
registered entities to notify the ACNC Commissioner of changes and
problems, and demonstrates their willingness to take action to meet their
regulatory obligations and to address contraventions and non-compliance.
7.36 In considering an appropriate response to a contravention or
non-compliance with the Bill, a notification made by an entity could be
used by the ACNC Commissioner as evidence of the entity's willingness
and responsiveness to comply with the Bill.
Example 7.9
Aussies Inc is a registered entity. Liam has recently resigned from
Aussies Inc and the board of Aussies Inc appoints a new responsible
entity, Patrick, and notifies the ACNC Commissioner of this matter.
Upon his commencement Patrick inspects the books of Aussies Inc and
becomes aware of significant errors and falsifications made by Liam in
Aussie Inc's financial reports. Patrick brings these matters to the
attention of the board, who had no prior knowledge of the problem.
The board notifies the ACNC Commissioner of the matter
immediately.
The duty to notify the ACNC Commissioner arises once the entity
becomes aware of the matter, regardless of the fact that the actual
contravention may have occurred many months previously.
Aussies Inc has complied with its duty to notify, although there may
still be administrative penalties associated with submitting earlier false
financial reports.
In considering an appropriate response, the ACNC Commissioner may
exercise his or her discretion to reduce the administrative penalty to
nil, having taken into consideration Aussies Inc's fulfilment of their
duty to notify.
Example 7.10
Following on from the example above, Patrick brings the matter to the
board's attention, and they decide not to notify the ACNC
Commissioner. The ACNC Commissioner is made aware of the matter
some time later.
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The entity is liable to an administrative penalty for failing to notify the
ACNC Commissioner, as well as possible enforcement action for
falsifying financial reports.
7.37 In considering an appropriate response to the falsification of the
financial reports, the ACNC Commissioner takes the entity's failure to
notify the ACNC Commissioner of the matter into consideration. The
ACNC Commissioner may exercise his or her discretion to increase the
administrative penalty because the responsible entities deliberately
attempted to withhold information.
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Chapter 8
Information gathering and monitoring
powers
Outline of chapter
8.1 This Chapter:
· explains the information gathering and monitoring powers of
the Australian Charities and Not-for-profits Commission
(ACNC); and
· sets out the scope of information that can be gathered under
these powers and the circumstances in which the powers may
be used.
Summary of new law
8.2 The ACNC will be responsible for implementing a report-once,
use-often reporting framework, providing education and support to the
sector, and establishing a public information portal.
8.3 ACNC registration will be a precondition for not-for-profit
(NFP) entities to access exemptions, benefits and concessions provided
under Australian laws, including Australian taxation laws.
8.4 The ACNC will be responsible for assessing whether NFP
governance structures and financial positions are appropriate for these
entities to receive public funds.
8.5 Commonwealth government agencies that administer
exemptions, benefits and concessions provided in Australian laws would
no longer be required to assess the adequacy of NFP governance
structures and financial position.
8.6 The ACNC will take this role over from these other
Commonwealth government agencies and will therefore centralise the
assessment of the adequacy of NFP governance structures and financial
position.
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8.7 For the NFP sector's regulatory framework to function and
remain effective the ACNC needs to be able to access the latest available
information through appropriate information gathering and monitoring
powers.
8.8 Without these powers the ACNC would be unable to gather
information beyond that contained in information statements and financial
reports, and would be unable to investigate fraud and whether public
funds are being used to promote charitable purposes.
8.9 The ACNC will administer a report-once, use-often reporting
framework. A part of the framework will be the `charity passport' which
will be used by registered entities to meet the majority of their financial
and governance reporting requirements.
8.10 Commonwealth government agencies will use information in the
passport to satisfy their particular information requirements and will not
be required to verify the accuracy of information. Through time it is
possible that information in the charity passport could satisfy the
requirements of State and Territory government agencies.
8.11 Information contained in the passport must be correct and
accurate for the report-once, use-often framework to function effectively
and reduce the red-tape faced by NFPs. The information gathering and
monitoring power enables the Australian Charities and Not-for-profits
Commission Commissioner (ACNC Commissioner) to validate the
accuracy of the information contained in the passport.
8.12 Under its secrecy framework the ACNC will be able to share
information with Australian government authorities where the sharing of
information is reasonably necessary to promote the object of the Bill.
8.13 The ACNC will not be responsible for ensuring that product and
service standards are met. However, to function effectively as a one-stop
shop regulator for the sector, the ACNC will need to have appropriate
powers to take samples of products or inspect items on premises with a
view to sharing the information gathered with relevant authorities.
8.14 It is also critical for the legislation to contain safeguards to
protect the interests of registered entities and the privacy of employees of
these entities. This will be achieved by having specific conditions that are
required to be satisfied prior to the ACNC using these powers.
8.15 Additionally, the scope of the powers will be limited to
information that is absolutely necessary for the ACNC to administer the
sector's regulatory framework.
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Information gathering and monitoring powers
8.16 The ACNC Bill provides the ACNC Commissioner with powers
to gather information or request documents, search premises and inspect
items on premises, and secure documents or electronic equipment found
on premises.
8.17 The ACNC Commissioner can use these powers to determine
whether a registered entity has complied with:
· provisions of the ACNC Bill, including provisions that create
offences, or administrative penalties;
· registration conditions required to maintain ACNC
registration; and
· provisions in the Crimes Act 1914 or the Criminal Code that
creates offences related to the ACNC Bill.
8.18 The ACNC Commissioner will also be able to use these powers
to determine whether information provided by registered entities,
including information required to be provided under the ACNC Bill and
information provided on a voluntary basis, is correct and accurate.
8.19 These powers are required to support the regulatory framework
administered by the ACNC and the ACNC's role as a one-stop shop
regulator for the sector.
Detailed explanation of new law
Information gathering powers
8.20 This Bill provides the ACNC Commissioner with the power to
gather information or documents that are reasonably necessary for the
purposes of determining whether:
· a registered entity has complied with a provision subject to
monitoring in the ACNC Bill; or
· information given by a registered entity, either on a voluntary
basis or to fulfil an obligation under the ACNC Bill, is
correct and accurate.
[Subsection 70-5(1)]
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8.21 The ACNC Commissioner would be able to gather the required
information or documents from any entity that could reasonably be
expected to have the information required.
8.22 The ACNC Commissioner can send information requests to any
entity; requests do not have to be constrained to registered entities. This
includes for example banks and financial institutions that manage the
funds of registered entities, or any other entity that is affiliated with the
registered entity.
8.23 The information that can be requested is confined to information
that is reasonably necessary to determine whether a provision subject to
monitoring has been, or is being, complied with, and whether information
subject to monitoring is correct and accurate.
8.24 Further information on the scope of provisions subject to
monitoring and information subject to monitoring is provided in
paragraphs 8.54 to 8.59.
8.25 The ACNC Commissioner is required to issue a written notice to
an entity requesting the entity:
· to give to the ACNC Commissioner, within the period and in
the manner and form specified in the notice, any information;
· to attend and give evidence before the ACNC Commissioner
for the purpose of obtaining information;
· to produce to the ACNC Commissioner, within the period
and in the manner specified in the notice, any documents; or
· to make copies of any documents and to produce to the
ACNC Commissioner, within the period and in the manner
specified in the notice, those copies.
[Subsection 70-5(2)]
8.26 For the purposes of providing the ACNC Commissioner with
evidence, the ACNC Commissioner may require information to be given
on oath or affirmation and to be given orally or in writing. The ACNC
Commissioner (or an ACNC officer) may administer an oath or
affirmation. [Subsection 70-5(3)]
8.27 If an entity does not comply with the written notice issued by the
ACNC Commissioner the entity commits an offence. The maximum
penalty that the entity is liable for is 20 penalty units. [Subsection 70-5(4)]
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8.28 This penalty is low when compared to penalties imposed on
for-profit entities for similar offences (see for example Division 353 in
Schedule 1 to the Taxation Administration Act 1953).
8.29 To ensure entities have sufficient time to comply with a written
request issued by the ACNC Commissioner, entities are required to be
given a minimum of 14 days to comply. [Subsection 70-5(5)]
8.30 Written notice issued by the ACNC Commissioner must outline
the implications of not complying with the request, including the
implications of providing false or misleading information or documents
under sections 137.1 and 137.2 of the Criminal Code. [Subsection 70-5(6)]
8.31 As part of the ACNC Commissioner's general information
gathering powers, the ACNC Commissioner is able to inspect documents
provided by entities and to make and retain copies of the documents.
[Section 70-10]
8.32 This power is required in situations where the ACNC
Commissioner needs to examine significant quantities of documents and
information, and having to do so with limited time would be impractical.
8.33 To avoid doubt the ACNC Commissioner will be able to retain
possession of copies of documents provided by entities to meet their
requirements in the written notice given by the ACNC Commissioner.
[Section 70-20]
8.34 The ACNC Commissioner would have the authority to take and
retain for as long as is necessary, possession of an original document
provided by entities. [Subsection 70-15(1)]
8.35 Generally, the ACNC Commissioner would take certified
copies. However, in specific cases where originals are required to prevent
evidence from being destroyed of altered, the ACNC Commissioner
would be able to retain the original document.
8.36 For example, if the ACNC is provided access to a registered
entity's contractual documentation and there is a risk that the entity could
destroy or alter the contract which contains incriminating evidence, the
ACNC Commissioner would be able to retain the original.
8.37 To ensure that the entity providing the document is not
disadvantaged by the ACNC Commissioner maintaining possession of the
original document, the entity will be entitled to be supplied with a
certified copy of the document. [Subsection 70-15(2)]
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8.38 The copy certified by the ACNC Commissioner must be
received in all courts and tribunals as evidence as if the documents were
original. [Subsection 70-15(3)]
8.39 This subsection further ensures that the entity is not
disadvantaged by the ACNC Commissioner maintaining possession of the
original document.
8.40 As a safeguard, until the ACNC Commissioner supplies the
certified copy of the original documents, the entity which provided the
ACNC Commissioner with the document will have the right to inspect
and make copies of, or take extracts from, the document.
[Subsection 70-15(4)]
8.41 An individual will not be excused from complying with a notice
given by the ACNC Commissioner on the grounds that complying with
the notice may incriminate the individual or expose the individual to a
penalty. [Subsection 70-25(1)]
8.42 However, the use of the information that incriminates the
individual will be constrained. In particular, the information will not be
admissible in evidence against the individual in criminal proceedings or
proceedings in relation to the recovery of a civil penalty, this includes
information obtained as a direct or indirect consequence of the individual
providing information. [Subsection 70-25(2)]
8.43 Providing a blanket no self-incrimination provision could
seriously undermine the effectiveness of the regulatory scheme
administered by the ACNC. Information gathering and monitoring
powers are the main channels available to the ACNC Commissioner to
gather information and ultimately monitor ongoing eligibility to
registration. The Guide to Framing Commonwealth Offences notes that in
these situations overriding the privilege is acceptable.
8.44 For example, the privilege against self-incrimination does not
apply in relation to the Australian Tax Office's coercive information
gathering powers under section 264 of the Income Tax Assessment
Act 1936. As the ACNC is taking over the regulatory responsibilities of
the ATO for registered entities it has been provided with equivalent
powers. The Courts have accepted that retaining such a privilege in such
cases would frustrate the regulator in the exercise of its functions.1
1
Stergis v Commissioner of Taxation (1989) 89 ATC 4442; Donovan v Commissioner of
Taxation [1992] FCA 82; (1992) 92 ATC 4114; and Deputy Commissioner of Taxation v
Hugo John De Vonk [1995] FCA 1715 (4 December 1995).
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Information gathering and monitoring powers
8.45 However unlike the powers of the ATO this legislation
constrains the use of any incriminating evidence by providing both use
and derivative use immunity to protect the rights of individuals.
8.46 The ACNC will need to seek information from different types of
entities, including from third parties that may be self-incriminatory to
those parties. For example, there may be instances of collusion between
the management of a charity and donors. In the ACNC regulatory context
this type of tax fraud may occur where the committee of management of a
charity colludes with a large donor for tax avoidance purposes.
8.47 Failing to provide the ACNC with the necessary scope to act as
an effective regulator in the situations outlined above would create
significant integrity issues and risks of mismanagement of funds intended
for charitable and NFP purposes.
8.48 It is important to keep in mind that individuals working in NFP
entities manage public funds, at times with limited oversight. Public
companies, for example, have shareholders that ensure the individuals
running corporations are accountable. However, the same kind of market
discipline does not apply to those managing NFPs and it is arguable that
these individuals should be subject to appropriate levels of oversight.
8.49 Individuals working in NFP entities manage resources and
monies that come from donors or volunteers and are earmarked for the
most vulnerable in our community. It is therefore important that NFP
entities are subject to appropriate oversight to ensure those monies are
used lawfully to assist our most vulnerable community members.
8.50 It is recognised that overriding the privilege against
self-incrimination can lead to a loss of personal liberty. Therefore, it has
been decided to constrain the use of any self-incriminating information.
8.51 Constraining the use of any self-incriminating information
would generally increase the willingness of individuals to provide
information.
8.52 This is particularly important for NFP entities that may be
managed by volunteers who may not be aware of the totality of their
regulatory obligations and may therefore hesitate to provide information
unless assured that this information will not be used to prosecute them.
8.53 Evidence will be admissible against the individual in criminal
proceedings if those proceedings relate to: failure of the entity to comply
with the written notice; contravention of section 137.1 or 137.2 of the
Criminal Code which deals with false or misleading information; or
section 149.1 of the Criminal Code which deals with obstruction of
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Commonwealth public officials undertaking functions as a
Commonwealth public officials. [Subsection 70-25(2)]
Monitoring powers
8.54 The Bill provides for ACNC officers to enter the premises of an
entity and exercise a range of monitoring powers for the purposes of
monitoring compliance with a provision which is subject to monitoring, or
to determine whether information subject to monitoring is correct.
[Subsection 75-15(1)]
8.55 These powers will be used to monitor and investigate specific
issues and will complement the ACNC's more general information
gathering powers. [Division 75]
8.56 ACNC officers will only be able to enter an entity's premises
and exercise monitoring powers when the occupier of the premises has
consented to the entry, or the entry is made under a monitoring warrant.
[Subsection 75-15(2)]
8.57 The premises which the ACNC will be able to enter are broader
than the premises of NFPs registered by the ACNC. However, the
information which the ACNC will be able to obtain will be constrained to
information which is necessary to administer the ACNC Bill.
8.58 Provisions subject to monitoring include:
· a provision of the Bill that creates an offence; this includes
failure to comply with directions given by the ACNC
Commissioner and failure by registered entities to keep
records as required by the Bill;
· a provision of a legislative instrument made under this Bill
that creates an offence;
· a provision of the Crimes Act 1914 or the Criminal Code that
creates an offence, to the extent that the offence relates to the
Bill or a legislative instrument made under the Bill. This
includes section 137.1 or 137.2 of the Criminal Code that
deal with false or misleading information;
· a provision of the Bill, if non-compliance with the provision
gives rise to an administrative penalty, this includes a penalty
for failing to lodge a document on time;
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Information gathering and monitoring powers
· a provision of a legislative instrument made under the Bill, if
non-compliance with the provision gives rise to an
administrative penalty; and
· ongoing eligibility for registration including conditions for
registration in section 25-5 and for the revocation of
registration in section 35-10.
[Section 75-5]
8.59 Information subject to monitoring includes information given to
the ACNC:
· in compliance or purported compliance with a provision of
the Bill or of a legislative instrument made under the Bill,
this includes information in annual information statements
and financial statements;
· in compliance or purported compliance with a provision of
the Crimes Act 1914 or of the Criminal Code, to the extent
that the provision relates to the Bill or a legislative
instrument made under the Bill; or
· any other information given to the ACNC Commissioner,
including information given voluntarily, which is included on
the Australian Charities and Not-for-profits Register.
[Section 75-10]
Example 8.1
A registered entity, WT Inc, makes a statement to the ACNC
Commissioner. The statement is believed to be fraudulent, which is a
contravention of the Criminal Code. The ACNC Commissioner asks
WT Inc to provide evidence to support the statement. WT Inc is not
cooperative and refuses to provide the information.
As a last resort the ACNC Commissioner could apply for a monitoring
warrant, in order to gain access to the appropriate information and
determine the validity of the statement made by WT Inc.
Monitoring powers of ACNC Officers
8.60 ACNC officers have a set of monitoring powers which they may
exercise when they have entered a premise either with the consent of the
occupier of the premises, or under a monitoring warrant. [Section 75-20].
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8.61 The ACNC requires this set of monitoring powers to ensure that
it is able monitor ongoing eligibility to registration and to function as a
one-stop shop regulator for the sector.
8.62 The set of monitoring powers ensures that the ACNC is able to
collect information and materials which may also be required by other
Australian government agencies in administering their duties.
8.63 Australian government agency means the Commonwealth, a
State or a Territory or an authority of the Commonwealth, a State or a
Territory.
8.64 Information and materials would still be required for the
purposes of monitoring compliance with a provision subject to
monitoring, or to determine whether information subject to monitoring is
correct.
8.65 Where this information could also be required by other
authorities the ACNC would have the power to collect this information
and share it with these other Australian government authorities.
8.66 The sharing of information is an important channel available to
the ACNC to maintain, protect and enhance public trust and confidence in
the sector. The ACNC secrecy framework empowers the ACNC to share
information with Australian government authorities where the sharing of
information is reasonably necessary to promote the object of the ACNC
Bill.
Example 8.2
Reduced Poverty Inc is a registered charity established for the relief of
poverty. The entity provides food and housing to the homeless in
Sydney. The ACNC enters the premises of the entity under a
monitoring warrant to monitor whether it continues to meet the
requirements of registration. ACNC officers receive concerns raised
by beneficiaries of the charity suggesting that the food provided and
cooking practices are likely to not meet health standards. If the public
becomes aware of this potentially inappropriate practice it would affect
public trust and confidence in the sector.
ACNC officers therefore take images of the entity's cooking facilities
and a sample of the food provided to the homeless. Consistent with the
ACNC's secrecy framework, ACNC officers pass this information on
to the government agency which is responsible for local food safety
inspections.
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Example 8.3
Australia Overseas Aid Inc is a registered charity established for the
control of diseases in human beings in overseas jurisdictions. The
entity provides medication and medical equipment to countries in need
of support. The ACNC receives intelligence that the entity is not
complying with all of its registration conditions. ACNC officers enter
the entity's premises and decide to take a sample of the medicines on
the premises which look suspicious. ACNC officers pass this sample
on to the Australian Federal Police.
8.67 The set of monitoring powers provided to ACNC officers in the
ACNC Bill are:
· the power to search the premises and anything on the
premises;
· the power to examine or observe any activity conducted on
the premises;
· the power to inspect, examine, take measurements of, or
conduct tests on, anything on the premises;
· the power to make any still or moving image or any
recording of the premises or anything on the premises;
· the power to inspect any document on the premises;
· the power to take extracts from, or make copies of, any such
document;
· the power to take onto the premises such equipment and
materials as the ACNC officer requires for the purpose of
exercising powers in relation to the premises;
· the power to sample anything on the premises; and
· the powers set out in the Bill including the power to operate
electronic equipment on the premises and the authority to
have other individuals assist ACNC officers.
[Section 75-20]
8.68 The monitoring powers of an ACNC officer include the power
to operate electronic equipment on the premises and to use electronic
storage devices which are on the premises and are compatible with the
electronic equipment. [Subsection 75-25(1)]
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8.69 ACNC officers would have to have reasonable grounds to
suspect that electronic equipment contains information relevant to
determining compliance with a provision subject to monitoring, or if
information subject to monitoring is correct.
8.70 If an ACNC officer finds relevant information on electronic
equipment, ACNC officers will have the power to:
· convert relevant data into documentary form and remove
those documents from the premises;
· transfer relevant data to a disk, tape or other storage device
that is brought to the premises by the ACNC officer or is on
the premises; and
· remove the disk, tape or other storage device from the
premises.
[Subsections 75-25(2) and (3)]
8.71 An ACNC officer can only use a disk, tape or other storage
device that is in the premises if it has been agreed in writing by the
occupier. [Paragraph 75-25(3)(b)(ii)]
8.72 These powers are required to ensure ACNC officers are able to
convert any relevant information into a usable form. For example, ACNC
officers will have the power to use electronic equipment to print
documents and remove these documents from the premises.
8.73 The powers also ensure that the occupier's equipment is only
used with consent so as to not negatively affect the occupier's operations.
8.74 ACNC officers are able to operate electronic equipment only if
the ACNC officer believes on reasonable grounds that the operation of the
equipment can be carried out without damage to the equipment.
[Paragraph 75-25(4)(a)]
8.75 The ACNC officer also has to have reasonable grounds to
suspect that:
· the equipment contains data relevant to determining whether
a registered entity has, or is, complying with provisions
subject to monitoring, or if information subject to monitoring
is correct;
· the disk, tape or other storage device contains data relevant to
determining whether a registered entity has, or is, complying
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Information gathering and monitoring powers
with provisions subject to monitoring, or if information
subject to monitoring is correct. [Paragraph 75-25(4)(b)]
8.76 These provisions ensure that ACNC officers can access required
information and that the interests and privacy of registered entities and
their employees are adequately protected.
8.77 In certain circumstances, an ACNC officer may secure a thing or
item that is found on the premises for a period of 24 hours, or more if an
extension is provided by an issuing officer which is defined as a Federal
magistrate or magistrates under the Bill. [Section 75-30]
8.78 An ACNC officer can secure a thing for 24 hours when an
ACNC officer believes on reasonable grounds that:
· a provision subject to monitoring has been contravened with
respect to the thing;
· the thing affords evidence of the contravention of a provision
subject to monitoring; or
· the thing is intended to be used for the purpose of
contravening a provision subject to monitoring.
[Paragraph 75-30(2)(b)]
8.79 In addition, ACNC officers have to suspect on reasonable
grounds that:
· it is necessary to secure the thing in order to prevent it from
being concealed, lost or destroyed before a warrant to seize
the thing is obtained; and
· it is necessary to secure the thing without a warrant because
the circumstances are serious and urgent.
[Paragraph 75-30(2)(c)]
8.80 These conditions have been included to ensure that ACNC
officers will only secure a thing when it is required, and when there is a
serious risk that the thing needs to be secured to prevent it from been
destroyed in order to disturb the ACNC investigation.
8.81 In addition, the circumstances have to be serious and urgent to
enable ACNC officers to secure the thing without appropriate search
warrants. This can include a situation where public funds are going to be
used in a highly inappropriate manner.
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8.82 The 24 hour period may only be extended in accordance with the
Bill. To extend the time period an ACNC officer has to apply to an
`issuing officer' for an extension of the period. [Subsection 75-30(3)]
8.83 The ACNC officer needs to suspect on reasonable grounds that
the extension is required. The magistrate will take all information into
account when deciding whether to provide the extension.
[Subsection 75-30(4)]
8.84 The Bill also allows for the occupier of the premises to be heard
in relation to ACNC officers' extension application. [Subsection 75-30(4)]
8.85 This ensures that the circumstances surrounding the extension,
including the implications of the extension on the operations of the
occupier, are taken into account. For example, the occupier may suggest
alternative arrangements which would ensure ACNC officers have access
to relevant information and that the operations of the occupier are not
unnecessarily affected.
8.86 The issuing officer may issue the extension if the `issuing
officer' is satisfied that it is necessary to extend the period over which the
thing is secured, in order to prevent the thing from being concealed, lost
or destroyed. [Subsection 75-30(5)]
8.87 ACNC officers would be required to provide information to the
`issuing officer' on oath or affirmation.
8.88 The provisions of this Division relating to the issuance of
monitoring warrants, including Subdivision 75-F and Subdivision 75-H
apply, with necessary modifications, to the issuance of an extension.
[Subsection 75-30(6)]
8.89 The framework established by Division 75 for the issuance of
warrants applies to extensions. However, in certain sections the
provisions need to be modified to apply to extensions.
8.90 For example, in Subdivision 75-F the condition for issuing a
monitoring warrant differs from the condition the `issuing officer' needs
to consider when granting an extension.
8.91 The period may be extended on more than one occasion.
[Subsection 75-30(7)]
8.92 An ACNC officer may be assisted by other individuals in
exercising monitoring powers or performing functions or duties under this
Division. ACNC officers can only be assisted if the assistance is
necessary and reasonable. [Section 75-35]
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8.93 This may be the case where assistance is required to help carry
out documents or where the ACNC officer requires specialised assistance,
including for example, assistance to operate electronic equipment.
8.94 An individual assisting the ACNC officer would have the power
to:
· enter the premises; and
· perform functions and duties provided for under this Division
of the Bill in order assist the ACNC officer to determine if:
- a provision subject to monitoring has been, or is being,
complied with; or
- information subject to monitoring is correct.
8.95 The individual assisting the ACNC officer would be required to
use these powers in accordance with a direction given by an ACNC
officer. [Paragraph 75-35(2)(c)]
8.96 To ensure all provisions in this Division apply to individuals
assisting ACNC officers, including section 120-480 on compensation for
damage to electronic equipment, powers exercised and functions
undertaken by the by the individual assisting ACNC officers are taken to
have been exercised by an ACNC officer. [Subsections 75-35(3) and 75-35(4)]
8.97 To avoid doubt, any direction given by an ACNC officer to an
individual assisting the ACNC officer, is not a legislative instrument.
[Subsection 75-35(5)]
8.98 Where entry is authorised under a monitoring warrant or by
consent, an ACNC officer may ask the occupier, or an individual that
represents the occupier to answer any questions and produce any
document which relates to a:
· provision subject to monitoring; or
· information subject to monitoring.
[Subsections 75-40(1), (2) and (3)]
8.99 An individual will not be excused from answering any questions
or producing any document in order to comply with a request from an
ACNC officer on the grounds that complying may incriminate the
individual or expose the individual to a penalty. [Subsection 75-40(4)]
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8.100 However, the use of the information that incriminates the
individual will be constrained. In particular, the information will not be
admissible in evidence against the individual in criminal proceedings; this
includes information obtained as a direct or indirect consequence of the
individual providing information. [Subsection 75-40(5)]
8.101 This policy is consistent with that of Section 70-20 which was
developed to support the effectiveness of the regulatory scheme
administered by the ACNC and ensure the ACNC has access to required
information.
8.102 Evidence will be admissible against the individual in criminal
proceedings if those proceedings relate to: failure by the individual to
comply with the written notice; contravention of sections 137.1 or 137.2
of the Criminal Code which deals with false or misleading information; or
section 149.1 of the Criminal Code which deals with obstruction of
Commonwealth public officials undertaking functions as a
Commonwealth public officials. [Subsection 75-40(5)]
Obligations and incidental powers of ACNC officers
8.103 ACNC officers may enter the premises of an entity and exercise
monitoring powers if an occupier of the premises, or an individual that
represents the occupier of the premises, consents to the entry.
8.104 ACNC officers would be required to inform the occupier of the
premises that consent is voluntary and that the occupier may therefore
refuse consent. [Subsection 75-45(1)]
8.105 ACNC officers will only lawfully be able to enter premises and
exercise monitoring powers if the consent is truly voluntary.
[Subsection 75-45(2)]
8.106 If ACNC officers do not fulfil both conditions mentioned above,
the ACNC would not be able to use the information or evidence gathered
to administer the ACNC Bill or in criminal proceedings.
8.107 Occupiers of the premises may provide consent for entry for a
limited time period. The consent will only have effect for that period
unless the consent is withdrawn earlier by the occupier of the premises.
[Subsection 75-45(3)]
8.108 If consent is not limited to a particular period, the consent will
have effect until it is withdrawn. [Subsection 75-45(5)]
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8.109 The occupier has the discretion to extend the period of consent if
requested to do so by an ACNC officer and the occupier has no issue with
extending consent. [Subsection 75-45(4)]
8.110 If the occupier of the premises decides to withdraw the consent
given to ACNC officers, the ACNC officers and any person assisting the
ACNC officers must leave the premises. [Subsection 75-45(6)]
8.111 When an ACNC officer enters the premises of an entity under a
warrant issued by an issuing officer, the ACNC officer is required to
announce that he or she is authorised by virtue of a warrant to enter the
premises. [Subsection 75-50(1)]
8.112 ACNC officers are also required to show their identity card to
the occupier of the premises and to give the individuals at the premises an
opportunity to allow entry to the premises. [Subsection 75-50(2)]
8.113 However, an ACNC officer does not need to comply with these
requirements if the ACNC officer reasonably believes that immediate
entry is required. If this is the case, the ACNC officer must show their
identity card as soon as practicable after entering the premises.
[Subsection 75-50(2)]
8.114 Immediate entry will be required where ACNC officers have the
reasonable belief that the safety of a person is at risk or that by
announcing entry the effective execution of the warrant is at risk.
[Subsection 75-50(2)]
8.115 This power would be used in rare cases, where an ACNC officer
determines that information subject to monitoring is at risk of being
destroyed if the officer does not move quickly to obtain this information.
8.116 An ACNC officer is, under these circumstances, not required to
abide by the above provisions which require ACNC officers to announce
that he or she is authorised to enter the premises, and to show his or her
identity card.
8.117 When ACNC officers enter under the exception outlined above,
the officers would be required to show the occupier of the premises, or a
person who represents the occupier, his or her identity card as soon as
practicable after entering the premises. [Subsection 75-50(3)]
8.118 ACNC officers executing a monitoring warrant must be in
possession of the warrant, or a copy of the warrant. [Section 75-55]
8.119 ACNC officers must make a copy of the warrant available to the
occupier of the premises, or another individual that represents the
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occupier, and inform the occupier or individual who represents the
occupier of their rights and responsibilities in English. [Section 75-60]
8.120 This provision ensures that the occupier is satisfied that a
warrant has been issued, and that the occupier is made aware of the
purposes for which the warrant is issued and the time period for which the
warrant will be in force (further details on the content of the warrant are
provided in Section 75-85).
8.121 If ACNC officers suspect on reasonable grounds that there is
relevant information or data on the premises, that this information is
accessible by an expert operating electronic equipment, and the data may
be interfered with, ACNC officers will have the power to secure electronic
equipment on the premises. [Subsections 75-65(1), (2) and (3)]
8.122 This power is required for ACNC officers to gather data which
may not be easily accessible and requires an expert to extract and convert
into a usable form. This power could be used in situations where data is
encrypted.
8.123 The equipment may be secured by locking it up, placing the
equipment under the watch of a guard or any other means.
[Subsection 75-65(2)]
8.124 ACNC officers are required to inform the occupier of their
intention to secure the equipment. The officers must also inform the
occupier that the equipment may be secured for a period of up to 24 hours.
[Subsection 75-65(4)]
8.125 The electronic equipment may be secured until the 24-hour
period ends or for a shorter period if the equipment has been operated by
the expert. [Subsection 75-65(5)]
8.126 ACNC officers may apply to an issuing officer for an extension
of the 24-hour period if the ACNC officer suspects on reasonable grounds
that the equipment needs to be secured for longer. [Subsection 75-65(6)]
8.127 ACNC officers would use this power when they can't get an
expert to operate the equipment after the 24-hour period has passed, or
when the expert was unable to operate the equipment and the officer
engages another expert to operate the equipment.
8.128 Before ACNC officers make the application to the `issuing
officer', the officers must give notice to the occupier of the premises, with
the occupier being entitled to be heard in relation to the application for the
extension. [Subsection 75-65(7)]
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8.129 This requirement ensures that occupiers are given a chance to
respond to the officers' intention to apply for an extension.
8.130 The `issuing officer' may issue an extension if satisfied that it is
necessary to do so to prevent the destruction, alteration or inference with
the relevant data. [Subsection 75-65(8)]
8.131 The framework under which a monitoring warrant is issued
applies to cases where an `issuing officer' extends the time period which
electronic equipment is secured under this Section. [Subsection 75-65(9)]
8.132 In general, the framework established by Division 75 for the
issuance of warrants applies to extensions. However, in certain sections
the provisions need to be modified to apply to extensions.
8.133 For example, in Subdivision 75-F the condition for issuing a
monitoring warrant differs from the condition the `issuing officer' needs
to consider when granting an extension.
8.134 The 24-hour period may be extended more than once.
[Subsection 75-65(10)]
8.135 If damage or corruption occurs to the electronic equipment
because insufficient care was exercised in selecting the expert to operate
the equipment, or insufficient care was exercised by the individual, the
Commonwealth must pay the owner of the equipment reasonable
compensation for the damage or corruption. [Subsection 75-70(1)]
8.136 The Commonwealth and the owner have to agree on a
reasonable amount. [Subsection 75-70(2)]
8.137 If the owner and the Commonwealth do not agree on a
compensation amount, the owner or user may institute proceedings in a
Court for a reasonable amount of compensation. The Court would have
the responsibility of determining the reasonable amount of compensation.
[Subsection 75-65(3)]
8.138 In coming to a view on the reasonable amount of compensation
regard is to be had to whether the occupier of the premises, or the
occupier's employees or agents, were available and provided any
appropriate warning or guidance on the operation of the equipment.
[Subsection 75-70(4)]
8.139 For these subsections to apply, damage has to be caused to the
equipment, or data recorded on the equipment has to be damaged or
programs associated with the use of the equipment, or with the use of the
data have to be damaged or corrupted. [Subsection 75-70(1)]
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Occupier's rights and responsibilities
8.140 The occupier of premises to which a monitoring warrant relates,
or another person who represents the occupier, is entitled to observe the
execution of the monitoring warrant if present at the premises while the
warrant is being executed. [Subsection 75-75(1)]
8.141 ACNC officers continue to be able to execute the warrant in 2 or
more areas of the premises at the same time. [Subsection 75-75(3)]
8.142 The occupiers will lose the right to observe the execution of the
warrant if the occupier or other person impedes the proper execution of
the monitoring warrant. [Subsection 75-75(2)]
8.143 Occupiers must provide ACNC officers that are executing a
warrant and individuals assisting the ACNC officer with reasonable
facilities and assistance for the effective exercise of their powers.
[Subsection 75-80(1)]
8.144 The occupier commits an offence if the occupiers do not provide
ACNC officers with reasonable facilities and assistance for the effective
exercise of their powers. The penalty for this offence is 20 penalty units.
[Subsection 75-80(2)]
Monitoring warrants
8.145 The ACNC Commissioner may apply to an `issuing officer' for
a monitoring warrant under the Bill. [Subsection 75-85(1)]
8.146 The magistrate may issue the monitoring warrant if satisfied, by
information on oath or affirmation provided by the ACNC Commissioner,
that it is necessary that one or more ACNC officer should have access to
the premises for the purpose of determining whether:
· a provision subject to monitoring has been, or is being,
complied with; or
· information subject to monitoring is correct.
[Subsection 75-85(2)]
8.147 The ACNC Commissioner or their delegate must give the
magistrate any information required concerning the grounds on which the
warrant is being sought. This information can be provided orally or by
affidavit. [Subsection 75-85(3)]
8.148 The monitoring warrant must contain certain information which
is set out in the Bill, including the premises to which the warrant relates,
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the purpose for which the warrant is issued, and the day on which the
warrant ceases to be in force. [Subsection 75-85(4)]
8.149 The monitoring warrant will be in force for a period of no more
than one month after the issue of the warrant. [Paragraph 75-85(4)(f)]
Powers of issuing officers
8.150 Power conferred on an `issuing officer' to issue a monitoring
warrant is conferred in a personal capacity, not as a court or a member of
a court. [Subsection 75-90(1)]
8.151 The issuing officer does not need to accept the power conferred
by this Bill. [Subsection 75-90(2)]
8.152 An issuing officer will have immunity when exercising the
power under this Division as the court of which the issuing officer is a
member; or as a member of the court of which the issuing officer is a
member. [Subsection 75-90(3)]
General provisions
8.153 The ACNC Commissioner must issue an identity card to an
ACNC officer who the ACNC Commissioner considers is likely to
exercise monitoring powers and functions under this Bill.
[Subsection 75-95(1)]
8.154 The ACNC Commissioner would provide these individuals with
the appropriate training making them aware of their obligations and
responsibilities.
8.155 The identity card must be in the form set out by the ACNC
Commissioner, and contain a recent photograph of the ACNC officer.
[Subsection 75-95(2)]
8.156 A photograph is required to ensure that the occupiers of the
premises are satisfied that the ACNC officers mentioned in the warrant
are actually executing the warrant.
8.157 An ACNC officer would commit an offence if the officer ceases
to be an ACNC officer and does not return the identity card to the ACNC
Commissioner within 14 days of ceasing to be an ACNC officer.
[Subsection 75-95(3)]
8.158 The penalty for this offence will be 1 penalty unit. The offence
will be a strict liability offence. [Subsection 75-95(4)]
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8.159 The officer would not commit an offence if the identity card was
lost or destroyed. The officer would bear the evidential burden in relation
to the offence. [Subsection 75-95(5)]
8.160 ACNC officers must carry their identity card at all times when
exercising the monitoring powers. [Subsection 75-95(6)]
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Chapter 9
Education, compliance and enforcement
Outline of chapter
9.1 The object of this Bill is to maintain, protect and enhance the
public trust and confidence in the NFP sector.
9.2 The ACNC will primarily achieve the object of the Bill by
providing the NFP sector with guidance and educative materials to assist
the sector to understand and comply with regulatory obligations.
9.3 The Bill contains a wide spectrum of enforcement powers
reflecting that the ACNC would not have powers of enforcement unless
specifically provided for in legislation.
9.4 In cases where the ACNC's educative function fails to induce
the required action, the ACNC Commissioner will have the ability to use a
range of enforcement powers.
9.5 The range of enforcement powers this Bill provides enable the
ACNC to take strong, proportional and targeted actions to address actions
or lack of actions that could threaten public trust and confidence in the
NFP sector.
9.6 This Bill provides the ACNC with the authority to:
· issue warning notices;
· issue directions;
· enter into enforceable undertakings;
· apply to the courts for injunctions;
· suspend or remove responsible entities; and
· appoint acting responsible entities.
9.7 This Chapter specifies the application and necessity clauses that
must be met prior to the ACNC Commissioner using enforcement powers;
the range and scope of the ACNC's enforcement powers; and the penalties
associated with failing to comply with the ACNC Commissioner's
enforcement powers.
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Summary of new law
Enforcement powers
9.8 The new law provides the ACNC Commissioner with a range of
enforcement powers to assist in maintaining, protecting and enhancing
public trust and confidence in the sector's new regulatory framework.
9.9 Enforcement powers are modelled on those given to other
Commonwealth regulators such as the ASIC, the Australian Prudential
Regulation Authority (APRA) and the Australian Competition and
Consumer Commission (ACCC).
9.10 The ACNC will focus on education in order to minimise and
address non-compliance. However, the ACNC Commissioner will require
powers to deal with serious and significant wrong-doing and must be able
to take appropriate and targeted action against contraventions of the Bill.
9.11 Enforcement powers are an important tool for regulators to deter
entities from acting in an inappropriate manner and provide mechanisms
to protect assets from inappropriate use.
9.12 This Bill provides the ACNC with the authority to:
· issue warning notices; [Division 80]
· issue directions; [Division 85]
· enter into enforceable undertakings; [Division 90]
· apply to the courts for injunctions; [Division 95]
· suspend or remove responsible entities; and [Division 100]
· appoint acting responsible entities. [Division 100]
9.13 The Bill specifies the conditions that must be satisfied before the
ACNC Commissioner can use enforcement powers, the scope and range
of the ACNC's enforcement powers, and the associated penalties for
contravening enforcement powers issued by the ACNC Commissioner.
9.14 The ACNC Commissioner would be able to exercise
enforcement powers only over registered entities.
9.15 The ACNC Commissioner may generally only use enforcement
powers against `federally regulated entities' (defined below), however, the
ACNC Commissioner may revoke the registration of any registered entity.
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The ACNC Commissioner's enforcement powers in relation to external
conduct standards apply to all registered entities.
9.16 The ACNC's enforcement powers are consistent with those
available to other regulators under Commonwealth laws, and are similar
to the enforcement powers available to NFP regulators in comparable
jurisdictions, for example, the Charities Commission of England and
Wales, and the Office of the Scottish Charity Regulator.
9.17 The reviews and appeals provisions in Chapter 12 will generally
apply to the ACNC Commissioner's enforcement powers including
decisions taken by the ACNC Commissioner to issue or vary directions
and decisions to suspend or remove responsible entities.
Detailed explanation of new law
Enforcement powers
9.18 The ACNC will primarily achieve the objects of this Bill by
providing the NFP sector with guidance and educative materials to assist
the sector to understand and comply with regulatory obligations.
9.19 In cases where the ACNC's educative function fails to induce
required action, the ACNC Commissioner will have the ability to use a
range of enforcement powers.
9.20 The final report on the Scoping Study for a National
Not-for-profit Regulator recommended that a regulator for the NFP sector
should be given appropriate enforcement powers to take proportional and
targeted compliance actions.
9.21 The report recommended that the enforcement powers should
include asset protection powers, the power to remove or suspend
responsible entities, and information gathering powers.
9.22 More broadly, enforcement powers are an important tool for
regulators which deter entities from acting in an inappropriate manner and
provide mechanisms to protect assets from inappropriate use.
9.23 This Bill provides the ACNC with the authority to:
· issue warning notices; [Division 80]
· issue directions; [Division 85]
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· enter into enforceable undertakings; [Division 90]
· apply to the courts for injunctions; [Division 95]
· suspend or remove responsible entities; and [Division 100]
· appoint acting responsible entities. [Division 100]
9.24 This range of enforcement powers will enable the ACNC to take
proportional and targeted compliance action.
9.25 This is a fundamental change from the sector's current
regulatory framework where the default Commonwealth regulator, the
ATO, only has the power to remove an entity's access to tax concessions
and is unable to take action commensurate to the circumstances being
addressed.
9.26 Australian regulators, including APRA, the ACCC and ASIC are
generally given a range of enforcement powers which can include the
authority to issue directions, the authority to enter into enforceable
undertakings, and the right to apply to the courts to have injunctions
imposed.
9.27 The ACNC will take over the roles of other Commonwealth
level regulators in cases where these other regulators are responsible for
overseeing the governance structures and financial performance of NFP
entities. The enforcement powers provided by this Bill are therefore
modelled on the powers given to these other regulators.
9.28 Prior to using enforcement powers the ACNC Commissioner
would have to satisfy standard application and necessity clauses which are
generally consistent across the range of enforcement powers.
9.29 The ACNC Commissioner would also be required to take into
account a range of policy matters, including an entity's compliance track
record, prior to using enforcement powers.
9.30 The type of enforcement power used by the ACNC
Commissioner will be determined by the kinds of actions which are
required to address the contravention or non-compliance. In some cases,
all that will be required is the issuance of a warning notice to compel
self-correction; in other cases where an entity has persistently failed to
meet regulatory obligations, the ACNC Commissioner may have to
remove a responsible entity.
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9.31 Where possible, and in line with the regulatory approach to be
adopted by the ACNC, the ACNC Commissioner will attempt to obtain
self-correction through its educative role.
Application clause and necessity clause
9.32 The application and necessity clauses represent high thresholds
designed to ensure that these powers are only used when necessary.
9.33 The `application clause' constrains the provisions the ACNC
Commissioner is able to enforce, and the types of entities the ACNC
Commissioner is able to apply enforcement powers toward.
9.34 The application clause and necessity clause that are required to
be satisfied would generally be consistent across the range of the ACNC
Commissioner's enforcement powers.
9.35 The ACNC Commissioner is able to use enforcement powers if:
· an entity is a federally regulated entity, and the ACNC
Commissioner reasonably believes that the entity has
contravened, or is more likely than not to contravene, a
provision in the Bill;
· an entity is a federally regulated entity, and the ACNC
Commissioner reasonably believes that the entity has not
complied, or is more likely than not to not comply, with a
governance standard; or
· the ACNC Commissioner reasonably believes that the
registered entity has not complied, or more likely than not to
not comply, with an external conduct standard.
9.36 The `reasonably believes' threshold ensures the ACNC
Commissioner can only use enforcement powers if any reasonable
individual, provided with the set of information available to the ACNC
Commissioner, would deem that a particular registered entity has
contravened a provision of the Bill, or has failed to comply with a
governance standard or external conduct standard.
9.37 It would be inconsistent with this requirement for the ACNC
Commissioner to use enforcement powers in situations where information
on an entity's compliance with regulatory obligations is inconclusive or
does not clearly point to a likely contravention or case of likely
non-compliance.
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9.38 The ACNC Commissioner would be able to use enforcement
powers in cases where it is `more likely than not' that a registered entity
will contravene a provision in the Bill, or will fail to comply with
governance standard or external conduct standard.
9.39 The ACNC Commissioner would need to have reliable
information which clearly indicates that, barring any discretionary change,
the registered entity will contravene a provision in the Bill, or will fail to
comply with a governance standard or external conduct standard.
9.40 Two implicit conditions are required to be satisfied prior to the
ACNC Commissioner using enforcement powers for cases where
contraventions or non-compliance are more likely than not.
9.41 Information needs to be reliable. Generally, reliable information
includes information contained in financial statements, information
statements, annual reports, governing documents, contractual agreements
and any other information, forms or statements that the ACNC
Commissioner obtains from a reliable source.
9.42 Information that would not be considered reliable includes
rumours, opinions and subjective and unsubstantiated complaints and
information provided to the ACNC Commissioner.
Example 9.1
The Paul Bird Foundation is a charity established for the advancement
of religion. The ACNC is made aware that the Foundation will use its
funds to sponsor a professional sporting team. Using its monitoring
powers the ACNC obtains a copy of the contract between the charity
and the sporting organisation. In this case the entity will not be using
its charity funds to promote its charitable purpose resulting in a
contravention of the ACNC Bill. The ACNC could use enforcement
powers to ensure the entity does not contravene the Bill.
9.43 Additionally, the situations where an entity is `more likely than
not' to contravene a provision in the Bill or more likely than not to not
comply with a governance or external conduct standard, but the
circumstances that led to this conclusion are more likely than not to be
temporary and rectified without discretionary action are also excluded.
Example 9.2
The CFO of Moments Foundation, a registered charity, has taken sick
leave in the lead up to the end of the financial year. Given the length
of leave it is more likely than not that the entity will not submit its
annual financial statement by the due date, rather it will be marginally
late and be submitted when the CFO returns from leave. In this case,
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the ACNC Commissioner could use its enforcement powers for the
`more likely than not' contravention but would choose not to because
no actual discretionary change would be required for the entity to
become compliant.
9.44 The `necessity clause' ensures that the ACNC Commissioner
can only use enforcement powers when use of the power is necessary to
directly address the contravention or more likely than not contravention of
the ACNC Bill, or the non-compliance or more likely than not non-
compliance with a governance standard or external conduct standard.
9.45 The necessity clause constrains the outcomes the ACNC
Commissioner can achieve, through the use of enforcement powers, to
outcomes which directly address the contravention or non-compliance.
9.46 The ACNC Commissioner would not be able to direct a
registered entity to undertake a specified act which is unrelated to the
contravention or case of non-compliance.
9.47 This requirement addresses concerns that any open-ended
enforcement power could provide for the ACNC to inappropriately
interfere in a registered entity's operations.
Example 9.3
OPD Inc has persistently failed to provide the ACNC Commissioner
with annual information statements. The ACNC Commissioner may
direct OPD Inc to complete and provide an information statement to
the ACNC Commissioner for the years for which OPD Inc has failed to
lodge. The direction contains a specified act which addresses the
contravention. The ACNC Commissioner would not be able to direct
the OPD Inc to change other aspects of its operations as this would be
inconsistent with the necessity clause.
Example 9.4
The Better Humans Fund submits a duty to notify notice which
proposes a change to its charitable purpose that would render it
ineligible for registration. The ACNC Commissioner may direct the
Fund to not change its governing rules in a specified manner.
However, the ACNC Commissioner could not direct the registered
entity to undertake other acts, such as require the entity to cease to
transfer funds to meet contractual obligations.
Matters ACNC Commissioner must take into account
9.48 The ACNC Commissioner would be required to consider a range
of policy matters (outlined below) prior to using any enforcement power
or revoking an entity's registration. [Subsection 35-10(2)]
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9.49 These matters are wider than the factors considered in
developing a view on whether the application clause and necessity clause
have been satisfied.
9.50 The matters ensure that the ACNC Commissioner considers the
registered entity's track compliance record, the nature and persistence of
the contravention or non-compliance, and the implications that result from
the contravention or non-compliance.
9.51 Requiring the ACNC Commissioner to consider this broader
range of matters provides the ACNC Commissioner with the scope to act
appropriately when faced with identical cases of non-compliance.
9.52 In deciding whether to use enforcement powers, the ACNC
Commissioner must consider:
· the nature, significance and persistence of the contravention
or non-compliance [Paragraph 35-10(2)(a)];
· the actions the ACNC Commissioner, the registered entity, or
any of the responsible entities could have taken:
- to address the contravention or non-compliance (or
prevent the more likely than not contravention or non-
compliance); or
- to prevent any similar contravention or non-compliance in
the future [Paragraph 35-10(2)(b)];
· the desirability of ensuring that contributions made to the
registered entity are applied consistently with the NFP
nature, and the purpose, of the registered entity
[Paragraph 35-10(2)(c)];
· the objects of any Commonwealth laws that refer to
registration under this Bill [Paragraph 35-10(2)(d)];
· the extent (if any) to which the registered entity is conducting
its affairs in a way that may cause harm to, or jeopardise, the
public trust and confidence in the sector
[Paragraph 35-10(2)(e)];
· the welfare of members of the community (if any) that
receive direct benefits from the registered entity
[Paragraph 35-10(2)(f)]; and
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· any other matter of policy that the ACNC Commissioner
considers relevant [Paragraph 35-10(2)(g)].
9.53 This list of matters should be considered in its entirety and a
decision should be made by balancing each of the factors.
9.54 The individual matters are outlined and discussed in the
paragraphs below.
Nature, significance and persistence of contravention or non-compliance
9.55 The ACNC Commissioner must consider the nature,
significance and persistence of any contravention or non-compliance.
[Paragraph 35-10(2)(a)]
9.56 Under this matter, the ACNC Commissioner must consider:
· whether any contraventions have occurred;
· whether the responsible entity has persistently contravened or
not complied with the Bill;
· the implications associated with the breaches; and
· the nature or underlying cause of the breach.
Example 9.5
Two registered entities commit the same breach. Both entities fail to
notify the ACNC Commissioner of major changes to their governing
rules which could impact on their registration entitlement.
One of the registered entities has a track record of failing to comply
with regulatory obligations including, for example, failing to lodge
information statements by the required time.
In both cases a contravention occurs and the ACNC Commissioner
may use enforcement powers to direct both entities to comply with the
duty to notify requirement in the Bill.
However, the ACNC Commissioner must consider other aspects,
including the registered entities' track records of compliance with
regulatory responsibilities. The ACNC Commissioner could choose to
use one of its enforcement powers against the registered entity with a
track record of breaching regulatory requirements.
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Actions taken
9.57 In deciding whether to use any of the enforcement powers
available under this Bill, the ACNC Commissioner must consider what
action the ACNC Commissioner, the registered entity, or any of the
responsible entities could or have taken to address any contravention or
non-compliance (or prevent any more likely than not contravention or
non-compliance), or to prevent any similar contravention or non-
compliance. [Paragraph 35-10(2)(b)]
9.58 This matter ensures that the ACNC Commissioner takes into
account any discretionary actions taken by the registered entity or the
responsible entities to address the breach.
9.59 Discretionary actions may include any actions taken in response
to other enforcement powers used by the ACNC Commissioner. It also
includes changes to the legal and operational framework of the registered
entity which addresses the current contravention or case of
non-compliance as well as reducing the likelihood of future breaches.
9.60 By mandating that the ACNC Commissioner considers the
actions which the responsible entity could have undertaken ensures that
responsible entities are held accountable for matters which they have
control over and gives them opportunities for self-correction.
Ensuring contributions are applied consistently with nature and purpose
of NFPs
9.61 The ACNC Commissioner must also consider how to ensure that
`contributions' made to the registered entity are applied consistently with
the NFP nature, and the purpose, of the registered entity.
[Paragraph 35-10(2)(c)]
9.62 What constitutes contributions under the Bill is defined broadly.
Contribution includes provision of money, property, or an individual's
time or reputation or other gift. Contributions also include Government
tax concessions, grants and other forms of support. [Section 205-40]
9.63 Registered entities are registered under a type and subtype, and
are eligible to receive public monies which are used to promote the
registered entity's charitable purpose.
9.64 The regulatory framework developed by this Bill helps to ensure
that monies are used consistently with the purposes for which the funds
were given to the NFP entity.
9.65 Therefore, when coming to a view on whether to use any of the
enforcement powers available, the ACNC Commissioner needs to
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consider whether the use of the enforcement power increases the
likelihood that charitable funds are protected and used appropriately.
Other Commonwealth laws
9.66 The ACNC Commissioner must take into consideration the
objects of any Commonwealth laws, the operation of which are affected
by registration under this Bill. [Paragraph 35-10(2)(d)]
9.67 Registration has implications for the entity in relation to the
operation of other Acts, mostly notable the tax laws. For example, to
access tax concession earmarked for the sector an entity must be
registered by the ACNC.
9.68 Registration helps ensure that entities are appropriately regulated
as well as operating under appropriate governance arrangements. The
ACNC Commissioner must therefore consider the implications of using or
not using enforcement powers on the objects of these other Acts.
9.69 For example, the ACNC Commissioner must consider whether
not using enforcement powers to ensure compliance with the Bill would
have severe implications for the integrity of the tax law.
Maintaining, protecting and enhancing public trust and confidence
9.70 The ACNC Commissioner must consider the extent to which the
registered entity is conducting its affairs in a way that may cause harm to,
or jeopardise, the public trust and confidence mentioned in the objects
clause. [Paragraph 35-10(2)(e)]
9.71 This matter ensures the ACNC Commissioner considers broader
issues related to the public's trust and confidence in the sector when
coming to a view on whether to use enforcement powers.
9.72 For example, the ACNC Commissioner may consider the
implications on the public's trust and confidence in the sector resulting
from not taking action and suspending a responsible entity that is
defending significant criminal charges in court.
9.73 Further explanation of public trust and confidence can be found
in Chapter 1 - Background.
Welfare of members of the community
9.74 The ACNC Commissioner must consider the welfare of
members of the community (if any) that receive direct benefits from the
registered entity. [Paragraph 35-10(2)(f)]
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9.75 In considering whether to use an enforcement power, or which
power to use, the ACNC Commissioner must consider whether a course of
action would improve or worsen the welfare of any members of the
community that benefit directly from the registered entity.
Other matters
9.76 The ACNC Commissioner can also take into consideration any
other matter that he or she considers relevant. [Paragraph 35-10(2)(g)]
Example 9.6
The Ciaro Organisation is a federally regulated entity that is registered
with the ACNC. All registered entities are required to comply with the
governance standards in this Bill as a condition of registration.
The Ciaro Organisation is providing short-term direct care to animals
that have been mistreated and their governing rules state that their
purpose is to relieve poverty. The ACNC Commissioner considers this
is a contravention of the governance standard.
The entity puts processes in place to ensure it is operating to relieve
poverty, and the ACNC Commissioner is satisfied with those
processes. However, the entity decides it wants to expand its purposes
over the long term. The entity applies to the ACNC Commissioner to
change its governing rules and expand its purposes.
In this case there is no need for the ACNC Commissioner to suspend
or remove the responsible entity, or use other enforcement powers.
If, on the other hand, the entity did not to address the non-compliance,
the ACNC Commissioner could use an enforcement power, such as the
power to suspend or remove responsible entities, in order to ensure
compliance.
Example 9.7
The Moments Foundation is a registered entity established for the
advancement of religion. It has several individuals appointed as
responsible entities.
One of these responsible entities has recently been declared bankrupt.
The entity may contravene a governance standard. The Moments
Foundation takes steps to effectively address the contravention. The
ACNC Commissioner does not have to remove the responsible entity
to ensure compliance in this situation.
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Example 9.8:
Company Go-To was established to promote education in rural
communities. The director falls ill and is unable to send the ACNC its
information and financial statements. As such the entity does not meet
its obligations.
A minor contravention, like failing to lodge statements when due for
the first time, are unlikely to result in the ACNC Commissioner using
enforcement power.
However, if this continues, the ACNC Commissioner may consider
using one of the enforcement powers to ensure compliance.
Federally regulated entity
9.77 The ACNC Commissioner may generally only use her or his
enforcement powers against federally regulated entities. The ACNC
Commissioner's enforcement powers in relation to the external conduct
standards apply to all registered entities.
9.78 Federally regulated entities are entities that the Commonwealth
has power to regulate under section 51(xx) of The Constitution (the
corporations power) or section 122 of The Constitution (the Territories
power).
9.79 The corporations power allows the Commonwealth to make
laws with respect to constitutional corporations. The Territories power
allows the Commonwealth to make laws for the government of any
Territory.
9.80 Constitutional corporations include a financial corporation, a
trading corporation or a foreign corporation, and a body corporate that is
incorporated in a Territory. [Section 205-20]
9.81 Federally regulated entities are also entities based in a Territory
and relate to the Territories power, such as:
· a body corporate incorporated in a Territory
[paragraph 205-15(c)]; or
· a trust, all of the trustees of which are bodies corporate
incorporated in a Territory [paragraph 205-15(d)]; or
· an entity, the core or routine activities of which are carried
out in or in connection with a Territory [paragraph 205-15(e)].
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9.82 The ACNC will bring matters concerning non-federally
regulated entities to the attention of the relevant State or Territory
regulators. These regulators operate under their own laws. The ACNC is
expected to work with State and Territory regulators to ensure that they
are aware of matters concerning non-federally regulated entities for the
purposes of administering their own laws.
9.83 The Commonwealth Government is negotiating a statement of
principles with States and Territories to facilitate cross-jurisdiction
regulatory cooperation.
Warning notices
9.84 The ACNC Commissioner has the power to issue written
warning notices to registered entities. [Division 80]
9.85 Warning notices are an effective tool to strengthen the sector's
transparency and accountability and to induce change where appropriate.
9.86 The ACNC Commissioner must make warning notices publicly
available through the ACN Register. [Note in subsection 80-5(2)]
9.87 Warning notices provide the public with a source of information
on contraventions or non-compliance with regulatory obligations, and
limit the gravity of any contraventions or non-compliance by triggering
appropriate behavioural responses.
9.88 For example, if the public becomes aware of a charity misusing
funds it is likely that donations to the entity would fall as a response. In
severe cases, the ACNC Commissioner may also wish to use other
enforcement powers to protect charitable funds.
9.89 Warning notices therefore provide registered entities with
greater incentive to comply with regulatory obligations as notices
generally have significant implications for an entity's goodwill, revenue,
and public engagement.
9.90 The Bill contains safeguards to protect the interests of registered
entities and their beneficiaries. The ACNC Commissioner can only issue
warning notices if the application clause is satisfied, that is if:
· the ACNC Commissioner has considered the factors listed in
subsection 35-10(2) [subsection 80-5(3)]; and
· an entity is a federally regulated entity, and the ACNC
Commissioner reasonably believes that the entity has
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contravened, or is more likely than not to contravene, a
provision in the Bill [paragraph 80-5(1)(a)]; or
· an entity is a federally regulated entity, and the ACNC
Commissioner reasonably believes that the entity has not
complied, or is more likely than not to not comply, with a
governance standard [paragraph 80-5(1)(b)]; or
· the ACNC Commissioner reasonably believes that the
registered entity has not complied, or is more likely than not
to not comply, with an external conduct standard
[paragraph 80-5(1)(c)].
9.91 As explained in the general enforcement power section under the
heading `detailed explanation of the new law', the `reasonably believes'
threshold ensures the ACNC Commissioner only issues warning notices if
any reasonable individual provided with the set of information available to
the ACNC Commissioner would deem that a particular registered entity
has contravened a provision of the Bill, or has failed to comply with a
governance standard or external conduct standard.
9.92 Additionally, the ACNC Commissioner is able to issue warning
notices in cases where it is `more likely than not' that a registered entity
will contravene a provision in the Bill, or where it is more likely than not
that the registered entity will not comply with the governance standards or
external conduct standards.
9.93 Rumour or mere suspicion on the part of the ACNC
Commissioner would not be sufficient to trigger the requirement. The
ACNC Commissioner needs to have reliable information which clearly
indicates that the registered entity will contravene a provision in the Bill,
or will fail to comply with a governance standard or external conduct
standard.
9.94 This enables the Commissioner to intervene to prevent
contraventions or non-compliance from occurring, and to take action
where necessary, such as to proactively protect the charity's assets before
they may be depleted
9.95 Warning notices inform the registered entity of circumstances in
relation to the contravention or non-compliance, or the more likely than
not contravention or non-compliance. [Paragraph 80-5(2)(a)]
9.96 Warning notices also outline actions that could be taken by the
ACNC Commissioner in response to the contravention or case of
non-compliance. [Paragraph 80-5(2)(b)]
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9.97 Warning notices may generally include a:
· description of the relevant provision which the ACNC
Commissioner believes the registered entity has or is more
likely than not to contravene;
· description of the governance standard or external conduct
standard which the ACNC Commissioner believes the
registered entity has or is more likely than not to contravene;
· actions and activities which in the ACNC Commissioner's
view has led to the contravention or non-compliance, or is
more likely than not to lead to a contravention or case of non-
compliance;
· actions which the entity should take to address the
contravention or case of non-compliance; and
· the actions, if any, the ACNC Commissioner intends to take
if the entity does not address the contravention or case of
non-compliance.
Directions
9.98 The ACNC Commissioner has the authority to give a registered
entity a written direction to take specified actions. [Division 85]
9.99 Directions provide the ACNC Commissioner with a mechanism
to direct registered entities to address any actual or highly likely
contraventions of provisions to the ACNC Bill, or cases of
non-compliance with governance standards or external conduct standards.
9.100 Directions must be given to a registered entity through a written
notice. The notice must clearly specify the ground or grounds on which
the direction was issued and the period of time the registered entity has in
order to comply with the direction. [Subsection 85-5(3)]
9.101 The Bill outlines a set of circumstances under which the ACNC
Commissioner may issue directions. The circumstances provide a
safeguard for the sector and ensure that directions are only issued when
there are significant concerns.
9.102 The ACNC Commissioner may issue a direction if the
application clause is satisfied; that is, if:
· the entity is a federally regulated entity, and the ACNC
Commissioner reasonably believes that the entity has
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contravened, or is more likely than not to contravene, a
provision in the Bill; or [Paragraph 85-5(1)(a)]
· the entity is a federally regulated entity, and the ACNC
Commissioner reasonably believes that the entity has not
complied, or is more likely than not to not comply, with a
governance standard; or [Paragraph 85-5(1)(b)]
· the ACNC Commissioner reasonably believes that the
registered entity has not complied, or is more likely than not
to not comply, with an external conduct standard.
[Paragraph 85-5(1)(c)]
9.103 As explained in relation to the general enforcement powers, the
`reasonably believes' threshold ensures the ACNC Commissioner can
only issues warning notices if any reasonable individual provided with the
set of information available to the ACNC Commissioner would deem that
a particular registered entity has contravened a provision of the Bill, or
has failed to comply with a governance standard or external conduct
standard.
9.104 Additionally, the ACNC Commissioner is able to issue warning
notices in cases where it is `more likely than not' that a registered entity
will contravene a provision in the Bill, or will fail to comply with a
governance standard or external conduct standard.
9.105 This only covers a situation where there is a substantial or
significant likelihood of a contravention and would not extend to a
situation where there was only a small chance of a contravention
occurring
9.106 Rumour or mere suspicion on the part of the ACNC
Commissioner would not be sufficient to trigger the requirement. The
ACNC Commissioner needs to have reliable information which clearly
indicates that the registered entity will contravene a provision in the Bill,
or will fail to comply with a governance standard or external conduct
standard.
9.107 This enables the Commissioner to intervene to prevent
contraventions or non-compliance from occurring, and to take action
where necessary, such as to proactively protect the charity's assets before
they may be depleted.
Example 9.9
Make it Better, a registered entity, remunerates its Director with an
annual salary of $3 million. This salary is excessive compared to other
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similar registered entities. This suggests that the entity is not being run
as a NFP entity. The ACNC Commissioner may issue an direction to
Make it Better to act to remedy the situation.
Example 9.10
The B Good Organisation, a registered entity, has not held an annual
meeting for its members in two years. This means that the B Good
Foundation could potentially not comply with a governance standard
or its governing rules. The ACNC Commissioner may issue a
direction to the B Good Organisation to direct it to hold an annual
meeting.
Example 9.11
The Lightbulb Organisation, a registered entity whose purpose is to
provide welfare for disadvantaged youths in Western Australia,
collects money from donations and sends it to Japan to help victims of
a tsunami. The purpose of the Lightbulb Organisation is to provide
welfare for disadvantaged youths, not to provide disaster relief
overseas. The ACNC Commissioner may issue a direction to the
Lightbulb Organisation directing the Organisation to stop sending
funds overseas and to redirect funds to its purpose.
9.108 In deciding whether to give a registered entity a direction, and
the content of the direction, the ACNC Commissioner must take into
account the standard set of matters outlined in the general enforcement
powers. [Subsection 85-5(2)]
9.109 The ACNC Commissioner must take these factors into account
to ensure that any direction, and its content, issued to a registered entity is
proportional, adequate and targeted.
Kinds of direction
9.110 To issue a direction the ACNC Commissioner has to reasonably
believe that the `application threshold' has been satisfied (see above), and
that it is necessary to direct an entity to undertake a specified act in order
to address the actual or likely contravention, or the actual or likely case of
non-compliance. [Subsection 85-10(1)]
9.111 The necessity threshold is used to narrow the scope of acts the
ACNC Commissioner can direct a registered entity to undertake.
Example 9.12
The PB Fund has persistently failed to provide the ACNC
Commissioner with annual financial statements. The ACNC
Commissioner may direct the Fund to complete and provide annual
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financial statements to the ACNC Commissioner for the relevant years.
The ACNC Commissioner is not able to direct the PB Fund to change
other aspects of its operations.
9.112 The ACNC Commissioner is not able to direct a registered entity
to undertake a specified act which is unrelated to the contravention or
non-compliance.
9.113 This requirement addresses concerns that any open ended
enforcement power may allow the ACNC to inappropriately interfere in a
registered entity's operations.
Example 9.13
The JRC Fund submits a duty to notify notice which proposes a change
to its governing rules that would render it ineligible for registration.
The ACNC Commissioner may direct the JRC Fund to not change its
governing rules in a specified manner. However, the ACNC
Commissioner cannot direct the registered entity to undertake other
acts such as appointing an acting responsible entity.
9.114 A specified act may include directing an entity to ensure that a
`shadow' responsible entity does not have any influence over decisions
that affect the whole or a substantial part of the business of the registered
entity. [Paragraph 85-10(2)(a)]
9.115 A `shadow' responsible entity is an entity that is not formally
appointed but has a significant influence over the registered entity's
business activities and practices, or over the decisions and actions taken
by formally appointed responsible entities. [Subsection 85-10(3)]
9.116 In this case, the registered entity is required to take the specified
act. If the responsible entities continue to be influenced by the `shadow'
responsible entity when making decisions and taking actions related to the
activities of the registered entity, the registered entity would be liable for
an offence.
Example 9.14
Helping Australians Ltd is a registered entity which has decided to
alter the charitable purpose included in the entity's governing
documents. The entity's staff prepare a duty to notify statement in
accordance with Division 60 of the ACNC Bill. An individual directs
staff to not submit the notice. The ACNC Commissioner is made
aware of the situation and directs the entity to put procedures in place
to ensure that the activities of the registered entity are no longer
influenced by this individual.
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9.117 In practice, the responsible entity that continues to be influenced
is liable for the offence through Division 180 of the Bill.
9.118 The definition of `shadow' responsible entity adopts the
precedence established in the Corporations Act 2001. The definition
includes an individual:
· who makes, or participates in making, decisions that affect
the whole, or a substantial part, of the business of the
registered entity; or
· who has the capacity to affect significantly the registered
entity's financial standing; or
· in accordance with whose instructions or wishes the
responsible entities of the registered entity are accustomed to
acting (excluding advice given by the individual in the proper
performance of functions attaching to the individual's
professional capacity or his or her business relationship with
the responsible entities of the registered entity).
9.119 The ACNC Commissioner may also direct a registered entity to
not enter into a specified commercial transaction, financial transaction or
other transaction, including:
· borrowing any amount;
· repaying any money on deposit or advance;
· paying or transferring any amount or asset to any entity, or
creating an obligation (contingent or otherwise) to do so.
[Paragraph 85-10(2)(b)]
9.120 This direction is required to protect the assets of registered
entities. It provides the ACNC Commissioner with an instrument to move
rapidly in cases of fraud and misappropriation.
Example 9.15
The Community Assistance ADFT Fund is a registered charity
established for the relief of poverty. The ACNC Commissioner
receives intelligence that the entity is being used as a conduit for an
elaborate tax avoidance scheme. To ensure charitable funds remain
within the sector, the ACNC Commissioner directs the Fund to not pay
any amount of funds or assets to any of its affiliated entities over a
particular time frame. This direction is required to address the
contravention (expending public monies in a manner which is not
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consistent with the entity's charitable purpose) and also promotes the
objects of the Bill.
9.121 The ACNC Commissioner may specify a particular class of acts
or particular classes of acts in a single direction. [Paragraph 85-10(4)(a)]
9.122 This ensures that the ACNC Commissioner has flexibility in
issuing directions that require multiple acts to be performed by a
registered entity.
Example 9.16
The responsible entity of the PDMB Trust has entered into ten
contracts to transfer assets to other affiliated entities. The ACNC
Commissioner has reason to believe that the transfer of assets is likely
to be a contravention of this Bill. The ACNC Commissioner may issue
a single direction to the registered entity directing the entity to not
execute the ten contracts to transfer the assets to the other entities.
9.123 The ACNC Commissioner may make different provisions with
respect to different acts or different classes of acts. [Paragraph 85-10(4)(b)]
9.124 This ensures that the ACNC Commissioner has flexibility in
issuing directions that require multiple and varied acts to be performed by
a registered entity.
Example 9.17
The responsible entity of the Bell-Swain Memorial Foundation enters
into five contracts that the ACNC Commissioner believes contravene
this Bill. The ACNC Commissioner may issue a single direction that
directs the responsible entity to not execute four contracts, and to
change the details of one contract so that it does not contravene the
Bill.
9.125 Directions issued by the ACNC Commissioner in relation to the
payment or transfer of money do not override an order of a court or a
process of execution. [Subsection 85-10(5)]
9.126 Registered entities issued with a direction are required to comply
with the direction despite any clauses or provisions in governing rules or
contracts the entity has entered into. [Section 85-15]
9.127 This ensures that a registered entity can comply with a direction
issued by the ACNC Commissioner even if its governing rules or if any
contract or arrangement to which the entity is a party would prevent the
entity from complying with the direction.
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9.128 The Commissioner may issue such a direction in the case where
the registered entity is already contravening its governing rules.
Variation and revocation of directions
9.129 Directions can generally be used by the ACNC Commissioner as
short term instruments to direct an entity to undertake a specified act in
order to address the actual or likely contravention, or the actual or likely
case of non-compliance.
9.130 Directions remain in force until the expiration of the time period
specified in the direction notice, or until the ACNC Commissioner
revokes the direction.
9.131 The ACNC Commissioner may, by notice in writing to the
registered entity, vary or revoke the direction, if he or she considers the
variation necessary and appropriate. [Subsections 85-20(1) and 85-20(3)]
9.132 In deciding whether to vary or revoke a direction, the ACNC
Commissioner must take into account the matters set out in
subsection 35-10(2). [Subsections 85-20(2) and (4)]
9.133 The ACNC Commissioner may use this authority in situations
where a registered entity has addressed the contravention or
non-compliance by taking the specified act in the direction notice.
Example 9.18
The ACNC directs a registered entity to ensure that a shadow
responsible entity does not influence the business activities of the
registered entity. The shadow responsible entity's contract expires and
he parts ways with the registered entity. In this case the ACNC
Commissioner revokes the direction as there is no longer a threat that
the shadow responsible entity will influence the activities of the entity.
9.134 If the ACNC Commissioner does not amend or revoke the
enforceable direction for a period of 12 months after it was issued the
ACNC Commissioner must consider within a reasonable time after the
end of the 12 months whether it would be reasonable to vary or revoke the
direction. [Subsections 85-20(5) and 85-20(6)]
9.135 As noted above, directions are generally used as short term
instruments. The required statutory review ensures the ACNC
Commissioner reconsiders the appropriateness of directions at the later
time.
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9.136 In certain situations, it is possible that the other enforcement
powers, such as the removal of responsible entities may be better suited to
achieve the intended outcomes.
Objections
9.137 If a registered entity is dissatisfied with the decision taken by the
ACNC Commissioner to:
· give a direction,
· vary a direction, or
· not vary or revoke a direction after a 12 month period has
passed,
the registered entity may seek to review or appeal the ACNC
Commissioner's decision. [Section 85-25]
9.138 Further information on the reviews and appeals procedure can be
found in Chapter 12 - Review and appeal.
Non-compliance with a direction
9.139 A registered entity must comply with a direction issued by the
ACNC Commissioner within the timeframes specified in the direction
notice.
9.140 If a registered entity does an act, or fails to do an act, and doing
or failing to do the act results in a contravention of a direction, the
registered entity commits an offence. [Subsection 85-30(1)]
9.141 A separate offence is committed on each day that the registered
entity fails to comply with the direction issued by the ACNC
Commissioner. The maximum penalty for each offence is 40 penalty
units. [Subsection 85-30(2)]
9.142 Where a body corporate is convicted of an offence for failing to
comply with a direction issued by the ACNC Commissioner, subsection
4B(3) of the Crimes Act 1914 allows a court to impose a fine of up to five
times the maximum penalty of 40 penalty units. [Subsection 85-30(2)]
9.143 These penalties are lower than those of other Commonwealth
regulators that have the power to issue directions, including
section 11CG of the Banking Act 1959 administered by APRA.
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Enforceable undertakings
9.144 Enforceable undertakings are court-enforceable agreements
voluntarily entered into by the ACNC Commissioner and a registered
entity.
9.145 A written undertaking specifies an action or a series of actions
that a registered entity has agreed to take, or refrain from taking, in order
to comply with a provision that is enforceable. [Division 90]
9.146 Enforceable provisions are:
· a provision of this Bill;
· governance standards or external conduct standards; and
· a provision of a legislative instrument made under this Bill.
[Subsection 90-5]
9.147 Enforceable undertakings have successfully been employed as
an alternative to other enforcement actions by Australian regulators to
influence behaviour.
9.148 The standard application and necessity clauses outlined above
do not apply to enforceable undertakings. Instead, a modified application
clause applies, as there does not need to be a contravention or case of
non-compliance for the ACNC Commissioner to enter into an enforceable
undertaking.
9.149 The ACNC Commissioner must make information relating to
enforceable undertakings available to the public through the
ACN Register. [Note in subsection 90-10(3)]
Acceptance of undertakings
9.150 The ACNC Commissioner has authority to accept enforceable
undertakings relating to the powers or functions under the Bill.
[Section 90-10]
9.151 The ACNC Commissioner is able to accept a written
undertaking from a registered entity that is a federally regulated entity,
specifying that the entity will:
· take specified action or refrain from taking specified action
to comply with an enforceable provision; and
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· take specified action to ensure that the entity does not
contravene or is more likely than not to not contravene an
enforceable provision in the future.
[Subsection 90-10(1)]
9.152 The ACNC Commissioner is also able to accept a written
undertaking from any registered entity specifying that the entity will:
· take specified action or refrain from taking specified action
to comply with an external conduct standard; and
· take specified action to ensure that the entity does not
contravene or is unlikely to contravene an external conduct
standard in the future.
[Subsection 90-10(2)]
9.153 The modified application clause allows the ACNC
Commissioner to accept a written undertaking when there has, or there is
likely to be, a contravention, or situations where there has been no
contravention but an entity wants to make changes to ensure it does not
contravene an enforceable provision or external conduct standard in the
future.
9.154 Any undertaking agreed to by the ACNC Commissioner must be
expressed to be an enforceable undertaking under Division 90 of the Bill
for the undertaking to have effect. [Subsection 90-10(3)]
9.155 The registered entity which entered into the enforceable
undertaking may withdraw or vary the undertaking at any time, but only
with the consent of the ACNC Commissioner. [Subsection 90-10(4)]
9.156 The ACNC Commissioner may cancel the undertaking by giving
written notice to the registered entity. [Subsection 90-10(6)]
Example 9.19
The PMB Memorial Foundation enters into an enforceable undertaking
with the ACNC Commissioner. The Foundation agrees to comply with
a voluntary governance standard. After a change in circumstances, the
Foundation decides that it will withdraw from the enforceable
undertaking so that it does not need to comply with the voluntary
governance standard. The ACNC Commissioner gives consent for the
Foundation to withdraw from the enforceable undertaking. The
Foundation is no longer required to comply with the voluntary
governance standard.
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9.157 The written consent of the ACNC Commissioner is not a
legislative instrument within the meaning of Section 5 of the Legislative
Instruments Act 2003. [Subsection 90-10(5)]
Enforcement of undertakings
9.158 If the ACNC Commissioner considers that a registered entity has
breached any of the terms of an enforceable undertaking, the ACNC
Commissioner may apply to a `designated court' to have the undertaking
enforced. [Subsection 90-15(1)]
9.159 Designated court includes the Federal Court of Australia, or a
Supreme Court of any State or Territory.
9.160 A `designated court' may issue an order directing a registered
entity to comply with the terms of an enforceable undertaking only if the
Court is satisfied that:
· the registered entity has breached the enforceable
undertaking;
· the entity continues to be registered by the ACNC; and
· if the undertaking relates to an enforceable provision,
excluding the external conduct standards, the entity continues
to be a federally regulated entity.
[Subsection 90-15(2)]
9.161 If the latter two requirements are not satisfied the ACNC
Commissioner is not authorised to accept the undertaking, therefore, a
`designated court' does not have the authority to enforce the undertaking.
9.162 If all the requirements are satisfied, a court may use relevant
judicial powers to order a registered entity to comply with the terms
agreed to in the undertakings. Providing a court with the power to enforce
undertakings is necessary to provide entities with the required incentive to
comply with the undertaking.
9.163 The orders that a court may make are outlined below. Failure to
comply with an order of a court is a criminal offence.
9.164 A court may order a registered entity to comply with the
undertaking. This order ensures that the registered entity takes or refrains
from taking the actions agreed to in the undertaking. [Paragraph 90-15(3)(a)]
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9.165 A court may order a registered entity to pay to the
Commonwealth an amount up to the amount of any financial benefit that
the entity has obtained directly or indirectly and that is reasonably
attributable to the breach. [Paragraph 90-15(3)(b)]
9.166 The possibility of issuing this order limits the financial incentive
associated with breaching undertakings.
Example 9.20
Camp for Youths Ltd is a registered charity that has agreed to an
undertaking to avoid revocation of registration. The charity continues
to access tax concessions. Through its monitoring power, the ACNC
Commissioner finds that the entity has not complied with the
undertaking and has inappropriately maintained its registration and
access to concessions. A court orders the entity to repay the financial
benefit, in this case the amount of tax the entity did not pay by virtue
of its registration, gained as a result of the breach.
9.167 The ACNC Commissioner may apply to a court for an order
directing the entity to compensate any third party that has suffered loss or
damage as a result of the breach. [Paragraph 90-15(3)(c)]
9.168 This type of order is required to ensure that third parties that
suffer a financial or physical loss or damage as a result of the breach are
adequately compensated.
Example 9.21
The PBusta Foundation maintains deductible gift recipient status as a
result of registration. Individual donors can claim an income tax
deduction for donations made to the Foundation. The ACNC
Commissioner finds that the Foundation has breached the terms of an
undertaking and revokes the entity's registration retrospectively.
Based on ACNC registration, the ATO also revokes the entity's
endorsement as a deductible gift recipient retrospectively. Individuals
that claimed an income tax deduction for donations made to the
Foundation could in theory be required to repay the tax deductions
they claimed.
In this situation the Foundation may have to compensate an individual
who has a tax liability as a result of the breach.
9.169 The ACNC Commissioner may apply to a `designated court' for
an order that the `designated court' considers appropriate.
[Paragraph 90-15(3)(d)]
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9.170 The court will be able to order the registered entity to do
anything which is not covered by the other orders in this Chapter, in order
to undo or rectify the consequences of the breach.
Injunctions
9.171 The ACNC Commissioner has the authority to apply for
injunctions to restrain registered entities from contravening an enforceable
provision, or to compel compliance with an enforceable provision.
[Division 95]
9.172 An injunction generally specifies actions which a person is
required to take, or is required to refrain from taking, in order to become
compliant with enforceable provisions.
9.173 The definition of person in the Bill includes all legal persons
(such as registered entities) that can legally own or have property vested
in their person.
9.174 Injunctions can generally be sought by the ACNC
Commissioner in circumstances where:
· a registered entity has engaged in serious and persistent
contraventions and court involvement is desirable; or
· the ACNC needs to move rapidly to ensure that public
monies are used appropriately.
9.175 Injunctions can also be used in circumstances where a registered
entity has not complied with a direction notice which has been issued by
the ACNC Commissioner under Division 85 of the Bill.
9.176 Enforceable provisions are:
· a provision of this Bill;
· governance standards or external conduct standards; and
· a provision of a legislative instrument made under this Bill.
[Section 95-5]
9.177 The standard application and necessity clauses apply to
injunctions. Consistent with the application clause that applies to the
other enforcement powers of the ACNC Commissioner, the ACNC
Commissioner may only apply to a court, and the court may only grant an
injunction or an interim injunction if:
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· the injunction or interim injunction relates to a registered
entity that is a federally regulated entity; or
· the injunction or interim injunction relates to an external
conduct standard.
[Section 95-10]
9.178 The application requires that injunctions are only issued to
federally regulated entities, unless the injunction is issued to ensure that
an entity is compliant with an external conduct standard. In the latter case
the injunction can be issued to any registered charity.
9.179 A court issuing injunctions under Division 95 of the Bill must
take into account the object of this Bill. The objects of the Bill must be
considered when coming to a view on whether to issue an injunction and
on the content of the injunction. [Section 95-35]
9.180 Division 95 of the Bill provides courts with the authority to
remove or vary any injunction that has been issued by courts under this
Division. [Section 95-25]
Grant of injunctions
Restraining injunctions
9.181 The ACNC Commissioner has the authority to apply to a court
for a restraining injunction. [Section 95-15]
9.182 Restraining injunctions can be used where a person has engaged
or is proposing to engage in conduct that can be deemed a contravention
of an enforceable provision. [Subsection 95-15(1)]
9.183 The standard necessity clause applies to injunctions as a court is
only able to issue injunctions to:
· restrain the person from engaging in the conduct deemed to
have contravened an enforceable provision; and
· require a person to do a thing if it is desirable to do the thing
in order to address the contravention.
[Subsection 95-15(1)]
Example 9.22
The Fairsight Foundation is a registered entity. The ACNC
Commissioner through its monitoring power has obtained a copy of the
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employment contract under which one of the responsible entities is
been engaged. The contract enables the responsible entity to receive
large bonuses which is inconsistent with the entity's charitable
purpose. The ACNC Commissioner applies for an injunction to
restrain the registered entity from acting in the manner which would
result in a contravention of an enforceable direction. The injunction
can only be used to restrain the action which would lead to a
contravention and cannot be used to influence the operations of the
foundation.
9.184 The power of a relevant court to grant restraining injunctions
may be exercised:
· whether or not it appears to the court that the person intends
to engage again, or to continue to engage, in conduct of that
kind [paragraph 95-30(1)(a)];
· whether or not the person has previously engaged in conduct
of that kind [paragraph 95-30(1)(b)]; and
· whether or not there is an imminent danger of substantial
damage to any other person if the person engages in conduct
of that kind [paragraph 95-30(1)(c)].
9.185 This is intended to make it clear that a court is able to issue an
injunction:
· where a person has engaged in the conduct in the past and
apparently does not intend to engage in this conduct again;
· in cases where the person under question has not previously
engaged in the conduct; or
· if the implications of engaging in the conduct, for other
entities, are relatively minor.
Performance injunctions
9.186 The ACNC Commissioner has the authority to apply to a court
for a performance injunction. [Section 95-15]
9.187 Performance injunctions can be used where a person has refused
or failed, is refusing or failing, or is proposing to refuse or fail to do a
thing that ensures the person would comply with enforceable provisions.
[Subsection 95-15(2)]
9.188 The standard necessity clause applies to performance injunctions
as a court is only able to issue injunctions requiring the person to do the
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thing which would ensure compliance with enforceable provisions.
[Subsection 95-15(2)]
Example 9.23
Helpers Inc is a registered entity. The entity has refused, and is
continuing to refuse, to develop and put in place processes which
ensure that the registered entity is promoting the charitable purpose for
which it was registered. The ACNC Commissioner has issued warning
notices to the entity which have been ignored. The ACNC
Commissioner applies to a court for a performance injunction which
requires that the entity put in place appropriate processes.
9.189 The power of a relevant court to grant performance injunctions
may be exercised:
· whether or not it appears to the court that the person intends
to refuse or fail again, or to continue to refuse or fail, to do
that thing [paragraph 95-30(2)(a)];
· whether or not the person has previously refused or failed to
do that thing [paragraph 95-30(2)(b)]; and
· whether or not there is an imminent danger of substantial
damage to any other person if the person refuses or fails to do
that thing [paragraph 95-30(2)(c)].
9.190 This ensures that a court is able to issue an injunction where:
· a person has failed to do a thing in the past and apparently
does not intend to fail to do the thing again;
· in cases where the person under question has not previously
refused or failed to do that thing; or
· if the implications of refusing or failing to do the thing, for
other entities, are relatively minor.
Consent injunctions
9.191 A court has the authority to grant consent injunctions.
[Subsection 95-15(3)]
9.192 Consent injunctions can be used where the ACNC
Commissioner has begun the process of applying for a restraining
injunction or a performance injunction, and all the parties involved have
agreed to the course of action.
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9.193 The court does not have to be satisfied that the person has
contravened, or will contravene, an enforceable provision.
[Subsection 95-15(3)]
Example 9.24
The TYX Trust is registered by the ACNC. New trustees have been
appointed and discover that previous trustees engaged in practices that
have contravened enforceable provisions. The ACNC Commissioner
and the new trustees agree on a course of action and apply to a court
for a consent injunction. The injunction puts a halt to the activities
which led to the contravention while the new trustees and the ACNC
Commissioner develop longer term solutions to address any
shortcomings in the trust's operational framework.
Interim injunction
9.194 The ACNC Commissioner may apply for an interim injunction
pending determination of an application for either a restraining or
performance injunction. [Subsection 95-20(1)]
9.195 A relevant court may grant an interim injunction:
· restraining a person from engaging in conduct; or
· requiring a person to do a thing.
9.196 Interim injunctions are required to ensure the ACNC can rapidly
move to protect charitable assets on a temporary basis prior to the
agreement of more permanent arrangements.
9.197 The court must not require the ACNC Commissioner to give an
undertaking for damages as a condition of granting an interim injunction.
[Subsection 95-20(2)]
9.198 The powers conferred on a court under Division 95 are in
addition to, and not instead of, any other powers of the court.
[Section 95-40]
Suspension and removal of responsible entities
9.199 The ACNC Commissioner has the power to remove or suspend
responsible entities, and to appoint acting responsible entities.
[Division 100]
9.200 The standard application and necessity clauses apply to the
ACNC Commissioner's power to remove or suspend responsible entities.
[Section 100-5]
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9.201 The ACNC Commissioner generally has the authority to remove
or suspend responsible entities of federally regulated registered entities.
Where the non-compliance or likely non-compliance relates to an external
conduct standard, the ACNC Commissioner has the authority to remove
or suspend a responsible entity of any registered entity. [Subsection 100-5(1)]
9.202 In the same manner as the other enforcement powers discussed
above, a rumour or mere suspicion on the part of the ACNC
Commissioner would not be sufficient to be considered to be more likely
than not. Rather, the Commissioner needs reliable and accurate evidence
which clearly indicates that there will be a contravention in order to meet
this test.
9.203 The ACNC Commissioner does not have the authority to
remove or suspend responsible entities of an incapacitated entity, which
includes a receiver, a liquidator, an administrator of a deed of company
arrangement, a trustee in bankruptcy or other entity administering a
compromise arrangement between the registered entity and someone else
(see section 205-30(c) for a definition). [Subsection 100-5(2)]
9.204 Incapacitated entities fall under the regulatory oversight of the
ASIC or the Insolvency and Trustee Service Australia (ITSA).
9.205 ASIC and ITSA have established appropriate expertise to deal
with these entities as they relate to for-profit and NFP entities. Therefore,
this function appropriately remains under the purview of ASIC and the
ITSA.
9.206 The ACNC Commissioner does not have the authority to
remove or suspend responsible entities of a basic religious charity.
[Subsection 100-5(3)]
9.207 The ACNC Commissioner must make information relating to
the removal or suspension of responsible entities available to the public
through the ACN Register. [Note in subsection 100-5(3)]
9.208 For further information about the publishing of information on
the ACN Register see Chapter 4 - Australian Charities and Not-for-profits
Register.
9.209 The Scoping Study for a National Not-for-profit Regulator
process found that there was sector support for responsibility for the
supervision of charitable trusts to be undertaken by a national regulator.
9.210 Unlike State Attorneys-General, who currently have the
responsibility for supervising charitable trusts, the ACNC has both
supervisory and investigatory powers in relation to registered entities.
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These powers allow the ACNC Commissioner the means to investigate
claims of misconduct and contraventions of the Bill, and to gather
evidence if necessary.
9.211 Affording the ACNC Commissioner the power to suspend or
remove trustees, in appropriate circumstances, moves this power from
being a judicial function to a regulatory function.
9.212 There are a number of benefits to this movement. Firstly, a
regulator can ensure that the approach taken is proportional in the
circumstances. Secondly, a regulator can act in a timely manner, without
the need for lengthy court proceedings. Thirdly, the decisions of
regulators are subject to an appropriate review and appeal process
throughout the levels of the judicial system. Finally, a regulator can
provide more cost-effective and accessible redress, negating the need for
costly court proceedings. This ensures that the beneficiaries of charitable
trusts have improved access to justice.
9.213 The movement of this function from the judiciary to the
executive is reflected in reforms that have occurred internationally, and is
a movement that is progressively being adopted in Australia. For
example, APRA has the power to suspend or remove trustees of most
superannuation funds and the Commissioner of Taxation has these powers
in relation to self-managed super funds and charitable ancillary funds.
Allowing the ACNC Commissioner, as the regulator of the NFP sector, to
suspend or remove trustees brings Australia into line with international
best practice.
Suspension of responsible entities
9.214 The ACNC Commissioner is only able to suspend a responsible
entity if the necessity clause has been satisfied.
9.215 Thus, the ACNC Commissioner needs to consider whether
suspending a responsible entity is necessary to address the contravention
or non-compliance (or prevent more likely than not contravention or non-
compliance). [Subsection 100-10(1)]
Example 9.25
Shadys Ltd is a registered charity established to provide subsidised
housing for the direct relief of poverty. The entity has several
responsible entities. One of these entities is a director of a for-profit
affordable housing provider that competes with the charity in the
affordable housing segment of the market. This responsible entity has
a clear conflict of interest in this situation and may therefore not be
promoting the purposes for which the charity was registered.
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The entity continues to function in its capacity as a responsible entity,
as such; the registered entity may not be complying with regulatory
obligations. To address this case of non-compliance the ACNC
Commissioner could suspend the responsible entity.
9.216 The ACNC Commissioner must give the responsible entity
written notice setting out the decision to suspend it. The written notice
must set out the ACNC Commissioner's decision, provide reasons for the
decision and set out the time the suspension ends. [Subsection 100-10(3)]
9.217 Before suspending or removing a responsible entity the ACNC
Commissioner must give a show cause notice to the registered entity that
states the grounds on which the ACNC Commissioner has made his or her
decision and which invites the registered entity to respond within 28 days.
[Subsections 100-10(4) and (5) and subsections 100-15(3) and (4)]
9.218 The ACNC Commissioner is not required to give a show cause
notice, or to wait for a response to a show cause if, taking into account the
matters in 35-10(2), more immediate action is necessary.
[Subsections 100-10(6) and 100-15(5)]
9.219 The suspension of a responsible entity starts when the ACNC
Commissioner gives the responsible entity notice of his or her decision to
suspend the entity. [Subsection 100-10(2)]
9.220 The ACNC Commissioner may change the end time of the
suspension. [Subsection 100-10(7)]
9.221 The ACNC Commissioner is required to give the responsible
entity a written notice setting out a decision to extend the suspension,
providing reasons for the decision and setting out the new time the
suspension ends. [Subsection 100-10(8)]
Removal of responsible entities
9.222 The ACNC Commissioner can only remove a responsible entity
if the necessity clause has been satisfied.
9.223 Thus, the ACNC Commissioner needs to consider whether
removing a responsible entity is necessary to address the contravention or
non-compliance (or prevent the more likely than not contravention or
non-compliance). [Subsection 100-15(1)]
Example 9.26
Continuing from example 9.25 above, if the suspended individual
returns to his position as a responsible entity once the suspension
period ends, and the registered entity, through the remaining
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responsible entities, has not put in place appropriate processes to
manage this conflict of interest and ensure the entity is promoting the
purposes for which the charity was registered, the ACNC
Commissioner can remove the responsible entity to address the case of
non-compliance.
9.224 The ACNC Commissioner must give the responsible entity
written notice setting out his or her decision to remove the responsible
entity. The written notice must set out the ACNC Commissioner's
decision and provide reasons for the decision. [Subsection 100-15(2)]
Matters ACNC Commissioner must take into account
9.225 The ACNC Commissioner is required to consider the standard
range of matters outlined in subsection 35-10(2) prior to suspending or
removing responsible entities. [Subsections 100-10(9) and 100-15(6)]
9.226 The matters that are required to be considered ensure that the
ACNC Commissioner balances a range of different considerations when a
forming a view on appropriate enforcement actions.
9.227 The matters include factors which would help ensure that, where
possible, other options to help promote compliance are considered before
a responsible entity is removed or suspended.
9.228 In some situations, such as in relation to minor non-compliance
and where other mechanisms such as warning notices or enforceable
undertakings are available, it may not be appropriate to suspend or remove
a responsible entity.
9.229 In other situations the removal or suspension of responsible
entities may be necessary, even where other enforcement actions are
available to the ACNC Commissioner and have not been taken.
9.230 For example, the suspension or removal of a responsible entity
may be necessary where a registered entity has significantly and
persistently contravened the law and there is a significant risk that assets
may be applied in an inappropriate manner.
Review of decisions
9.231 A responsible entity that is dissatisfied with the ACNC
Commissioner's decision to remove or suspend (or change the time a
suspension of the responsible entity ends) may object against the decision
in the manner set out in Part 7-2. [Subsections 100-10(10) and 100-15(7)]
9.232 For further information on the review and appeal procedures see
Chapter 12 - Review and appeal.
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Effect of suspension or removal
9.233 A responsible entity that has been suspended cannot become a
responsible entity of the registered entity until the suspension ends.
[Subsection 100-20(1)]
9.234 A responsible entity that has been removed cannot become a
responsible entity of the registered entity. [Subsection 100-20(2)]
9.235 When a responsible entity is removed or suspended, the
responsible entity is removed or suspended only from the position or
office which led the entity to be considered a responsible entity for the
purposes of this Bill. [Subsection 100-20(1) and subsection 100-20(2)]
9.236 The relevant positions or offices are outlined in the definition of
`responsible entity' and include:
· in the case where the registered entity is a company -- a
director of the registered entity; or
· in the case where the registered entity is a trust -- a trustee of
the registered entity, and if a trustee is a body corporate, a
director of the trustee.
9.237 Where the suspended or removed responsible entity is a director
of a registered entity, or a director of a corporate trustee, the individual
ceases to be to be a director of the company or trustee, indefinitely for the
case of a removal, or in the case of suspension, until the suspension ends.
[Subsection 100-20(3)]
9.238 This ensures that a removed or suspended responsible entity
cannot be reappointed (prior to the end of the suspension) after the
removal or suspension.
9.239 The provision also clarifies that the suspended or removed
responsible entity can continue to function, or work, for the registered
entity in another capacity if considered appropriate.
Example 9.27
Holdspoint primary is a NFP school which is registered by the ACNC.
The registered charity has contravened a provision of the Bill and the
ACNC Commissioner decides to suspend one of the schools
responsible entities (the Principal of the school who is also a Director)
in order to address the contravention. The Principal will continue to be
able to teach and provide other educative services related to the role of
school Principal, however, this individual would not be able to
function as a Director of the school until the suspension period ends.
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9.240 A removed or suspended responsible entity is generally not able
to function as a responsible entity of another registered entity during the
period of suspension or removal, if the appointment would result in the
other registered entity contravening a governance standard.
9.241 A suspended or removed responsible entity commits an offence
if the responsible entity makes, or participates in making, decisions that
affect the whole, or a substantial part, of the business of the registered
entity. [Subsection 100-25(1)]
9.242 The maximum penalty for this offence is 50 penalty units or
imprisonment for one year, or both. [Subsection 100-25(1)]
Example 9.28
The XAY Inc is a registered charity that has had one of its responsible
entities suspended. The responsible entity no longer formally holds the
office of Director but continues to attend Board meetings and
participate in making Board decisions that affect substantial parts of
the registered entity's business. Under this section the responsible
entity would has committed an offence and may be liable for a penalty.
9.243 A suspended or removed responsible entity commits an offence
if the responsible entity exercises the capacity to significantly affect the
registered entity's financial standing. [Subsection 100-25(2)]
9.244 The maximum penalty for this offence is 50 penalty units or
imprisonment for one year, or both. [Subsection 100-25(2)]
Example 9.29
Camp Farah Ltd is a registered charity which has had one of its
Directors removed by the ACNC. The Director that was removed
continues to work for the entity in a different capacity. The ACNC is
made aware that the individual continues to influence the decisions and
strategies of the working group of the Board of Directors by
influencing the views of the remaining responsible entities. Decisions
taken by the working group relate to the entity's long-term funding and
investment plan, which significantly affects the registered entity's
financial standing and position. The individual is liable to an offence.
Example 9.30
The Campo Foundation is an ancillary fund registered by the ACNC.
The Foundation is a federally regulated entity with all of its trustees
being constitutional corporations. The ACNC Commissioner removes
one of the Directors of one of the trustees. The suspended individual
continues to work for the trustee in a different capacity and is
responsible for managing the stationery inventory of the corporations
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including the payments for stationery. In this case the individual's
decisions will have a minor effect on the entity's financial standing.
9.245 An offence is committed by a suspended or removed responsible
entity, that is an individual who communicates instructions or wishes to
the responsible entities of the registered entity:
· knowing that responsible entities are accustomed to act in
accordance with the suspended or removed individual's
instructions or wishes; or
· intending that those responsible entities will act in
accordance with those instructions or wishes; and
· the communication of those instructions or wishes is not
advice given by the entity in the proper performance of
functions attaching to the entity's professional capacity or his
or her business relationship with the responsible entities of
the registered entity. [Subsection 100-25(3)]
9.246 The maximum penalty for this offence is 50 penalty units or
imprisonment for one year, or both. [Subsection 100-25(3)]
Example 9.31
PCA Help Ltd is a registered charity which has had one of its Directors
suspended by the ACNC. The ACNC is made aware that the
individual continues to influence the decisions of the Board of
Directors by influencing the views of responsible entities. The
responsible entities of the entity are accustomed to act in accordance
with the suspended Director's instructions and the Director
communicates the instructions with a view to compelling the
responsible entities to act in accordance with instructions. The
individual has committed an offence.
9.247 Offences included in this section of the Bill are strict liability
offences as defined in section 6.1 of the Criminal Code.
[Subsection 100-25(4)]
9.248 The offences ensure that responsible entities are strictly liable
for their actions that are taken to influence (directly or indirectly through
other responsible entities) the whole or a substantial part of the registered
entity's business or financial standing (that is, liable regardless of fault).
9.249 This liability has been established to compel responsible entities
which have already been removed on the grounds of misconduct to refrain
from influencing the activities of the registered entity in order to ensure
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the registered entity addresses the contravention or case of
non-compliance.
9.250 It is expected that the ACNC Commissioner only takes action to
remove or suspend a responsible entity in situations that involve serious
contraventions or non-compliance.
If a responsible entity is removed or suspended
9.251 The ability to appoint an acting responsible entity provides the
ACNC Commissioner with the power to ensure that registered entities are
able to operate effectively and continue to promote their charitable
purpose when responsible entities have been suspended or removed.
9.252 If the ACNC Commissioner removes or suspends one or more
responsible entities, the ACNC Commissioner has the authority to appoint
one or more persons (acting responsible entities) to undertake the duties of
the responsible entity during the period of suspension or until a permanent
replacement responsible entity is appointed. [Subsections 100-30(1)
and 100-30(3)]
9.253 If the ACNC Commissioner removes or suspends all of a
registered entity's responsible entities, the ACNC Commissioner is
required to appoint one or more persons (acting responsible entities) to act
in the place of the suspended or removed entities during the period of the
suspension or until at least one of the vacancies created by the removal or
suspension is filled. [Subsections 100-30(2) and 100-30(4)]
9.254 To clarify, the ACNC Commissioner is required to appoint a
director of a corporate trustee if the corporate trustee is a responsible
entity of a trust which is a registered entity, and the ACNC Commissioner
suspends all of the directors of the trustee.
9.255 The ACNC Commissioner is also required to appoint an acting
responsible entity where all trustees of the trust have been suspended or
removed.
Example 9.32
A registered entity has two responsible entities, both of which are
corporate trustees. The ACNC Commissioner suspends all of the
directors of one of the corporate trustees.
While the registered entity still has one of the responsible entities,
suspending all the directors of one of the corporate trustees leaves it
with no directors. The ACNC Commissioner is therefore required to
appoint an acting director of the corporate trustee.
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9.256 The ACNC Commissioner has discretion to determine the
number of responsible entities that will be appointed to ensure the
effective operations of the registered entity. This may include a minimum
number of directors as specified in other laws, for example the
Corporations Act 2001.
9.257 Where the ACNC Commissioner suspends or removes a
responsible entity of a trust which is a `federally regulated entity', to the
extent possible, the ACNC Commissioner generally looks to appoint a
constitutional corporation to fill any vacancy that results from the
suspension or removal of responsible entities. [Subsection 100-35(1)]
9.258 Additionally, the ACNC Commissioner will strive to appoint the
same type of constitutional corporations. [Subsection 100-35(2)]
9.259 Constitutional corporations include financial corporation, a
trading corporation or a foreign corporation, and a body corporate that is
incorporated in a Territory. [Section 205-20]
9.260 The ACNC Commissioner may appoint a person that is not a
constitutional corporation if it is not practical to appoint a person that is a
constitutional corporation. [Subsection 100-35(3)]
9.261 In cases where the ACNC Commissioner is unable to appoint
the same type of constitutional corporation, an acting responsible entity is
only able to act as a responsible entity for a maximum period of 6 months.
[Subsection 100-35(4)]
9.262 This may be required when the ACNC Commissioner wants the
acting responsible entity to be a government authority or an incapacitated
entity.
9.263 The ACNC Commissioner has the authority to determine the
terms and conditions of the appointment of the acting responsible entities.
The determination has effect despite anything in any Australian law the
registered entity's governing rules or the governing rules of a corporate
trustee. [Subsection 100-40(1)]
9.264 The ACNC Commissioner generally requires that the acting
responsible entities' fees are to be paid out of the assets of the registered
entity including the assets of a trust. This is required as the acting
responsible entity provides the registered entity with a service from which
the registered entity benefits. [Subsection 100-40(2)]
9.265 The ACNC Commissioner may terminate the appointment of an
acting responsible entity at any time. [Section 100-45]
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9.266 This authority enables the ACNC Commissioner to remove an
acting responsible entity if required. For example, the ACNC
Commissioner may want to remove an acting trustee to appoint an
incapacitated entity if circumstances so require.
9.267 An acting responsible entity may resign by writing given to the
ACNC Commissioner. The resignation does not take effect until the end
of the seventh day after the day on which the notice was given to the
ACNC Commissioner. [Section 100-50]
9.268 The acting responsible entities may exercise all the rights, title
and powers, and must perform all the functions and duties, of the removed
or suspended responsible entities. [Subsection 100-55(1)]
9.269 The registered entity's governing rules (and, if the suspended
or removed responsible entities were directors of a trustee of the
registered entity, the governing rules of the trustee), and every Australian
law that applies in relation to the acting responsible entities as if the acting
responsible entities were a director, or a trustee. [Subsection 100-55(2)]
9.270 This ensures that the responsible entities are able to function
effectively as responsible entities and do all that is required or possible for
the registered entity to fulfil its charitable purpose.
9.271 The ACNC Commissioner may give a written notice directing
an acting responsible entity to do, or not to do, one or more specified acts
or things in relation to the registered entity. [Subsection 100-60(1)]
9.272 These powers ensure that the ACNC Commissioner has the
power to address the contravention or case of non-compliance which led
to the removal or suspension of responsible entities.
9.273 Such directions are provided to the acting trustee so that they are
aware of the contravention or case of non-compliance which led to the
suspension and removal and can therefore act to address the problem.
9.274 An acting responsible entity commits an offence if the registered
entity engages in conduct which contravenes a notice given by the ACNC
Commissioner. [Subsection 100-60(2)]
9.275 The maximum penalty attached to this offence is 40 penalty
units. [Subsection 100-60(2)]
9.276 This section does not affect the validity of a transaction entered
into in contravention of a notice given under subsection.
[Subsection 100-60(3)]
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9.277 This is required to ensure any arrangements or agreements are
still valid even though this may contravene the direction to do or not do an
act given by the ACNC Commissioner to the acting responsible entity.
9.278 Furthermore, it protects parties relying in good faith on a valid
appointment.
Special provisions about acting trustees
9.279 If the ACNC Commissioner appoints an acting responsible
entity to act in the place of a suspended or removed trustee of the
registered entity, the ACNC Commissioner must make a written order
vesting the property of the registered entity in the acting responsible
entity. [Subsection 100-65(1)]
9.280 If the appointment period ends, the ACNC Commissioner must
make a written order vesting the property of the registered entity in the
new acting responsible entity, the previously suspended trustee or trustees,
or the new permanent trustee or trustees (whichever is applicable).
[Subsection 100-65(2)]
9.281 If the ACNC Commissioner makes an order under this Bill
vesting property of a registered entity in a person or persons, generally the
property immediately vests in the acting responsible entities appointed by
the ACNC Commissioner. [Subsection 100-65(3)]
9.282 If the assets or property held by the trust is of a kind whose
transfer or transmission may be registered under an Australian law; and
the law:
· enables the registration of such an order; or
· enables the person or persons to be registered as the owner or
owners of that property;
the property does not vest in the person or persons until the requirements
of the law referred to are complied with.
[Subsection 100-65(4)]
9.283 If the ACNC Commissioner makes a property vesting order to
vest the property of a registered entity in an acting responsible entity, the
former trustee or former trustees are required to give the acting
responsible entity all books relating to the registered entity's affairs that
are in the former trustee's or former trustees' possession, custody or
control. [Subsections 100-70(1) and (2)]
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9.284 If the former trustee or former trustees do not, within 14 days of
the ACNC Commissioner making the property vesting order, comply with
the requirement to give the acting responsible entity all books relating to
the registered entity's affairs, the entity commits an offence.
[Paragraph 100-70(1)(c)]
9.285 The maximum penalty for this offence is 50 penalty units.
[Paragraph 100-70(1)(c)]
9.286 This is required to ensure that the acting responsible entity has
all the information required to effectively manage the affairs of the trust.
Without the books of the trust, the acting responsible entity is unaware of
the financial position and performance and related information required to
formulate an appropriate business strategy for the trust.
9.287 If the ACNC Commissioner makes a property vesting order to
vest the property of a registered entity in an acting responsible entity, the
acting responsible entity may, by notice in writing to the former trustee or
former trustees, require the trustee or trustees:
· to identify property of the registered entity; and
· to explain how the former trustee or former trustees have
kept account of that property.
[Subsection 100-70(3)]
9.288 The former trustee(s) commit an offence if they fail to comply
with the requirement in the notice within 28 days of the notice being
given. [Subsection 100-70(5)]
9.289 The maximum penalty for this offence is 50 penalty units.
[Subsection 100-70(5)]
9.290 The acting responsible entity may also require the former trustee
or former trustees to take specified action to transfer property vested in the
former trustee or former trustees to the acting responsible entity.
[Subsection 100-70(4)]
9.291 This provision only covers properties that are vested in the
former trustee(s) which are vested in this trustee(s) by virtue of the
trustee's position as a responsible entity.
9.292 The former trustee(s) commit an offence if they fail to comply
with the requirement in the notice within 28 days of the notice being
given. [Subsection 100-70(5)]
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Education, compliance and enforcement
9.293 The maximum penalty for this offence is 50 penalty units.
[Subsection 100-70(5)]
9.294 Offences included in this section of the Bill are strict liability
offences as defined in section 6.1 of the Criminal Code.
[Subsection 100-70(6)]
9.295 The offences ensure that former trustee(s) are strictly liable for
their actions relating to books, identification of property and transfer of
property (that is, liable regardless of fault).
9.296 This liability has been established to compel former trustee(s)
which have already been removed on the grounds of misconduct to deal
fairly with the trust's property during the handover period.
9.297 It is expected that the ACNC Commissioner will only take
action to remove or suspend a trustee in situations that involve serious
contraventions or non-compliance.
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Chapter 10
The Commission and the Advisory Board
Outline of chapter
10.1 This Chapter:
· explains the establishment and functions of the Australian
Charities and Not-for-profits Commission (ACNC);
· explains the establishment, functions and powers of the
Australian Charities and Not-for-profits Commission
Commissioner (ACNC Commissioner);
· sets out the terms and conditions of appointment of the
ACNC Commissioner, and the ACNC Commissioner's
powers of delegation; and
· explains the establishment, functions and powers of the
Advisory Board, including the membership of the Advisory
Board.
Summary of new law
10.2 The ACNC is a new Commonwealth statutory office which will
be responsible for the regulation of the not-for-profit (NFP) sector.
10.3 This Chapter addresses how the ACNC is established, as well as
the terms and conditions of appointment of the ACNC Commissioner, and
the ACNC Commissioner's powers of delegation, in order to administer
the national regulatory framework.
10.4 The ACNC will also provide assistance and support for the NFP
sector through the provision of educational material and other guidance.
Detailed explanation of new law
The Australian Charities and Not-for-profits Commission
10.5 This Bill establishes the ACNC. [Section 105-5]
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10.6 The ACNC consists of:
· the ACNC Commissioner; and
· any staff assisting the ACNC Commissioner that are engaged
under the Public Service Act 1999 and are subject to the
directions of the ACNC Commissioner.
[Section 105-10]
10.7 Staff assisting the ACNC Commissioner are provided by the
Commissioner of Taxation; however, they will be officers of the ACNC
and report to the ACNC Commissioner in respect of all matters for which
the ACNC Commissioner is responsible.
10.8 The function of the ACNC is to assist the ACNC Commissioner
in the performance of his or her functions. [Section 105-15]
10.9 The ACNC enjoys the same privileges and immunities as the
Crown. This means that the ACNC is legally and financially part of the
Commonwealth. This confers on the ACNC the non-statutory privileges
and immunities of the Crown, and the benefit of the presumption that
legislation does not generally apply to the Crown. [Section 105-20]
The ACNC Commissioner
10.10 This Bill establishes the position of the ACNC Commissioner.
[Subsection 110-5(1)]
10.11 Once the Bill is enacted, the ACNC Commissioner has the
general administration of the law, and the other powers and functions that
this Bill, or any other laws, confers on the office. [Subsection 110-5(2)]
10.12 The ACNC Commissioner has the function of assisting
registered entities in complying with and understanding the Bill, by
providing them with guidance and education. [Subsection 110-10(1)]
10.13 The ACNC Commissioner also has the function of assisting the
public in understanding the work of the NFP sector, in order to support the
transparency and accountability of the sector, by giving the public
relevant information on the ACNC's website. This function does not limit
the ACNC Commissioner's other functions. [Subsection 110-10(2) and (3)]
10.14 The ACNC Commissioner has the power to do all those things
necessary or convenient to be done for, or in connection with, the
performance of his or her functions. However, this power does not extend
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to the spending of public monies without a proper delegation in place.
[Subsection 110-15]
10.15 This means that the ACNC Commissioner is able to administer
general activities associated with the Bill such as the running of a website
and the provision of educational information to the sector, as well as other
powers and functions as described in detail in the Bill.
10.16 The position of ACNC Commissioner is an independent
statutory office. In the exercise of his or her functions, the ACNC
Commissioner is not subject to the direction or control of any Minister or
of another government department or agency.
10.17 The ACNC Commissioner may have regard to the advice and
recommendations of the Advisory Board (see paragraphs 10.58 to 10.70
below) in carrying out his or her functions and exercising his or her
powers, but he or she is not obligated to act in accordance with this
advice. [Subsection 110-20(1)]
10.18 These provisions mean that the Advisory Board is not a
decision-making body. While the Advisory Board can provide advice and
suggestions, it is the ACNC Commissioner who is responsible for making
decisions on behalf of the ACNC.
10.19 The ACNC Commissioner may attend Advisory Board meetings
only upon an invitation from the Chair of the Advisory Board.
[Subsection 110-20(2)]
Terms and conditions of appointment
10.20 The Bill sets out the terms and conditions of the ACNC
Commissioner's appointment.
10.21 The Governor-General is responsible for appointing the ACNC
Commissioner by written instrument. [Subsection 115-5(1)]
10.22 The ACNC Commissioner is to be appointed on a full-time
basis. [Subsection 115-5(2)]
10.23 The written instrument of appointment contains the period of
appointment, which must not exceed 5 years. [Section 115-10]
10.24 The person currently occupying the office of ACNC
Commissioner is eligible for re-appointment. [Section 115-10 note]
10.25 The Bill provides for circumstances when there needs to be an
Acting ACNC Commissioner. The Bill gives the Minister the power to
appoint an Acting ACNC Commissioner when there is a vacancy in the
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office, or if the ACNC Commissioner is out of Australia or unable to
perform the duties of the office. The rules that apply to acting
appointments are set out in section 33A of the Acts Interpretation
Act 1901. [Section 115-15]
10.26 The Remuneration Tribunal is responsible for determining the
remuneration and leave entitlements of the ACNC Commissioner. The
regulations may prescribe a remuneration amount that is to apply in the
absence of a determination by the Remuneration Tribunal. The
regulations may also prescribe any allowances due to the ACNC
Commissioner. [Section 115-20]
10.27 Recreation leave entitlements of the ACNC Commissioner are
determined by the Remuneration Tribunal. The Minister also has
discretion to grant the ACNC Commissioner a leave of absence. The
Minister may grant a leave of absence, for example, if the personal
circumstances of the ACNC Commissioner require it. [Section 115-25]
10.28 The ACNC Commissioner must disclose to the Minister, in
writing, all interests, pecuniary or otherwise, that the ACNC
Commissioner has or acquires which may conflict with the proper
performance of the ACNC Commissioner's functions. [Section 115-30]
10.29 The ACNC Commissioner is not allowed to engage in other paid
employment without the Minister's approval. [Section 115-35]
10.30 The above two conditions ensure that the ACNC Commissioner
is not compromised by other interests in his or her duties.
10.31 The Minister may set other terms and conditions of the ACNC
Commissioner's office which are not covered by the Bill. This may
include setting out additional specific leave entitlements. [Section 115-40]
10.32 The ACNC Commissioner may resign from the office by giving
the Governor-General a signed notice of resignation. The ACNC
Commissioner's resignation will take effect from the day the notice is
received by the Governor-General, unless the notice specifies another day
in the future, in which case resignation will take effect from the later day.
[Section 115-45]
10.33 The Bill provides for the Governor-General to terminate the
ACNC Commissioner's appointment:
· for misbehaviour or incapacity (either physical or mental)
[Subsection 115-50(1)]; or
· if the ACNC Commissioner:
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The commission and the Advisory Board
- becomes bankrupt;
- applies for bankruptcy;
- compounds with his or her creditors; or
- assigns his or her remuneration for the benefit of creditors
[Paragraph 115-50(2)(a)]; or
· if the ACNC Commissioner is absent without a leave of
absence [Paragraph 115-50(2)(b)];
· if the ACNC Commissioner engages in paid employment
without approval [Paragraph 115-50(2)(d)]; or
· if the ACNC Commissioner fails to comply with any terms or
conditions of employment provided for by the Bill or by the
Minister in accordance with the Bill [Paragraph 115-50(2)(c)].
10.34 This standard provision is included to ensure that the ACNC
Commissioner is able to perform his or her duties without interference,
while acknowledging that there may be circumstances where it is both
appropriate and warranted for the ACNC Commissioner to be replaced to
ensure the proper function of the office of ACNC Commissioner.
10.35 The ACNC Commissioner's appointment may be terminated in
cases where her or his personal finances have been compromised. These
circumstances are included to ensure the ACNC Commissioner's ability to
perform her or his duties is not compromised by his or her personal
financial situation.
10.36 The ACNC Commissioner is able to delegate his or her powers
or functions in accordance with this Bill. The delegation must be in
writing, and must be to a person holding the position, or performing the
duties, of a Senior Executive Service (SES) employee working at the
ACNC. [Subsection 115-55(1)]
10.37 Delegates must exercise their powers in accordance with any
lawful written directions provided by the ACNC Commissioner.
[Subsection 115-55(2)]
10.38 Lower level staff of the ACNC will be involved in the
day-to-day decisions of the ACNC; however, decision-making authority
will rest with the delegate. This is in line with the practices of most
Commonwealth authorities. Consistent with those practices, other
Australian Public Service (APS) staff may act as an agent of the delegate
in carrying out the ACNC Commissioner's functions.
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10.39 Before signing or executing any notice, determination,
instrument or other document which gives rise to a reviewable decision,
officers must ensure that they have been authorised by a delegate of the
ACNC Commissioner to exercise the power in question on his or her
behalf, and in accordance with any instructions given to the officer acting
for, and on behalf of, the delegate.
Staffing and consultants
10.40 The Bill provides details of the staffing of the ACNC, and the
ability of the ACNC to engage consultants.
10.41 The ACNC Commissioner has members of staff which are
engaged under the Public Service Act 1999. The staff are provided by the
Commissioner of Taxation, however, they are responsible to the ACNC
Commissioner when performing their duties under their employment.
[Section 120-5]
10.42 This ensures that staff provided to the ACNC Commissioner by
the Commissioner of Taxation are accountable to the ACNC
Commissioner in the performance of their duties under the ACNC Bill
and act independently of the Commissioner of Taxation in making
decisions about the registration and regulation of entities under this Bill.
[Section 120-5 and section 120-5 (note)]
10.43 This Bill does not displace the existing common law duty of
employees to comply with lawful and reasonable directions by the
employer, or the existing duty of APS employees to comply with a lawful
and reasonable direction under the APS Code of Conduct as set out in
section 13 of the Public Service Act 1999.
10.44 In the rare event that a conflict should arise between a direction
from the Commissioner of Taxation and the ACNC Commissioner, staff
must comply with the directions of the ACNC Commissioner.
10.45 The ACNC Commissioner may engage consultants to assist in
the performance of the ACNC's functions. These consultants will be
engaged on behalf of the Commonwealth. [Subsection 120-10(1)]
10.46 The ACNC Commissioner is not allowed to engage a member of
the Advisory Board as a consultant [Subsection 120-10(2)]. This is to ensure
that Advisory Board members provide independent advice to the ACNC
Commissioner to assist him or her in carrying out the functions of the
ACNC. To have a member of the Advisory Board engaged as a
consultant has the potential to interfere with this independence.
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Special account for the ACNC
10.47 A Special Account for the purposes of the Financial
Management and Accountability Act 1997 (FMA Act) is established by
the Bill. This will be the Australian Charities and Not-for-profits
Commission Special Account (Special Account). [Section 125-5]
10.48 The Special Account is an appropriation mechanism that sets
aside amounts within the Consolidated Revenue Fund for expenditure for
special purposes, which, in this case, relates to expenditure for the special
purposes of funding the operations of the ACNC.
10.49 The Special Account sits within the Australian Taxation Office's
(ATO) portfolio budget statements; however, it is accounted for as its own
item, similar to how the Tax Practitioners Board is reported on in the
ATO's portfolio budget statements.
10.50 A memorandum of understanding (MOU) is proposed to exist
between the Commissioner of Taxation and the ACNC Commissioner.
This will set out in detail how the two agencies will work together,
including how the ACNC Commissioner will independently manage the
ACNC budget.
10.51 However, the ACNC Commissioner must comply with the
requirements of the FMA Act. [Section 110-15 note]
10.52 The FMA Act sets out the way in which officials must handle
public money, public property and other resources of the Commonwealth.
It also sets out general integrity rules that apply to the financial
management of other Commonwealth regulators such as Australian
Securities and Investment Commission (ASIC) and Australian
Competition and Consumer Commission (ACCC).
10.53 The Special Account may be credited by amounts equal to the
following:
· amounts received by the Commonwealth in connection with
the performance of the ACNC Commissioner's functions
under the Bill;
· amounts of any gifts or bequests made for the purposes of the
account; and
· amounts received by the Commonwealth in relation to
property paid for with amounts debited from the ACNC
Special Account.
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[Section 125-10]
10.54 The Special Account is used to pay or discharge costs, expenses
and other obligations incurred by the Commonwealth in relation to the
performance of the ACNC Commissioner's functions; to pay for
remuneration or allowances to persons in accordance with the Bill; and to
meet any expenses associated with administering the Special Account.
[Section 125-15]
Reporting
10.55 The ACNC Commissioner must provide an annual report to the
Minister as soon as practicable after the end of the financial year (1 July to
30 June) for presentation to Parliament. The report provides details on the
ACNC Commissioner's operations during that year. [Subsection 130-5(1)]
10.56 The report must also include an evaluation of the ACNC's
overall performance during the year. [Subsection 130-5(2)]
10.57 The provisions about annual reports in section 34C of the Acts
Interpretation Act 1901 apply in relation to the presentation of the ACNC
Commissioner's annual report. For example, subsection 34C(2) provides
that the ACNC Commissioner must furnish the report to the Minister
within six months after the end of the financial year. This means that `as
soon as practicable' is read to mean no longer than six months.
[note in subsection 130-5(1)]
10.58 Subsection 34C(4) of the Acts Interpretation Act 1901 also
applies so that the ACNC Commissioner may apply to the Minister for an
extension of the period if the ACNC Commissioner is of the opinion that
it will not be reasonably possible to comply with the six-month time
requirement.
The Advisory Board
10.59 The Bill establishes an ACNC Advisory Board. [Section 135-5]
10.60 The Advisory Board consists of two to eight general members.
Collectively, the general Advisory Board members must have expertise
relating to charities and NFP entities, or experience and appropriate
qualifications in relation to law, taxation or accounting. Each member
may have expertise and experience in a number of these areas.
[Paragraph 135-10(b)]
10.61 The members are expected to have a detailed knowledge of the
NFP sector and how it operates.
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The commission and the Advisory Board
10.62 The Advisory Board may also consist of a number of ex officio
members as determined by the Minister. [Paragraph 135-10(a)]
10.63 The Advisory Board's function is to provide advice and make
recommendations to the ACNC Commissioner in relation to the ACNC
Commissioner's functions under this Bill. The Advisory Board is to
provide advice to the ACNC Commissioner in response to a request for
such advice from the ACNC Commissioner. [Subsection 135-15(1)]
10.64 The Advisory Board cannot provide advice that is not in
response to a request from the ACNC Commissioner.
10.65 The Advisory Board can do anything which is necessary or
convenient in connection with performing its function.
[Subsection 135-15(2)]
10.66 However, this broad power does not extend to the spending of
public monies without a proper delegation in place. The Advisory Board
must not spend money without a delegation from the Commissioner of
Taxation. However, it is not expected that the need will arise for the
Advisory Board to spend public money, and therefore, no delegations for
the spending of public money are likely to be put in place. These matters
are to be set out in the MOU between the Commissioner of Taxation and
the ACNC Commissioner.
10.67 The ACNC Commissioner is not bound to act in accordance
with any advice from the Advisory Board because the Advisory Board is
not a decision-making body. [Subsection 135-15(3)]
10.68 The Advisory Board is a body that can provide sector-specific
advice to the ACNC Commissioner, to assist the ACNC Commissioner in
his or her decision-making role. The Advisory Board is not a governing
body and has no operational oversight role.
10.69 The Advisory Board has no decision-making power. It is
intended to be a resource for the ACNC Commissioner as it can provide
the ACNC Commissioner with a pool of broad knowledge and experience
in the NFP sector, law, accounting and taxation which the ACNC
Commissioner can draw on to assist him or her to effectively fulfil the
role of ACNC Commissioner.
10.70 For example, the ACNC Commissioner may request the
Advisory Board to consider the implications of certain decisions on the
sector, what the next piece of guidance material that the ACNC
Commissioner releases should be or what sort of education and support
for the sector is necessary to assist the sector in response to emerging
issues.
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10.71 Commonwealth regulators are normally structured in this way so
that mechanisms to ensure accountability are in place.
Appointment
10.72 The Minister may appoint a general member of the Advisory
Board by written instrument. [Subsection 140-5(1)]
10.73 The term of appointment for general members is as specified in
the written instrument, however the period must not exceed 3 years.
[Section 140-10]
10.74 Members of the Advisory Board are eligible for reappointment.
[Note in section 140-10]
10.75 A member of the Advisory Board is appointed on a part-time
basis, and must be an ordinary resident in Australia.
[Subsections 140-5(1) and 140-5(2)]
10.76 One of the members of the Advisory Board is to be appointed by
the Minister as the Chair of the Advisory Board. Another member is to be
appointed as the Deputy Chair. [Subsection 140-5(3)]
10.77 A person's appointment as a general member, the Chair or the
Deputy Chair is not invalid merely because of a defect or irregularity in
connection with the person's appointment. This protects the ACNC in the
event that they would receive advice from a possibly, and only
technically, mis-constituted board. [Subsection 140-5(4)]
10.78 A defect or irregularity could include such things as an incorrect
date, a signature in the wrong place or incorrectly numbered pages.
10.79 A general member of the Advisory Board is not an `officer' for
the purposes of Appendix E of the Legal Services Directions. This means
that the Commonwealth will not be liable to pay the costs if a member of
the Advisory Board is sued in their capacity as Advisory Board member.
Remuneration
10.80 The remuneration of the general members of the Advisory Board
is determined by the Remuneration Tribunal. If no remuneration
determination is in place, general members are paid in accordance with
the remuneration amounts set out in the regulations. [Subsection 140-15(1)]
10.81 The regulations may prescribe any allowances payable to the
general members [subsection 140-15(2)]. Any regulations have effect subject
to the Remuneration Tribunal Act 1973 [subsection 140-15(3)].
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Disclosure by members
10.82 Members of the Advisory Board must provide the Minister with
written notice of all interests, pecuniary or otherwise, that the member has
or acquires which may conflict with the proper performance of their
functions as Advisory Board members. [Subsection 140-20(2)]
10.83 A member must disclose these interests to the Minister as soon
as practicable after becoming aware of a possible conflict of interest.
[Subsection 140-20(2)]
Other terms and conditions
10.84 The Minister may determine, in writing, other terms and
conditions to limit the operations of the Advisory Board and its members.
[Subsection 140-25]
Resignation and termination
10.85 General members of the Advisory Board may resign from their
position on the Board by giving the Minister a signed notice of
resignation. [Subsection 140-30(1)]
10.86 The Chair and the Deputy Chair are able to resign from those
positions while remaining a general member on the Advisory Board.
[Subsections 140-30(2) and 140-30(3)]
10.87 A resignation takes effect on the day it is received by the
Minister, unless the notice specifies a day in the future, in which case
resignation takes effect on the later day. [Subsection 140-30(4)]
10.88 The Minister has the power to terminate a member's
appointment at any time. [Section 140-35]
Meetings of the Advisory Board
Holding meetings
10.89 The Chair of the Advisory Board has additional responsibilities
in relation to the convening of meetings.
10.90 The Chair must convene at least four Advisory Board meetings
in each financial year but can call additional meetings if these are
necessary for the efficient performance of the Advisory Board's function.
[Subsection 145-5(1)]
10.91 For example, the Chair may convene an additional meeting to
respond to a request for advice from the ACNC Commissioner.
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Procedure of meetings
10.92 The Advisory Board can determine for itself how it operates.
However, it must comply with any written matters determined by the
ACNC Commissioner in relation to the operation of the Advisory Board.
[Subsection 145-5(2) and (3)]
10.93 A determination made by the ACNC Commissioner in this
regard is not a legislative instrument. [Subsection 145-5(9)]
10.94 The Chair must ensure that minutes of the Advisory Board
meetings are kept. [Subsection 145-5(4)]
Disclosure of interest by a member
10.95 If a matter arises during a meeting to which a member of the
Advisory Board has a direct or indirect financial interest, being an interest
that could conflict with the proper performance of the Advisory Board's
function, then the member must disclose that interest to the other
Advisory Board members as soon as possible. [Subsection 145-5(5)]
10.96 This duty relates specifically to meetings, and does not override
the duty which requires members to give notice to the Minister of all
interests, pecuniary or otherwise, that could conflict with the proper
performance of the Advisory Board's function (see paragraphs 10.82 to
10.83 above).
Disclosure to be recorded in the minutes of the meeting
10.97 An interest that arises during a meeting, and the subsequent
decision made by the Advisory Board, must be recorded in the minutes of
the meeting. [Subsection 145-5(6)]
10.98 The member with the interest must exclude themselves from the
discussion and any subsequent advice provided by the Advisory Board,
unless given permission by the Chair to participate. [Subsection 145-5(7)]
10.99 If the member with the interest happens to be the Chair of the
Advisory Board, then the ACNC Commissioner must give permission for
the Chair to participate in the discussion and any subsequent decisions
relating to that member's interest. [Subsection 145-5(7)]
Attendance by ACNC Commissioner
10.100 The Chair of the Advisory Board may invite the ACNC
Commissioner to attend all or any part of an Advisory Board meeting.
[Subsection 145-5(8)]
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10.101 The ACNC Commissioner must not attend an Advisory Board
meeting without such an invitation.
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Chapter 11
Secrecy framework
Outline of chapter
11.1 This Chapter explains the secrecy framework of the Australian
Charities and Not-for-profits Commission (ACNC), including:
· the overview and objectives of the secrecy framework;
· the general prohibition that applies to the use and disclosure
of protected information;
· the exceptions that apply to the general prohibition to allow
for use and disclosure in certain specified circumstances; and
· penalties for unauthorised disclosures of protected
information.
Summary of new law
Overview of the secrecy framework
Objectives of the secrecy framework
11.2 Under the Bill, the secrecy framework is intended to balance the
need to protect personal and confidential information that entities provide
to the ACNC with the need to enable disclosure of that information where
it is necessary to disclose that information in accordance with the objects
of this Bill. [Section 150-5]
11.3 Engagement with and the trust of the not-for-profit (NFP) sector
could be at risk if responsible entities and registered entities do not have
confidence that their information is being handled appropriately, which
would, in turn obstruct the ACNC in undertaking its powers and functions
under the Bill. [Paragraph 150-5(a)]
11.4 However, as the NFP sector receives substantial assistance
through taxpayer funded concessions and public donations, the
information provided to the ACNC needs to be disclosed to the public in
certain circumstances in order to promote transparency and accountability
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of the sector and ensure public confidence that taxpayer resources and
public donations are being used appropriately. [Paragraph 150-5(b)]
Structure of the secrecy framework
11.5 Under the Bill, the secrecy framework has been designed so that
where certain entities have access to personal or confidential information,
obtained by the ACNC in accordance with the Bill, they are subject to a
general prohibition on the use and disclosure of that information.
11.6 However, to ensure the ACNC is able to fulfil its powers and
functions under the Bill, including promoting good governance,
transparency and accountability, and acting as a `one-stop shop' regulator
for the NFP sector, disclosure of the protected information is permitted in
specified circumstances detailed within the Bill.
11.7 By structuring the secrecy framework in this manner, it ensures
that it is fundamentally clear to those entities handling protected
information that the disclosure of that information is prohibited in all
circumstances except where it is clearly set out in the Bill that it may be
disclosed and for what purpose.
Interaction with other privacy and secrecy regimes
11.8 Whilst the secrecy framework in the Bill provides for an
overarching protection of information provided to the ACNC, that
information may also be protected under other related privacy or secrecy
regimes.
11.9 For example, information that is provided to the Commissioner
of Taxation under a taxation law is protected under the tax secrecy
framework within Division 355 in Schedule 1 to the Tax Administration
Act 1953.
11.10 Similarly, the Office of the Australian Information
Commissioner also protects information that is personal and relates to an
individual under the Privacy Act 1988 (Privacy Act). In particular, the
Information Privacy Principles under the Privacy Act apply to the ACNC
and set out the standards for the handling and protecting an individual's
personal information.
11.11 Of note, Information Privacy Principle 11 operates to limit the
disclosure of personal information by a Government agency, except to the
extent that disclosure is required or authorised by or under law.
Consequently, in the specified circumstances set out in the Bill where
disclosure of protected information is authorised, the secrecy framework
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is consistent with the requirements under Information Privacy Principle 11
and the Privacy Act.
11.12 There is also other Commonwealth legislation that overrides the
secrecy framework in the Bill and authorises disclosures in limited
circumstances. These laws either permit particular entities such as the
Auditor-General or Commonwealth Ombudsman to access protected
information or provide immunity for ACNC officers and other entities
who are compelled to disclose information that is protected under the Bill
for circumstances specified in the following provisions (this list is not
exhaustive):
· sections 32 and 33 of the Auditor-General Act 1997;
· section 9 of the Ombudsman Act 1976;
· section 44 of the Privacy Act;
· section 12 of the Parliamentary Privileges Act 1987; and
· schedule 6 to the Anti-Terrorism Act (No. 2) 2005.
Evidential burden
11.13 Under this Bill, there are certain exceptions that apply to the
general prohibition on the use, disclosure and on-disclosure of information
protected under the secrecy framework.
11.14 Where an entity seeks to rely on these exceptions, the entity will
bear the evidential burden to prove that they used the information or
disclosed/on-disclosed the information in accordance with that exception.
11.15 Under subsection 13.3(3) of the Criminal Code, `evidential
burden' means the burden of adducing or pointing to evidence that
suggests a reasonable possibility that the matter exists or does not exist.
11.16 In the context of the ACNC secrecy framework, this would
mean that an entity seeking to rely on one of the exceptions will need to
point to evidence, by way of a document or email, that suggests a
reasonable possibility that they were entitled to use the information or
disclose/on-disclose the information under the Bill.
11.17 It is common amongst Commonwealth secrecy regimes to place
the evidential burden on the defendant where the defendant seeks to rely
on an exception or defence to the general prohibition on disclosure of
information (an offence-specific defence).
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11.18 This is consistent with the Attorney-General's Department's
publication entitled A guide to framing Commonwealth offences,
infringement notices and enforcement powers where it states that an
evidential burden of proof should generally apply to a defence where there
is an offence-specific defence. In these situations, the defendant is in the
best position to provide evidence justifying why they undertook the act
that triggered the offence-specific defence.
11.19 Therefore, where an entity does disclose or use information they
will be aware of the general prohibition and will be seeking to use the
offence-specific defence that the disclosure was an authorised disclosure.
In that case, placing the evidential burden on the entity is justified as they
will be able to point to the authorised disclosure provision they relied
upon and provide emails or written directions which support the use of the
authorised disclosure.
11.20 Despite the evidential burden resting on the entity, the
prosecution retains the `legal burden' of proof and is required to prove
each element of an offence beyond reasonable doubt, consistent with the
requirements of Article 14 of the International Covenant on Civil and
Political Rights.
Detailed explanation of new law
Scope of the secrecy framework
Information protected under the secrecy framework
11.21 Under the Bill, the information that is protected under the
secrecy framework is protected ACNC information.
11.22 This is defined in the Bill to include all information that was
disclosed to, or obtained by an ACNC officer for the purposes of the Bill
where the information relates to the affairs of an entity other than the
ACNC officer and where the information identifies, or is reasonably
capable of being used to identify an entity. [Section 150-15]
11.23 For example, protected ACNC information includes information
that is not currently in the public domain and may have been provided to
the ACNC on a registration or compliance document such as an
application form for registration or under a duty to notify as explained in
Chapter 7 -- Duty to notify.
11.24 Personal information that is provided to the ACNC related to
responsible entities, management, and employees of a registered entity is
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Secrecy framework
also protected ACNC information and as it pertains to an individual is also
subject to the Information Privacy Principles under the Privacy Act.
11.25 Information that is either in the public domain or in no way
identifies an entity, or is reasonably capable of being used to identify an
entity, is not considered protected ACNC information.
11.26 Information that has been made public through the ACNC
Register under Division 40 is not considered protected ACNC information
after it has been displayed on the ACNC website.
Entities subject to the secrecy framework
11.27 Under the Bill, Part 7-1 applies to ACNC officers (as defined
under section 900-5) but it also extends to other entities and refers to them
within Part 7-1 as if they were ACNC officers. [Section 150-10]
11.28 These non-ACNC officer entities that are within scope of the
secrecy framework include:
· an entity engaged to provide services relating to the ACNC
[paragraph 150-10(a)];
· an individual employed by an entity referred to in the dot
point above [paragraph 150-10(b)];
· an individual appointed or employed by, or performing
services for, the Commonwealth or an authority of the
Commonwealth that is performing functions or exercising
powers under or for the purposes of the Bill
[paragraph 150-10(c)]; or
· a member of the Advisory Board [paragraph 150 10(d)].
Example 11.1
Todd is an IT contractor who has recently been contracted by the
ACNC to develop an internet based product. Todd is a non-ACNC
officer entity that is subject to the secrecy framework under the
Bill.
Example 11.2
Johan is an IT sub-contractor and works for Todd (as per
Example 11.1) and is supporting him in testing his internet based
product. As he is an individual employed by Todd to provide
services relating to the Commission, he is also a non-ACNC officer
entity that is subject to the secrecy framework under the Bill.
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Example 11.3
Gerald works for the Department of Families, Housing,
Community Services and Indigenous Affairs. However, as part of
a secondment program he is working for the ACNC and performing
audits on charities. Gerald is a non-ACNC officer entity that is
subject to the secrecy framework under this Bill.
Example 11.4
Ashley is a member of the Advisory Board and appointed under
Division 140 of this Bill. Ashley provides advice and makes
recommendations to the ACNC Commissioner in relation to the
ACNC Commissioner's functions under the Bill and is therefore a
non-ACNC officer entity that is subject to the secrecy framework
under the Bill.
11.29 In addition to the non-ACNC officers that are covered by
section 150-10, the secrecy framework also applies, to some extent, to
entities that acquire protected ACNC information in accordance with an
authorised disclosure detailed in the Bill.
11.30 In that situation, they are subject to a prohibition on
on-disclosure of that information except where allowed under
Subdivision 150-D. This is discussed further at paragraph 11.64 of this
Chapter.
Example 11.5
Eliz works for the ATO and in the performance of her duties acquired
protected ACNC information through an authorised disclosure under
section 150-40 for the purpose of administering the tax law.
Whilst Eliz is not an ACNC officer or an entity covered by section
150-10, she is still subject to the secrecy framework as she is
prohibited from disclosing or using the protected ACNC information
pursuant to Subdivision 150-D.
General prohibition on use or disclosure of protected ACNC information
11.31 The secrecy framework in the Bill prohibits the use or disclosure
of protected ACNC information by an entity (as described at paragraph
11.27 of this Chapter). [Section 150-25]
11.32 The unauthorised use or disclosure of protected ACNC
information by an entity is an offence and a court can impose upon an
individual a penalty of imprisonment of up to two years or 120 penalty
units or both. [Subsection 150-25(1)]
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11.33 The Crimes Act 1914 prescribes rules for converting penalties
for natural persons into a penalty that applies to a body corporate.
Meaning of `use' and `disclosure'
11.34 Under this Chapter, the terms `use' and `disclosure' are intended
to take their ordinary meaning.
11.35 The term `use' includes situations where an ACNC officer has
access to the protected ACNC information and records the information,
takes the information or recalls the information and takes advantage of the
information or exploits it for some kind of outcome.
Example 11.6
Harry has access to protected ACNC information, he writes down
sensitive financial information about a charity from a file and puts it to
use by changing his share portfolio to account for the information he
has used.
By exploiting the information for a personal benefit and altering his
share portfolio, Harry has `used' the protected ACNC information in
contravention of the general prohibition under this Bill.
11.36 The term `disclosure' includes situations where an ACNC
officer has access to the protected ACNC information and then divulges
or releases that information to another entity.
11.37 Information may be disclosed by publishing, writing, speaking,
transmitting or conveying it in any form that enables the other entity to
identify the entity to which the information relates.
Example 11.7
Finn has access to protected ACNC information; he then publishes the
information on his blog which is publicly available on the internet.
By publishing the information on the internet, which can be viewed by
the public, Finn has disclosed the protected ACNC information in
contravention of the general prohibition under this Bill.
Exceptions to the general prohibition on use or disclosure of protected
ACNC information
11.38 The general prohibition operates to make it an offence to use or
disclose the information, however, in order to give effect to the balance
between protection of information and disclosure for the objects of the
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Bill, the secrecy framework permits use or disclosure of information in
certain circumstances. [Subparagraph 150-25(1)(c)(i) and subsection 150-25(3)]
11.39 These exceptions to the general prohibition which give rise to
authorised use or disclosures include:
· disclosure to the entity to whom the information relates
[subparagraph 150-25 (1)(c)(i) and subsection 150-25(2)];
· disclosure or use in the performance of duties under the Bill
[section 150-30];
· disclosure on the Australian Charities and Not-for-profits
Commission Register (ACN Register) to achieve the objects
of the Bill [section 150-35];
· disclosure to an Australian government agency
[section 150-40];
· disclosure or use with consent of the entity [section 150-45];
and
· disclosure of information lawfully made available to the
public [section 150-50].
Disclosure to the entity to whom the information relates
11.40 An entity covered by the general prohibition may disclose the
protected ACNC information, where that information is disclosed to a set
of entities to which the information relates, or are closely linked to the
entity to whom the information relates. These entities include:
· the entity to whom the information relates
[paragraph 150-25(2)(a)];
· a relevant agent of the entity to whom the information relates
[paragraph 150-25(2)(b)]; or
· a responsible entity of a registered entity to whom the
information relates [paragraph 150-25(2)(c)].
Example 11.8
Help the Children Ltd is a charity and is a registered entity under
the ACNC. The company requests the ACNC to provide it with
certain financial information it provided in the previous year. The
financial information is protected ACNC information under the
Bill.
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Secrecy framework
However, as the entity that provided the protected ACNC
information is the entity requesting that information, the ACNC
officer responsible may disclose that information to the company.
Example 11.9
Boris is a registered tax agent and is the tax agent for the recently
established Citytown Public Hospital. He needs information on the
endorsement process and requests this information from the ACNC
for the purpose of filling out tax returns and interacting with the
Commissioner of Taxation.
Because Boris is an agent of the public hospital, to whom the
protected ACNC information relates, and Boris is the relevant
agent for that information, the ACNC officer may disclose that
information to Boris.
Example 11.10
Philip is the responsible entity of the `Fix Poverty' charity which is
a registered entity under the ACNC. He needs some information
from the ACNC which the charity provided in previous years.
The information provided is protected ACNC information, but
because Philip is the responsible entity of the registered entity, the
ACNC officer responsible may disclose that information to Philip.
Disclosure or use in the performance of duties under the Bill
11.41 An ACNC officer may use or disclose protected ACNC
information where the use or disclosure is in the ordinary course of
performing their duties under the Bill.
11.42 This exception covers the performance of duties that are
necessary for the administration of any powers or functions granted to an
ACNC officer under the Bill.
11.43 This exception also allows ACNC officers to disclose
information amongst each other within the ACNC or use information in
order to perform the powers or functions detailed within the Bill.
Example 11.11
Cherry is an ACNC officer who is responsible for processing
registration forms for charities applying to be registered entities under
this Bill. In order to process a particular application Cherry needs to
talk to Pourus in the compliance area about the charity involved.
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Because Cherry is performing her duties under the Bill by processing
registration applications she is able to use the protected ACNC
information and is able to disclose that information to Pourus who is
also performing his duties under the Bill.
Example 11.12
Edmund is an ACNC officer in the compliance area of the ACNC and
is responsible for auditing registered entities. Edmund has been
assigned five cases, however, he sees that his colleague has been
assigned a case involving a famous celebrity.
Edmund decides to have a look through his colleagues `celebrity' file
and then at lunch speaks to another ACNC colleague, Tony, about the
case details.
Even though both Edmund and Tony are ACNC officers, and even
though Edmund is involved in compliance, the disclosure of the
`celebrity' file to Tony was not in the ordinary course of Edmund's
duties as he was not assigned to the file and accessed the material
outside of his normal duties. In this situation, Edmund would have
committed an offence under section 150-25 of the Bill.
11.44 This exception also allows for use and disclosure of protected
ACNC information by an ACNC officer for the purpose of proceedings
related to the Bill. This means that under this exception ACNC officers
would be able to use information or disclose the information to courts,
external legal advisers, the Commonwealth Director of Public
Prosecutions or the Administrative Appeals Tribunal (AAT) for the
purpose of proceedings that are related to the Bill.
Example 11.13
A registered entity has its registration revoked by the ACNC
Commissioner under this Bill. The entity goes through the objection
process but at the end wishes to challenge the ACNC Commissioner's
objection decision and have it reviewed by the AAT.
Under this exception, the relevant ACNC officer can disclose the
relevant protected ACNC information to the AAT for the purpose of
having the decision reviewed in accordance with the review and
appeals framework under the Bill.
11.45 Despite the operation of this exception, an ACNC officer cannot
be compelled to disclose protected ACNC information to a court or
tribunal or to produce to a court or tribunal documents containing
protected ACNC information except where it is necessary to do so for the
purposes of giving effect to this Act. [Section 150-20]
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11.46 This limit on the disclosures to courts and tribunals recognises
the potential loss of privacy that would occur in the release of protected
ACNC information in an open court and ensures that where it is necessary
for information to be provided to a court or tribunal it is done in a manner
that is consistent with the Bill.
Disclosure on the ACN Register to achieve the objects of the Bill
11.47 Under this exception, an ACNC officer may disclose protected
ACNC information to the public through the ACN Register in accordance
with Division 40 of this Bill. [Paragraph 150-35(a)]
11.48 The disclosure is authorised under this exception only where it is
required under section 40-5(1) of the Bill and is for the purpose of
including on the ACN Register. [Paragraph 150-35(b)]
11.49 Once the protected ACNC information has been disclosed on the
Register under this exception, the information will be considered in the
public domain and further disclosure of that information, or on-disclosure
of that information will be permitted by other exceptions in
sections 150-50 and 150-65 of the Bill which are discussed below.
11.50 Where the information to be disclosed under this exception is
personal information (as defined under the Privacy Act), then the ACNC
officer making the disclosure must consider whether the disclosure is
necessary to achieve the objects of the Bill. [Paragraph 150-35(c)]
11.51 This provides an additional safeguard against arbitrary
interference with privacy and will ensure that personal information is only
disclosed where it is required and justified.
Disclosure to an Australian government agency
11.52 A disclosure of protected ACNC information is authorised under
this exception where it is made to an Australian government agency for
the purpose of enabling them to fulfil their powers and functions and
where it is reasonably necessary to promote the objects of the Bill.
[Section 150-40]
11.53 The intention of this exception is to enable the ACNC to fulfil
its role under the Bill as a `one-stop shop' regulator for the NFP sector by
sharing relevant information with other government departments and
agencies.
11.54 For registered charities under this Bill this will then produce cost
efficiencies as the required information is provided and collected on a
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single occasion, instead of on multiple occasions and interaction with
government departments and agencies can be more efficient and timely.
Example 11.14
The ACNC may provide a `seamless' application process for entities
applying to be a registered entity and applying for an Australian
Business Number (ABN) at the same time.
This interaction with the Australian Business Registrar will be
authorised under this exception and will ensure that `behind the scenes'
there is a process for disclosure or relevant information for efficient
registration of the ABN and the registered entity.
11.55 When considering whether disclosure is authorised under this
provision, the ACNC officer concerned must be satisfied that the
disclosure is necessary for the purposes of enabling or assisting the
government department or agency to perform or exercise a particularly
function or power of the agency which is reasonably necessary to promote
the objects of the Bill. [Paragraphs 150-40(b) and 150-40(c)]
11.56 This consideration ensures that only information that is required
by the government department or agency to meet the objects of this Bill
will be disclosed. This provides an additional safeguard against arbitrary
interference with privacy and ensures that protected ACNC information is
handled appropriately.
Meaning of an Australian government agency under this exception
11.57 The disclosure to an Australian government agency under this
provision references the definition of `Australian government agency'
under the Bill and will cover Commonwealth, State and Territory
governments as well as an authority of the Commonwealth, State and
Territory. [Paragraph 150-40(a) and section 900-5]
11.58 The Commonwealth, State and Territory authorities that are
expected to have information disclosed under these provisions will be
those that administer laws using registration as a pre-condition to
entitlements and those that administer laws that protect and enhance the
trust and confidence in NFP entities.
Disclosure or use with consent
11.59 Where a responsible entity or registered entity provides their
consent to an ACNC officer in writing, then disclosure of the protected
ACNC information relating to that responsible entity or registered entity is
authorised to the extent that it is consistent with the purpose for which the
consent was given by the relevant entity. [Section 150-45]
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Example 11.15
Freddy is a responsible entity for the `HumaNature' charity which is a
registered entity under this Bill. Freddy fills out a consent form and
signs it on behalf of HumaNature to allow the ACNC to disclose
protected ACNC information, in respect to HumaNature, to the
Commonwealth Department of Human Services for a grant
application.
Based on the consent of the responsible entity, the ACNC officer
concerned may disclose the protected ACNC information relating to
HumaNature to Department of Human Services for the purpose of the
grant application.
Disclosure of information lawfully made available to the public
11.60 Where information is in the public domain it is accessible by
everyone and therefore does not retain its confidential nature.
11.61 Therefore under this exception, where protected ACNC
information has lawfully been made available to the public, an ACNC
officer may disclose that information. [Section 150-50]
11.62 Information that has been made available to the public means
publicly available information that would include the internet,
newspapers, open court records, the electoral role and would also include
information that the public may access by way of a fee structure.
11.63 However, despite the application of this exception, the general
prohibition on use and disclosure of protected ACNC information applies
so that an ACNC officer may not use non-public information to
supplement or qualify the information that has been lawfully made
available to the public.
General prohibition on the on-disclosure of protected ACNC information
11.64 Subdivision 150-D provides that where an entity acquires
protected ACNC information under an authorised disclosure provision in
the Bill there is a general prohibition on the on-disclosure of that
information to another entity or use of that information. [Subsection
150-55(1)]
11.65 The general prohibition on the use of protected ACNC
information by entities that have acquired the information from an ACNC
officer under the Bill is in place to ensure that those entities that acquire
the information must use the information in a manner that is consistent
with the original purpose for the disclosure. This is explained further
below at paragraph 11.72 of this Chapter.
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11.66 The general prohibition on the on-disclosure of protected ACNC
information operates to restrict the flow of protected information from
entities that have acquired the information from an ACNC officer under
the Bill. This prohibition applies to an entity where:
· the entity concerned is not an ACNC officer as determined
under this Part [paragraph 150- 55(1)(b)]; and
· the entity concerned acquired protected ACNC information
and acquired it under an exception to this Bill
[paragraphs 150-55(1)(a) and 150-55(1)(c)].
Example 11.16
Bruce works for the ATO and in the course of performing his duties as
a taxation officer acquired protected ACNC information about the
`Healthy Touch' charity under section 150-40 of the Bill for the
purpose of administering a taxation law.
During lunch he discloses to his friend details of the charity and
sensitive information about financial matters. Under this provision
Bruce has contravened the general prohibition on on-disclosure and
has committed an offence.
11.67 Where an entity contravenes this provision by on-disclosing or
using the protected ACNC information, it constitutes a criminal offence.
The maximum penalty for this offence is 2 years imprisonment or
120 penalty units or both. [Subsection 150-55(1)]
11.68 For the purposes of Part 7-1, `on-disclosure' and `use' has the
same meaning as `disclosure' and `use' as discussed at paragraph 11.34 of
this Chapter.
Exceptions to the general prohibition on the on-disclosure of protected
ACNC information
11.69 As with the general prohibition on use or disclosure for ACNC
officers, on-disclosure and use of the protected ACNC information
acquired by an entity will be authorised where the on-disclosure or use
falls under an exception in the Bill. [Subparagraph 150-55(1)(d)(i) and
subsection 150-55(3)]
11.70 These exceptions to the general prohibition on the use and
on-disclosure of protected ACNC information acquired by entity which
give rise to an `authorised on-disclosure' include:
· on-disclosure to the entity to whom the information relates
[Subparagraph 15-55(1)(d)(i) and subsection 150-55(2)];
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· on-disclosure or use of information for the original purpose
or in connection with the original purpose that it was
disclosed [Section 150-60]; and
· on-disclosure of information that has lawfully been made
available to the public [Section 150-65].
On-disclosure to the entity to whom the information relates
11.71 This exception is identical to the exception that applies to
disclosure or use of information by ACNC officers in subparagraph
150-25(1)(c)(i). The intention being that an entity covered by the general
prohibition on on-disclosure of information may disclose the protected
ACNC information, where that information is disclosed to a set of entities
to whom the information relates, or are closely linked to the entity to
whom the information relates. These entities include:
· the entity to whom the information relates
[paragraph 150-55(2)(a)];
· A relevant agent of the entity to whom the information
relates [paragraph 150-55(2)(b)]; or
· a responsible entity of a registered entity to whom the
information relates [paragraph 150-55(2)(c)].
On-disclosure or use of information for the original purpose or in
connection with the original purpose that it was disclosed
11.72 This exception allows entities that acquire protected ACNC
information for a purpose specified in an exception in Subdivision 150-C
to use the information or on-disclose the information where the use or
on-disclosure is for the original purpose, or in connection with the original
purpose for which the information was provided to the entity.
[Subsection 150-60(1)]
11.73 Under this exception, the `original purpose' means the purpose
for which the protected ACNC information was initially disclosed by an
ACNC officer under an exception in Subdivision 150-C.
Example 11.17
Linda, an ACNC officer, discloses protected ACNC information to Ian,
an official from the Department of Health and Ageing under section
150-40 for the purpose of undertaking a funding program related to
aged care services run by the Department.
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Ian can only use that information for the purpose of undertaking the
funding program run by the Department.
Example 11.18
Patrick, an ACNC officer, discloses protected ACNC information to
Lauren, an official from ASIC under section 150-40 for the purpose of
enforcing a law that ASIC administers that may result in a criminal
offence.
Lauren can on-disclose that information within ASIC to other sections
that directly facilitate building the case as the on-disclosure would be
for the purpose of enforcing a law that ASIC administers that may
result in a criminal offence.
11.74 Under this exception, `in connection with the original purpose'
means that the use or on-disclosure is incidental to, or arises as a
consequence of, any action taken in pursuance of the original purpose.
Example 11.19
As per Example 11.17, where Ian is undertaking the funding program
he is asked to quantify the costs associated with the program and
provide a brief to the Department of Finance and Deregulation about
whether the spending has been worthwhile. Ian uses some of the
information provided by the ACNC to develop the brief for the
Department of Finance.
In that situation, whilst the use of the information for the brief is not
directly for the original purpose of undertaking the funding program, it
is in connection with the original purpose as the use is a consequence
of undertaking the funding program and facilitates undertaking the
funding program by meeting evaluation requirements for further
funding.
11.75 Under the Bill, it is made it clear that, without limiting the
meaning of `in connection with the original purpose', it is intended that
use or on-disclosure will be considered `in connection with the original
purpose' where the use is by or disclosure is to any entity, court or
tribunal and it is for the purpose of criminal, civil or administrative
proceedings (including merits review or judicial review) related to the
original purpose. [Subsection 150-60(2)]
Example 11.20
As per Example 11.18, where Lauren and her ASIC colleagues have
built a case for a potential contravention of a law that ASIC
administers which may result in a criminal offence, Lauren will be able
to on-disclose the information to the Commonwealth Director of
Public Prosecution (CDPP) to enable them to prosecute the offence.
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Whilst the original disclosure was for the purpose of ASIC enforcing
the law, allowing CDPP to prosecute the offence is in connection with
the original purpose and would therefore be covered by the exception.
On-disclosure of information that has lawfully been made available to
the public
11.76 This exception is identical to the exception that applies to
disclosure of information by ACNC officers in section 150-50.
11.77 The intention being that where protected ACNC information has
lawfully been made available to the public, an entity that acquired the
protected ACNC information may on-disclose that information.
[Section 150-65]
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Chapter 12
Reviews and appeals
Outline of chapter
12.1 This Chapter explains:
· the review and appeal framework under this Bill;
· what decisions can be reviewed and how they are reviewed
and appealed; and
· the process for appealing a decision to the Administrative
Appeals Tribunal (AAT) or court.
Summary of new law
Overview of the review and appeal framework
12.2 The review and appeal framework of the Bill sets out the
processes for an entity to challenge certain decisions of the Australian
Charities and Not-for-profits Commission Commissioner (ACNC
Commissioner), if they are dissatisfied with the ACNC Commissioner's
decision.
12.3 These processes are consistent with the review and appeal rights
under other Commonwealth legislation and allow objections related to
reviewable decisions to be properly reviewed by the ACNC, or to be
independently reviewed by the AAT or the courts. [Subsection 155-5(1)]
12.4 The structure of the review and appeal framework in this Bill is
modelled closely on the existing review and appeal framework in
Part IVC of the Taxation Administration Act 1953 (TAA 1953). This
ensures that whilst decisions of the ACNC Commissioner will be
reviewed independently and separately from the processes in the tax law,
the way in which the review and appeal process operate will be familiar to
those NFP entities that operated prior to the establishment of the ACNC
and were previously endorsed by the Commissioner of Taxation.
12.5 Consistency between the review and appeal framework in this
Bill and in the taxation law also allows for decisions of the ACNC
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Commissioner and the Commissioner of Taxation to be heard together.
This reduces compliance costs for charities that are dissatisfied by a
decision and wish to object to both decisions. This is further discussed at
paragraph 12.97 of this Chapter.
Detailed explanation of new law
Who can have a decision reviewed?
12.6 Only an entity that is directly affected by the decision can utilise
review and appeal rights in respect to the decision of the ACNC
Commissioner.
12.7 This ensures that parties are fully informed of the circumstances
surrounding the ACNC Commissioner's decisions, and limits the right to
lodge objections to those that have a direct stake in the ACNC
Commissioner's decision.
12.8 An entity for the purposes of this framework will commonly
include an entity that is registered under this Bill, a responsible entity of
that registered entity, or an entity that is in the process of applying for
registration under this Bill.
What decisions can be reviewed?
12.9 The types of decisions that are reviewable are referenced at
various points throughout the Bill as being reviewable under Part 7-2. For
the purposes of Part 7-2 these decisions are referred to as an
`administrative decision'. [Subsection 155-5(2)]
12.10 An administrative decision commonly includes decisions made
by the ACNC Commissioner which affect a particular entity that may be
applying for registration under this Bill or relate to the registration or
regulation of that particular entity.
12.11 Within this Bill, the following decisions are `administrative
decisions':
· refusal of application for registration [Subsection 30-15(4)];
· refusal of registration [Section 30-35];
· revocation of registration [Section 35-20];
· decision to give a direction [Paragraph 85-25(a)];
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· decision to vary a direction [Paragraph 85-25(b)];
· decision not to vary or revoke a decisions after 12 months
[Paragraph 85-25(c)];
· decision to suspend the responsible entity
[Paragraph 100-10(10)(a)];
· decision to change the time a suspension of the responsible
entity ends [Paragraph 100-10(10)(b)]
· decision to remove a responsible entity [Subsection 100-15(7)];
and
· decision to remit all or a part of an administrative penalty
[Subsection 175-60(3)].
12.12 Where there are multiple administrative decisions that affect the
entity and the entity wishes to challenge an administrative decision under
Part 7-2 of the Bill, the set of administrative decisions are deemed to be
the one decision. [Section 155-10]
12.13 This allows the ACNC Commissioner to consider circumstances
in full and to explicitly consider the implications of changing one decision
on other related decisions.
12.14 Entities may also be able to have related decisions of another
Commonwealth Government agency or department considered jointly
with a review of the ACNC Commissioner's decision by the AAT or
courts where certain conditions are met. This is further discussed at
paragraph 12.97 of this Chapter.
How is a decision reviewed?
12.15 The review and appeal framework of this Bill provides entities
with a number of avenues to have decisions made by the ACNC
Commissioner reviewed. These include:
· making an objection to an administrative decision;
· reviewing an objection decision or an
extension-of-time-refusal decision by the AAT;
· reviewing an objection decision by the courts; or
· making a combined application for AAT review or appeal to
the court.
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Making an objection to an administrative decision
12.16 An entity that is dissatisfied by an administrative decision under
this Bill can have that decision reviewed by making an objection to the
ACNC Commissioner. [Subsection 155-5(1)]
12.17 So that the objection can be fully considered, it must be lodged
in the form specified by the ACNC Commissioner, within a specified
period and must state in detail the ground on which the entity is objecting
to the decision. [Section 160-5]
12.18 When determining the approved form for lodging objections, the
ACNC Commissioner can specify the information required in order to
develop a view and respond to lodged objections.
Timeframe for lodging an objection
12.19 The review period means the period of time in which the
objection must be lodged and is 60 days after the administrative decision
has been served on the entity. This time period provides adequate time for
registered entities and responsible entities to consider administrative
decisions and develop a case for objection. [Subsection 160-10(1)]
12.20 The review period is also consistent with the timeframe provided
under other Commonwealth review and appeal provisions such as
section 14ZW of the TAA 1953 which applies to taxpayers wishing to
make a taxation objection.
12.21 Where the entity is unable to meet the review period, the entity
may apply to the ACNC Commissioner for late lodgement of the
objection by lodging the objection along with a written request to the
ACNC Commissioner to have the objection considered despite the late
lodgement. [Subsection 160-10(2)]
12.22 The written request must include information about why the
entity was unable to meet the 60 day time period and give reasons for why
the ACNC Commissioner should consider the late lodgement of the
objection. [Subsection 160-10(3)]
12.23 The ACNC Commissioner may only accept late lodgement of
objections in special circumstances including, but not limited to, situations
where:
· there were unforeseeable and uncontrollable events; or
· further time is required to ensure all the relevant facts are
considered in coming to a view on the objection.
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Example 12.1
Jerry is a responsible entity for a registered entity and wishes to object
to a decision under this Bill. However, before the end of the review
period, Jerry could not lodge the objection with the ACNC because of
an unforeseen information technology failure.
In this situation it is likely that the ACNC Commissioner would accept
an application for a late objection lodgement from Jerry.
Example 12.2
Carrie is the contact officer for an entity applying to be registered
under this Bill and is dissatisfied with a decision of the ACNC
Commissioner. However, before she can lodge the objection with the
ACNC in the review period, there is a devastating natural disaster in
her location.
In this situation, it is likely that the ACNC Commissioner would accept
an application for a late objection lodgement from Carrie.
Example 12.3
Priyanka is the responsible entity for a registered entity under the Bill
and is dissatisfied with a decision of the ACNC Commissioner and
wishes to lodge an objection.
However, the review period ends one month before the latest financial
statements are ready and Priyanka applies for late lodgement of the
objection to take account of the latest financial statement.
In this situation, it is likely that the ACNC Commissioner would accept
an application for a late objection lodgement from Priyanka.
12.24 After considering the late lodgement request, the ACNC
Commissioner must make a decision to accept or reject the request and
give the entity written notice of that decision. [Subsections 160-10(4) and (5)]
12.25 Where the ACNC Commissioner accepts the request, then the
objection is treated as if it was lodged within the review period. However,
where the ACNC Commissioner rejects the request, the objection will be
refused and the entity can then apply to the AAT for review of the
extension of time refusal decision. [Subsections 160-10(6) and (7)]
Making the decision
12.26 Once an objection has been lodged with the ACNC
Commissioner in the approved form and within the review period, the
ACNC Commissioner is required to consider the grounds on which the
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objection was made and make a decision about whether to allow the
objection, wholly or in part, or disallow it. [Subsection 160-15(1)]
12.27 This decision of the ACNC Commissioner is referred to as an
objection decision and the ACNC Commissioner must, after making the
objection decision, provide the entity with written notice of the decision.
[Subsections 160-15(2) and (3)]
12.28 This written notice will notify the entity of the ACNC
Commissioner's objection decision and set out any further review and
appeal rights open to the entity under Part 7-2 of this Bill. The written
notice will also inform the entity that they may request a statement of
reasons for the objection decision as per their rights under
subsection 28(1) of the Administrative Appeals Tribunal Act 1975 (AAT
Act).
12.29 Where the entity decides to request the ACNC Commissioner to
provide a written notice providing a statement of reasons for the objection
decision, the ACNC Commissioner shall provide this notice to the entity
as soon as practicable but, in any case, within 28 days of making the
request.
12.30 Pursuant to section 28 of the AAT Act, the statement of reasons
should set out the findings on the material questions of fact, make
reference to material or other information on which those findings were
based, and provide clearly articulated reasons for the decision.
Requiring the ACNC Commissioner to make a decision
12.31 Under this Bill, if an entity has lodged an objection with the
ACNC Commissioner in accordance with the requirements of section
160-5, they can, by written notice, require the ACNC Commissioner to
make an objection decision where that decision has not been made within
a particular timeframe. [Subsection 160-20(1)]
12.32 That timeframe is the later of:
· 60 days after the day that the objection was lodged with the
ACNC Commissioner (otherwise referred to as the objection
day); and
· 60 days after the ACNC Commissioner has received the
necessary information, in the case where the ACNC
Commissioner requires the entity to give further information
relating to the objection (so long as the ACNC Commissioner
requested this further information within the original 60 day
period following the lodgement of the objection).
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[Paragraph 160-20(1)(b)]
12.33 To clarify further, the objection day referred to above is also
intended to mean the day on which the ACNC Commissioner agrees to
allow a late objection lodgement. [Subsection 160-20(2)]
12.34 Where an entity provides the ACNC Commissioner with a
written notice requiring a decision to be made, the ACNC Commissioner
then has 60 days to make an objection decision. If no decision has been
made by then, the ACNC Commissioner is taken to have disallowed the
objection, allowing the entity to move to the next stage of the review and
appeal process. [Subsection 160-20(3)]
Reviewing an objection decision or an extension of time refusal decision
by the AAT
12.35 Division 165 of this Bill enables entities to apply to the AAT
where they are dissatisfied with the ACNC Commissioner's objection
decision or refusal to provide an extension of time decision (collectively
referred to as a `Commissioner's decision' for the rest of this Chapter).
[Paragraph 160-25(a) and subsection 160-10(7)]
12.36 Only entities that are directly affected by a decision of the
ACNC Commissioner can apply for an independent review of the
Commissioner's decision by the AAT. This is consistent with the
framework for objections to an administrative decision.
12.37 When making an application to the AAT for review, the entity is
limited to arguing on the grounds stated in the objection to which the
relevant decision relates. This is intended to ensure that the AAT has
sufficient knowledge and information to handle the objection and that
only relevant facts are considered to promote administrative efficiency by
limiting the scope of appeals to directly relevant issues.
[Paragraph 165-40(a)]
12.38 The entity, when making an application to the AAT, also has the
burden of proving that the Commissioner's decision is wrong and should
have not been made, or should have been made differently.
[Paragraph 165-40(b)]
12.39 This burden is appropriately placed on the entity making the
application as it is consistent with common law principles that the party
bringing a law-suit or claiming that another entity's decision is wrong
must prove that this is indeed the case. Further, the facts and evidence
relating to these disputes are peculiarly within the knowledge of
dissatisfied entities.
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12.40 Both limiting the grounds of objection and placing the burden of
proof on the applicant is consistent with Part IVC of the TAA 1953 and it
is intended that this Bill operate in the same manner.
12.41 Entities that apply to the AAT for review of a decision are
required to comply with the Commissioner's decisions until the AAT
review is finalised, and the AAT amends or revokes the decision.
[Section 165-50]
12.42 The fact that a registered entity or responsible individual has
applied for an AAT review or is granted an AAT review cannot be used as
an excuse to fail to implement or comply with a decision of the ACNC
Commissioner.
12.43 Entities are required to comply with the Commissioner's
decision until the AAT review is finalised because it will often be the case
that the Commissioner's decisions will have flow-on implications for the
work of other government departments and agencies. For that reason, it is
necessary to ensure that the Commissioner's decision remains in place
until the review and appeal process has concluded.
12.44 This ensures that decisions of other government departments and
agencies, including the Commissioner of Taxation, are not required to be
amended multiple times causing uncertainty for the registered entity and
potentially increasing administrative costs for government departments
and agencies.
12.45 Once the AAT's decision on the review of a Commissioner's
decision has become final, the ACNC Commissioner has 60 days to
implement the AAT's decision. This includes amending any
determination as is necessary to give effect to the decision. [Section 165-45]
12.46 For the purposes of determining when a decision is final, where
no such appeal has been made within the appeal period, then the AAT's
decision is taken as final and must be implemented by the ACNC
Commissioner after 60 days. [Subsection 165-45(2)]
Modifications to the application of the AAT Act to this Bill
12.47 Under this Bill there are modifications to the manner in which
the AAT Act applies to a Commissioner's decision.
12.48 The modifications are made to promote transparency and
accountability over the operations and activities of the sector, promote
administrative efficiency, and make provisions specific to the documents
and notices that the ACNC Commissioner will provide.
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12.49 These modifications are also modelled on Part IVC of the
TAA 1953 and are intended to operate in the same manner.
Modifications to sections 27, 41 and 44A of the AAT Act
12.50 Under this Bill, sections 27 and 41 of the AAT Act do not apply
to a Commissioner's decision and section 44A of the AAT Act will not
apply to objection decisions only. [Section 165-10]
Section 27 of the AAT Act
12.51 Section 27 of the AAT Act allows an application to be made to
the AAT for a review of a decision by or on behalf of any person, or
persons, whose interests are affected by the decision.
12.52 The AAT Act defines an association of persons to have interests
that are affected by a decision if the decision relates to a matter which is
included in the objects or purposes of the association.
12.53 This provision would allow persons or entities beyond those that
are directly affected by the decision to apply for a review.
12.54 The charities sector is made up of an estimated 56,000 entities.
It is possible that decisions which relate to, for example, registration,
could affect a large segment of the sector. Under this AAT Act provision,
a large segment of the sector and public (including donors and members)
would potentially be able to apply for a review which would be an
inefficient use of government resources, as well as those of the registered
entity.
12.55 Likewise, were section 27 of the AAT Act to apply to a
Commissioner's decision, entities that would apply under section 27 but
were affected indirectly by the decision, may not have access to private
information considered in objection decisions.
12.56 The modification ensures that only well-informed registered
entities or responsible entities (those entities directly affected by
decisions) are able to initiate an AAT review.
12.57 Entities indirectly affected by decisions would not be able to
initiate AAT reviews, however, they would have the right to become party
to an initiated review which would allow the review to cover important
tangential issues of relevance. See paragraph 12.76 of this Chapter.
Section 41 of the AAT Act
12.58 Section 41 of the AAT Act allows the AAT to make an order
varying or revoking the objection decision related to the review prior to
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completion of the review, if the AAT is of the view that the order would
be appropriate for the purposes of securing the effectiveness of the
hearing.
12.59 The section also allows the person who made the decisions, in
this case the ACNC Commissioner, to make a submission in relation to
the matter.
12.60 Providing the AAT with the authority to amend or vary the
ACNC Commissioner's objection decision without having conducted a
full review could undermine the authority of the ACNC Commissioner
and create uncertainty for the sector.
12.61 The ACNC Commissioner's decisions will have flow-on
implications for the work of other government departments and agencies.
Given these linkages, providing the AAT with the authority to change
objection decisions made by the ACNC Commissioner without a full
review would introduce administrative costs for these other departments
and agencies who would have to change tax assessments, the issuance of
grants or similar decisions on multiple occasions.
12.62 Furthermore, it would also result in the AAT authorising the
spending of public monies, a responsibility that appropriately rests with
the agency authorised to do so by the Parliament.
12.63 Such decisions may also undermine the object of this Bill by
affecting the public's reliance on the ACN Register because an entity's
registration may change multiple times in respect of the same period.
12.64 The Bill currently employs the tax law review and appeal model
so that decisions of the ACNC Commissioner and of the Commissioner of
Taxation can be managed together in any review by the AAT or by the
Courts.
12.65 There are a number of reasons why this single review model is
used for the ACNC. Allowing decisions of both the ACNC
Commissioner and the Commissioner of Taxation to be reviewed together
ensures that compliance costs and administrative expense are minimised.
Furthermore, it prevents erosion of tax system integrity. Finally, it
ensures the equitable treatment of all taxpayers.
12.66 Despite provisions in the Bill which modify this section of the
AAT Act, the ACNC Commissioner retains the ability to offer a registered
entity an administrative stay of the review or appeal decision, in certain
circumstances.
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12.67 The ACNC Commissioner may negotiate with a registered entity
to allow the entity to continue to operate as if registered with the ACNC,
pending the outcome of the review or appeal process, similar to the
administrative concession offered by the Commissioner of Taxation. This
negotiation would take into consideration the Commissioner of Taxation's
views about the revenue at risk, the potential risk to donors and the
legitimacy of the basis on which an entity reviews or appeals a decision
(that is, whether the entity is merely attempting to delay a decision, or
not).
12.68 In negotiating an administrative stay of a decision, the ACNC
Commissioner must have regard for the need to consult with other
regulators to ensure that an administrative stay of a decision is appropriate
in each circumstance. This is because the ACNC Commissioner's
decision can have significant implications for other Commonwealth
regulatory systems, including the tax system, prudential regulatory system
and money laundering and terrorist financing regulation.
Section 44A of the AAT Act
12.69 In cases where there is an appeal to the Federal Court of
Australia, section 44A of the AAT Act allows the courts to make orders
varying or affecting the operations or implementation of the ACNC
Commissioner's objection decision.
12.70 The policy reasons for why section 44A of the AAT Act should
not apply to objection decisions made by the ACNC Commissioner are
the same as those given for section 41 of the AAT Act as described above.
12.71 As explained under the heading `Section 41 of the AAT Act'
above, the ACNC Commissioner can negotiate with a registered entity an
administrative stay to allow the registered entity to operate as if it were
registered with the ACNC pending a decision, in low-risk cases.
Modification to section 29 of the AAT Act
12.72 Section 29 of the AAT Act sets out the processes and framework
for applying for an AAT review.
12.73 The modification to section 29 of the AAT Act within this Bill
makes it clear that applications must be in writing, lodged with the AAT,
and lodged within 60 days after the entity making the application is served
with the ACNC Commissioner's written notice of the objection decision.
[Section 165-15]
12.74 The 60-day timeframe ensures consistency with the time period
for lodging objections with the ACNC Commissioner.
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12.75 The modifications within the Bill are identical to those made in
section 14ZZC of the TAA 1953.
Modification to section 30 of the AAT Act
12.76 Subsection 30(1A) of the AAT Act allows other persons whose
interests are affected by the decision which is being reviewed by the AAT
to apply to become a party to the proceedings.
12.77 The modification to subsection 30(1A) of the AAT Act in this
Bill makes clear that the person making application to be party to the
proceedings consents to the order made by the AAT. [Section 165-20]
12.78 This enables entities indirectly affected by decision to become
party to an initiated review which would allow the review to cover
tangential issues of relevance.
Modification to section 37 of the AAT Act
12.79 Subsection 37(1) of the AAT Act provides guidance to the
person with the authority to make objection decisions, in this case the
ACNC Commissioner, on the documents that have to be lodged with the
AAT.
12.80 It also provides the AAT with authority to shorten deadlines and
request documents setting out reasons for objection decisions, and outlines
situations where the person with the authority to make objection decisions
is not required to lodge documents.
12.81 The proposed modifications to section 37 of the AAT Act in this
Bill simplify these requirements leaving no uncertainty over the
documents and information the ACNC Commissioner would have to
provide the AAT, and makes the wording consistent with the documents
and notices issued by the ACNC. [Paragraph 165-25(1)(a)]
12.82 Subsection 37(2) of the AAT Act provides for the AAT to
request other documents or information that it feels may be required to
conduct its review in an effective manner.
12.83 Modifications to this provision under this Bill allow the AAT to
make requests orally at a conference as defined in the AAT Act, and allow
the AAT to request a list of documents that is in the person's possession
or under the person's control. [Paragraph 165-25(1)(b)]
12.84 This simplifies the authority for the AAT to request relevant
information and extend authority to allow the AAT to request a list of
documents, including in a conference setting. [Section 165-25]
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12.85 A related consequential modification will also be made to
section 38 of the AAT Act so that a reference to paragraph 37(1)(a) of the
AAT Act within section 38 is instead read as a reference to subparagraph
165-25(1)(a)(i) of the Bill. [Section 165-30]
Modification to section 43 of the AAT Act
12.86 Section 43 of the AAT Act mandates that the AAT give reasons
orally or in writing for its decision, and provides parties to the proceeding
the right to request reasons in writing from the AAT.
12.87 The modification to section 43 of the AAT Act in this Bill
ensures that the AAT has the authority to publish decisions related to both
private and public hearings. This extension is particularly important for
an objection decision of the ACNC Commissioner as the sector is
comprised of entities that operate for the public benefit and it is necessary
that this information be made public to promote transparency and
accountability in the NFP sector. [Section 165-35]
Reviewing an objection decision by the courts
12.88 Under the review and appeal framework of this Bill, an entity
who is dissatisfied with an objection decision of the ACNC Commissioner
has the right to appeal to the courts. [Paragraph 160-25(b)]
12.89 To have the decision reviewed by the courts the entity must
lodge an appeal with the relevant court within 60 days of receiving written
notice from the ACNC Commissioner of the objection decision.
[Section 170-5]
12.90 When making an appeal to the court, the entity is limited to
arguing on the grounds stated in the objection to which the relevant
decision relates. They also have the burden of proving that the ACNC
Commissioner's decision is wrong and should not have been made, or
should have been made differently. [Section 170-10]
12.91 This is consistent with the treatment for entities having the
decision reviewed by the AAT as explained at paragraph 12.38 of this
Chapter.
12.92 The court may make any order it sees fit when hearing an appeal
against an objection decision. This would include an order to confirm or
vary the objection decision. [Section 170-15]
12.93 Where the court makes an order that is final, the ACNC
Commissioner has 60 days to do all things necessary to implement the
court's decisions. This provides adequate time for the ACNC
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Commissioner to go through required administrative processes to
implement the courts' findings. [Subsection 170-20(1)]
12.94 A court order is final when no appeal is lodged against the order
within the period for lodging an appeal. Where the only possible appeal
against the order is to the High Court of Australia with special leave, and
no application for special leave is made within the period of 30 days after
the order is made, then the order will also be considered final.
[Subsection 170-20(2)]
12.95 The fact that an appeal is pending does not interfere with, or
affect, the objection decision. This ensures that the ACNC
Commissioner's authority is not undermined and limits any uncertainty
for the NFP sector related to the application of objection decisions once an
appeal to the Courts has been, or is being, lodged. [Section 170-25]
12.96 Decisions of the ACNC Commissioner have flow-on effects for
the work of other government departments and agencies. Given these
inter-linkages, ensuring that objection decisions remain valid until
otherwise determined ensures compliance costs for NFPs and
administrative costs for governments are not increased unnecessarily.
Making a combined application for AAT review or appeal to the court
12.97 Under this Bill, entities that are dissatisfied with a decision of
the ACNC Commissioner and are also intending to apply for a review or
appeal of a related administrative decision taken by another government
agency or department, either simultaneously or sequentially, are able to
make a joint action in certain circumstances. [Sections 165-55 and 170-30]
12.98 A government agency or department for the purposes of
combined appeals to the AAT is intended to include all Commonwealth
government agencies or departments.
12.99 In respect to combined appeals to the court, this would include a
decision made by an Australian government agency which as defined in
this Bill includes the Commonwealth, a State or a Territory or an authority
of the Commonwealth or of a State or a Territory.
[Subparagraph 170-30(1)(a)(ii)]
12.100 Entities may make a combined application for AAT review or a
combined appeal to the court and the AAT, and the relevant court may
deal with the decisions together where:
· the decisions are directly related; and
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· it would be useful from a procedural and efficiency
perspective to consider decisions jointly.
[Sections 165-55 and 170-30]
12.101 The need for joint actions under this Bill arises from the linkage
between a decision of the ACNC Commissioner to register an entity and
the fact that ACNC registration will be a necessary precondition for
entities to access other forms of Commonwealth government support.
12.102 In this instance, Commonwealth government support includes,
but is not limited to, access to tax concessions, exemption from
regulations and access to government grants and contracts.
12.103 If an entity's registration is altered by a reviewable decision of
the ACNC Commissioner, then there will potentially be flow on effects to
the range of government support the entity can lawfully access and, more
relevantly, reviewable decisions of other government agencies and
departments.
12.104 Having joint actions under this Bill is intended to promote cost
savings and administrative efficiency for the NFP sector, as well as
ensuring that the totality of issues are considered by the AAT or courts
when reviewing and assessing decisions taken by the ACNC
Commissioner, and related decisions made in other Commonwealth
government agencies and departments.
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Chapter 13
Miscellaneous
Outline of chapter
13.1 This Chapter explains common rules which govern the operation
of administrative matters, including:
· the requirements for approved forms for material given to the
Australian Charities and Not-for-profits Commission
Commissioner (ACNC Commissioner);
· the requirements for address for service rules;
· how some core concepts have been defined;
· administration penalties for late lodgement and false and
misleading statements; and
· how the new law imposes certain obligations, liabilities or
offences on specific responsible entities.
Summary of new law
13.2 The Bill sets out the common rules which govern the operation
of administrative matters of the ACNC. In particular, there are
requirements for the approved forms for material given to the ACNC
Commissioner, address for service rules, as well as administrative
penalties for registered entities for late lodgement and false and
misleading statements.
13.3 This Chapter also explains the imposition of certain obligations,
liabilities or offences on specific responsible entities, as well as outlining
some other core concepts.
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Detailed explanation of new law
Approved forms
13.4 The approved form rules set out matters such as the standard
manner in which certain information must be provided to the ACNC
Commissioner including how that information is to be set out, what is to
be included or appended, who can sign-off on the materials and the
mechanism in which it is to be provided.
13.5 The rules help provide for administrative efficiency and
simplicity in the operation of the ACNC.
13.6 The approved form is determined as an administrative function
of the ACNC Commissioner and does not constitute a legislative
instrument.
13.7 The Bill provides for the ACNC Commissioner to approve the
form of certain information that the ACNC routinely collects such as
returns, applications, notifications and statements.
13.8 The rules also allow the ACNC Commissioner to determine how
information is to be provided to the ACNC Commissioner, such as
whether it may be provided in a paper form or a virtual form, and where
the document is given, for example, electronically or by telephone.
13.9 These rules have been based on similar requirements contained
in other Commonwealth laws, including the Taxation Administration
Act 1953.
13.10 Information is in the approved form if it meets all the following
requirements:
· it is in the form approved by the ACNC Commissioner for
that kind of document;
· it contains a declaration that the information provided is true
and correct, signed by an entity or entities as the form
requires;
· it contains the information that the form requires, and any
further information, statement or document as the ACNC
Commissioner requires, whether in the document or
otherwise; and
· if it is to be given to the ACNC Commissioner, it is given in
the manner that the ACNC Commissioner requires.
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[Subsection 190-10(1)]
13.11 If an entity provides a document to the ACNC Commissioner
that satisfies all the above requirements, except for the requirement that it
contains any further information, statement or document as required by
the ACNC Commissioner, the document is also in the approved form, if it
contains the other information required by the ACNC Commissioner.
[Subsection 190-10(2)]
13.12 The ACNC Commissioner must specify the further information,
statement or document that is required in writing. [Subsection 190-10(2)]
13.13 The ACNC Commissioner may combine more than one
document (for example two notices, or a statement and an application)
into the same approved form. [Subsection 190-10(3)]
13.14 The ACNC Commissioner may approve a different approved
form for different entities. For example, the ACNC Commissioner may
require medium and large registered entities to lodge a different annual
information statement to that lodged by small registered entities.
[Subsections 190-10(4) and note in subsection 190-10(4)]
13.15 The ACNC Commissioner may also defer the time by which
information is to be provided to the ACNC Commissioner, or to another
entity, in the approved form. [Section 190-15]
Declaration by an entity
13.16 If an entity gives a document to the ACNC Commissioner in the
approved form, the entity must make a declaration in the approved form
that any information in the document is true and correct. [Section 190-20]
13.17 This gives assurance to the ACNC Commissioner that the entity
has provided accurate information.
Declaration by an entity where an agent gives a document
13.18 If a document is to be given to the ACNC Commissioner in the
approved form by an agent on the entity's behalf, the entity must make a
declaration in writing:
· stating that the entity has authorised the agent to give the
document to the ACNC Commissioner; and
· declaring that any information the entity provided to the
agent for preparation of the document is true and correct.
[Subsection 190-25(1)]
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13.19 The entity must give the declaration to the agent.
[Subsection 190-25(2)]
13.20 The entity must retain the declaration or a copy of the
declaration for:
· seven years after it is made; or
· a shorter period determined by the ACNC Commissioner in
writing for the entity; or
· a shorter period determined by the ACNC Commissioner by
legislative instrument for a class of entities that include the
entity.
[Subsection 190-25(3)]
13.21 A determination made by the ACNC Commissioner may specify
different periods for different classes of entities. [Subsection 190-25(4)]
13.22 An entity must produce the declaration or copy if requested to
do so within that period by the ACNC Commissioner. [Subsection 190-25(5)]
13.23 The agent must not give the document to the ACNC
Commissioner before the entity makes the declaration.
[Subsection 190-25(6)]
13.24 The entity must sign the declaration. [Subsection 190-25(7)]
Declaration by an agent
13.25 If an agent gives a document to the ACNC Commissioner in the
approved form on behalf of another entity, the agent must, if the document
so requires, make a declaration in the approved form stating that:
· the document has been prepared in accordance with the
information supplied by the other entity; and
· the agent has received a declaration from the other entity
stating that the information provided to the agent is true and
correct; and
· the agent is authorised by the other entity to give the
document to the ACNC Commissioner.
[Section 190-30]
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Signing declarations
13.26 An entity must sign a declaration in a document the entity gives
to the ACNC Commissioner in paper form. [Subsection 190-35(1)]
13.27 If an entity's agent gives a document to the ACNC
Commissioner on the entity's behalf in paper form the document must
contain:
· if the document so requires -- a declaration made by the
entity with the entity's signature; and
· if the document so requires -- a declaration made by the
agent with the agent's signature.
[Subsection 190-35(2)]
13.28 Any document of an entity's that is lodged electronically:
· if the entity gives it to the ACNC Commissioner - must
contain the entity's declaration with the entity's electronic
signature; or
· if the entity's agent gives it to the ACNC Commissioner -
must contain the agent's declaration with the agent's
electronic signature.
[Subsection 190-35(3)]
Address for service
13.29 The new law sets out rules for how the ACNC can serve
documents on registered entities (or on responsible entities of registered
entities). This includes documents such as directions, warnings and
penalty notices.
13.30 These rules require registered entities to keep their details
up-to-date with the ACNC to ensure they receive all material sent to them.
13.31 By using the address for service, the ACNC Commissioner can
presume that documents have been served to the registered entity.
13.32 Failure to update an address with the ACNC may lead to a
registered entity failing to fulfil an important obligation.
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13.33 Registered entities are required to notify the ACNC
Commissioner if they change their address for service. This is explained
in detail in Chapter 7 -- Duty to notify.
13.34 Maintaining an up-to-date address for service makes sure that
registered entities are able to receive all directions and other information
from the ACNC Commissioner, ensuring they meet (and not avoid) their
regulatory obligations.
13.35 It is important for registered entities to regularly check their
electronic and physical mail to ensure they are able to meet their
regulatory obligations.
13.36 An entity's address for service can be a physical address in
Australia, a postal address in Australia or an electronic address that the
entity has given the ACNC Commissioner for the purposes of receiving
documents from the ACNC. [Subsection 195-5(1)]
13.37 If an entity has given the ACNC Commissioner more than one
address for service, the Bill allows the ACNC Commissioner to choose
the address that the ACNC Commissioner reasonably believes to be the
address for service in the circumstances. [Subsection 195-5(2)]
13.38 If an entity has not given the ACNC Commissioner an address
for service the ACNC Commissioner may use an address that he or she
reasonably believes to be the entity's address for service.
[Subsection 195-5(3)]
Example 13.1
Noad Inc is a registered entity. Noad Inc has not given an address for
service to the ACNC Commissioner. The ACNC Commissioner needs
to serve a document on Noad Inc. The Australian Securities and
Investments Commission (ASIC) has an address for Noad Inc. The
ACNC Commissioner may use that address to serve the document on
Noad Inc.
How documents may be given
13.39 A document (however described) may be given to an entity:
· in the manner specified in section 28A of the Acts
Interpretation Act 1901;
· if the entity's address for service is an electronic address --
by sending it to that address;
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· if the entity is a company and a liquidator of the company has
been appointed -- by leaving it at, or posting it to, the
address of the liquidator's office in the most recent notice of
that address lodged with ASIC; or
· if the entity is a company and an administrator of the
company has been appointed -- by leaving it at, or posting it
to, the address of the administrator in the most recent notice
of that address lodged with ASIC.
[Subsection 195-10(1)]
13.40 Despite section 29 of the Acts Interpretation Act 1901, a
document given under the Bill is taken to be given at the time the ACNC
Commissioner leaves or posts it. [Subsection 195-10(2)]
Example 13.2
The Paper Charity has an address for service registered with the
ACNC. The ACNC Commissioner needs to serve a notice on The
Paper Charity. The ACNC Commissioner sends the notice by post to
the address for service held for The Paper Charity on 2 February 2013.
The notice is taken to be given to The Paper Charity on
2 February 2013.
13.41 This Division of the Bill has effect despite paragraphs 9(1)(d)
and (2)(d) of the Electronic Transactions Act 1999. [Subsection 195-10(3)]
Core concepts
Entity
13.42 The new law uses the concept of `entity' as a broad term to refer
to any individual or body.
13.43 The NFP sector is comprised of many diverse entities. The term
entity is used as a general term throughout the Bill to reflect the diversity
of the NFP sector.
13.44 The term entity is used to refer to any of the following:
· an individual;
· a body corporate;
· a body politic;
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· any other unincorporated association or body or persons;
· a trust.
[Subsection 205-5(1)]
13.45 The term entity is used through the Bill in a number of different,
but related senses. It covers all kinds of legal person. It also covers
groups of legal persons, and other things, that in practice are treated as
having a separate identity in the same way as a legal person does. [Note in
subsection 205-5(1)]
13.46 Any other unincorporated association or body or persons does
not include a non-entity joint venture (within the meaning of the Income
Tax Assessment Act 1997). [Subsection 205-5(2)]
13.47 The concept of an entity also distinguishes between the different
capacities in which a legal person may act. For example, an individual
acting in the capacity of a trustee will be treated as a separate entity from
that individual acting in a personal capacity. This will remove the
necessity to continually state that a particular provision only applies to an
individual otherwise than in the capacity of trustee.
13.48 The trustee of a trust is taken to be an entity consisting of the
person who is the trustee, or the persons who are the trustees, at any given
time. [Subsection 205-5(3)]
13.49 This is because a right or obligation cannot be conferred or
imposed on an entity that is not a legal person. [Note 1 in subsection 205-5(3)]
13.50 The entity that is the trustee of a trust does not change merely
because of a change in the person who is the trustee of the trust, or
persons who are the trustees of the trust. [Note 2 in subsection 205-5(3)]
13.51 A legal person can have a number of different capacities in
which the person does things. In each of those capacities, the person is
taken to be a different entity. [Subsection 205-5(4)]
13.52 For example, in addition to his or her personal capacity, an
individual may be a sole trustee of one or more trusts; and one of a
number of trustees of a further trust. In his or her personal capacity, he or
she is one entity. As trustee of each trust, he or she is a different entity.
The trustees of the further trust are a different entity again, of which the
individual is a member. [Example in subsection 205-5(4)]
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13.53 If a provision refers to an entity of a particular kind, it refers to
the entity in its capacity as that kind of entity, not to that entity in any
other capacity. [Subsection 205-5(5)]
13.54 For example, a provision that refers to a company does not cover
a company in a capacity as trustee, unless it also refers to a trustee.
[Example in subsection 205-5(5)]
13.55 Because obligations are placed on registered entities generally,
other rules are required to explain how the law is to be applied where the
entity is not a legal entity. See heading below -- Obligations, liabilities
and offences.
Small, medium and large registered entities
13.56 The concepts small, medium and large registered entities are
used throughout this Bill to differentiate NFP entities based on their
revenue.
13.57 Tiered registration of NFP entities ensures proportionality of
reporting and other requirements for registered entities of different sizes.
13.58 A registered entity is a small registered entity in a particular
financial year if the revenue of the registered entity for the financial year
is less than $250,000, or any other amount prescribed by the regulations
for the purposes of determining tier thresholds. [Subsection 205-25(1)]
13.59 A registered entity is a medium registered entity in a particular
financial year if:
· it is not a small registered entity in the financial year; and
· the revenue of the registered entity for the financial year is
less than $1,000,000, or any other amount prescribed by the
regulations for the purposes of determining tier thresholds.
[Subsection 210-10(2)]
13.60 A registered entity is a large registered entity in a particular
financial year if it is not a small registered entity or a medium registered
entity in the financial year. [Subsection 205-25(3)]
13.61 Revenue is to be calculated for the purposes of this section in
accordance with accounting standards in force at the relevant time (even if
the standard does not otherwise apply to the financial year of the
registered entity concerned). [Subsection 205-25(4)]
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13.62 The ACNC Commissioner may continue to treat a registered
entity as either a small, medium or large registered entity for a financial
year if the ACNC Commissioner is of the opinion that the entity was a
registered entity of that size for the previous financial year, and the entity,
while not being of that size for the current financial year, is likely to
return to that size during the next financial year. [Subsection 205-25(5)]
13.63 This provision allows for the ACNC Commissioner to use
discretion to allow for certain circumstances that may make it
inappropriate for an entity to move between the small, medium and large
thresholds.
13.64 For example, a previously small registered entity disposes of a
capital asset in a particular financial year and this produces a large amount
of revenue, causing the entity to move beyond the threshold of a small
registered entity, and into the threshold of a medium registered entity. As
this is an uncommon event and the entity is likely to be a small registered
entity in the next financial year, the ACNC Commissioner may continue
to treat the entity as a small registered entity, even though it is a medium
registered entity in that particular financial year.
13.65 The tiered framework minimises the compliance burden placed
on registered entities, while striking a balance with accountability and
transparency.
13.66 The tiered framework ensures that all registered entities provide
standardised information which is useful to the public, for example to
allow members of the public to make meaningful assessments of
registered entities in considering whether to volunteer for, or donate to,
these organisations.
13.67 For further information see Chapter 6 - Reporting and record
keeping.
Responsible entities
13.68 The concept of responsible entity identifies individuals and other
entities that are responsible for the decision-making, day-to-day
management and compliance of a registered entity.
13.69 The term responsible entity is used throughout the new law to
identify entities to whom responsibilities and liabilities in relation to
registered entities fall.
13.70 Each of the following is a responsible entity of a registered
entity.
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13.71 In the case of a registered entity that is a company, the
responsible entities are the directors. [Paragraph 205-30(a)]
13.72 In the case of a registered entity that is a trust the responsible
entities are each of the following:
· a trustee of the registered entity;
· if a trustee of the registered entity is a body corporate -- a
director of the trustee.
[Paragraph 205-30(b)]
13.73 A person who is any of the following:
· a trustee in bankruptcy of the registered entity;
· a receiver, or receiver and manager, of the property of the
registered entity;
· an administrator of the registered entity;
· an administrator of a deed of a company arrangement
executed by the registered entity;
· a liquidator of the registered entity; or
· a trustee or other entity administering a compromise or
arrangement made between the registered entity and someone
else.
[Paragraph 205-30(c)]
13.74 For an incorporated association the responsible entities are
members of the management committee.
13.75 The law also looks to corporate responsible entities (such as
corporate trustees) to identify other responsible entities who control the
mind and will of the registered entity (such as directors of a corporate
trustee of a registered entity that is a trust).
Company
13.76 In this Bill the term company means:
· a body corporate; or
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· any unincorporated association or body of persons; but does
not include a partnership.
[Section 205-10]
Basic religious charity
13.77 The term basic religious charity is used throughout this Bill to
identify certain registered entities that have different obligations and
requirements under the Bill.
13.78 A basic religious charity is an entity that meets all of the
following requirements:
· it is a registered entity;
· it is registered as the type -- charity and as the subtype --
entity with a purpose that is the advancement of religion; and
· it is not entitled to be registered as any other subtype.
[Subsection 205-35(1)]
13.79 An entity would not be entitled to be registered with another
subtype to the extent that it activities in that subtype are merely ancillary
and incidental to its subtype registration. For example, a church that is
registered with the subtype - entity with a purpose that is the advancement
of religion occasionally provides clothes and food vouchers to families
that attend their church services and that are experiencing poverty. This
service is not provided frequently, and is merely incidental to the
registered entity's activities to advance religion.
13.80 An entity is not a basic religious charity if:
· it is a body corporate that is registered under the
Corporations Act 2001;
· it is a corporation registered under the Corporations
(Aboriginal and Torres Strait Islander) Act 2006;
· the entity is incorporated under a State or Territory
Incorporated Associations Act;
· it is registered under the Associations Incorporation Act 2005
of Norfolk Island; or
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· it is registered under the Companies Act 1985 of Norfolk
Island.
[Subsection 205-35(2)]
13.81 An entity is also not a basic religious charity if it is a deductible
gift recipient (DGR). [Subsection 205-35(3)]
13.82 An entity may still be considered a basic religious charity if it
operates a fund, authority or institution as a separate entity that is a DGR,
where the running of the DGR and all DGR funds are kept separate from
the parent entity. For example, a church may operate a trust that is listed
on the Register of Cultural Organisations as a DGR. The trust is a
separate entity and has a separate bank account. All DGR funds are kept
separate from the church. In this case, the church could still be considered
a basic religious charity.
13.83 In the case where a church operates a fund, authority or
institution that is a DGR, but where all the church and DGR funds are
kept in one bank account the church would not be considered a basic
religious charity.
13.84 In this case, the church would have to separate the DGR fund,
authority or institution so that the DGR can report separately. In this case,
the church could then be considered a basic religious charity.
13.85 An entity is also not a basic religious charity at a time in a
financial year if the ACNC Commissioner has allowed it (together with
one or more other entities) to form part of a reporting group for the year
under section 60-95. [Subsection 205-35(4)]
13.86 An entity is also not a basic religious charity at a time if the
total of the grants (however described)(if any) it receives from Australian
government agencies in a financial year exceeds $100,000; in any of
these financial years:
· the financial year in which the time occurs; or
· either of the previous two financial years.
[Subsection 205-40(5)]
13.87 This requirement will only apply from the 2013-14 financial
year. That is to say, if a registered entity receives a grant in the 2012-13
financial year or an earlier financial year, the registered entity will not be
excluded from being considered a basic religious charity.
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13.88 The definition of Australian government agency used in the Bill
does not include local government bodies. Accordingly, an entity may
receive grants to any value from a local government body and, providing
it meets all other requirements, could still be considered a basic religious
charity.
Governing rules
13.89 Governing rules are those documents of an NFP entity that set
out its purposes and how it is to be run. Governing rules may include a
constitution, association rules, cooperative rules, memorandum and
articles of association, legislation, a trust deed or church law.
[Section 300-5]
13.90 Governing rules cover a broad range of topics, including rules
about an entity's mission, procedures for when an entity winds up,
removal of members, how the governing rules can be altered and what
happens when an officer of the entity resigns from his or her position.
13.91 An entity's governing rules may be drawn from more than one
source.
13.92 For example, a church parish may be subject to governing rules
set at an Australia-wide, or world-wide, level, as well as to governing
rules established at the parish level.
13.93 The content of the governing rules must be binding on the
registered entity. Rules that allow an entity to do certain things, but do
not bind them to do certain things, are not sufficient.
13.94 A registered entity must notify the ACNC Commissioner of any
changes made to their governing rules -- see Chapter 7 -- Duty to Notify.
13.95 In addition, the Governor-General may make regulations
relating to the governance standards which cover the content of a
registered entity's governing rules.
Administrative Penalties
13.96 The Bill establishes a regime for administrative penalties.
13.97 Penalties can be administrative, civil or criminal. Civil and
criminal penalties are imposed by the courts, whereas administrative
penalties are imposed without the need for court action.
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13.98 The ACNC will rely on entities providing correct information to
establish their eligibility for registration as a charity, and in the future, for
other NFP statuses.
13.99 Where an entity fails to correctly report to the ACNC, this may
lead to the incorrect registration of an entity and the subsequent provision
of tax concessions and other benefits and exemptions where they should
not have been provided. Incorrect reporting, or a failure to report, impacts
on the public at large, through a reliance on incorrect information.
13.100 It is expected that administrative penalties in relation to an
entity's dealings with the ACNC will not be imposed frequently.
However, it is important that appropriate sanctions are put in place for
those who seek to purposely mislead the ACNC Commissioner, whilst
protecting those who unintentionally provide the ACNC Commissioner
with incorrect information, having taken reasonable care not to.
13.101 The administrative penalties regime is proportional and
dynamic. As such, there are more severe penalties for prolonged lateness,
attempts to mislead the ACNC Commissioner and for providing
deliberately false information. Conversely, penalties are more lenient
where an entity voluntarily provides information.
False or misleading statements
13.102 For the purposes of the administrative penalties regime, a
statement may be made orally, in a document, or any other way (including
electronically) for a purpose connected with the Bill. Administrative
penalties also apply to statements made by an entity's agent as if they had
been made by the entity. [Section 175-5]
Liability to penalty
13.103 An entity is liable to an administrative penalty if the entity
makes a false or misleading statement to the ACNC Commissioner or to
an entity that is exercising powers or performing functions under the Bill.
[Paragraph 175-10(1)(a)]
13.104 In this Bill, a statement may be false or misleading in a material
particular whether because of things in it or omitted from it.
[Paragraph 175-10(1)(b)]
13.105 An entity is also liable to an administrative penalty in these
circumstances where a statement is made by an entity's agent as though it
had been made by the entity. [Note in paragraph 175-10(1)(b)]
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13.106 An entity is liable to an administrative penalty if the entity
makes a false or misleading statement which is, or purports to be, one
required or permitted by this Bill. An entity is liable where a statement is
made to an entity other than the ACNC Commissioner or an entity
exercising powers or performing functions under this Bill.
[Subsection 175-10(2)]
13.107 However, there is an exception for reasonable care. That is, an
entity is not liable to an administrative penalty if the entity (or their agent
where relevant) took reasonable care in connection with the making of the
statement. [Subsection 175-10(3)]
Example 13.3
Giving Incorporated makes a false or misleading statement to the
ACNC Commissioner, but did so unintentionally. The entity is liable
to an administrative penalty. If the entity is able to show that they took
reasonable care to prevent making the misleading statement, no penalty
will be imposed.
13.108 When an entity makes an error or omission in documentation,
the ACNC Commissioner will take into account the relevant
circumstances, such as, previous compliance history, when deciding what
action to take, particularly in relation to pursuing administrative penalties.
Amount of penalty
13.109 The Bill provides for a base penalty amount that may be
increased or decreased according to certain factors, based on the
culpability and actions of the registered entity. [Section 175-15]
13.110 The base penalty amount is worked out according to the table in
the Bill which sets out the penalty units applicable to various types of
false or misleading statements. [Subsection 175-20(1)]
13.111 There is a higher penalty for a statement that was false or
misleading because of intentional disregard of the Bill by the entity or its
agent than there is for a statement which was false or misleading because
of recklessness by the entity or its agent.
13.112 A statement that was false or misleading because of a failure by
the entity or its agent to take reasonable care to comply with the Bill is
subject to a lesser penalty again. Whereas where an entity fails to give a
document in accordance with the Bill where that document is necessary
for the ACNC Commissioner to make a decision, the entity is subject to a
higher penalty. [Subsection 175-20(1)]
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13.113 The item that produces the greater base penalty amount will be
used where more than one item in the table applies. [Subsection 175-20(2)]
13.114 An entity may have their base penalty amount reduced if the
entity received information or advice from the ACNC Commissioner in
some form which lead the entity to believe that the Bill operated in a
certain way. [Subsection 175-20(3)]
13.115 Information published on the ACNC website is to be taken as
having been approved by the ACNC Commissioner in writing for these
purposes.
Increase in penalty
13.116 The Bill provides for circumstances where the base penalty is
able to be increased by 20 per cent. An increase in the penalty will occur
if the entity took steps to prevent or obstruct the ACNC Commissioner
from finding out about the false or misleading nature of the statement.
[Paragraph 175-25(a)]
13.117 The base penalty is increased by 20 per cent where the entity
became aware of the false or misleading nature of the statement made to
the ACNC Commissioner or another entity after the statement had been
made and did not tell the ACNC Commissioner or the other entity about it
within a reasonable time. [Paragraph 175-25(b)]
13.118 The penalty is also increased if the entity has been liable to a
similar penalty previously. [Paragraph 175-25(c)]
13.119 This allows for the ACNC Commissioner to recognise
differences between registered entities that have made every effort to
comply with their obligations under the Bill, and those entities which have
deliberately sought to mislead the ACNC Commissioner, or withhold
information from the ACNC Commissioner. This ensures that the
administrative regime is proportional and responsive to different
circumstances.
Reduction in penalty
13.120 The Bill provides for circumstances where the base penalty is
able to be reduced by 20 per cent where the entity voluntarily informs the
ACNC Commissioner of the false or misleading statement.
13.121 The base penalty amount is reduced if the ACNC Commissioner
tells the entity that an examination is to be made of the entity's affairs
relating to this Bill and after this time the entity voluntarily tells the
ACNC Commissioner, in the approved form, about the false or misleading
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nature of the statement and telling the ACNC Commissioner will likely
save the ACNC Commissioner a significant amount of time or resources.
[Subsection 175-30(1)]
13.122 In recognition of the savings made to the time and resources of
the ACNC Commissioner, the penalty amount is reduced to nil if the
entity voluntarily tells the ACNC Commissioner, in the approved form,
about the false or misleading nature of the statement before the day the
ACNC Commissioner tells the entity that an examination is to be made in
relation to the entity's affairs under the Bill. [Paragraph 175-30(2)(a)]
13.123 In the case where the ACNC Commissioner makes a public
statement requesting entities to make a voluntary disclosure by a
particular earlier day about a matter that applies to its affairs, the entity
must voluntarily tell the ACNC Commissioner before that day to have the
penalty amount reduced. [Paragraph 175-30(2)(b)]
13.124 The ACNC Commissioner has discretion to treat a voluntary
statement as having occurred before being told about the examination,
even if the voluntary statement is made after having been told about the
examination, if the ACNC Commissioner considers it appropriate to do so
in the circumstances. [Subsection 175-30(3)]
Failure to lodge documents on time
13.125 The Bill sets out the penalties for failing to lodge documents on
time.
13.126 Penalties for lodging documents late encourage registered
entities to lodge documents on time.
13.127 If the ACNC Commissioner has documents on time, he or she
can ensure that information on the Australian Charities and Not-for-profits
Register is up to date, and that the ACNC Commissioner has the most
accurate information for each registered entity on which to base
administrative decisions.
Liability to penalty
13.128 The ACNC Commissioner needs certain documents in order to
make informed decisions in relation to entities registered with the ACNC.
As such, it is important that the ACNC Commissioner has access to timely
and accurate information.
13.129 Where an entity is required under this Bill to give a report,
return, notice, statement or other document to the ACNC Commissioner
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and the entity fails to do so in the required time the entity will be liable to
an administrative penalty. [Section 175-35]
13.130 Proportional and appropriate penalties are required to ensure that
registered entities have an incentive to comply with their obligations
under the Bill.
Amount of penalty
13.131 The amount of the penalty for failure to lodge documents on
time varies as to the size of the entity. Medium and large entities are
subject to proportionately higher penalties. Small entities will be required
to pay the base penalty amount only. [Section 175-40)]
13.132 Medium registered entities are required to pay double the base
penalty amount. [Paragraph 175-40(1)(a)]
13.133 Large registered entities are required to pay five times the base
penalty amount. [Paragraph 175-40(1)(b)]
13.134 The base penalty amount is one penalty unit for each period of
28 days or part of a period of 28 days starting on the day when the report,
return, notice, statement or other document is due and ending when the
entity gives the document. There is a maximum of five penalty units.
[Subsection 175-40(2)]
13.135 Section 4AA of the Crimes Act 1914 sets out the current value
of a penalty unit. If this value changes, the base penalty amount is
calculated using the amount applying at the start of the relevant 28 day
period. [Note in paragraph 175-40(2)(b) and subsections175-40(3)]
13.136 The ACNC Commissioner can notify the entity of the penalty
before the entity actually provides the relevant report, return, notice or
other document. If necessary, the amount of the penalty can be increased
later, when the total amount is known. [Subsection 175-40(4)]
Machinery provisions for administrative penalties
13.137 The Bill sets out the machinery provisions in relation to
administrative penalties, such as the requirement of the ACNC
Commissioner to give written notification of the penalty, the due date for
the penalty, the power of the ACNC Commissioner to remit the penalty,
interest charges on unpaid penalties, and the collection of the penalty by
the Commissioner of Taxation.
13.138 The machinery provisions ensure that the administrative
penalties operate as a flexible and effective enforcement mechanism.
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13.139 The Bills give the ACNC Commissioner the power to remit all
or part of an administrative penalty. This means that the ACNC
Commissioner may decide that, although the penalty is imposed, that he
or she will remove liability for the penalty because it is appropriate in the
circumstances to do so. This can happen either by the ACNC
Commissioner deciding not to issue a notice or by issuing a notice and
later reducing any liabilities in part or in full.
13.140 This broad discretion allows the Commissioner to ensure that
administrative penalties are only used in circumstances where it is
appropriate to do so, ensuring that the Commissioner can be responsive to
the unique aspects of the NFP sector, and recognise that administrative
penalties should not be imposed if they would merely unfairly penalise
those individuals who depend on the services provided by the entity in
question.
13.141 Where an administrative penalty is imposed on an entity, the
ACNC Commissioner must provide written notice to the entity, setting out
the entity's liability to pay the penalty and the reasons behind the penalty.
[Sections 175-45 and 175-50]
13.142 If the ACNC Commissioner is required to give a notice to the
entity for another unrelated reason, the ACNC Commissioner can provide
the penalty notice in the same document. [Section 175-50]
13.143 Where the ACNC Commissioner has issued a penalty notice, the
penalty will be due for payment 14 days after the day specified in the
notice. [Section 175-55]
13.144 This Bill provides the ACNC Commissioner with the power to
remit all or part of an administrative penalty [Section 175-60]. This means
that the ACNC Commissioner may decide that, although there is a liability
for a penalty, that he or she will remove liability for the penalty because it
is appropriate in the circumstances to do so.
Example 13.4
The ACNC Commissioner notifies Lizzie Inc., a registered entity, that
a penalty will be imposed on Lizzie Inc. for making a false or
misleading statement in its registration documentation. The date of the
notice is 29 March 2013, meaning that the notice will be due for
payment 14 days later, on 13 April 2013. The payment is due 14 days
after the date specified on the notice, even though some of the days
during that period were public holidays for the Easter period.
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Example 13.5
Following on from the example above, the ACNC Commissioner
decides that it is not appropriate to collect the administrative penalty
from Lizzie Inc. On 28 March 2013 there was a fire at the premises of
Lizzie Inc. Therefore, Lizzie Inc. was unable to lodge on time. The
ACNC Commissioner decides to remit the penalty in full, and notifies
Lizzie Inc. accordingly. Lizzie Inc. is not required to pay the penalty.
13.145 Where the ACNC Commissioner decides not to remit the
penalty, or to remit only part of the penalty, the ACNC Commissioner
must give written notice of the decision and the reasons for the decision to
the entity. [Subsection 175-60(2)]
13.146 Section 25D of the Acts Interpretation Act 1901 sets out rules
about the content of a statement of reasons [Subsection 175-60(2) note].
13.147 This does not mean the ACNC Commissioner needs to consider
remission in all cases and give reasons each time. The ACNC
Commissioner need only give reasons in cases where the ACNC
Commissioner actively considers whether to exercise the discretion and
decides not to.
13.148 In the routine course, the ACNC Commissioner would not be
expected to consider remission unless requested to do so by the entity
subject to the penalty.
13.149 Where the ACNC Commissioner decides to any extent not to
remit an amount of penalty, and the amount of penalty payable after the
refusal is more than two penalty units and the entity is dissatisfied with
the decision, the entity may object against the decision according to the
review and appeal provisions of the Bill. [Subsection 175-60(3)]
13.150 The general interest charge (GIC) will apply on unpaid penalty
amounts arising under this Division. The GIC has the same meaning as
under the Taxation Administration Act 1953.
13.151 If an entity fails to pay all or part of their penalty by the due
date, the entity is liable to pay the GIC on the unpaid amount for each day
the debt remains outstanding. The debt is calculated for each day starting
at the beginning of the day on which the amount was due to be paid and
finishing at the end of the last day where either the amount or the GIC on
any of the amount, remains unpaid. [Section 175-65]
13.152 This Bill provides for the collection of the penalty by the
Commissioner of Taxation. [Section 175-70]
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13.153 When a notice is given, the penalty and any GIC in respect of
the penalty becomes a tax-related liability under section 255-1 in Schedule
1 to the Taxation Administration Act 1953. The collection and recovery
rules applying to these debts are located in Part 4-15 in Schedule 1 to the
Taxation Administration Act 1953. [Subsection 175-70(2)]
13.154 For the purposes of Part IIB of the Taxation Administration Act
1953, the penalty and any GIC in respect of the penalty is a primary tax
debt. This provision allows the Commissioner of Taxation to add the
penalty to an entity's running balance account. [Subsection 175-70(1)]
13.155 To allow the Commissioner of Taxation to collect the debt, the
ACNC Commissioner must notify the Commissioner of Taxation when he
or she gives an entity a written notice. [Subsection 175-70(3)]
13.156 Following on from the paragraph above, the ACNC
Commissioner must also notify the Commissioner of Taxation if he or she
remits all or part of the penalty. [Subsection 175-70(4)]
13.157 If the ACNC Commissioner uses his or her discretion and does
not issue a penalty notice to the registered entity because the ACNC
Commissioner has remitted the penalty in full, the ACNC Commissioner
is not required to notify the Commissioner of Taxation of the penalty.
13.158 This communication between the ACNC Commissioner and the
Commissioner of Taxation will allow the Commissioner of Taxation to be
fully aware of any debts that he or she is to pursue in relation to this
Division. Further information about communication between the ACNC
Commissioner and the Commissioner of Taxation is to be set out in the
Memorandum of Understanding between the two Commissioners.
13.159 The Commissioner of Taxation is responsible for the debt for the
purposes of the Financial Management and Accountability Act 1997.
[Subsection 175-70(2) note 1 and 2]
13.160 The Commissioner of Taxation will treat the debt as a primary
tax debt, in the same way that any debt arising from a taxation law would
be treated.
13.161 Upon request in writing by the ACNC Commissioner, the
Commissioner of Taxation must notify the ACNC Commissioner of any
action taken by the Commissioner of Taxation to recover a debt
attributable to the penalty. [Subsection 175-70(5)]
13.162 Allowing the Commissioner of Taxation to collect ACNC debts
ensures cost effectiveness and efficiency for the Government and for the
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entity, ensuring all its debts are centralised and managed by one
government agency.
Obligations, liabilities and offences
Overview
13.163 If an entity is subject to an obligation or liability, or commits an
offence, certain entities that are responsible for managing the entity may
also be subject to the obligation or liability, or commit the offence, in
specific situations. [Division 180]
13.164 This ensures that certain responsible entities are accountable for
fulfilling the obligations contained in the Bill. This is particularly
important in the case of entities that do not have legal personality, such as
unincorporated associations and trusts, as they cannot be sued or
penalised.
13.165 In contrast, a body corporate does have separate legal
personality, and can be sued or penalised. For this reason, the Bill sets out
a more streamlined and targeted framework for attaching personal liability
to directors of a body corporate. The directors of the body corporate will
not be made personally liable for any offences contained in the Bill.
Furthermore, the directors will only be personally liable for the liabilities
of the body corporate in certain limited cases, for example, if there is a
deliberate act involving dishonesty on their part.
13.166 This regime ensures that certain responsible entities are
accountable for making sure that the entity complies with the law, whilst
protecting those responsible entities by providing that they will only be
subject to certain liabilities or offences in specified cases, for example, if
they act dishonestly.
Obligations, liabilities and offences
13.167 The Bill expressly identifies those requirements that result in an
offence. For example, a failure to comply with a direction from the
ACNC Commissioner would result in an offence [Section 85-30].
13.168 In addition to offences other liabilities can arise, for example, as
a result of administrative penalties. A liability is an amount payable under
the Act, which can only arise where there has been a contravention of the
Act. For example, a failure to lodge an annual report on time, which may
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result in the imposition of an administrative penalty [Section 175-35]. The
administrative penalty regime was explained earlier in this Chapter.
13.169 An obligation includes any requirement contained in the Bill, for
example, the obligation to keep financial records. Irrespective of whether
a liability or offence arises, the Bill makes it clear that certain responsible
entities are responsible for fulfilling the obligations contained in the Bill.
However, in some cases, the Bill provides greater protection for
responsible entities in respect of liabilities and offences that apply to them
by requiring that specific fault elements be present, as noted above.
13.170 An obligation can continue to apply to certain responsible
entities, even if the entity is not subject to an offence provision or another
type of liability. For example, if an unincorporated association fails to
keep financial records, the association will commit an offence under the
Bill. In this case, the members of the committee of management will not
be taken to have personally committed the offence if they did not aid,
abet, counsel or procure the act or omission, or if they were not knowingly
concerned in, or a party to, the act or omission. However, they will be
subject to the obligation to keep financial records.
13.171 Imposing these obligations, offences and liabilities on certain
responsible entities does not reduce or negate the obligations, offences
and liabilities applying to the entity itself.
13.172 The obligations, offences and liabilities of entities are not
imposed on receivers, administrators or liquidators of entities under the
Bill.
Unincorporated associations and bodies of persons
Obligations
13.173 An obligation that is imposed on an unincorporated association
or body of persons is also imposed on each member of the committee of
management at the time the obligation arose. [Subsection 180-5(1)]
13.174 As the unincorporated association or body of persons has no
separate legal personality, these obligations need to be placed on the
members of the committee of management to ensure that the association
or body complies with the law.
Liabilities
13.175 A liability that is payable under the Bill (that is, a liability that
results from a contravention of the Bill) by an unincorporated association
or body of persons is payable by each member of the committee of
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management at the time the amount became payable [Subsection 180-5(2)].
This is consistent with the existing position in respect of unincorporated
associations and bodies of persons, as they have no separate legal
personality, and therefore, the debts of the association or body are payable
by the members.
13.176 The members of the committee are jointly and severally liable to
pay the amount. [subsection 180-5(3)] This ensures that the ACNC
Commissioner could sue any of them, or could sue them as a group.
13.177 If one or more members pay the amount, they have a right of
indemnity, subrogation and contribution against other members of the
committee. [Section 180-35]
Offences
13.178 Any offence that is committed by an unincorporated association
or body of persons under the Bill is taken to have been committed by each
member that was a member of the committee of management at the time
the association or body committed the offence, only if the member:
· aided, abetted, counselled or procured the relevant act or
omission; or
· was in any way knowingly concerned in, or a party to, the
relevant act or omission (whether directly or indirectly and
whether by any act or omission of the director).
[Subsections 180-10(1) and (2)]
13.179 There are two defences available to a member of the committee
of management in respect of the offence provisions.
13.180 An offence will not apply to the member of the committee of
management if, because of illness or for some other good reason, it would
have been unreasonable to expect the member to take part, and the
member did not take part, in the management of the association or body at
any time when the offence was committed. [Subsections 180-10(3) and
180-15(1)]
13.181 An offence will also not apply to the member of the committee
of management if the member took all reasonable steps to ensure that the
association or body did not commit the offence, or there were no such
steps the member could have taken [subsection 180-15(2)]. For example, if a
member of the committee was out-voted at a board meeting on a particular
resolution to do an act that would lead to a breach of the Bill, it is likely
that they could rely on this defence.
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13.182 In determining what are reasonable steps, it is necessary to have
regard to when, and for how long, the member was a member of the
management of committee, and all other relevant circumstances.
[Subsection 180-15(3)]
13.183 A defendant bears the evidential burden to prove the matters in
respect of these defences.
13.184 Under subsection 13.3(3) of the Criminal Code, `evidential
burden' means the burden of adducing or pointing to evidence that
suggests a reasonable possibility that the matter exists or does not exist.
13.185 In the context of these defences, this would mean that a member
seeking to rely on one of the defences will need to point to relevant
evidence, including evidence of their illness or any reasonable steps taken
by them.
13.186 This is consistent with the Attorney-General Department's
publication entitled A guide to framing Commonwealth offences,
infringement notices and enforcement power where it states that an
evidential burden of proof should generally apply to a defence where there
is an offence-specific defence. In these situations, the defendant is in the
best position to provide evidence justifying why they triggered the
offence-specific defence.
13.187 In this case, placing the evidential burden on the defendant is
justified as they will be able to point to any relevant evidence relating to
their illness and the extent of any participation in the management of the
association or body, or any reasonable steps taken by them.
13.188 Despite the evidential burden resting on the defendant, the
prosecution retains the `legal burden' of proof and is required to prove
each element of an offence beyond reasonable doubt, consistent with the
requirements of Article 14 of the International Covenant on Civil and
Political Rights.
Trusts
Obligations
13.189 An obligation that is imposed on a trust is also imposed on each
trustee at the time the obligation arose, provided the trustee is not a
corporate trustee.
13.190 If the trustee is a corporate trustee, the obligation is imposed on
each director of the corporate trustee, as well as the trustee, at the time the
obligation arose. [Subsection 180-20(1)]
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Liabilities
Trustee is not a corporate trustee
13.191 A liability that is payable under the Bill (that is, a liability that
results from a contravention of the Bill) by a trust is payable by each
trustee at the time the amount became payable, provided the trustee is not
a corporate trustee. [Subsection 180-20(2)]
13.192 The trustees are jointly and severally liable to pay the amount
[Subsection 180-20(4)].
This ensures that the ACNC Commissioner could sue
any of them, or could sue them as a group. If one or more trustees pay the
amount, they have a right of indemnity, subrogation and contribution
against any other trustees [Section 180-35].
Trustee is a corporate trustee
13.193 If the trustee, or one or more of the trustees, is a corporate
trustee, the liability is payable by the trustee and each director of the
corporate trustee at the time the obligation arose only if there is a
deliberate act or omission of the director involving dishonesty, gross
negligence or recklessness. [Subsection 180-20(3)]
Joint and several liability
13.194 The trustees, and any directors of a corporate trustee, are jointly
and severally liable to pay the amount [subsection 180-20(4)]. This ensures
that the ACNC Commissioner could sue any of them, or could sue them as
a group. If one or more trustees or directors pay the amount, they have a
right of indemnity, subrogation and contribution against any other trustees
or directors. [Section 180-35]
Commissioner of Taxation has direct access to trust assets
13.195 In suing for amounts owed by a trust, the Commissioner of
Taxation is not limited to recovering against the personal assets of the
trustees or directors of the corporate trustee. He or she can also take
action directly against the trust assets. [Section 180-20(5)]
Offences
13.196 Any offence that is committed under the Bill by a trust, is taken
to have been committed by each trustee at the time the trust committed the
offence. [Section 180-25]
Trustee is a corporate trustee
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13.197 Directors of a corporate trustee are not subject to an offence
provision contained in the Bill that applies to a trust.
Bodies corporate
Liabilities
13.198 A liability that is payable under the Bill (that is, a liability that
results from a contravention of the Bill) by a registered body corporate is
also payable by each director of the body corporate at the time the amount
became payable, only if the liability arose because of a deliberate act or
omission of the director involving dishonesty, gross negligence or
recklessness. [Section 180-30]
13.199 The directors and the body corporate are jointly and severally
liable to pay the amount. [subsection 180-30(3)] This ensures that the ACNC
Commissioner could sue any of them, or could sue them as a group. If
one or more directors pay the amount, they have a right of indemnity,
subrogation and contribution against any other directors [Section 180-35].
Offences
13.200 Directors of a body corporate are not subject to an offence
provision contained in the Bill that applies to the body corporate.
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Chapter 14
Transitional provisions
Outline of chapter
14.1 This Chapter outlines the transitional arrangements for:
· registration;
· reporting;
· the Australian Charities and Not-for-profits (ACN) Register;
· Australian Charities and Not-for-profits Commission
(ACNC) annual report;
· the Advisory Board;
· endorsement timing; and
· the disclosure of protected taxation information to the
ACNC.
14.2 References in this Chapter to the `Consequential and
Transitional Bill' are references to the Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
(Consequential and Transitional Bill). All other references to `the Bill'
are references to the main ACNC Bill.
Summary of new law
14.3 This Chapter explains the transitional arrangements that apply to
various aspects of the Bill under the Consequential and Transitional Bill.
14.4 These transitional arrangements allow entities time to transition
effectively from endorsement under the taxation law to the new
arrangements under the Bill. The transitional arrangements also facilitate
additional time for the ACNC to perform its powers and functions under
the Bill.
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Detailed explanation of new law
Registration
14.5 Transitional registration arrangements will apply that will enable
certain entities endorsed or eligible under Division 50 of the Income Tax
Assessment Act 1997 (ITAA 1997) to be registered entities under the Bill.
14.6 However, once transitioned, all registered entities are then
subject to the ongoing requirements of the ACNC in order to remain
registered and charities that are not registered with the ACNC are not
eligible to continue to receive Commonwealth tax concessions from
1 October 2012. For more information on Registration see Chapter 3 --
Registration.
Charities and charity sub-types
14.7 The entity types described below are automatically registered
with the ACNC on 1 October 2012 through the transitional registration
arrangements. They do not need to do anything else in order to become
registered.
Charities
14.8 Under these transitional registration arrangements, entities that
are endorsed by the Australian Taxation Office (ATO) prior to the
commencement of the ACNC are taken to be registered entities under the
ACNC on the commencement of the ACNC, under the type - charity.
[Schedule 1, item 2 of the Consequential and Transitional Bill]
14.9 For the purposes of the transitional registration arrangements,
`charities' are those entities that are endorsed by the ATO as charities that
are income tax exempt under table items 1.1 and 1.5 to 1.5B in section
50-5 of the ITAA 1997. This includes all entities which are charitable
institutions, funds or trusts endorsed by the Commissioner of Taxation.
14.10 Registration as a subtype under the Bill is not automatic, but if
an entity meets the requirements, it can register as one or more subtype at
a later date.
Health promotion charities
14.11 Under these transitional registration arrangements, entities that
are currently endorsed as health promotion charities are taken to be
registered entities under the ACNC on the commencement of the ACNC
as entities with a type -- charity and a subtype -- entity whose principal
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activity is to promote the prevention or the control of diseases in human
beings. [Schedule 1, item 3 of the Consequential and Transitional Bill]
14.12 For the purposes of the transitional registration arrangements,
`health promotion charities' are those entities that are;
· income tax exempt under table item 1.1; and
· endorsed under table item 1.1.6 of subsection 30-20(1) of the
ITAA 1997; or
· have access to fringe benefits tax (FBT) concessions under
section 57A of the FBTAA)
Example 14.1
Yellow Lines is a health promotion charity registered with the
ATO and eligible for income tax exemptions under the ITAA
1997 and FBT concessions under the FBTAA. On 1 October
2012 Yellow Lines is automatically registered with the ACNC
under the type -- charity and the subtype -- institution whose
principal purpose is to promote the prevention or the control of
diseases in human beings. Yellow Lines does not need to do
anything in order to be registered on 1 October 2012.
Public benevolent institutions
14.13 Entities which are currently endorsed as public benevolent
institutions (PBIs) are taken to be registered entities under the ACNC on
the commencement of the ACNC, as entities with a type - charity and a
subtype - public benevolent institution. [Schedule 1, item 4 of the
Consequential and Transitional Bill]
14.14 For the purposes of the transitional registration arrangements,
`PBIs' are those entities that are;
· income tax exempt entities under table item 1.1; and
· endorsed under table item 4.1.1 of subsection 30-45(1) of the
ITAA 1997; or
· have access to fringe benefits tax (FBT) concessions under
section 57A of the FBTAA.
Religious institutions
14.15 Any entities which may be self-assessing as income tax-exempt
under item 1.2 in the table in section 50-5 of the ITAA 1997, and which
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are not endorsed as a charity, a PBI or a health promotion charity are also
transitioned across to the ACNC upon its commencement.
14.16 Entities that fall under this category must notify the ACNC
Commissioner of their type, and any subtype(s), in the approved form and
within 12 months of the commencement of the ACNC. [Schedule 1, item 6 of
the Consequential and Transitional Bill]
Opting out of registration
14.17 Registration with the ACNC is voluntary. As such, charities,
PBIs and health promotion charities that are automatically registered upon
the commencement of the ACNC may opt-out of registration if they wish
to.
14.18 Religious institutions do not need to opt-out of registration as
they are not endorsed by the Commissioner of Taxation and are therefore
self-assessing as tax exempt. They will be required to notify the ACNC of
their intention to be registered under the transitional registration
arrangements.
14.19 If an entity opts-out of registration with the ACNC they lose
ongoing access to Commonwealth tax concessions, exemptions and other
benefits.
14.20 To opt-out of registration with the ACNC, charities must
provide advice, in the approved form, to the ACNC Commissioner by
1 March 2013. [Schedule 1, subitem 5(1) of the Consequential and Transitional Bill]
14.21 If an entity decides to opt-out of registration, they are taken to
have never been automatically registered with the ACNC.
[Schedule 1, subitem 5(2) of the Consequential and Transitional Bill]
14.22 An entity that opts-out of registration is taken to not to have
been registered since 1 October 2012, and taken to have been dis-endorsed
by the Commissioner of Taxation from 30 September 2012.
[Schedule 1, subitem 5(3) of the Consequential and Transitional Bill]
14.23 As such, they lose access to tax concessions from the
commencement of the ACNC, even if they do not provide advice to the
ACNC until a later date.
Example 14.2
Tea and Sympathy is a PBI endorsed by the ATO to receive
income tax exemptions and FBT concessions. Tea and Sympathy
is automatically registered with the ACNC upon its
commencement on 1 October 2012.
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Tea and Sympathy does not wish to be registered with the
ACNC. Tea and Sympathy provides advice to the ACNC, in the
approved form, before 1 March 2013 that it wishes to opt-out of
registration. Tea and Sympathy is taken to have never been
registered with the ACNC.
Tea and Sympathy loses its PBI status and endorsement from
1 October 2012. It also loses ongoing access to Commonwealth
tax concessions from 1 October 2012.
Example 14.3
The South Fund, a charity, is automatically transitioned to a
registered entity under the ACNC on 1 October 2012. However,
the South Fund decides to opt-out of registration. They provide
advice in the approved form to the ACNC Commissioner on 1
December 2012.
During the period 1 October to 1 December 2012 the Fund
receives $1,000 in tax-free income. The South Fund is taken to
have never been registered with the ACNC, and dis-endorsed by
the Commissioner of Taxation from 30 September 2012 and may
be liable for tax on the $1,000 of income.
The ACN Register
14.24 The ACN Register is an electronic database made available to
the public which contains information about entities registered with the
ACNC. For more information on the ACN Register see Chapter 4 -- The
ACN Register.
14.25 However, the ACNC Commissioner will not have all the
information detailed in Division 20 of the Bill in the first 15 months from
the commencement of the ACNC.
14.26 This is because registered entities are not required to provide
information such as their first annual information statements and financial
reports until sometime after the commencement of the ACNC and the
existing ATO information may not be disclosed to the ACNC (under the
transitional secrecy arrangements discussed below) straight away.
14.27 In recognition of this, the transitional ACN Register provision
allows the ACNC Commissioner to maintain an incomplete ACN Register
in the first 15 months from the commencement of the ACNC.
[Schedule 1, item 7 of the Consequential and Transitional Bill]
14.28 During the period from 1 October 2012 to 1 December 2013, the
transitional ACN Register provision operates so that Division 20 of the
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Bill does not apply to information or documents that the ACNC
Commissioner does not possess. [Schedule 1, item 7 of the Consequential and
Transitional Bill]
14.29 The ACNC Commissioner must only publish the information to
which he or she has access to in the period between 1 October 2012 and
1 December 2013.
Reporting
Statements, reports and other documents given to other Australian
government entities
14.30 The ACNC Commissioner may treat a statement, report or other
document given under an Australian law to an Australian government
agency (other than the Commissioner) by a registered entity (whether
before or after the entity is registered) as being:
· an information statement for a financial year given to the
Commissioner under the ACNC Bill; or
· the reports mentioned in section 60-10 of the ACNC Bill for
a financial year given to the Commissioner in accordance
with Subdivision 60-C (Annual financial reports) or 60-D of
the ACNC Bill.
[Schedule 1, subitem 10(4) of the Consequential and Transitional Bill]
14.31 The purpose of this provision is to enable the ACNC
Commissioner to address potential reporting duplication during the
process of establishing the ACNC as a one-stop shop regulator.
14.32 The non-government schools sector and charitable Indigenous
corporations would be examples of classes of entity that are intended to
benefit from the exercise of the discretion of the ACNC Commissioner.
14.33 In determining whether to treat a statement, report or other
document as satisfying an entity's reporting obligations under the ACNC
Bill, the Commissioner must have regard to the following matters:
· what access the Commissioner has to the statement, report or
other document;
· whether the statement, report or other document contains:
- the information required under the ACNC Bill to be in the
information statement or reports; or
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- other information that relates to, or has the purpose of,
enabling the same recognised assessment activities to be
carried out in relation to registered entities;
· the processes that have been undertaken to verify the
information contained in the statement, report or other
document. This may include, for example, whether the
report, statement or document has been subject to an audit or
review.
14.34 This applies to statements, reports or other documents in respect
of:
· the 2012-13 financial year; and
· the 2013-14 financial year; and
· the 2014-15 financial year; and
· a later financial year prescribed by the regulations.
[Schedule 1, Subitem 10 of the Consequential and Transitional Bill]
14.35 The requirements relating to substituted accounting periods
apply (see detailed explanation of substituted accounting periods below).
Annual Information Statements
14.36 All registered entities must complete an annual information
statement for the first financial year of the ACNC, and later financial
years. [Schedule 1, subitem 8(1) of the Consequential and Transitional Bill]
14.37 The first annual information statement will need to be prepared
for the financial year commencing 1 July 2012 to 30 June 2013, and will
need to be lodged with the ACNC by 31 December 2013.
14.38 If an entity adopts a substituted accounting period (SAP) under
Subdivsion 60-F, then the annual information statement will be due six
months after the end of the SAP that commences in the 2012-13 financial
year. [Schedule 1, subitem 8(2) of the Consequential and Transitional Bill]
Financial reports
14.39 Unlike the annual information statement, financial reporting is
not compulsory for the first financial year. The annual financial report
requirements of the ACNC Bill apply to the 2013-14 financial year and
later financial years. [Schedule 1, subitem 9(1) of the Consequential and
Transitional Bill]
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14.40 Financial reporting is compulsory for all medium and large
registered entities from 1 July 2013. This will mean that the first financial
report will be due by 31 December 2014, in respect of the 2013-14
financial year.
14.41 If an entity adopts a SAP under Subdivision 60-F, then the
financial report will be due six months after the end of the substituted
accounting period that commences in the 2013-14 financial year.
[Schedule 1, note in subitem 9(1) of the Consequential and Transitional Bill]
Voluntary financial reports
14.42 Entities that wish to complete a financial report for the 2012-13
financial year may do so voluntarily and lodge it with their annual
information statement.
14.43 If an entity wishes to voluntarily complete a financial report for
the 2012-13 financial year, they do not need to comply with the rules set
out in the Bill about the content of financial reports, audit requirements or
due dates for lodging such reports. [Schedule 1, subitems 9(2) and 9(3) of the
Consequential and Transitional Bill]
14.44 If an entity adopts a substituted accounting period under
Subdivision 60-F, then the financial report will be due six months after the
end of the substituted accounting period that commences. [Schedule 1, note
in subitem 9(4) of the Consequential and Transitional Bill]
Substituted accounting periods
14.45 The transitional arrangements allow entities which currently
report under an Australian law on a substituted accounting periods (SAP)
basis to continue to report to the ACNC on the basis of the SAP.
[Schedule 1, item 11 of the Consequential and Transitional Bill]
14.46 These arrangements are applicable to all entities that are or were
required under an Australian law to prepare a report (any form of financial
reports) for a period of 12 months that ended on a substituted end day
during the 2012-13 financial year. [Schedule 1, subitem 11(1) of the
Consequential and Transitional Bill]
14.47 Registered entities in this situation are taken to have been
approved by the ACNC Commissioner to have a SAP.
14.48 The registered entity must advise the ACNC Commissioner of
their reporting period, in the approved from, within six months of the
commencement of the ACNC to allow the ACNC Commissioner to
update their records so they know which entities operate on an existing
SAP. [Schedule 1, subitem 11(2) of the Consequential and Transitional Bill]
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14.49 Financial reports for entities with SAPs are due six months after
the end of the first SAP that substitutes for the 2013-14 financial year.
14.50 Registered entities with a SAP can also voluntarily lodge
financial reports before this time. If a registered entity with a SAP reports
voluntarily before financial reports are mandatory they need not comply
with the rules set out in the Bill about the content of financial reports,
audit requirements or due dates for lodging such reports.
[Schedule 1, subitems 9(2), (3) and (4) of the Consequential and Transitional Bill]
Example 14.4
Towns Girls School reports to the Australian Curriculum,
Assessment and Reporting Authority at the end of each calendar
year. Upon the commencement of the ACNC on 1 October 2012,
Towns Girls School is automatically approved by the ACNC
Commissioner to continue reporting on a calendar year basis.
Towns Girl School notifies the ACNC Commissioner of their
SAP on 1 January 2013.
Towns Girls School's first SAP after 1 July 2013 begins on
1 January 2014 and ends on 31 December 2014. Towns Girls
School's first report is due six months after 31 December 2014
on 30 June 2015.
14.51 These arrangements allow for registered entities to continue to
report to the ACNC over the same period as they previously reported to a
government body, without needing to apply to the ACNC Commissioner
for approval of a SAP. This minimises the compliance burden on
registered entities.
14.52 Entities which are or were not required under an Australian law
to prepare a financial report in the previous financial year are not
automatically approved for a SAP.
14.53 However, such an entity may apply to the ACNC
Commissioner, in the approved form, for a SAP (in lieu of the financial
year) by the time set down by the ACNC Commissioner
ACNC Annual report
14.54 As the ACNC commences part way through a financial year, on
1 October 2012, the first annual report produced by the ACNC
Commissioner will not relate to an entire financial year.
14.55 Consequently, the first annual report will be for the period
commencing 1 October 2012, and finishing on 30 June 2013.
[Schedule 1, item 12 of the Consequential and Transitional Bill]
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Advisory Board
14.56 The Advisory Board must meet four times each financial year
beginning in the 2013-14 financial year.
14.57 However, under the Consequential and Transitional Bill, the
Advisory Board is not required to meet four times during the period 1
October 2012 to 30 June 2013, although the Chair may still convene
meetings during this period. [Schedule 1, item 13 of the Consequential and
Transitional Bill]
Endorsement timing issues
14.58 The ATO is responsible for endorsing entities as charities
(including as PBIs and health promotion charities) until
30 September 2012.
14.59 The ACNC is responsible for registering entities as charities
(including PBIs and health promotion charities) from 1 October 2012.
14.60 Entities that have applied to the ATO for endorsement as a
charity (including as a PBI and health promotion charity) prior to the
commencement of the ACNC, but have not yet had their application
finalised by 1 October 2012, continue to have their application finalised
by the ATO.
14.61 If such an entity then receives endorsement by the ATO under
the relevant provisions, they are taken to be a registered entity under the
ACNC upon its commencement under the transitional registration
provisions.
Example 14.5
The JRC Foundation applies to the ATO for endorsement as a
charity on 10 September 2012. The ATO approves the JRC
Foundation's application and endorses it as a charity on
20 September 2012.
The JRC Foundation is automatically registered with the ACNC
on 1 October 2012.
Example 14.6
Following on from the above example, the ATO approves the
JRC Foundation's application and endorses it as a charity on
15 October 2012.
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The ATO backdates the JRC Foundation's endorsement as a
charity to the day that it applied to the ATO. The JRC
Foundation is taken to have been a tax endorsed charity since 10
September 2012. As such, the JRC Foundation is taken to have
automatically transitioned to the ACNC on 1 October 2012.
The JRC Foundation is registered with the ACNC and does not
need to do anything further.
14.62 Entities that have applied to the ATO for endorsement as a
charity (including as a PBI or health promotion charity), but have had
their application rejected by the ATO prior to the commencement of the
ACNC, and wish to appeal that decision, must appeal under the tax law
review and appeal rules against the decision of the Commissioner of
Taxation.
Example 14.7
MOLA applies to the ATO for endorsement as a charity on
10 September 2012. The ATO does not approve MOLA's
application and notifies the entity of this on 20 September 2012.
MOLA wishes to appeal the decision. MOLA must appeal the
Commissioner of Taxation's decision under the tax law review
and appeal rules.
MOLA could also choose to abandon an appeals process and
apply to be registered with the ACNC.
14.63 Any review or appeal that commenced with the ATO prior to the
commencement of the ACNC remains with the ATO for determination
according to the tax law review and appeal rules.
Example 14.8
BendIt applied to the ATO for endorsement as a charity on
15 August 2012. The ATO rejects their application and notifies
BendIt on 5 September 2012. BendIt appeals the decision. On
5 October 2012 the Administrative Appeals Tribunal (AAT)
decides that BendIt should have been endorsed as a charity by the
Commissioner of Taxation.
The AAT decides that BendIt should have been endorsed by the
Commissioner of Taxation on 5 September 2012. BendIt is taken
to have been automatically registered with the ACNC on 1
October 2012.
14.64 The application information provided by entities that apply to
the ACNC (on or after 1 October 2012) to be a registered entity under any
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subtype category, and seek a backdated registration and endorsement prior
to 1 October 2012, is to be passed to the ATO for consideration of the
period prior to 1 October 2012.
Example 14.9
LooLA applies to the ACNC to be registered as a charity on
15 October 2012. LooLA seeks backdated registration to
15 September 2012. The ACNC Commissioner of the ACNC
determines the organisation's charitable status from 1 October
2012. The ACNC passes LooLA's application information to the
ATO to allow the ATO to determine LooLA's eligibility to be
endorsed as a charity for the period 15 September 2012 to
30 September 2012.
Example 14.10
Following on from the example above the ACNC determines that
LooLA is entitled to register with the ACNC from 1 October
2012. However, the ATO determines that LooLA was not
eligible to be endorsed as a charity for the period 15 September
2012 to 30 September 2012.
LooLA may appeal the Commissioner of Taxation's decision in
accordance with the tax law review and appeal laws.
Disclosure of protected taxation information to the ACNC
14.65 In order to facilitate a smooth transition for the ACNC,
transitional secrecy provisions in the Consequential and Transitional Bill
enable a taxation officer to make a record or disclose to the ACNC
Commissioner protected taxation information for the purpose of the
ACNC Commissioner performing powers and functions or exercising
powers in relation to the ACN Register. [Schedule 1, item 14 of the
Consequential and Transitional Bill]
14.66 However, the record or disclosure of protected taxation
information can only be made up until six months from the start of the
commencement day. [Schedule 1, paragraph 14(d) of the Consequential and
Transitional Bill]
14.67 This temporary exception to the operation of section 355-25 in
Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) enables
the ACNC to populate the ACN Register with information about existing
charities that were previously endorsed by the ATO prior to the
commencement day.
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14.68 This ensures that as the ACNC takes over the function of
registering charities, it is able to publish information previously provided
to the ATO on the ACN Register subject to the ACNC secrecy framework
and subject to the restrictions on the disclosure of personal information
under the ACNC Bill.
14.69 This allows the ACNC to be fully functional from the
commencement date and remove the need for the ACNC to contact all of
the existing charities to provide information which the ATO already has
available.
14.70 Whilst there are consequential amendments (as part of the
Consequential and Transitional Bill) that facilitate the disclosure of
protected taxation information under Division 355 in Schedule 1 to the
TAA 1953 to the ACNC for the purpose of administering the Bill, these
transitional secrecy provisions are necessary for a different purpose.
14.71 Unlike disclosure under the consequential amendments (wherein
the information disclosed retains its character as `protected taxation
information' and is subject to the on-disclosure provisions in Division 355
in Schedule 1 to the TAA 1953, the information disclosed under these
transitional secrecy provisions will become publicly available as they are
published on the ACN Register and will then become `protected ACNC
information' and be subject to the secrecy framework within this Bill.
14.72 However, the transitional secrecy provisions do not extend to the
disclosure of protected taxation information that is outside of the scope of
the type of information required under section 40-5 of the Bill.
14.73 Moving forward, should the ACNC require (for purposes under
this Bill) tax specific information or any other information not covered
within transitional secrecy arrangements, it will need to request disclosure
of that information from the Commissioner of Taxation in accordance
with the proposed consequential amendment to Division 355 in Schedule
1 to the TAA 1953 allowing for disclosure of protected taxation
information to the ACNC for the purposes of administering the Bill.
Five year review
14.74 The ACNC Consequential and Transitional Bill provides for a
statutory review of the ACNC legislation. This ensures that five years
after the commencement of the Bill, the Minister must appoint a person to
review the operation of the ACNC Bill and the ACNC Consequential and
Transitional Bill. The review will focus on the operation of the legislation
and the ACNC and how the objects of the ACNC Bill have been achieved.
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The reviewer must provide a report and present the report to the
Parliament. [Schedule 1, item 15]
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Chapter 15
Consequential amendments
Outline of chapter
15.1 This Chapter explains:
· the rationale behind the consequential legislative
amendments; and
· the commencement timing of the consequential legislative
amendments.
15.2 This Chapter also identifies the Commonwealth Acts which will
be amended by the Australian Charities and Not-for-profits Commission
Consequential and Transitional Bill (the ACNC Consequential and
Transitional Bill).
Summary of new law
15.3 The Australian Charities and Not-for-profits Commission Bill
(ACNC Bill) will create a `one-stop shop' for eligible NFP entities that
are seeking access to tax concessions and, consistent with the
Government's announcements, to make Australian Charities and
Not-for-profits Commission (ACNC) registration a precondition where
charities seek access to Australian Government exemptions, concessions
or benefits available to charities.
15.4 To give effect to this policy intent a range of consequential
legislative amendments are required to establish the ACNC as the central
regulatory body for the NFP sector.
15.5 The amendments to Commonwealth legislation alter references
to 'charity', 'charities', 'charitable entities' and like terms so that
concessions, exemptions and benefits that are available to charities are
now available only to charities registered with the ACNC.
15.6 Minor amendments were also made to Commonwealth Acts that
provide concessions, exemptions and benefits to not-for-profits (NFPs).
This was done to ensure that benefits earmarked for NFPs are only
accessed by charities which are registered.
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15.7 Finally, consequential legislative amendments were also made in
order to minimise any regulatory duplication which may exist at the
Commonwealth level; and to cater for the establishment and integration of
the ACNC into the Commonwealth Government.
Detailed explanation of new law
15.8 As announced during the 2011-12 Budget, the ACNC will be a
`one-stop shop' regulator for the NFP sector. The ACNC's initial
responsibilities will include:
· determining the legal status of entities seeking charitable
status, including public benevolent institution (PBI) status,
on behalf of all Commonwealth agencies;
· registering entities under their charitable status; and
· administering a new system of smarter regulation which will
be proportional to size and risk, and minimise any regulatory
duplication.
15.9 Consequential legislative amendments are required to enable the
ACNC to determine the charitable status of entitles on behalf of all
Commonwealth agencies; to minimise any regulatory duplication which
may exist at the Commonwealth level; and to cater for the establishment
and integration of the ACNC into Commonwealth Government.
15.10 The ACNC Consequential and Transitional Bill also contains a
set of commencement provisions which ensures that the consequential
amendments achieve intended outcomes.
15.11 The commencement provisions takes into account amendments
which results from several measures still before Parliament.
15.12 Amendments contained in Schedule 2 to Schedule 3 to the
ACNC Consequential and Transitional Bill will become operative once
the ACNC Bill commences. These amendments generally change
endorsement requirements for Commonwealth concessions, exemption
and benefits to include ACNC registration as a precondition.
15.13 Amendments in Schedule 4 of the ACNC Consequential and
Transitional Bill will become operative once the Tax Laws Amendment
(Special Conditions for Not-for-profit Concessions) Bill 2012
commences. These amendments are used to consolidate the terms `funds',
`trusts' and `institution' into `entity', standardise certain conditions for
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Consequential amendments
access to tax concessions, and apply a consistent definition for the term
`Not-for-profit' across Commonwealth legislation.
15.14 The form of some of the amendments contained in Part 6 in
Schedule 2 to the ACNC Consequential and Transitional Bill will hinge
on the commencement of the amendments to the Customs Tariff
Amendment Act 1995.
15.15 Timing elements must be kept in mind when working through
the consequential amendments, as many amendments are contingent on
other reforms commencing. For this reason it has been necessary to
carefully sequence the amendments to certain Acts.
15.16 For example, amendments in Division 2 of Part 2 in Schedule 4
to the ACNC Consequential and Transitional Bill make changes to the
amendments which are made to Part 7 of Schedule 2 of the ACNC
Consequential and Transitional Bill. This is required because the latter
changes can only be made once the Tax Laws Amendment (Special
Conditions for Not-for-profit Concessions) Bill 2012 commences.
Determining charitable status on behalf of all Commonwealth agencies
15.17 Charities receive concessions, exemptions and benefits from the
Commonwealth Government in recognition of the public benefit they
provide. Commonwealth concessions, exemptions and benefits usually
appear in Commonwealth Acts.
15.18 To access the numerous concessions, exemptions and benefits,
entities have to satisfy the Commonwealth agency which administers
these Acts that they are charities within the common law definition of the
term.
15.19 Providing the ACNC with a central registration function will
ensure that entities have to apply for charitable status on a single occasion.
This will ultimately reduce the compliance cost and regulatory burden
faced by NFP entities, and the administrative burden on the
Commonwealth Government.
15.20 To ensure the ACNC's registration applies across all
Commonwealth agencies, consequential amendments to Commonwealth
Acts which provide charities with concessions, exemptions and benefits
were made. A large share of consequential amendments included in the
ACNC Consequential and Transitional Bill require charities to be
registered by the ACNC under their charitable status, as a precondition to
accessing the concessions, exemptions and benefits.
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15.21 The amendments to Division 30 of the Income Tax Assessment
Act 1997, Division 50 of the Income Tax Assessment Act 1997, to the
Competition and Consumer Act 2010 and the Do Not Call Register Act
2006 are all examples of this type of amendment. [Schedule 2, Part 2, and
Part 7]
15.22 In specific cases where Commonwealth concessions, exemptions
and benefits are earmarked for a particular subtype of charity,
amendments require ACNC registration as a particular subtype.
15.23 The amendments to the Fringe Benefits Tax Assessment Act
1986, the A New Tax System (Goods and Services Tax) Act 1999, and
certain item of Division 30 of the Income Tax Assessment Act 1997 are all
examples of this type of amendment. [Schedule 2, Parts 1, 3, 4 and 6]
15.24 Chapter 2 of the main ACNC Bill includes a registration table
which describes the range of charitable subtypes. (Further information is
provided in Chapter 3 of the explanatory memorandum)
15.25 The ACNC Consequential and Transitional Bill also makes
further changes to the structure of Division 30 of the Income Tax
Assessment Act 1997 which sets out the endorsement requirements for
entities wishing to be deductible gift recipients. [Schedule 2, Part 1]
15.26 To make conditions associated with endorsement clearer, special
conditions are now divided into two columns, one of the columns
specifying the conditions the entity has to satisfy to be endorsed, with the
second setting out the conditions associated with the gift.
15.27 The tables listing the entities that have been specifically listed as
deductible gift recipients have not been changed.
15.28 The ACNC Consequential and Transitional Bill also clarifies
that endorsement under most of the deductible gift recipient categories in
Division 30 of the Income Tax Assessment Act 1997 are limited to
charities.
15.29 Currently, some of the deductible gift recipient categories do not
explicitly require an entity to be a charity prior to being endorsed as a
deductible gift recipient. However, the Australia Taxation Office's
(ATO's) administrative practice and interpretation of the law would
generally require entities to be charitable prior to receiving endorsement.
15.30 To be covered by a deductible gift recipient category an entity
would have to have a purpose which is conducive to the public benefit and
be a NFP entity. In all cases the purpose will be charitable and therefore
the entity would meet the common law definition of charity, unless it is a
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Consequential amendments
government entity. While being charitable is not an explicit condition of
endorsement as a deductible gift recipient, the deductible gift recipient
categories are generally subsets of charity which imply a limitation of
endorsement to only charities.
15.31 For example, in item 1.1.1 of the Division, `public hospitals' are
not legally required to be charities. However, to be endorsed under this
category hospitals would need to be a NFP entity and, given the nature of
the hospital's activities, would have a purpose which is beneficial to the
community. A NFP entity with a purpose which is beneficial to the
community would meet the common law definition of charity.
15.32 The ATO's database shows that the clarification will not affect
existing deductible gift recipients. However, should the database not be
up to date and some entities are not charities, they will have a 12 month
transition period to ensure they meet the requirement to be a charity and
endorsed under DGR categories.
15.33 The Consequential and Transitional Bill also clarifies that is
certain cases special conditions and registration requirements would be
required to be met by the entity that is operating a public fund.
15.34 This occurs for example in items 9.1.1 and 9.1.2 in subsection
30-80(1) of the Income Tax Assessment Act 1997, and items 12.1.2,
12.1.3, 12.1.4 and 12.1.5 in subsection 30-100(1) of the Income Tax
Assessment Act 1997.
15.35 These amendments ensure that where public funds are set up by
registered charities, for example to provide resources for disaster relief,
the public fund does not have to go through a registration process. The
amendments also ensure consistency with the ATO's current
administrative practice.
15.36 The ACNC Consequential and Transitional Bill also make
changes to Division 50 of the Income Tax Assessment Act 1997. The
Division provides certain entities with access to income tax exemption,
usually in recognition of the public benefit these entries provide.
15.37 The change amalgamates the `religious institution' exemption
into the broader charitable exemption. The `religious institution'
exemption is a relic of history made redundant after the Extension of
Charitable Purpose Act 2004.
15.38 The ATO has advised that no entity should currently be
accessing income tax concession under item 1.2, instead these entities
should be accessing concessions as charities established for the
advancement of religion. Therefore, this amalgamation does not amount
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to a change in policy and will have no effect on the scope of entities that
can access the exemption.
15.39 The amalgamation similarly applies across other
Commonwealth tax laws, such as fringe benefits tax and goods and
services tax where they itemise both religious institutions and charities in
the same provisions but where the former is merely a subset of the latter.
15.40 To cater for cases where an entity is inadvertently accessing
income tax exemption through the `religious institution' category, the
Consequential and Transitional Bill transitions these institutions into a
`registered religious institutions,' where these entities notify the ACNC in
the prescribed manner. [Schedule 1, Item 6]
15.41 This transitioning of this subtype ensures consistency with the
policy of transitioning subtypes that have unique tax concessions (such as
public benevolent institutions and health promotion charities). [Schedule 1,
Items 3 and 4]
15.42 Associated changes were also made to Division 50 to take into
account and adopt the amendments being proposed by the Tax Laws
Amendment (Special Conditions for Not-for-profit Concessions)
Bill 2012.
15.43 Currently, charitable funds are exempt from paying tax under
the items 1.5 of section 50-5. Section 50-5 separates certain charitable
trusts into different items to reflect distinctions between institutions and
funds, and that trusts established on or after 1 July 1997, or the funds or
assets acquired by charitable trusts on or after 1 July 1997, are subject to
the special conditions introduced in 1 July 1997.
15.44 The Tax Laws Amendment (Special Conditions for Not-for-
profit Concessions) Bill 2012 is standardising the special conditions for
charities, and therefore there is no longer any basis to separate these
charitable entities into these categories and a requirement to have a
distinction between fund and institution.
15.45 The ACNC Consequential and Transitional Bill eliminates the
final distinction between fund and institution, which also ensures
consistency with the ACNC Bill which will register charitable entities and
not institutions or funds. [Schedule 2, items 26 to 30]
15.46 To ensure that funds established prior to 1 July 1997 (including
returns earned by these funds on their stock of assets) are not required to
comply with additional requirements a transitional provision in the
Income Tax (Transitional Provisions) Act 1997. This ensures that the
updated special condition only apply:
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Consequential amendments
· to charitable trusts established on or after 1 July 1997; or
· to any funds or assets acquired or given to a charitable trust
on or after 1 July 1997 where a charitable trust was operating
prior to 1 July 1997. This includes any income derived from
these funds or assets.
[Schedule 2, item 40]
15.47 Further changes to the tax law provisions clarify that references
to entities listed in Division 30 means those entities that are endorsed as
deductible gift recipients. This includes amendments to the Income Tax
Assessment Act 1936. [Schedule 2, items 1 to 3]
Establishment and integration of the ACNC
15.48 The ACNC Consequential and Transitional Bill makes
consequential amendments to related Commonwealth legislation to cater
for the establishment of the ACNC and ensure the smooth transition of the
ACNC into the Commonwealth Government.
15.49 These amendments eliminate the need for the Australian
Securities and Investments Commission (ASIC) to continue to regulate
NFP entities that are incorporated under the Corporations Act 2001, and
ensure that the ACNC has the legal infrastructure required to function
effectively, for example to enable the ACNC to share information with
other regulators. [Schedule 3, Part 3]
15.50 The ACNC Consequential and Transitional Bill amends
Subdivision 426-B in Schedule 1 to the Taxation Administration Act 1953.
This Subdivision sets out the ATO's endorsement processes for charitable
entities under numerous tax laws including the A New Tax System (Goods
and Service) Act 1999.
15.51 Amendments to the Subdivision ensure that changes to the
endorsement conditions resulting from ACNC registration are taken into
account when the ATO endorses charitable entities. [Schedule 2, items 131 to
134]
15.52 The ACNC Consequential and Transitional Bill removes certain
administrative decisions taken by the ACNC from being subject to the
Administrative Decisions (Judicial Review) Act 1977. [Schedule 3, item 1]
15.53 The ACNC Bill establishes processes for an entity to challenge
certain decisions of the ACNC. These processes are consistent with the
review and appeal rights under other Commonwealth legislation
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(including taxation law), and cater for both internal and external merits
review, and judicial review.
15.54 The ACNC Bill also allows appeals and reviews to be
considered jointly with related administrative decisions of the
Commissioner of Taxation, which are also not subject to the
Administrative Decisions (Judicial Review) Act 1977.
15.55 Enabling the Administrative Decisions (Judicial Review) Act
1977 to apply to the Commissioner's decisions is not required given the
clear and robust review and appeal options available in the ACNC Bill,
including the possibility of judicial review.
15.56 Additionally, given that administrative decisions of the
Commissioner of Taxation and the ACNC will in practice be interlinked
and jointly considered, subjecting ACNC decision to the Administrative
Decisions (Judicial Review) Act 1977 may allow entities to initiate
multiple judicial reviews in order to frustrate the implementation of
ACNC decisions at significant expense and inconvenience to relevant
regulators, the Administrative Appeals Tribunal, and Federal Courts.
15.57 The ACNC Consequential and Transitional Bill also amends the
definition of Australia in the Australian Business Number Act 1999. In
the ACNC Bill, entities are required to have a Australian Business
Number (ABN) prior to being eligible for ACNC registration.
15.58 The amendment ensures that where an entity is entitled to be a
charity or deductible gift recipient but is unable to obtain an ABN because
the entity is located in one of Australia's external Territories, these entities
will nonetheless be able to obtain an ABN and therefore be entitled to be
registered by the ACNC. [Schedule 3, item 2]
15.59 The ACNC Consequential and Transitional Bill also makes
technical amendments to provisions of the tax laws conferring deductible
gift recipient status on all entities providing volunteer based emergency
services. The amendment ensures that all State and Territory government
bodies that coordinate volunteer fire brigades and state emergency
services can access deductible gift recipient status. [Schedule 5, items 1 to 4]
Minimising regulatory duplication
15.60 Establishing the ACNC as the central regulatory body for the
NFP sector will assist the sector through reduced regulatory duplication
and will promote the good governance, accountability and transparency of
NFP entities by ensuring that only those charities that are registered with
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Consequential amendments
and regulated by the ACNC can access Australian Government
concessions, exemptions and benefits.
15.61 Registered NFP entities would be required to comply with
governance standards and meet reporting and notification obligations
included in the ACNC Bill.
15.62 Currently, charities are regulated by numerous agencies at the
Commonwealth level, and therefore, are likely to be reporting and
providing the same set of information to multiple Commonwealth
agencies.
15.63 The `charity passport' which the ACNC will develop will enable
registered entities to meet the majority of their financial and governance
reporting requirements by reporting to the ACNC. This will help in
minimising duplication in reporting obligations.
15.64 Consequential legislative amendments will be required to ensure
that registered entities do not have the legal obligation to report on
multiple occasions and meet duplicative regulatory obligations. The
passport would ensure that the same information does not have to be
provided on multiple occasions but would not eliminate the legal
obligations on entities to provide this information.
15.65 The ACNC will not be responsible for monitoring service
delivery outcomes and quality standards of NFP entities. Agencies that
oversee these aspects of NFP entities operation will continue to play this
role. Therefore, these entities will still require the legal authority to be
able to collect information and regulate the quality standards of registered
entities.
15.66 A balance needed to be struck between minimising regulatory
obligations and ensuring agencies have sufficient power to fulfil all of
their legal obligations.
15.67 Consequential legislative amendments were made where there is
direct regulatory duplication. These include for example amendments to
the A New Tax System (Family Assistance) (Administration) Act 1999, the
Aged Care Act 1997, and the Corporations Act 2001.
15.68 The amendments to A New Tax System (Family Assistance)
(Administration) Act 1999 and the Aged Care Act 1997 ensure that where
information is provided to the ACNC, entities would not be legally
obligated to provide this information to the ACNC. [Schedule 2, items 142
and 148]
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15.69 The ACNC Consequential and Transitional Bill will make
consequential amendments to the Corporations Act 2001 (the
Corporations Act) to address duplication for NFP entities, clarify the
delineation of responsibilities between the ACNC and the Australian
Securities and Investments Commission (ASIC), and reduce regulatory
burden on the NFP sector. [Schedule 3, Part 3]
15.70 The consequential amendments will remove duplication by
turning off the following requirements in the Corporations Act for entities
registered with the ACNC: [Schedule 3, Part 3]
· the requirement for entities to notify ASIC of various
matters, such as changes to its address or its directors, as
these notifications will now be provided to the ACNC, as
part of its `one-stop shop' function;
· certain director's duties for entities registered with the
ACNC, as under the new regime, the responsible entities will
be subject to equivalent governance standards that will be
specifically tailored for the NFP sector. These governance
standards will be set out in regulations that will commence
on 1 July 2013;
· the financial reporting requirements in the Corporations Act,
as these requirements are contained under the draft ACNC
legislation. Further detail about the content of financial
reports will be set out in the regulations that will commence
on 1 July 2013; and
· the procedural requirements relating to the conduct of Annual
General Meetings (AGMs), as an equivalent procedure,
which will be simplified and tailored for the NFP sector, will
be set out in regulations that will commence on 1 July 2013.
15.71 A regulation making power will enable other provisions of the
Corporations Act to be turned off in respect of registered entities, and
allow conditions to be imposed in respect of the provisions which are
being turned off. This regulation making power is needed to allow further
duplication in the Corporations Act to be addressed, as a result of future
reporting and governance standards that will be developed following
consultation and will commence from 1 July 2013.
15.72 Consequential amendments are also being made to expand the
category of individuals able to conduct a review of a medium sized entity,
which is intended to increase the supply of reviewers, and lower the costs
associated with these reviews. [Schedule 3, item 32]
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15.73 At the same time, appropriate safeguards will be maintained by
ensuring that such individuals are subject to the oversight and continuing
professional development requirements of the three professional
accounting bodies, CPA Australia, the Institute of Chartered Accountants,
and the Institute of Public Accountants.
15.74 The consequential amendments also clarify the responsibilities
of ASIC and the ACNC, as entities registered with the ACNC will be
primarily regulated by the ACNC, rather than ASIC, in relation to the
day-to-day activities of the registered entity.
15.75 Under the new regime, ASIC will continue to register
companies, including companies limited by guarantee, but will have
limited oversight of the financial reporting and governance arrangements
of those companies that choose to register with the ACNC, as oversight of
these arrangements will be performed by the ACNC.
15.76 Currently, ASIC conducts surveillance of financial reports
prepared by companies, registered schemes and disclosing entities, and
their compliance with Part 2M.3 of the Corporations Act. ASIC will not
continue to be responsible for financial reporting surveillance in respect of
entities registered with the ACNC from 1 July 2013, as this function will
instead be performed by the ACNC.
15.77 ASIC is currently responsible for registering authorised audit
companies and registered company auditors, and will continue to do so
under the new regime. As part of consequential amendments to the
Australian Securities and Investments Act 2001, ASIC will retain the
power to obtain information in respect of ACNC audits. [Schedule 3, items
20 to 23]
15.78 ASIC will also continue its current oversight role with respect to
external administration processes, such as liquidations and
administrations, undertaken under the Corporations Act.Do not remove
section break.
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Chapter 16
Regulatory Impact Statement:
establishing a regulator for the
not-for-profit sector
Background
16.1 Australia's not-for-profit (NFP) sector consists of organisations
which seek to achieve a community, altruistic or philanthropic purpose,
and who are involved in the supply of goods and services that have a
social value greater than the price that a consumer could or would
otherwise pay.
16.2 NFPs contribute to community wellbeing through the provision
of welfare, education, sports, arts, religious, culture and community
services.
16.3 Australian governments provide the NFP sector with support in
the form of direct funding and access to a range of taxation concessions.
· Total quantifiable Commonwealth taxation expenditures
provided to the NFP sector in the 2010-11 financial year is
estimated to be around $3.3 billion (Tax Expenditures
Statement 2010). Unquantifiable tax expenditures to the
sector are likely to be of a similar magnitude, and consist
mainly of income tax exemptions.
· Direct government funding to the sector in 2006-07 was
estimated to be $25.5 billion; see the 2010 Productivity
Commission's Contribution of the Not-for-Profit sector
(Productivity Commission 2010 p 300). This funding was
provided to pay for the sector's delivery of programs and
services on behalf of the Government, such as the Family
Relationship Services Program.
16.4 The general public provides the sector with resources in the
form of donations and volunteer time.
· Total public donations to the sector were estimated to be
$7.2 billion in 2006-07, with an estimated value of
$14.6 billion provided in volunteer time (Productivity
Commission 2010 p 64)
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Problem
16.5 The NFP sector's regulatory framework is not meeting the needs
of the NFP sector, Australian governments and the Australian public more
broadly. The regulatory framework under which NFP entities operate is:
· fragmented and inconsistent;
· uncoordinated with regulatory responsibilities spread across a
range of government agencies;
· producing complex reporting requirements which are, in
certain situations, overlapping; and
· not adequately addressing the informational needs of the
Australian public.
16.6 These shortcomings have left some NFP entities, particularly
those operating across multiple jurisdictions, with an inappropriately high
regulatory and compliance burden. It has also allowed other NFP entities,
particularly small unincorporated associations, to operate under no
regulatory oversight.
16.7 A typical large NFP would currently be required to provide
general reporting (including financial reporting) to multiple
Commonwealth agencies. For example, a large NFP entity which is a
company limited by guarantee would be required to provide general
financial reports to the ASIC. To receive grants and contracts for the
delivery of Commonwealth Government services from various
Government agencies such as the Department of Health and Ageing, the
Department of Education, Employment and Workplace Relations
(DEEWR) and the Department of Families, Housing, Community
Services and Indigenous Affairs (FaHCSIA), the NFP entity would be
required to provide additional general and specific financial reports to
these agencies, resulting in a duplication of reporting.
16.8 Additionally, the NFP entity would need to meet governance
requirements from each agency with respect to grants and would be
generally required to get each report audited separately, which the sector
has indicated costs, on average, $1,000 per audit.
16.9 If the entity was an incorporated association operating across
jurisdictions, it would need to provide general financial reports to
different State and Territory regulators resulting in further duplication of
reporting.
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Regulatory Impact Statement: establishing a regulator for the not-for-profit sector
16.10 A medium sized NFP would typically be provided a smaller
number of government grants and enter into a smaller number of contracts
for Australian's government service delivery. This would reduce possible
reporting and compliance burdens. However, unnecessary duplication
would remain.
16.11 A typical small NFP entity with charitable status would have a
small number or no government grants and enter into a limited number or
no Australian government service delivery contracts. A typical example
would be a private ancillary fund. These funds are required to submit a
private ancillary fund return form on an annual basis which includes
audited general purpose financial reports.
16.12 The regulatory burden faced by NFP entities operating with a
high regulatory and compliance burden may be diverting scarce NFP
resources away from intended targets toward administration and
compliance expenses. Additionally, fragmented and inconsistent
information coupled with a lack of publicly available information may be
deterring philanthropic engagement.
16.13 Over the past decade there have five reviews into the regulation
and taxation of the NFP sector in Australia, including the:
· 2001 Report of the inquiry into the Definition of Charities
and Related Organisations;
· 2008 Senate Economics Committee inquiry into Disclosure
Regimes for Charities and NFP Organisations;
· 2009 Australia's Future Tax System report (AFTS report);
· 2010 Productivity Commission report on Contribution of the
Not-for-Profit sector; and
· 2010 Senate Economic Legislation Committee inquiry into
the Tax Laws Amendment (Public Benefit Test) Bill 2010.
16.14 These reviews have consistently concluded that the NFP sector's
regulatory framework tends to adds complexity and costs, especially for
organisations operating in more than one jurisdiction, and recommended
that the regulation of the NFP sector should be significantly improved by
establishing a national NFP regulator and harmonising and simplifying
regulatory and taxation arrangements.
16.15 The NFP sector has largely supported the recommendations
made by these reviews.
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16.16 The NFP regulatory framework is fragmented, inconsistent and
based on entity type rather than activities or outcomes. The sector
consists of 600,000 NFP entities. The majority (around 440,000) of these
entities are unincorporated organisations that fall largely outside of the
sector's regulatory framework.
· These entities do not have reporting obligations, Australian
Business Numbers (ABNs) and cannot be endorsed as
charities or DGRs. However, they are able to self-assess
income tax exemptions.
16.17 Around 136,000 are incorporated associations under relevant
State and Territory Acts, and around 11,700 are companies limited by
guarantee, who are registered with ASIC. Relevant State and Territory
government agencies regulate incorporated associations with ASIC
regulating companies limited by guarantee.
16.18 The sector is also comprised of charitable trusts and private and
public ancillary funds. These organisations manage and distribute funds
to individuals and organisations for a charitable purpose. Charitable trusts
and private and public ancillary funds tend to be endorsed as deductible
gift recipients (DGRs) and charities. Charitable trusts are generally not
required to comprehensively report to any regulator (they are required to
be endorsed by the ATO), as such, little is known about the number and
total value of the asset managed by charitable trusts. Based on
confidential data the Government estimates that there are around 1,000
charitable trusts that access tax concessions.
16.19 The Crown, represented by State Attorneys-General, protects the
property of charitable trusts. Attorneys-General are required for
enforcement of the charitable trust. Anecdotal evidence suggests that
Attorneys-General interventions are costly and thus infrequent.
16.20 The majority of NFP entities operate outside the sector's
regulatory framework. This produces a lack of appropriate oversight over
the activities and performance of the sector; ensures that there is
insufficient data and information on the operations of the NFP sector; and
may encourage organisations with improper or even illegal activities to
exploit this significant gap in the sector's regulatory regime.
16.21 Occasional reports of improper practices by unregulated NFP
entities have the potential to undermine the public's confidence in, and
support of the sector. Without a systematic approach to accountability
and transparency, regulators and governments more generally may find it
difficult to counter suggestions of compliance and integrity issues.
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Regulatory Impact Statement: establishing a regulator for the not-for-profit sector
16.22 The regulatory regime faced by NFP entities that are
incorporated associations operating in a single jurisdiction have
weaknesses detracting from the sector's effectiveness. The sector has
expressed concerns related to information for selecting the best form of
incorporation and compliance costs associated with reporting and other
obligations, including to state government agencies that are not
proportionate to scope of activity (PC report 2010 pp 113-135). Other
concerns include passive oversight of the operation and activities of
incorporated associations by state regulators.
16.23 Incorporated associations operating across multiple jurisdictions
face an unnecessarily complex and costly regulatory environment. These
entities are required to meet different reporting requirements that are
imposed across different jurisdictions.
16.24 Regulatory overlap between Commonwealth, States and
Territories can result in a high regulatory and compliance burden, but a
poor level of regulatory oversight. Inconsistencies in the sector's
regulatory framework and an increasing compliance burden are a matter
of increasing concern to both the sector and governments. In their
submission to the PC report, the Institute of Chartered Accountants stated:
· `The paper [on Improving Corporate Reporting and
Accountability] published by Treasury in 2007 specifically
asked respondents a question `Do you consider there is a
need to harmonise the financial reporting requirements of
companies limited by guarantee and incorporated
associations to provide a consistent reporting framework for
not for profit entities in Australia?' The submissions that are
publicly available overwhelmingly support harmonisation.'
(Institute of Chartered Accountants 2010 p 6)
16.25 To illustrate the level of complexity faced by the sector, there
are currently more than 178 pieces of Commonwealth, State or Territory
legislation that involve 19 separate agencies regularly determining the
charitable purpose or status of an NFP entity.
16.26 The sector has expressed concerns in relation to this complexity.
For example, in their submission to the PC report, the Institute of
Chartered Accountants stated:
· `... the legislation governing these various structures is both
inconsistent between the types of legal structures and
inconsistent within the structures. For example, incorporated
associations are controlled by individual state legislation,
much of which is inconsistent when compared state to state.
NFPs using this incorporated association structure now
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increasingly find themselves operating across state
boundaries and therefore their managers and advisers need to
be familiar with a number of differing regulatory regimes.'
(Institute of Chartered Accountants 2010 p 5)
16.27 At the Commonwealth level regulatory oversight is spread
across multiple Government agencies which increases compliance costs
and complexity. The ATO, ASIC, the Office of the Registrar of
Indigenous Corporations (ORIC), the national housing regulator for the
NFP sector, and a range of government agencies that provide the sector
with grants and contracts for service delivery (such as the FaHCSIA)
oversee specific aspects of the sectors operations.
16.28 This structure has led to a number of shortcomings. For
example, there is no agency overseeing the totality of the sector's
performance and activities; there is no agency collecting required
information for the sector as a whole which could be used to develop
policy and coordinate structural reforms; it produces unnecessary
compliance costs with entities having to interact and engage with a
number of agencies; and may be affecting public confidence and
engagement with the sector.
16.29 Similar sentiments have been expressed by stakeholders. For
example, Lyons, appearing before a Senate inquiry argued:
· `In the absence of a single regulator, governments lack data
and knowledge of Australia's not-for-profit organisations and
are therefore unable to develop appropriate policies to better
regulate them and encourage their formation ...' (PC report
2010 p 116. Extracted from SSCE 2008, p 42)
16.30 In their submission to the PC report, Gilbert+Tobin stated:
· `... there is an urgent need to bring together the multiplicity
of governance, taxation and fundraising regulatory
arrangements, especially at the Commonwealth level ...'
(Gilbert+Tobin 2010 p 1)
16.31 Existing reporting arrangements for NFP entities are
uncoordinated and complex, and do not take into account the differing
size, risks and access to public monies of NFP entities.
16.32 The reporting obligation of a specific NFP entity depends on the
entity's legal form and activities. NFP entities may have a large, and in
some instances, duplicative reporting burden. Other NFP entities that are
unincorporated and receive no government funding have no reporting
requirements.
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Regulatory Impact Statement: establishing a regulator for the not-for-profit sector
16.33 There are four main types of reporting undertaken by NFP
entities. They include:
· corporate and financial reporting associated with the legal
structure under which entities are incorporated;
· financial, governance and performance information required
for obtaining or acquitting government funding, or
government funded service delivery contracts;
· information required for endorsement for concessional tax
treatment; and
· information required for fundraising.
16.34 Corporate and financial reporting for companies limited by
guarantee is determined by the Corporations Act 2001, with corporate and
financial reporting by incorporated organisations determined by the
relevant Associations Incorporation Act.
16.35 Under the Corporations Act 2001, companies are generally
required to prepare a public financial report and directors' report
consisting of financial statements, notes to the financial statements, and
directors' declaration about the statement and notes.
16.36 In June 2010, the Government simplified the reporting
framework for companies limited by guarantee. Under the new regime, a
three-tiered differential reporting framework for companies was
established.
· The first tier comprises companies with annual revenue less
than $250,000 which do not have DGR status. Companies
falling in the first tier are exempt from preparing a financial
report and a directors' report.
· The second tier comprises companies with annual revenue of
less than $250,000 that are a DGRs and companies with
annual revenue of $250,000 or more but less than $1 million,
irrespective of whether the company is a DGR. These
companies prepare a financial report which they can elect to
have reviewed rather than audited, a streamlined directors'
report, and are subject to a streamlined process for
distributing annual reports to members.
· The third tier comprises companies limited by guarantee with
an annual revenue of $1 million or more, irrespective of
whether the company is a DGR. These companies are
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required to prepare an audited financial report, a streamlined
directors' report, and are subject to a streamlined process for
distributing the annual report to members.
16.37 Corporate and financial reporting requirements for incorporated
organisations have in the past been less onerous than requirements of
companies limited by guarantee. However, given the reforms outlined
above, requirements have become more onerous. For example, while
unincorporated associations operate under a tiered reporting framework,
the relevant threshold for the highest tier are lower when compared
against Commonwealth level thresholds which means more companies fit
into the top tier.
16.38 Additionally, reporting requirements for incorporated
associations generally vary between states and territories adding to
complexity and compliance costs faced by entities operating across
multiple jurisdictions.
16.39 Reporting requirements associated with funding arrangements
for the delivery of government services generally involve complex
reporting obligations and result in the duplication of reporting
requirements. The sector has indicated that this is particularly evident
with acquittal of grants.
16.40 NFP entities entering service delivery contracts with the
Government are required to provide information on financial health and
performance, general capabilities and governance structures. This
information is also required to be provided to regulatory agencies such as
ASIC.
16.41 Public submissions received by the Government on the scope
and functions of any NFP regulator as part of the scoping study for a
national NFP regulator suggest that the sector's compliance costs are
significant and that there is scope to streamline and remove reporting
duplication. For example, Rotary Australian World Community Service
Limited stated that:
· `The `report-once, use-often' model of reporting offers a
streamlining of compliance requirements and a huge
potential saving by reducing the duplication of reports for
various users. This is particularly so where an entity is in
receipt of grants from various governments or government
agencies.' (Rotary Australian World Community Service
Limited 2011 pp 4-5)
· In a similar vein UnitingCare Australia submitted: `There
would be enormous benefit in all governments committing to
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Regulatory Impact Statement: establishing a regulator for the not-for-profit sector
a policy of `report-once, use-often', especially in relation to
organisational and compliance data requests. A commitment
from at least State and Commonwealth leaders that they will
move quickly toward adopting a `report-once, use-often'
policy would be welcomed by the sector. While we
acknowledge that getting action from all levels of
government to this principle will take time, we strongly
encourage agencies within each level of government to start
this process as soon as possible. Whilst this process would
be best driven by an independent regulator this work could be
initiated by other bodies such as COAG.' (UnitingCare
Australia 2011 p 9)
· Consumers Health Forum of Australia submitted: `CHF
welcomes the proposal in the Consultation Paper for a
"report-once, use-often" model of reporting, supported by a
national regulator. This has the potential to substantially
reduce the administrative burden of organisations that are
currently required to provide similar reports to a range of
entities.' (Consumers Health Forum of Australia 2011 p 2)
16.42 When referring to the acquittal of government grants the North
Queensland Land Council stated that:
· `There is a significant cost with complying with contractual
reporting requirements for NTRB's. For example, auditing
costs are in the order of twenty to thirty thousand dollars per
annum and we have to employ in-house a Certified Practising
Accountant (CPA). We understand the need for proper
compliance and it seems that one area where the compliance
burden could be reduced would be the number of interim
reports required throughout the financial year.' (North
Queensland Land Council 2011 p 4)
· The Association of Independent Schools of Western
Australia, UnitingCare NSW and the ACT, UnitingCare
Australia and the Chamber of Commerce and Industry WA
made similar comments and quantified acquittal costs in a
similar method.
16.43 Compliance costs associated with reporting obligations are
difficult to accurately estimate and quantify for any sector operating in the
Australian economy. These problems are particularly pronounced in the
NFP sector. NFP entities do not report on the totality of activities, rather,
on specific aspects of their operations. Furthermore, the sector is
extremely diverse and a generalised number would be unhelpful and
particularly misleading. Given informational gaps, it is impossible to
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estimate current compliance costs faced by the sector and changes in
compliance costs that would arise due to the implementation of options
considered in this regulatory impact statement (RIS). The PC report
reached a similar conclusion.
16.44 Public transparency over the activities of charities and other
concessionally taxed entities is lacking.
16.45 Some information is currently available in relation to tax
concessions on the Australian Business Register (ABR), with financial
reports also available at a charge from ASIC and from some State and
Territory agencies in relation to incorporated associations.
16.46 The lack of a single source of public information makes it
difficult for members of the community seeking to access reliable
information on charities and DGRs. The lack of public transparency
could reduce public confidence in the sector, restricts informed choices
and philanthropy more generally, and discourages appropriate levels of
sector accountability and governance. For example, Whitelion Inc.
submitted:
· `Whitelion believes that a NFP sector information portal
would have a range of benefits to stakeholders across the
community. Through listing all registered charities, the
public would be better able to find information on a given
charity, and indeed confirm the validity of a charity should
there be doubts as to a charity appeal. Further, for
Government agencies and philanthropic funders, the
centralised provision of general purpose financials on an
information portal provides scope for greater efficiency and
rigour in risk assessments. Whitelion believes that a NFP
information portal has the potential to increase transparency
in the sector, and thus build public trust in the NFP sector.'
(Whitelion Inc. 2011 pp 2-3)
16.47 Overall, the sector's regulatory framework has failed to keep up
with modern tax and regulatory system developments and public
expectations. Over the last decade, five reviews have recommended
taxation and regulatory reform, and there has been significant reform
internationally, including in the United Kingdom, United States, Canada,
New Zealand and Ireland. Yet Australia has achieved only incremental
changes.
16.48 Weaknesses in the NFP sector's regulatory framework have
created an environment where large and medium sized NFP entities,
particularly those operating across multiple jurisdictions, are subject to
excessive regulation, while smaller NFP entities, particularly small
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unincorporated associations and small charities, have remained
unregulated despite their access to public monies in the form of donations,
access to tax concessions and Government grants.
16.49 This is hindering the ongoing growth of the sector and its ability
to properly function and fully contribute in modern Australia.
Objectives of Government action
16.50 The Government recognises the important role played by the
NFP sector in establishing an inclusive and productive Australia. The
Government has committed to deliver smarter regulation, reduce red tape,
and improve transparency and accountability of the sector. The
Government also committed to consulting with stakeholders throughout
the reform process.
16.51 The Australian governments, the NFP sector and the public
recognise that it is important the sector is well regulated so that it remains
accountable to the communities it serves and that fund its diverse
operations. For example, the Australian Council of Social Services
(ACOSS) submitted to the 2010 Productivity Commission's report,
Contribution of the Not-for-Profit sector (PC report):
· `... the community values the contribution of the sector and
expects State, Territory and Commonwealth governments to
help not-for-profits to flourish through appropriate regulation
and concessional treatment. This is reflected in current
legislation and regulations, which aim to assist non profit
organisations by reducing costs, providing protection for
members and directors, and by increasing the confidence of
the public to make donations.' (PC Report 2010 p 114.
Citing ACOSS 2010 p 28)
16.52 Specifically, objectives of the Government include:
· establishing a robust and streamlined regulatory framework
for the sector while removing unnecessary duplication in
regulatory and reporting arrangements; and
· strengthening the NFP sector's transparency, governance and
accountability.
16.53 Comparable jurisdictions have recently reformed their regulation
of the NFP sector. Oversight of charities and tax concessional NFP
entities in the United Kingdom, Canada, New Zealand and the United
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States is now undertaken by a single national regulator who requires
regularly report on activities and financial performance. Improved
reporting has been driven by the need to strengthen transparency,
governance and accountability in a growing and dynamic sector.
Options that may achieve objective(s)
16.54 To promote transparency, governance and accountability and
limit the number of NFP entities that are operating under no regulatory
oversight, the Government will look at options to ensure NFP entities and
charities receiving Government support fall within the sector's regulatory
framework and undertake periodic and proportional financial reporting.
16.55 The Government will also explore measures to reduce
compliance burdens for NFP entities that face unnecessary high and
inefficient level of regulatory and compliance burden. Options that
centralise the Government's interaction with the NFP sector could help
reduce compliance burdens. For example, a `report-once, use-often'
approach to reporting could be adopted in relation to financial reporting.
Option 1: Retain existing policy
16.56 Under this option, regulatory responsibilities would remain
scattered across different governments and government departments both
within jurisdictions, and between jurisdictions. Government departments
and agencies would continue to oversee the operation of NFP entities for
different and sometimes overlapping purposes. This would result in
continued unnecessary red tape and a high regulatory burden for the NFP
sector.
16.57 Incremental changes to the regulatory framework could be
implemented to reduce red tape and regulatory burden. However, these
undertakings would largely be at the discretion of individual governments
and government agencies.
16.58 Additionally, under this option there would be no body
specifically established to oversee the operation and performance of the
NFP sector. Therefore, NFP entities would continue to interact with
several government agencies and departments for different purposes.
Option 2: Pursue the establishment of a national regulatory framework
16.59 Under this option the Government would pursue the
establishment of a national regulatory approach. At the centre of this
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approach the Government could establish a NFP regulator that would
undertake and centralise a broad range of regulatory functions; coordinate
and oversee the simplification of regulatory arrangements; and ultimately
provide a `one-stop shop' for the NFP sector.
16.60 Any regulator could perform the following functions (the final
list of activities would be determined in close consultation with sector
stakeholders):
· assess and determine eligibility for charity and NFP status;
· educate the NFP sector about sector-specific issues and
ensure compliance with relevant laws;
· establish a single general reporting framework;
· establish and enforce a national governance and disclosure
framework for NFP entities;
· administer an administrative penalty regime for NFP entities
which fail to comply with governance requirements;
· suspend or remove trustees/directors/responsible individuals
or NFP entities that fail to comply with the law;
· take action to protect assets of NFP entities;
· assist with dispute management between members of NFP
entities;
· establish a public information portal relating to NFP entities;
· replace the supervisory role of State and Territory
attorneys-general in respect of charitable trusts;
· administer a national incorporated associations legislative
scheme; and
· administer a national fundraising legislative scheme.
16.61 The Commonwealth does not have the necessary constitutional
power to establish a national regulatory approach without the support of
the States and Territories. The Government could pursue the
establishment of a national regulatory approach through the Council of
Australian Governments (COAG).
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16.62 There are three alternatives for the establishment of a national
NFP regulatory framework. Alternatives include a referral of powers by
the States to the Commonwealth, a cooperative legislative regime based
on model Commonwealth legislation or a cooperative legislative regime
based on model state legislation. The form of the agreement would be
determined following negotiations with the States and Territories.
16.63 A national regulatory approach could be conducive to
harmonisation of criteria for tax concessions across jurisdictions, standard
reporting arrangements for grants and other government funding, and a
`report-once, use-often' model. A national approach would maximise the
reduction in red tape and regulatory burden faced by the sector.
16.64 The Government could pursue the establishment of a national
regulatory approach through the establishment of a NFP working group
which would report to COAG through the Standing Council for Federal
Financial Relations (SCFFR).
Option 3: Establish the Australian NFP Administrator within the ATO.
16.65 The Government could establish the Australian NFP
Administrator (ANA) within the ATO. The ANA would sit within the
ATO but would be structurally separated and branded.
16.66 The ANA could progress Commonwealth level regulatory
reform while the Government pursues a national NFP regulatory approach
through COAG. This would help address time lags required to obtain
agreement between Commonwealth, State and Territories governments.
16.67 The ANA would determine the status of an organisation, for
example charitable or NFP, and register entities as charities or PBIs only.
To determine the status of a NFP entity, the ANA would use definitions
and principles endorsed by the Australian Government. This could mean
applying the current common law definition of charity or any statutory
definition of charity which the Government is pursuing in its NFP reform
package.
16.68 NFP entities that do not agree with the status provided by the
ANA have various channels available to appeal. They are largely the
same as what is currently available to entities that do not agree with the
ATO's ruling over charitable status and access to tax concessions. They
include: request for internal reviews; appeal through the administrative
appeals tribunal; appeal through the Federal Court; appeal through the
Full Federal Court; and appeal through the High Court of Australia.
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· Requests for internal reviews would be undertaken free of
charge. Costs associated with the other channels would be
the same as is currently the case.
16.69 Registration for charities and PBIs would be voluntary.
However, only registered entities would be eligible for tax and other
concessions or benefits provided by the Commonwealth, such as
exemptions from certain Commonwealth laws.
16.70 There would be no change to regulation for the remaining NFP
entities, including those that currently self-assess. Later, the Government
may decide that it is appropriate for these entities to be included into the
sector's regulatory framework, requiring periodic reporting and formal
registering. Any decision would be undertaken in consultation with the
sector.
16.71 Under this option, existing regulators would retain their existing
functions. For example, ASIC would retain its corporate governance
functions and the ATO would continue to endorse entities for access to tax
concessions as well as undertake compliance activity in relation to those
concessions. The ANA would only be responsible for compliance of
charities and NFP entities with respect to their NFP status and registration
as charities.
16.72 Other activities which the ANA would undertake include:
· develop and maintain public information portal; and
· establish an Advisory Board made up of experts in the NFP
sector, for example lawyers and accountants. The Advisory
Board would be established to advise the ANA on a range of
NFP issues.
16.73 Similar nations with significant NFP sectors, such as the United
Kingdom, United States and New Zealand, have developed NFP
information portals. Over the long term, jurisdictions that have introduced
NFP information portals have seen improvements in public confidence
and in philanthropy.
16.74 Public submissions received by the Government indicate that the
sector is supportive of a public information portal which would provide
information to the public on the goals and activities of the sector. For
example, St John Ambulance Australia stated that a:
· `NFP sector information portal could have many benefits to
the public by making the activities of NFPs more transparent.
This could have the benefit of improving accountability as
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well as increasing public knowledge about the diversity and
importance of activities offered by NFPs.' (St John
Ambulance Australia 2011 p 3)
16.75 The ANA would not increase and strengthen its educative role
nor would it provide any governance support.
16.76 The ANA would be set up to begin its operations on
1 July 2011. From 1 July 2013, reporting by registered entities would
commence and the information portal would go online. Reporting would
be based on activity from the 2012-13 financial year.
16.77 The ANA would be established and fully funded from the
Australian Government's general revenue.
Option 4: Establish an independent statutory office regulator called the
Australian Charities and Not-for-profits Commission.
16.78 Regulatory reform at the Commonwealth level could be
progressed by a structurally separated office supported by the ATO which
would turn into a statutory office. The statutory office would take over
the role and responsibilities of the structurally separated office supported
by the ATO, and be given additional responsibilities.
16.79 Under this Option, the ATO would structurally separate the role
of determining entities' charitable status (a role to pass to the new
statutory body once it is in place) from the ATO's ongoing revenue role of
assessing access to tax concessions with respect to the not-for-profit
sector.
16.80 The statutory office would be called the Australian Charities and
Not-for-profits Commission (ACNC) and headed by a newly appointed
Australian Charities and Not-for-profits Commission Commissioner
(ACNC Commissioner). The ACNC would be required to separately
report to Parliament and administer a legislative regime, including with
remedial or penalty powers such as to obtain enforceable undertakings.
ACNC's powers of enquiry would either be ATO powers or comparable
powers which would be legislated.
16.81 The statutory office would determine entities' NFP status and
register charities and PBIs; develop and maintain a public information
portal; and provide secretariat services for the NFP Advisory Board.
· The public information portal would provide information for
the public, the sector and government on each registered
charity and PBI; and the sector with an avenue for online
interaction with the regulator and guidance material. The
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Regulatory Impact Statement: establishing a regulator for the not-for-profit sector
portal will interact with existing government databases and
agencies, such as the ATO, the ABR, and ASIC's companies
register.
16.82 The process of registering charities and PBIs would be based on
the existing process used by the ATO in determining whether an entity is
charitable. This is based on a common law definition of charity and
charitable purpose. This would not have any effect on charities and PBIs
compliance costs.
16.83 The statutory office would provide the sector with educative
material and governance support, and would establish itself as a `one-stop
shop' body. More specifically, the statutory office would develop a
reporting form that registered entities would use to access a range of
government services and concessions.
16.84 Submitted reports would be used by the ACNC to provide a
seamless approach for applications for ABNs, charitable status and
endorsement for tax concessions. The ABR and ATO respectively would
be required to formally endorse entities on ACNC's advice. Therefore, a
seamless process would be created, reducing compliance costs and red
tape faced by the sector.
16.85 NFP entities that are not registered by the ACNC would
continue to go through the same endorsement processes. This would
therefore require continued interaction with the ATO or self-assessment of
eligibility for tax concessions.
16.86 The ACNC would also be expected to establish and run
education programs and provide governance support to the sector,
including through `how to guides' and educative and guidance materials.
16.87 The ACNC would be responsible for consultation with the
public, sector and government on the form and content of reporting
requirements. This would be facilitated by the creation of an NFP reform
implementation taskforce which would be headed by an interim
independent ACNC Commissioner. The taskforce would begin operation
on 1 July 2011.
16.88 The Implementation Taskforce will reside within Treasury and
would work to ensure the ACNC is ready for operation by 1 July 2012.
The taskforce would be expected to:
· engage with State agencies to negotiate use of the public
information portal as a `one-stop shop' for reporting to State
agencies;
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· engage with the ATO on infrastructure requirements and the
transition of ATO staff and recruitment of new staff for the
ACNC;
· provide input into the development of the legislation for the
ACNC;
· consult with the public, the sector and government agencies,
for the new NFP general reporting framework and the details
of a public information portal; and
· work on developing the public information portal.
16.89 The ACNC would be set up to begin its operations on
1 July 2012. From 1 July 2013, reporting by registered entities would
commence and the information portal would go online. Reporting would
be based on activity from the 2012-13 financial year.
16.90 The ACNC would be established and fully funded from the
Australian Government's general revenue. The NFP sector would not be
required to pay cost recovery fees.
Option 5: Establish an independent Financial Management and
Accountability Act regulator called the Australian Charities and
Not-for-profits Commission.
16.91 The Government would progress Commonwealth level
regulatory reform through a structurally separated NFP regulator
supported by ATO. This regulator would evolve into a new Financial
Management and Accountability Act 1997 (FMA Act) independent
regulator for the sector and would be called the ACNC to be headed by a
newly appointed Australian NFP ACNC Commissioner.
16.92 As is the case under Option 4, the ACNC would determine the
status of NFP entities and register charities and PBIs; develop and
maintain a public information portal which would be more user friendly
than the portal envisaged in Option 3; establish a NFP Advisory Board;
consult with the sector on appropriate reporting requirements and
structure for the information portal; and provide education programs and
governance support to the sector.
· The appeals process and definition of charity and charitable
purposes which the ACNC would use are the same as
outlined under Option 3.
16.93 The structurally separated regulator would be required to
undertake initial recruitment for the regulator. The key difference
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between this Option and Option 4 is that the ACNC would be a
completely separate entity by virtue of its FMA Act status. This would
delay commencement of reporting and the launch of the public
information portal.
16.94 The structurally separated office within the ATO would be
created on 1 July 2011 with the ACNC to be established by 1 July 2012.
Reporting would commence from 1 July 2014, based on activity
undertaken during the 2013-14 financial year. At this stage, the
information portal would also be developed with public access to coincide
with the receipt of the first batch of reports.
16.95 The ACNC would be established and fully funded from the
Australian Government's general revenue. The NFP sector would not be
required to pay cost recovery fees.
Impact analysis
16.96 The Government has developed and will implement a reform
package to strengthen the performance of the NFP sector and ensure it is
effectively meeting the needs of the Australian public. Overall, the
Government's reform package would reduce compliance costs and
red tape faced by the sector, while also improving the sector's
accountability and transparency.
16.97 The options which were considered to addressed the problems
outlined above would:
· produce a consistent and coordinated regulatory framework
for the sector;
· centralise regulatory responsibilities within a single
government agency;
· lead to streamlined and simplified reporting requirements for
the majority of NFP entities;
· ensure all NFP entities receiving substantial amounts of
public monies (most notably charities, PBIs and charitable
trusts) fall within the sector's regulatory framework;
· support and strengthen the sector by providing educative
material; and
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· ensure there is information available to the Government and
public on the performance and activities of the sector by
introducing public information portal.
16.98 The NFP regulator would work to ensure that small charities,
including charitable trusts, do not experience large and significant
increases in compliance burden resulting from new reporting obligations.
Reporting obligations would be proportional to size and risk posed by
NFP entities and would therefore be significantly less for smaller
charities.
16.99 All charities are currently required to be endorsed, as such, there
would be no change to the compliance burden relating to endorsement for
charitable status.
16.100 Given the lack of data, it is not possible for the Government to
accurately estimate the number of charities that would fit into various
segments of the sector (for example, small charities). This makes it
extremely difficult to estimate the overall implication on compliance costs
for the sector as a whole.
16.101 However, overall the Government considers, given information
available and through discussion with the sector, that compliance burden
would be reduced under all options considered (besides the option where
the status quo would be maintained).
Option 1: Retain existing policy
Effect on the sector
16.102 Under this option, a segment of the NFP sector, primarily
comprised of large NFP entities that undertake a range of activities such
as the delivery of government services funded by a range of government
agencies, would continue to face unnecessarily high and inefficient level
of regulatory and compliance burden. These NFP entities would continue
to be regulated, interact and report to different government agencies both
across and between jurisdictions for different and overlapping purposes.
16.103 On the other hand, a segment of the NFP sector, mainly
comprised of charitable trusts and small charities, would continue to
operate under no regulatory oversight.
16.104 To reduce regulatory and compliance burden where appropriate,
under the Government's direction individual government departments and
agencies could endeavour to reduce regulatory burden and red tape faced
by the sector. However, it is likely that such a disjointed, uncoordinated
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approach would be counterproductive and unlikely to deliver significant
benefits to the sector.
16.105 This view was expressed by stakeholders during recent
consultation conducted by the Government. For example Australasian
Society for HIV Medicine submitted:
· `A standard set of accounts would be great. AusAID and
ACFID tried to do this but in fact, without a national
regulator all they have done is impose another set of
reporting to meet ACFID Code requirements and this
inappropriate for organisations which have a development
arm, but for whom overseas aid program activities are only a
part of the whole organisation.' (Australasian Society for
HIV Medicine 2011 p 4)
Effect on Government
16.106 This option would amount to a continuation of current
Government policy. Therefore, it will have no implication for the
Government's Budget over the forward estimates.
Effect on the public
16.107 This option would not deliver improved accountability and
transparency, and a substantial number of NFP entities that account for a
small number of the sector's activity would continue to operate outside
the sector's regulatory framework.
16.108 The public would not have access to reliable and useful
information on the activities of charities and PBIs and a point of contact
for issues related to charities. Therefore, this option could reduce public
confidence in the sector and restrict informed choices and philanthropy
more generally.
16.109 Additionally, the regulatory burden faced by NFP entities
operating with a high compliance burden could continue to divert scarce
NFP resources away from core activities leading to a reduction in public
confidence in the ability of NFP entities to fulfil their objectives.
Option 2: Pursue the establishment of a national regulatory framework
Effect on the sector
16.110 This option has the potential for greatest decline in compliance
burden faced by the sector, and has the potential to ensure all NFP entities
accessing public monies operate within the sector's regulatory framework.
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However, pursuing the establishment of a national regulatory framework
would take time to implement and require State and Territory cooperation.
16.111 A national regulatory system for the NFP sector has the potential
to reduce red tape and compliance costs, remove unnecessary duplication
of required information across jurisdictions, improve transparency,
increase philanthropy (through increased donations and volunteerism),
and provide Australia with a system that will allow NFPs to focus on core
activities.
16.112 The costs and benefits associated with this option, particularly in
relation to regulatory and compliance burden will depend on the final
scope of reforms which are agreed with the States and Territories. Given
informational gaps which do not allow for accurate quantification of
compliance costs, we would not be able to estimate potential reductions in
compliance costs resulting from this Option.
16.113 Achieving State and Territory agreement may be difficult,
however, it would provide significant benefits in terms of harmonisation
and simplification. A national approach to NFP regulation will allow for
the removal of the complex, inequitable and duplicative regulatory
requirements which are currently in place for the NFP sector. It would
also provide scope to expand regulatory oversight across the totality of
NFP entities receiving public monies.
16.114 Mission Australia recently submitted in response to the
Government's consultation paper on a NFP regulator that:
· `Mission Australia supports the referral of powers from the
States to the Commonwealth to establish a national NFP
regulator. It is acknowledged that without State support and
further progress through COAG, a less than optimal national
regime would result with ongoing duplication and
inconsistencies in regulatory treatment across jurisdictions.'
(Mission Australia 2011 p 4)
GAAP Consulting submitted: `The status quo is not an option
for the reasons stated in the scoping study. Anything less
than a national regulator for all not-for-profit entities would
be a sub-optimal outcome; and a significant opportunity
missed for generations.' (GAAP Consulting 2011 p 2)
Effect on Government
16.115 The impacts on the Government would ultimately depend on the
final set of reform proposals agreed to by Australia, State and Territory
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governments. At this stage, it is impossible to quantify any budgetary or
related impacts on the Government.
Effect on the public
16.116 Ensuring that appropriate governance, accountability and
transparency exists within the NFP sector through smarter regulation is
expected to improve public confidence in the sector, promote informed
choices and ultimately help secure the long term sustainability of the
sector.
16.117 National regulatory frameworks characterised by independent
charities regulators have been established in many comparable overseas
jurisdictions, including New Zealand, the United Kingdom and Ireland.
Canada has established a charity regulator (the Charities Directorate)
within its relevant tax authority while in the United States, the Internal
Revenue Service is responsible for regulating charities. These
jurisdictions have experienced increased public engagement following
implementation of reforms.
Option 3: Establish the Australian Not-for-profits Administrator within
the ATO.
Effect on the sector
16.118 Under this option, the Government would establish a structurally
separate regulator for the NFP sector within the ATO. The regulator
would register charities and PBIs, oversee the performance of the sector
including by collecting financial reports from all registered charities and
PBIs on an annual basis, and develop and maintain a NFP information
portal.
16.119 Existing regulators would retain their existing functions.
Required reporting would be provided by the ANA to these regulators to
allow them to carry out functions. However, this sharing of information
would not be a seamless process.
16.120 Required information and reports would not be tailored to
address the totality of reporting requirements and could therefore still
warranted interaction with other regulators. Therefore, there would a
move towards a `report-once, use-often' approach, which would result in a
reduction in compliance burden faced by NFP entities.
16.121 The criteria for endorsement and registration as a charity or PBI
would be consistent with current definitions and principles. Therefore,
charities or PBIs would not need to be re-endorsed by the new regulator.
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· These criteria are currently expressed in common law. The
Government is likely to provide the sector with a statutory
definition of charity and PBI. A statutory definition would
retain current principles and criteria and would therefore
leave unchanged entities and activities eligible to be endorsed
as charities and PBIs.
16.122 Compliance costs associated with regulatory obligations are
difficult to accurately estimate for any sector operating in the Australian
economy. For example, in a sector where regular reporting of financial
performance is required it would be difficult to separate reporting and
accounting expenses related to regulatory obligations and, reporting
requested by owners or shareholders.
16.123 These problems are particularly pronounced in the NFP sector.
NFP entities do not report on the totality of activities rather on specific
aspects of their operations. Given informational gaps, it is impossible to
estimate current compliance costs faced by the sector and changes in
compliance costs that would arise due to the implementation of options
considered in this RIS. The PC report reached a similar conclusion.
16.124 We are able to qualitatively describe the average impacts of
options on certain segments of the NFP sector. In turn, this qualitative
analysis would allow us to gauge whether options considered would
increase or decrease compliance burden faced by a typical NFP entity in
specific segments of the NFP sector.
16.125 Incorporated associations and companies limited by guarantee
that undertake a range of activities are required to interact with a range of
government agencies and therefore generally have onerous reporting
requirements. These organisations tend to be large and medium sized
NFP entities.
16.126 Under the new reporting arrangements, large and medium sized
NFP entities would be required to report to the regulator on a regular
basis. The information collected by the regulator would be shared with
relevant Commonwealth agencies allowing charities and PBIs to meet a
range of their reporting obligation with the one form. This form is not
expected to cover the totality of charities and PBI information
requirements; therefore, to the extent that there are informational gaps,
charities and PBIs may still be required to interact with a range of
government agencies, only to the extent necessary to meet specific
information requirements of those agencies.
16.127 Charitable trusts and small charities with limited government
interaction (such as the delivery of government services) currently have
limited reporting obligations. This option would bring these NFP entities
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that access public monies into the sector's regulatory framework by
ensuring they register with the regulator on a voluntary basis if they wish
to maintain their charitable status.
16.128 The level of reporting detail required would be tiered based on
factors such as size, risks and access to public monies. The actual
requirements would be established in consultation with the sector but
requirements for smaller entities are expected to consist of basic financial
data such as total revenue, total costs, estimates of net worth and contact
details.
16.129 There is currently no data on the number of small charities
operating in Australia. However, it is likely that most small charities are
incorporated associations. Currently, there are around 136,000
incorporated associations operating in Australia. Incorporated
associations are required to maintain up-to-date financial and operational
information to meet requirements imposed by stakeholders such as current
regulators and donors, and are required to report to regulators such as
relevant State authorities.
16.130 Regular reporting to the NFP regulator may result in minor
additional compliance burdens on small charities and would amount to
inserting information already collected information into a standard forms.
A conservative estimate would be that it would costs half of one working
day in staff time for these entities to meet reporting obligations under this
option.
· If all the reporting requirements of small charities that are
incorporated associations were covered by the one form in
the event of agreement with the States, these entities may
experience a reduction in compliance burden resulting from
the new reporting requirements (see `Impact' section for
Option 4).
· To the extent that reporting is still required for current
regulators this option would lead to an increase in
compliance burden. The upper bound estimate of increased
compliance burden is half of one working day in staff time
per annum.
16.131 Small charities, such as incorporated associations, that do not
have the in-house capacity to collect up-to-date financial information
engage professional service providers such as accountants. The sector has
indicated that professional services are generally provided free of charge
or at highly subsidised rates. Reporting requirements under this option
would not be more onerous than current requirements, would be satisfied
by information already collected to meet current requirements, and would
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therefore have minor or no addition compliance costs for small charities
such as incorporated associations.
· As part of the scoping study on a national NFP regulator the
Government undertook targeted consultation with key
stakeholders in the NFP sector. Stakeholders consulted were
of the view that new reporting requirements would lead to
minor increases in compliance costs faced by small charities.
16.132 We estimate that there are around 2,500 private ancillary funds.
Private ancillary funds are also required to maintain up-to-date financial
and operational information to meet requirements imposed by
stakeholders and report periodically to the ATO. There would be no
change in compliance burden faced by private ancillary funds as they
would be required to report to the NFP regulator instead of the ATO.
16.133 In addition, we estimate that there are around 1,000 charitable
trusts. Charitable trusts do not report to stakeholders, however, for
internal purposes are required to maintain up-to-date financial
information. Information needed to meet reporting obligations under this
option would already be collected by charitable trusts. Therefore, regular
reporting to the NFP regulator would have minor compliance costs for
these entities and would amount to inserting already collected information
into a standard form. A conservative estimate would be that it cost half of
one working day in staff time for these entities to meet reporting
obligations under this option.
16.134 This option would give rise to some sensitivities where the
sector would see this as `interim regulation by the ATO' of the sector, and
where this would increase the reporting burden for a small number of
charities.
16.135 Structural separation and branding would help to address the risk
of a perceived conflict of interest between the Commissioner of
Taxation's revenue collection focus and the role as default NFP ACNC
Commissioner.
· The establishment of an advisory board would mitigate
concerns about sector engagement and help underpin the
NFP sector's confidence in the regulator's decision making
processes.
Effect on Government
16.136 The sector was of the view that education function would be
required to ensure NFP entities are complying with regulatory objections
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and would facilitate any adjustment to a new regulatory environment. For
example, Wesley Mission submitted:
· `It should also have, as a core activity an education and
training support function in addition to its regulatory
responsibilities. This will go a long way to reducing the level
of confusion currently within the sector.' (Wesley Mission
2011 p 9)
16.137 Under this option, the ANA would not have any additional
education role. The sector may therefore criticise the Government for not
providing an education role.
16.138 The costs of structurally separating the role of determining NFP
status and registering charities and PBIs from the ATO's role of
administering tax concessions; implementing general reporting;
establishing and maintaining the NFP public information portal and
undertaking related activities is estimated to cost $14.3 million the
forward estimates.
Effect on the public
16.139 The public would have access to more information on the
activities of charities, a clear point of contact for issues related to
charities. Therefore changes should generate confidence in the activities
of charities.
Option 4: Establish an independent statutory office regulator called the
Australian Charities and Nor-for-profits Commission
16.140 Under this option the Government would progress reform
through a structurally separated area supported by the ATO which would
turn into the ACNC from 1 July 2012. The statutory office would take
over the role and responsibilities of the structurally separated office, and
be given additional responsibilities.
Effect on the sector
16.141 The ACNC would provide the sector with a `one-stop shop' for
registration, tax concessions, and accessing other Australian Government
services and concessions. Incorporated associations and companies
limited by guarantee that are involved in a range of activities would only
have to report to the ACNC. These NFP entities tend to be large and
medium sized NFP entities.
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16.142 This information would then be used to fulfil other
Commonwealth level reporting obligations required for access to tax
concessions and government service delivery contracts.
16.143 Incorporated associations that are charities would only report to
the ACNC that would pass on required information to relevant agencies.
The Implementation Taskforce would negotiate with State authorities to
develop the public information portal as an `one-stop shop' for reporting
to State agencies. Therefore, incorporated associations would only be
required to report to these regulators if there are informational gaps.
16.144 The Government expects that the move to the
`report-once, use-often' approach would reduce compliance burden
associated with reporting for these large and medium sized NFP entities.
16.145 A large NFP would no longer be required to report to meet the
numerous reporting requirements associated with legal form and, access to
Government grants and contracts for service delivery. Instead of
interacting with numerous Government agencies on numerous occasions
(if, for example, two grants were acquired from a particular agency), the
NFP entity would be required to report on one occasion to the NFP
regulator. This would reduce auditing expenses that the sector has
indicated costs, on average, $1,000 per audit.
16.146 Charitable trusts and small charities with limited government
interaction (such as the delivery of government services) currently have
limited reporting obligations. This option would bring these NFP entities
that access public monies into the sector's regulatory framework by
ensuring they register with the regulator on a voluntary basis if they wish
to maintain their charitable status.
16.147 The level of reporting detail required would be tiered based on
factors such as size, risks and access to public monies. The actual
requirements would be established in consultation with the sector but
requirements for smaller entities are expected to consist of basic financial
data such as total revenue, total costs, estimates of net worth and contact
details.
16.148 There is currently no data on the number of small charities
operating in Australia. However, it is likely that most small charities are
incorporated associations. Currently, there are around 136,000
incorporated associations operating in Australia. Incorporated
associations are required to maintain financial and operational information
to meet requirements imposed by stakeholders such as current regulators
and donors, and are required to report to regulators such as relevant State
authorities.
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16.149 Once agreement is reached with the State authorities, regular
reporting to the NFP regulator as opposed to current regulators may result
in a reduction in compliance burden associated with reporting.
Incorporated associations would no longer be required to report to State
authorities but instead to the NFP regulator. It is possible that the NFP
regulator would require streamline reporting which could result in a
marginal reduction in compliance costs (see paragraph 1.37 for further
details).
16.150 More significant compliance savings would be achieved from
the use of `report-once, use-often' approach where entities could meet the
totality of reporting obligations associated with grants and government
service delivery contracts with the one form. The above assumes however
that agreement with the States is obtained in regards to the method of
interaction between the NFP regulator and existing State agencies. In the
interim, it is expected that small charities may be faced with an increased
reporting burden given the different reporting requirements of various
States. However, as reporting requirements to the NFP regulator are very
likely to be satisfied by information already produced, this impact would
be mitigated.
16.151 Small charities, such as incorporated associations, that do not
have the in-house capacity to collect up -to-date financial information
engage professional service providers such as accountants. The sector has
indicated that professional services are generally provided free of charge
or at highly subsidised rates. Reporting requirements under this option
would not be more onerous than current requirements, would be satisfied
by information already collected to meet current requirements, and would
therefore have minor or no additional compliance costs for small charities
such as incorporated associations.
· As part of the scoping study on a national NFP regulator the
Government undertook targeted consultation with key
stakeholders in the NFP sector. Stakeholders consulted were
of the view that new reporting requirements would lead to
minor increases in compliance costs faced by small charities.
16.152 We estimate that there are around 2,500 private ancillary funds.
Private ancillary funds are required to report periodically to the ATO and
therefore maintain up -to-date financial and operational information.
There would be no change in compliance burden faced by private
ancillary funds as they would be required to report to the NFP regulator
instead of the ATO.
16.153 In addition, we estimate that there are around 1,000 charitable
trusts. Charitable trusts do not report to stakeholders, however, for
internal purposes are required to maintain up -to-date financial
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information. Information needed to meet reporting obligations under this
option would already be collected by charitable trusts. Therefore, regular
reporting to the NFP regulator would have a minor compliance cost for
these entities and would amount to inserting already collected information
into a standard form. A conservative estimate would be that it would
costs half of one working day in staff time for these entities to meet
reporting obligations under this option.
16.154 In general, the Government considers that this option has the
potential to reduce compliance and administrative costs faced by the
sector and in particular reduce costs once agreement with State authorities
has been obtained. In other words, the reduction in compliance expenses
associated with the `report-once, use-often' approach, once fully
implemented, would offset any additional costs resulting from reporting.
However, small charities may see an increase in compliance costs in the
initial stage of this option.
16.155 Compliance and administrative savings are hard to quantify
particularly for this sector which has limited data on financial
performance. It is noted, however, that during Government consultation
with the sector, stakeholders indicated that a move toward a
`report-once, use-often' approach would lead to `huge' savings in
administrative and compliance costs (see paragraph 1.12 above for further
information).
16.156 The sector would also benefit from the other services offered by
the ACNC including the provision of education programs and governance
support, and an information portal which is user-friendly. These services
are likely to be more important for smaller entities that tend to be
unincorporated organisations and charities. Larger charities have more
resources to market their services and provide information to the public.
16.157 This option would provide the sector with an independent
regulator who would leverage off ATO resources to conduct back office
tasks on a more cost efficient scale. The regulator would be required to
report to the Australian Parliament.
Effect on Government
16.158 Structurally separating the role of determining NFP status and
registering charities and PBIs from the ATO's role of administering tax
concessions; providing education programs and governance support;
implementing general reporting; establishing and maintaining the NFP
public information portal and undertaking related activities is estimated to
cost $53.6 million over the forward estimates.
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Effect on the public
16.159 The public information portal and regular reporting by NFP
entities are likely to boost the sector's transparency and accountability,
leading to increased public confidence and engagement.
Option 5: Establish an independent Financial Management and
Accountability Act regulator called the Australian Charities and
Not-for-profits Commission
16.160 The impacts of this option are identical to those specified under
Option 4. The key difference between Option 4 and 5 is that the NFP
regulator would be an entirely new entity under Option 5 by virtue of its
FMA Act status.
16.161 This option would result in a completely separate entity unable
to leverage off the knowledge and support of the ATO. Therefore, this
option would cost significantly more than Option 4.
16.162 There are high implementation risks association with this option,
resulting from delays caused by the two pass Cabinet process, as well as
the legislative risks brought about by the need to legislate to introduce a
new FMA Act agency.
16.163 This option is likely to be supported by the sector which has
called for a new and independent regulator to deliver compliance,
transparency and education gains. However, the practical implications for
the sector and public would be identical under both Options 4 and 5.
16.164 Structurally separating the role of determining NFP status and
registering charities and PBIs from the ATO's role of administering tax
concessions; providing education programs and governance support;
implementing general reporting; establishing and maintaining the NFP
public information portal and undertaking related activities is estimated to
cost around $170 million over the forward estimates.
Consultation
16.165 Consistent with the direction provided by the Government
during the 2010 election campaign, the Government plans to consult on
design and implementation options for policy proposals. Consultation and
public views would be elicited through the issuance of public discussion
papers and other more focused consultation could occur through the NFP
Sector Reform Council.
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16.166 At this stage it in envisaged that the Government will release a
public consultation paper on:
· reporting requirements of NFP entities, including
consideration of appropriate thresholds to underpinned a
tiered reporting framework; and
· layout and content of the NFP public information portal.
16.167 Following the 2012 Commonwealth Budget, public consultation
papers would invite public submissions, with targeted consultation (with
key stakeholders including the NFP Reform Council, the ATO's Charities
Consultative Committee, and State and Territory authorities) would also
occur once the public consultation papers are in the public domain.
16.168 The Government would also consult through the issuance of
legislative exposure drafts.
Recent reviews of the NFP sector
16.169 The AFTS report and the PC report, both examined the
appropriateness of the NFP sector's regulatory framework. The analysis
and recommendations in both reports were informed by extensive public
consultation.
16.170 The AFTS report found that `The regulatory framework for NFP
organisations is inconsistent and opaque' (AFTS 2009, Volume 1, p 208).
16.171 The PC report found that:
· `The current regulatory framework for NFPs is characterised
by uncoordinated regimes at the Commonwealth and State /
Territory levels. Disparate reporting and other requirements
add complexity and costs, especially for organisations
operating in more than one jurisdiction ... (Productivity
Commission 2010 p 113)'
· It recommended the development of a national NFP regulator
to bring together Australian government regulatory functions
and the encouragement of self-regulation instruments, such
as voluntary codes of conduct, to enhance public trust and
confidence.
16.172 Other recent reviews into the regulation and taxation of the NFP
sector in Australia have taken place including the 2001 Report of the
inquiry into the Definition of Charities and Related Organisations, the
2008 Senate Economics Committee inquiry into Disclosure Regimes for
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Charities and NFP Organisations, and the 2010 Senate Economic
Legislation Committee Inquiry into the Tax Laws Amendment (Public
Benefit Test) Bill 2010.
16.173 The analysis and recommendations in these recent reviews of the
NFP sector were also largely informed by extensive public consultation.
16.174 A consistent theme that has emerged from these reviews is that
the regulation of the NFP sector would be significantly improved by
establishing a national regulator, and harmonising and simplifying
regulatory and taxation arrangements.
Government consultation on a NFP regulator
16.175 The Government consulted on the goals and form of a regulator,
and the scope and functions of regulation for the NFP sector as part of the
scoping study for a national NFP regulator. Over 160 submissions were
received. Feedback from submissions will be incorporated into the Final
Report of the Scoping Study which is expected to be finalised around
May 2011.
16.176 There was widespread support for a national and independent
NFP regulator to reduce the red tape and regulatory burden faced by the
sector. A consistent message emerged that a significant reduction in
red tape and regulatory burden could only be achieved through a national
NFP regulator.
16.177 Stakeholders expressed concerns in relation to the ability of an
interim Commonwealth regulator to reduce red tape and the regulatory
burden. These concerns mainly relate to the option that the Government
only pursue regulatory reform at the Commonwealth level. The
establishment of a Commonwealth regulator is likely to be perceived as an
important step in the broader reform process where it is pursued parallel to
a COAG reform agenda.
16.178 There was also widespread support for:
· streamlined and consistent reporting requirements; and
· a public information portal to provide a single, easily
accessible source of detailed information about NFP entities
and charities in Australia.
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Conclusion and recommended option
16.179 A truly national NFP regulator would provide the greatest
benefits in terms of reducing regulatory overlap, red tape and compliance
costs for the sector. However, achieving State and Territory agreement
may be difficult and take time. In this light, a structurally separated
regulator within the ATO or a new FMA Act agency could provide
significant benefits for the NFP sector in a much shorter timeframe
although there will be distributional issues in the transitional stage with
net benefits mainly accruing to larger NFPs while smaller NFPs could
face a small increase in compliance costs.
16.180 A balance needs to be struck between providing the sector with a
fully separate and independent NFP regulator, with the cost of such a
regulator, the need to avoid a new layer of bureaucracy and the need to
avoid pre-empting any model that COAG may agree to.
16.181 Whilst Option 3 involves structural separation and branding, the
benefits of this option are limited and are unlikely to meet the sector's
expectations for regulatory reform. Under this option, the ANA would
offer no additional educational support to the sector and therefore offer
limited compliance and governance gains.
16.182 Except for the provision of a basic information portal with
limited functionality and an Advisory Board, this option is consistent with
what the ATO is currently providing the sector.
16.183 Importantly, this option would offer minor compliance costs
savings from the `one-stop shop' reporting.
16.184 Option 5 would meet the sector's desire for a new and
independent regulator and deliver compliance, transparency and education
gains. The option would come at a high cost caused by its resourcing
demands. There are high implementation risks association with this
model given loss of access to knowledge and skills that exist in the ATO,
as well as the legislative risks brought about by the need to legislate to
introduce a new FMA Act agency, which would not be equipped with the
knowledge or support of the ATO. Moreover, this option may pre empt
COAG consideration of NFP national regulatory reform, and would add
another layer of bureaucracy.
16.185 In contrast, Option 4 would come at a lower cost than Option 3
and pose fewer implementation and legislative risks. Under this option,
the ACNC could leverage off existing ATO resources, including staff,
infrastructure and expertise. This option would deliver similar benefits as
Option 5 including seamless regulation of the sector and education,
transparency and compliance gains.
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16.186 This model will provide an independent regulator for the sector
and will therefore help to address the sector's concerns in relation to the
ATO's perceived conflict of interest between its regulatory and revenue
collection roles. This option will therefore provide timelier benefits to the
sector without pre-empting COAG consideration of NFP national
regulatory reform. For these reasons, Option 4 is the preferred model.
16.187 The Government would also pursue the Option 2. The interim
NFP regulator would implement a voluntary registration scheme; develop
a tiered mandatory reporting scheme; and create a public information
portal.
16.188 The final form and structure of reporting requirements and the
public information portal would be developed in close consultation with
the sector and relevant government agencies and departments.
16.189 The combination of these options would help the Government
establish a robust and streamlined regulatory framework for the NFP
sector; strengthen the sector's transparency, governance and
accountability; and provide the public with information on the sector
commensurate to the level of support provided to the sector by the public.
16.190 The Government favours the adoption of Options 1, 3 and 5.
These options would allow the government to implement long-term and
short-term reform at the Commonwealth level.
16.191 The combination of Option 2 and 4 would allow the
Government to implement immediate reform for the NFP sector at the
Commonwealth level, while pursuing a national regulatory approach
through the COAG process.
Implementation and review
Implementation
16.192 During its 2010 election campaign the Government committed
to reform the NFP sector and consult widely on options for reform and
strategies for implementation.
16.193 Consultation with the sector would occur prior to finalisation
and implementation of preferred option.
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Ongoing review
16.194 The performance of the recommended options will be assessed
qualitatively by ongoing monitoring of stakeholders' attitudes.
Stakeholder views on changes implemented, including the final form and
structure of reporting requirements, and the public information portal
would be received primarily through the NFP Reform Council and the
ATO's Charities Consultative Committee.
16.195 However, reporting is required for any regulator to effectively
oversee the performance of the sector and costs are expected to be minor
compared to funding and support the sector receives from the Government
and the public.
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Chapter 17
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Australian Charities and Not-for-profits Commission Bill 2012
17.1 This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
17.2 This Bill establishes a national regulator, and a national
regulatory framework for the not-for-profit (NFP) sector.
17.3 The purpose of the Bill is to maintain, protect and enhance the
public trust and confidence in the NFP sector.
17.4 The Bill will initially apply only to charities (including public
benevolent institutions). However, it is expected that this regulatory
framework over time will be extended to NFPs more generally.
17.5 Further context about the objects of the Bill and the broader NFP
reform agenda of which it is a part are detailed in Chapter 1.
Human rights implications
17.6 The Bill engages the following human rights.
Right to privacy
17.7 Article 17 of the International Covenant on Civil and Political
Rights (ICCPR) provides that no one shall be subjected to arbitrary or
unlawful interference with their privacy. Privacy guarantees a right to
secrecy from the public of private characteristics, actions or data.
17.8 Collecting, using, storing and sharing personal information
amount to interferences with privacy.
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17.9 In order for an interference with privacy not be `arbitrary', the
interference must be for a reason consistent with the ICCPR and
reasonable in the particular circumstances.
17.10 `Reasonableness', in this context, incorporates notions of
proportionality to the end sought and necessity in the circumstances.
Generally, this means that provisions interfering with privacy should be
precise, that they should not give decision-makers too much discretion in
authorising interferences, and that they should provide proper safeguards
against arbitrary interference.
Information gathering powers and monitoring warrant
17.11 Information gathering powers and monitoring warrant regimes
like the one established in this Bill engage the right to privacy in
Article 17 of the ICCPR.
17.12 The provisions to facilitate investigation should be reasonable,
necessary and proportionate to meeting the legitimate objective of
regulating the NFP sector.
17.13 Under the Bill, the Australian Charities and Not-for-profits
Commission (ACNC) will implement a report-once use often reporting
framework, provide education and support to the sector, and establish the
Australian Charities and Not-for-profits (ACN) Register.
17.14 Information contained in the ACN Register must be correct and
accurate for the report-once, use-often framework to function effectively
and reduce the red-tape faced by NFPs. The information gathering and
monitoring power enables the Australian Charities and Not-for-profits
Commission Commissioner (ACNC Commissioner) to validate the
accuracy of the information contained in the ACN Register.
17.15 The ACNC will not be responsible for ensuring that product and
service standards are met. However, to function effectively as a
one-stop-shop regulator for the sector, the ACNC will need to have
appropriate powers to takes samples of products or inspect items on
premises with a view to sharing the information gathered with authorities.
17.16 The investigation and monitoring powers of the ACNC override
the privilege against self-incrimination by providing that, a person is not
excused from producing information or documents or answering a
question on the grounds that doing so would incriminate him or herself.
17.17 Consistent with the Guide to Framing Commonwealth Offences
it is appropriate to override the privilege where its use could seriously
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undermine the effectiveness of a regulatory scheme and prevent the
collection of evidence.
17.18 For example, the privilege against self-incrimination does not
apply in relation to the Australian Tax Office's coercive information-
gathering powers under section 264 of the Income Tax Assessment Act
1936. As the ACNC is taking over the regulatory responsibilities of the
ATO for registered entities it has been provided with equivalent powers.
The Courts have accepted that retaining such a privilege in such cases
would frustrate the regulator in the exercise of its functions.2
17.19 However unlike the powers of the ATO this legislation
constrains the use of any incriminating evidence by providing both use
and derivative use immunity to protect the rights of individuals.
17.20 It is also critical for the legislation to contain safeguards to
protect the interests of registered entities and the privacy of employees of
these entities. This will be balanced through having specific conditions
that are required to be satisfied prior to using these powers.
17.21 By providing these additional safeguards, the provisions that
facilitate investigation are reasonable and necessary in the circumstances
and required to meet the objects of the Bill. These provisions are
therefore consistent with the requirements of Article 17 of the ICCPR.
Disclosure of personal information
17.22 The disclosure of personal information by a government
authority, as authorised in certain circumstances as part of the secrecy
framework in the Bill, engages the right to privacy in Article 17 of the
ICCPR.
17.23 The provisions that authorise the disclosure of personal
information should be reasonable, necessary and proportionate to meeting
the legitimate objective of regulating the NFP sector.
17.24 Under the Bill the secrecy framework authorises the disclosure
of information to Australian Government agencies and on the ACN
Register. There are also transitional secrecy provisions within the Bill
that enable disclosure of protected taxation information from the
Commissioner of Taxation to the ACNC for the ACN Register, and these
disclosures are also subject to the secrecy framework within the Bill.
2
Stergis v Commissioner of Taxation (1989) 89 ATC 4442; Donovan v Commissioner of
Taxation [1992] FCA 82; (1992) 92 ATC 4114; and Deputy Commissioner of Taxation v
Hugo John De Vonk [1995] FCA 1715 (4 December 1995).
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17.25 However, the Bill limits these disclosures by requiring the
relevant ACNC officer to consider whether the disclosure is consistent
with the objects of the Bill (which includes protecting and enhancing the
public trust and confidence in the NFP sector) and to be satisfied that the
protected ACNC information is being disclosed for a legitimate purpose.
17.26 This additional requirement for consideration against the objects
of the Bill will provide the necessary safeguard against arbitrary
interference with privacy and is therefore consistent with the requirements
of Article 17 of the ICCPR.
Presumption of innocence
17.27 Article 14 of the ICCPR provides that all persons shall be equal
before the courts and tribunals and everyone charged with a criminal
offence shall have the right to be presumed innocent until proven guilty
according to law.
17.28 This Article imposes on the prosecution of an offence, the
burden of proving the charge, guarantees that no guilt can be presumed
until the charge has been proved beyond reasonable doubt and ensures
that the accused has the benefit of doubt.
17.29 As per paragraph 30 of UN Human Rights Committee, General
Comment No. 32 (2004), this human right is normally engaged where
public authorities make public statements affirming the guilt of the
accused, shackle or keep defendants in cages during trials indicating that
they may be dangerous criminals or allow the media to show news
coverage that undermines the presumption of innocence.
Placing the evidential burden on the defendant
17.30 It could potentially be argued that where legislation places an
evidential burden on the defendant, this may engage the right to a
presumption of innocence under Article 14 of the ICCPR.
17.31 Under subsection 13.3(3) of the Criminal Code, `evidential
burden' means the burden of adducing or pointing to evidence that
suggests a reasonable possibility that the matter exists or does not exist.
Secrecy framework
17.32 Under the Bill, there are certain exceptions that apply to the
general prohibition on the use, disclosure and on-disclosure of information
protected under the secrecy framework.
17.33 Where an entity seeks to rely on these exceptions, the entity will
bear the evidential burden to point to evidence, such as a document or
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email, that suggests a reasonable possibility that they used the information
or disclosed/on-disclosed the information in accordance with that
exception.
17.34 It is common amongst Commonwealth secrecy regimes to place
the evidential burden on the defendant where the defendant seeks to rely
on an exception or defence to the general prohibition on disclosure of
information (an offence-specific defence). This is appropriate because the
defendant (in these situations) holds all of the evidence uniquely in their
possession.
17.35 Despite the evidential burden resting on the entity, the
prosecution retains the `legal burden' of proof and is required to prove
each element of an offence beyond reasonable doubt, consistent with the
requirements of Article 14 of the ICCPR.
Obligations of responsible entities
17.36 Under the Bill, there are certain obligations and liabilities placed
on the responsible entities of registered entities in order to ensure that
registered entities and responsible entities are accountable for fulfilling
their obligations under this law.
17.37 Where a responsible entity can prove illness at the relevant time,
or that the responsible entity took all the actions that it would be
reasonable in the circumstances to take to ensure that the registered entity
complied with its obligations and liabilities, then the responsible entity
would not be responsible for the obligation or liability (an offence-specific
defence).
17.38 When seeking to rely on this offence-specific defence the
responsible entity will bear the evidential burden to point to evidence, like
a document or email, which suggests a reasonable possibility that they
were ill at the relevant time or the extent of any participation in the
management of the unincorporated association, or any reasonable steps
taken by them.
17.39 This is consistent with the Attorney-General's Department's
publication A guide to framing Commonwealth offences, infringement
notices and enforcement powers, which states that an evidential burden of
proof should generally apply to a defence where there is an
offence-specific defence. In these situations, the defendant is in the best
position to provide evidence justifying why they undertook the act that
triggered the offence-specific defence.
17.40 Again, despite the evidential burden resting on the entity, the
prosecution retains the `legal burden' of proof and is required to prove
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each element of an offence beyond reasonable doubt, consistent with the
requirements of Article 14 of the ICCPR.
Conclusion
17.41 The Bill is compatible with human rights because it advances
the protection of human rights and to the extent that it may also limit
human rights, those limitations are reasonable, necessary and
proportionate.
Assistant Treasurer, the Hon David Bradbury
306
Index
Australian Charities and Not --for profits Commission
Bill 2012
Bill reference Paragraph number
Subsection 15-5(1) 1.80
Section 15-5(1)(c) 1.91
Subsection 15-5(2) 1.81
Subsections 15-5(3) 1.82, 1.83
Subsection 15-5(4) 1.83
Section 15-10 1.100, 1.101
Subparagraph 15-55(1)(d)(i) 11.70
Subsection 150-55(2) 11.70
Subsection 20-5(1) 3.19, 3.20, 3.25
Paragraph 25-5(1)(b) 3.26
Paragraph 25-5(1)(c) 3.42
Paragraph 25-5(1)(c) note 3.43
Subsection 20-5(2) 3.21, 3.25
Subsection 20-5(3) 3.22, 3.25
Paragraph 25-5(1)(b) 3.27
Paragraph 25-5(2)(b) 3.29, 3.26
Paragraph 25-5(3)(a) 3.32
Paragraph 25-5(3)(b) 3.36
Paragraph 25-5(3)(c) 3.38
Paragraph 25-5(3)(d) 3.40
Subsection 25-5(4) 3.44, 3.45, 3.58
Subsection 25-5(5) 3.47, 3.50, 3.55, 3.56
Subsections 25-5(5) and (6) 3.28
Subsection 25-5(6) 3.50
Section 30-5 3.66
Subsection 30-10(1) 3.66
Subsection 30-10(2) 3.67
Subsection 30-15(1) 3.68
Subsection 30-15(2) 3.73
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Bill reference Paragraph number
Subsection 30-15(3) 3.76
Subsection 30-15(4) 3.74, 12.11
Section 30-20 3.70
Section 30-25 3.71
Subsection 30-30 3.72
Section 30-35 3.77, 12.11
Section 35-5 3.80
Paragraph 35-10(1)(a) 3.81, 3.83
Paragraph 35-10(1)(b) 3.81, 3.84
Paragraph 35-10(1)(c) 3.81, 3.85
Paragraph 35-10(1)(d) 3.81, 3.94
Paragraph 35-10(1)(e) 3.81, 3.96
Subsection 35-10(2) 3.97, 9.48
Paragraph 35-10(2)(a) 3.103, 3.105, 9.52,
9.55
Paragraph 35-10(2)(b) 3.103, 3.106, 9.52,
9.57
Paragraph 35-10(2)(c) 3.103, 3.111, 9.52,
9.61
Paragraph 35-10(2)(d) 3.103, 3.115, 9.52,
9.66
Paragraph 35-10(2)(e) 3.103, 3.116, 9.52,
9.70
Paragraph 35-10(2)(f) 3.103, 3.121, 9.52,
9.74
Paragraph 35-10(2)(g) 3.103, 3.122, 9.52,
9.76
Paragraph 35-10(3)(a) 3.124
Paragraph 35-10(3)(b) 3.125
Paragraph 35-10(3)(c) 3.126
Subsection 35-10(4) 3.123
Subsection 35-15(1) 3.127
Subsection 35-15(2) 3.128
Paragraph 35-15(2)(b) 3.129
Subsection 35-15(3) 3.131, 3.132
Section 35-20 3.135, 12.11
Subsection 40-5(1) 4.10
Subparagraphs 40-5(1)(a)(i) to (iii) 4.11
308
Index
Bill reference Paragraph number
Subparagraphs 40-5(1)(a)(iv) to (vi) 4.12
Subparagraph 40-5(1)(a)(vii) 4.13
Subparagraphs 40-5(1)(b)(i) and (ii) 4.11
Subparagraph 40-5(1)(b)(iii) to (v) 4.12
Subparagraph 40-5(1)(b)(vi) 4.13
Paragraph 40-5(1)(c) 4.13
Paragraph 40-5(1)(d) 4.14, 6.41
Paragraph 40-5(1)(e) 4.14
Paragraph 40-5(1)(f) 1.1, 4.15, 4.19
Paragraph 40-5(1)(g) 4.15, 4.21
Subsection 40-5(2) 4.16
Subsections 40-5(3) and (4) 4.22
Subsection 40-5(4) (note) 4.23
Section 40-10 4.25
Subsection 40-10(1) 4.34, 4.36
Subsection 40-10(2) 4.35, 4.36
Paragraph 40-10(2)(a) 4.27
Paragraphs 40-10(2)(b) and (c) 4.30
Paragraph 40-10(2)(d) 4.31
Paragraph 40-10(2)(e) 4.33
Subsection 40-10(3) 4.35, 4.40
Subsection 40-10(4) 1.1
Subsection 45-5(1) 5.42
Subsection 45-5(2) 5.30
Subsection 45-10(1) 5.31
Subsection 45-10(2) 5.33
Subsection 45-10(3) 5.35
Subsection 45-10(4) 5.37
Subsection 45-10(5) 5.36
Subsection 50-5(1) 5.58
Subsection 50-5(2) 5.53
Subsection 50-10(1) 5.54
Subsection 50-10(2) 5.55
Subsection 50-10(3) 5.56
Subsection 55-5(1) 6.8
Paragraph 55-5(1)(b) 6.9
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Bill reference Paragraph number
Subsection 55-5(2) 6.10
Subsection 55-5(3) 6.14
Subsections 55-5(4) and (5) 6.17
Subsection 55-5(6) 6.18
Subsection 55-5(7) 6.19
Section 55-10 6.12
Section 60-5 6.36
Subsection 60-5(1) 6.34
Subsection 60-5(1) (note) 6.38
Subsection 60-5(2) 6.39
Section 60-10 6.49
Subsection 60-10(2) 6.53, 6.54
Subsection 60-15(1) 6.51
Section 60-20 6.94
Section 60-25 6.93
Subsection 60-30(1) 6.100
Paragraph 60-30(1)(d) 6.101
Subsection 60-30(2) 6.102
Subsections 60-30(3) and (4) 6.106
Section 60-35 6.107
Section 60-40 6.108
Section 60-45 6.110
Subsections 60-45(3) and 60-50(3) 6.111
Subsections 60-45(4) and 60-50(4) 6.112
Section 60-50 6.110
Section 60-55 6.113
Section 60-60 6.50
Section 60-65 6.60
Subsections 60-65(1) and (2) 6.45, 6.46
Subdivision 60-E 6.64
Section 60-75 6.66
Subsection 60-75(6) 6.67
Section 60-80 6.66
Subsection 60-80(6) 6.67
Section 60-85 6.55
Subsection 60-85(2) 6.58
310
Index
Bill reference Paragraph number
Subsection 60-85(3) 6.56
Subsection 60-90 6.59
Section 60-95 6.70, 6.71
Subsection 60-95(1) 6.72
Subsection 60-95(2) 6.73
Section 60-95(2) 6.75
Subsection 60-95(3) 6.76
Subsection 60-95(4) 6.77, 6.78
Paragraph 60-95(4)(f) 6.82
Section 60-100 6.89
Paragraphs 60-100(3)(a) and (b) 6.90
Paragraph 60-100(3)(c) 6.91
Section 60-105 6.86
Section 65-5 7.6
Section 65-5(1) 7.30
Paragraphs 65-5(1)(a) and (b) 7.7
Paragraph 65-5(1)(c) 7.8
Paragraph 65-5(1)(d) 7.11
Paragraph 65-5(1)(e) 7.16
Subsection 65-5(2) 7.16
Paragraphs 65-5(2)(a) and (b) 7.17
Paragraph 65-5(2)(c) 7.18
Subsection 65-5(3) 7.21
Section 65-5(4) 7.24
Paragraph 65-5(4)(a) 7.25
Paragraph 65-5(4)(b) 7.26, 7.28
Paragraph 65-5(4)(c) 7.27
Subsection 65-5(5) 7.29
Subsection 70-5 (1) 8.20
Subsection 70-5(2) 8.25
Subsection 70-5(3) 8.26
Subsection 70-5(4) 8.27
Subsection 70-5(5) 8.29
Subsection 70-5(6) 8.30
Section 70-10 8.31
Section 70-20 8.33
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Subsection 70-15 (1) 8.34
Subsection 70-15(2) 8.37
Subsection 70-15(3) 8.38
Subsection 70-15(4) 8.40
Subsection 70-25(1) 8.41
Subsection 70-25(2) 8.42, 8.53
Section 75-5 8.58
Section 75-10 8.59
Subsection 75-15(1) 8.54
Subsection 75-15(2) 8.56
Section 75-20 8.60, 8.67
Subsection 75-25 (1) 8.68
Subsections 75-25(2) and (3) 8.70
Paragraph 75-25(3)(b)(ii) 8.71
Paragraph 75-25(4)(a) 8.74
Paragraph 75-25(4)(b) 8.75
Paragraph 75-30(2)(b) 8.78
Paragraph 75-30(2)(c) 8.79
Subsection 75-30(3) 8.82
Subsection 75-30(4) 8.83, 8.84
Subsection 75-30(5) 8.86
Subsection 75-30(6) 8.88
Subsection 75-30(7) 8.91
Section 75-35 8.92
Paragraph 75-35(2)(c) 8.95
Subsections 75-35(3) and 75-35(4) 8.96
Subsection 75-35(5) 8.97
Subsections 75-40(1), (2) and (3) 8.98
Subsection 75-40(4) 8.99
Subsection 75-40(5) 8.100, 8.102
Subsection 75-45(1) 8.104
Subsection 75-45(2) 8.105
Subsection 75-45(3) 8.107
Subsection 75-45(4) 8.109
Subsection 75-45(5) 8.108
Subsection 75-45(6) 8.110
312
Index
Bill reference Paragraph number
Subsection 75-50(1) 8.111
Subsection 75-50(2) 8.112, 8.113, 8.114
Subsection 75-50(3) 8.117
Section 75-55 8.118
Section 75-60 8.119
Subsection 75-65(1) 8.121
Subsection 75-65(2) 8.121, 8.123
Subsection 75-65(3) 8.121, 8.137
Subsection 75-65(4) 8.124
Subsection 75-65(5) 8.125
Subsection 75-65(6) 8.126
Subsection 75-65(7) 8.128
Subsection 75-65(8) 8.130
Subsection 75-65(9) 8.131
Subsection 75-65(10) 8.134
Subsection 75-70(1) 8.135, 8.139
Subsection 75-70(2) 8.136
Subsection 75-70(4) 8.138
Subsection 75-75(1) 8.140
Subsection 75-75(2) 8.142
Subsection 75-75(3) 8.141
Subsection 75-80(1) 8.143
Subsection 75-80(2) 8.144
Subsection 75-85(1) 8.145
Subsection 75-85(2) 8.146
Subsection 75-85(3) 8.147
Subsection 75-85(4) 8.148
Paragraph 75-85(4)(f) 8.149
Subsection 75-90(1) 8.150
Subsection 75-90(2) 8.151
Subsection 75-90(3) 8.152
Subsection 75-95(1) 8.153
Subsection 75-95(2) 8.155
Subsection 75-95(3) 8.157
Subsection 75-95(4) 8.158
Subsection 75-95(5) 8.159
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Subsection 75-95(6) 8.160
Paragraph 80-5(1)(a) 9.90
Paragraph 80-5(1)(b) 9.90
Paragraph 80-5(1)(c) 9.90
Paragraph 80-5(2)(a) 9.95
Paragraph 80-5(2)(b) 9.96
Subsection 80-5(3) 9.90
Paragraph 85-5(1)(a) 9.102
Paragraph 85-5(1)(b) 9.102
Paragraph 85-5(1)(c) 9.102
Subsection 85-5(2) 9.108
Subsection 85-5(3) 9.100
Subsection 85-10(1) 9.110
Paragraph 85-10(2)(a) 9.114
Subsection 85-10(3) 9.115
Paragraph 85-10(2)(b) 9.119
Paragraph 85-10(4)(a) 9.121
Paragraph 85-10(4)(b) 9.123
Subsection 85-10(5) 9.125
Section 85-15 9.126
Subsections 85-20(1) and 85-20(3) 9.131
Subsections 85-20(2) and (4) 9.132
Subsections 85-20(5) and 85-20(6) 9.134
Section 85-25 9.137
Paragraph 85-25(a) 12.11
Paragraph 85-25(b) 12.11
Paragraph 85-25(c) 12.11
Section 85-30 13.167
Subsection 85-30(1) 9.140
Subsection 85-30(2) 9.141, 9.142
Subsection 90-5 9.146
Section 90-10 9.150
Subsection 90-10(1) 9.151
Subsection 90-10(2) 9.152
Subsection 90-10(3) 9.154
Subsection 90-10(4) 9.155
314
Index
Bill reference Paragraph number
Subsection 90-10(5) 9.157
Subsection 90-10(6) 9.156
Subsection 90-15(1) 9.158
Subsection 90-15(2) 9.160
Paragraph 90-15(3)(a) 9.164
Paragraph 90-15(3)(b) 9.165
Paragraph 90-15(3)(c) 9.167
Paragraph 90-15(3)(d) 9.169
Section 95-5 9.176
Section 95-10 9.177
Section 95-15 9.181, 9.186
Subsection 95-15(1) 9.182, 9.183
Subsection 95-15(2) 9.187, 9.188
Subsection 95-15(3) 9.191, 9.193
Subsection 95-20(1) 9.194
Subsection 95-20(2) 9.197
Section 95-25 9.180
Paragraph 95-30(1)(a) 9.184
Paragraph 95-30(1)(b) 9.184
Paragraph 95-30(1)(c) 9.184
Paragraph 95-30(2)(a) 9.189
Paragraph 95-30(2)(b) 9.189
Paragraph 95-30(2)(c) 9.189
Section 95-35 9.179
Section 95-40 9.198
Section 100-5 9.200
Subsection 100-5(1) 9.201
Subsection 100-5(2) 9.203
Subsection 100-5(3) 9.206
Subsection 100-10(1) 9.215
Subsection 100-10(2) 9.219
Subsection 100-10(3) 9.216
Subsections 100-10(4) and (5) 9.217
Subsection 100-10(6) 9.218
Subsection 100-10(7) 9.220
Subsection 100-10(8) 9.221
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Subsection 100-10(9) 9.225
Subsections 100-10(10) 9.231
Paragraph 100-10(10)(a) 12.11
Paragraph 100-10(10)(b) 12.11
Subsection 100-15(1) 9.223
Subsection 100-15(2) 9.224
Subsections 100-15(3) and (4) 9.217
Subsection 100-15(5) 9.218
Subsection 100-15(6) 9.225
Subsection 100-15(7) 9.231, 12.11
Subsection 100-20(1) 9.233, 9.235
Subsection 100-20(2) 9.234, 9.235
Subsection 100-20(3) 9.237
Subsection 100-25(1) 9.241, 9.242
Subsection 100-25(2) 9.243, 9.244
Subsection 100-25(3) 9.245, 9.246
Subsection 100-25(4) 9.247
Subsections 100-30(1) and 100-30(3) 9.252
Subsections 100-30(2) and 100-30(4) 9.253
Subsection 100-35(1) 9.257
Subsection 100-35(2) 9.258
Subsection 100-35(3) 9.260
Subsection 100-35(4) 9.261
Subsection 100-40(1) 9.263
Subsection 100-40(2) 9.264
Section 100-45 9.265
Section 100-50 9.267
Subsection 100-55(1) 9.268
Subsection 100-55(2) 9.269
Subsection 100-60(1) 9.271
Subsection 100-60(2) 9.274, 9.275
Subsection 100-60(3) 9.276
Subsection 100-65(1) 9.279
Subsection 100-65(2) 9.280
Subsection 100-65(3) 9.281
Subsection 100-65(4) 9.282
316
Index
Bill reference Paragraph number
Subsections 100-70(1) and (2) 9.283
Paragraph 100-70(1)(c) 9.284, 9.285
Subsection 100-70(3) 9.287
Subsection 100-70(4) 9.290
Subsection 100-70(5) 9.288, 9.289, 9.292,
9.293
Subsection 100-70(6) 9.294
Section 105-5 10.5
Section 105-10 10.6
Section 105-15 10.8
Section 105-20 10.9
Subsection 110-5(1) 10.10
Subsection 110-5(2) 10.11
Subsection 110-10(1) 10.12
Subsection 110-10(2) and (3) 10.13
Subsection 110-15 10.14
Section 110-15 note 10.51
Subsection 110-20(1) 10.17
Subsection 110-20(2) 10.19
Subsection 115-5(1) 10.21
Subsection 115-5(2) 10.22
Section 115-10 10.23
Section 115-10 note 10.24
Section 115-15 10.25
Section 115-20 10.26
Section 115-25 10.27
Section 115-30 10.28
Section 115-35 10.29
Section 115-40 10.31
Section 115-45 10.32
Subsection 115-50(1) 10.33
Paragraph 115-50(2)(a) 10.33
Paragraph 115-50(2)(b) 10.33
Paragraph 115-50(2)(c) 10.33
Paragraph 115-50(2)(d) 10.33
Subsection 115-55(1) 10.36
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Subsection 115-55(2) 10.37
Section 120-5 10.41, 10.42
Section 120-5 (note) 10.42
Subsection 120-10(1) 10.45
Subsection 120-10(2) 10.46
Section 125-5 10.47
Section 125-10 10.53
Section 125-15 10.54
Subsection 130-5(1) 10.55
Subsection 130-5(2) 10.56
Section 135-5 10.59
Paragraph 135-10(a) 10.62
Paragraph 135-10(b) 10.60
Subsection 135-15(1) 10.63
Subsection 135-15(2) 10.65
Subsection 135-15(3) 10.67
Subsection 140-5(1) 10.72, 10.75
Subsection 140-5(2) 10.75
Subsection 140-5(3) 10.76
Subsection 140-5(4) 10.77
Section 140-10 10.73
Subsection 140-15(1) 10.80
Subsection 140-15(2) 10.81
Subsection 140-15(3) 10.81
Subsection 140-20(2) 10.82, 10.83
Subsection 140-25 10.84
Subsection 140-30(1) 10.85
Subsections 140-30(2) and 140-30(3) 10.86
Subsection 140-30(4) 10.87
Section 140-35 10.88
Subsection 145-5(1) 10.90
Subsection 145-5(2) and (3) 10.92
Subsection 145-5(4) 10.94
Subsection 145-5(5) 10.95
Subsection 145-5(6) 10.97
Subsection 145-5(7) 10.98, 10.99
318
Index
Bill reference Paragraph number
Subsection 145-5(8) 10.100
Subsection 145-5(9) 10.93
Section 150-5 11.2
Paragraph 150-5(a) 11.3
Paragraph 150-5(b) 11.4
Section 150-10 11.27
Paragraph 150-10(a) 11.28
Paragraph 150-10(b) 11.28
Paragraph 150-10(c) 11.28
Paragraph 150 10(d) 11.28
Section 150-15 11.22
Section 150-20 11.45
Section 150-25 11.31
Subsection 150-25(1) 11.32
Subparagraph 150-25 (1)(c)(i) and subsection 150-25(2) 11.39
Subparagraph 150-25(1)(c)(i) and subsection 150-25(3) 11.38
Paragraph 150-25(2)(a) 11.40
Paragraph 150-25(2)(b) 11.40
Paragraph 150-25(2)(c) 11.40
Section 150-30 11.39
Section 150-35 11.39
Paragraph 150-35(a) 11.47
Paragraph 150-35(b) 11.48
Paragraph 150-35(c) 11.50
Section 150-40 11.39, 11.52
Paragraph 150-40(a) 11.57
Paragraphs 150-40(b) and 150-40(c) 11.55
Section 150-45 11.59
Section 150-50 11.61
Subsection 150-55(1) 11.64, 11.67
Paragraphs 150-55(1)(a) and 150-55(1)(c) 11.66
Paragraph 150- 55(1)(b) 11.66
Subparagraph 150-55(1)(d)(i) 11.69
Paragraph 150-55(2)(a) 11.71
Paragraph 150-55(2)(b) 11.71
Paragraph 150-55(2)(c) 11.71
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Bill reference Paragraph number
Subsection 150-55(3) 11.69
Section 150-60 11.70
Subsection 150-60(1) 11.72
Subsection 150-60(2) 11.75
Section 150-65 11.70, 11.77
Subsection 155-5(1) 12.3, 12.16
Subsection 155-5(2) 12.9
Section 155-10 12.12
Section 160-5 12.17
Subsection 160-10(1) 12.19
Subsection 160-10(2) 12.21
Subsection 160-10(3) 12.22
Subsections 160-10(4) and (5) 12.24
Subsection 160-10(6) 12.25
Subsection 160-10(7) 12.25, 12.35
Subsection 160-15(1) 12.26
Subsections 160-15(2) and (3) 12.27
Subsection 160-20(1) 12.31
Paragraph 160-20(1)(b) 12.32
Subsection 160-20(2) 12.33
Subsection 160-20(3) 12.34
Paragraph 160-25(a) 12.35
Paragraph 160-25(b) 12.88
Section 165-10 12.50
Section 165-15 12.73
Section 165-20 12.77
Paragraph 165-25(1)(a) 12.81
Paragraph 165-25(1)(b) 12.83
Section 165-25 12.84
Section 165-30 12.85
Section 165-35 12.87
Paragraph 165-40(a) 12.37
Paragraph 165-40(b) 12.38
Section 165-45 12.45
Subsection 165-45(2) 12.46
Section 165-50 12.41
320
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Bill reference Paragraph number
Sections 165-55 12.97, 12.100
Section 170-5 12.89
Section 170-10 12.90
Section 170-15 12.92
Subsection 170-20(1) 12.93
Subsection 170-20(2) 12.94
Section 170-25 12.95
Section 170-30 12.97, 12.100
Subparagraph 170-30(1)(a)(ii) 12.99
Section 175-5 13.102
Paragraph 175-10(1)(a) 13.103
Paragraph 175-10(1)(b) 13.104
Subsection 175-10(2) 13.106
Subsection 175-10(3) 13.107
Section 175-15 13.109
Subsection 175-20(1) 13.110, 13.112
Subsection 175-20(2) 13.113
Subsection 175-20(3) 13.114
Paragraph 175-25(a) 13.116
Paragraph 175-25(b) 13.117
Paragraph 175-25(c) 13.118
Subsection 175-30(1) 13.121
Paragraph 175-30(2)(a) 13.122
Paragraph 175-30(2)(b) 13.123
Subsection 175-30(3) 13.124
Section 175-35 13.129, 13.168
Paragraph 175-40(1)(a) 13.132
Paragraph 175-40(1)(b) 13.133
Subsection 175-40(2) 13.134
Subsection 175-40(4) 13.136
Section 175-45 13.141
Section 175-50 13.141, 13.142
Section 175-55 13.143
Section 175-60 13.144
Subsection 175-60(2) 13.145
Subsection 175-60(2) note 13.146
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Subsection 175-60(3) 12.11, 13.149
Section 175-65 13.151
Section 175-70 13.152
Subsection 175-70(1) 13.154
Subsection 175-70(2) 13.153
Subsection 175-70(2) note 1 and 2 13.159
Subsection 175-70(3) 13.155
Subsection 175-70(4) 13.156
Subsection 175-70(5) 13.161
Subsection 180-5(1) 13.173
Subsection 180-5(2) 13.175
Subsection 180-5(3) 13.176
Subsections 180-10(1) and (2) 13.178
Subsection 180-15(2) 13.181
Subsection 180-15(3) 13.182
Subsection 180-20(1) 13.190
Subsection 180-20(3) 13.193
Subsection 180-20(4) 13.192, 13.194
Section 180-30 13.198
Subsection 180-30(3) 13.199
Section 180-35 13.177, 13.194
Subsection 190-10(1) 13.10
Subsection 190-10(2) 13.11, 13.12
Subsection 190-10(3) 13.13
Subsections 190-10(4) and note in subsection 190-10(4) 13.14
Section 190-15 6.39, 13.15
Section 190-20 13.16
Subsection 190-25(1) 13.18
Subsection 190-25(2) 13.19
Subsection 190-25(3) 13.20
Subsection 190-25(4) 13.21
Subsection 190-25(5) 13.22
Subsection 190-25(6) 13.23
Subsection 190-25(7) 13.24
Section 190-30 13.25
Subsection 190-35(1) 13.26
322
Index
Bill reference Paragraph number
Subsection 190-35(2) 13.27
Subsection 190-35(3) 13.28
Subsection 195-5(1) 13.36
Subsection 195-5(2) 13.37
Subsection 195-5(3) 13.38
Subsection 195-10(1) 13.39
Subsection 195-10(2) 13.40
Subsection 195-10(3) 13.41
Section 205-10 13.76
Paragraph 205-15(c) 9.81
Paragraph 205-15(d) 9.81
Paragraph 205-15(e) 9.81
Subsection 205-5(1) 13.44
Subsection 205-5(2) 13.46
Subsection 205-5(3) 13.48
Subsection 205-5(4) 13.51
Subsection 205-5(5) 13.53
Subsection 210-10(2) 13.59
Section 205-20 9.80, 9.259
Subsection 205-25(1) 6.24, 13.58
Subsection 205-25(2) 6.25
Subsection 205-25(3) 6.26, 13.60
Subsection 205-25(4) 6.27, 13.61
Subsection 205-25(5) 6.28, 13.62
Paragraph 205-30(a) 13.71
Paragraph 205-30(b) 13.72
Paragraph 205-30(c) 13.73
Subsection 205-35(1) 13.78
Subsection 205-35(2) 13.80
Subsection 205-35(3) 13.81
Subsection 205-35(4) 13.85
Section 205-40 3.114, 9.62
Subsection 205-40(5) 13.86
Section 300-5 11.57, 13.89
323
Australian Charities and Not-for-profits Commission Bill 2012 and Australian Charities and
Not-for-profits Commission (Consequential and Transitional) Bill 2012
Australian Charities and Not --for profits Commission
(Consequential and Transitional) Bill 2012
Schedule 1: Application and transitional provisions
Bill reference Paragraph number
Item 2 14.8
Item 3 14.11, 15.41
Item 4 14.13, 15.41
Subitem 5(1) 14.20
Subitem 5(2) 14.21
Subitem 5(3) 14.22
Item 6 14.16, 15.40
Item 7 14.27, 14.28
Subitem 8(1) 14.36
Subitem 8(2) 14.38
Subitem 9(1) and note 14.39, 14.41
Subitem 9(2) 14.43, 14.50
Subitem 9(3) 14.43, 14.50
Subitem 9(4) and note 14.44, 14.50
Subitem 10 14.34
Subitem 10(4) 14.30
Item 11 14.45
Subitem 11(1) 14.46
Subitem 11(2) 14.48
Item 12 14.55
Item 13 14.57
Item 14 14.65
Paragraph 14(d) 14.66
Item 15 14.74
324
Index
Schedule 2: References to charities etc
Bill reference Paragraph number
Part 1 15.23, 15.25
Items 1 to 3 15.47
Part 2 15.21
Parts 3, 4 and 6 15.23
Part 7 15.21
Items 26 to 30 15.45
Item 40 15.46
Items 131 to 134 15.51
Items 142 and 148 15.68
Schedule 3: Amendments consequential on the
establishment of the ACNC
Bill reference Paragraph number
Item 1 15.52
Item 2 15.58
Part 3 15.49, 15.69, 15.70
Items 20 to 23 15.77
Item 32 15.72
Schedule 5: Other amendments
Bill reference Paragraph number
Items 1 to 4 15.59
325