Following the Coalition’s election win in September, the Government has continued its rhetoric that it will dismantle the Australian Charities and Not For Profits Commission (ACNC) and move all regulatory functions to the Australian Taxation Office (ATO).
With the ACNC still in its infancy, this has brought great uncertainty to the NFP and charity sectors. Minister Andrews indicated in mid-October that the Government would begin consultations with the sector to discuss the Government’s transition plans, with any implementation unlikely to be in place before the end of 2014.
On balance, it is our view that the ACNC is likely to survive due to the complexity in unwinding the legislation connected with it and the political uncertainty around passing the necessary amendments. In our view it is likely that some of the current, and what some in the sector would consider more onerous, obligations upon charities administered by the ACNC may be relaxed where legislative approval is not required or can be negotiated.
Charities registered with the ACNC
The ACNC currently regulates approximately 60,000 charities. These charities are all busy preparing to lodge their initial Annual Information Statements, adjusting accounting practices to lodge Annual Financial Reports (if you would like assistance please see our previous blog CPA Guide helps ACNC Charity Compliance) and focusing on compliance with recently introduced governance standards.
Whilst Susan Pascoe (the Commissioner for the ACNC) rightly states that for the ACNC it is “business as usual” until any legislation is passed amending the ACNC’s role, it is fair to say that the future of the ACNC is uncertain and it is possible that any legislated outcome may depend on the views of the Palmer United Party.
Although the Coalition plans to consult with the sector, any proposed changes are unlikely to take place before late 2014.
What is proposed by the Coalition?
Specifically, the Coalition has indicated plans for a Centre for Excellence which it proposes to play an educative role guiding the sector in “best practice”.
A key problem for the Government in implementing its agenda to dismantle the ACNC is that it does not, and will not, control the Senate. Labor, the Greens and at least one independent senator have indicated that they do not support the unwinding of the ACNC. It is therefore problematic as to whether any required legislation to unwind or change the role of the ACNC could pass in the Senate either before or after the new senators arrive on 1 July 2014.
Following the Federal election, Senator Arthur Sinodinos has been appointed as the new Assistant Treasurer and is now the Minister responsible for the Australian Charities and Not-for-Profits Commission (ACNC). Minister Kevin Andrews is now the Minister for Social Services and his department also has significant responsibility for the NFP sector more generally.
Labor Government reforms
During their time in office, the Labor Government pushed for a suite of reforms in the sector and our view in relation to these is as follows:
- The proposed extension of the ACNC’s reach beyond charities to other NFPs (of which there are approximately 500,000 in Australia) appears highly unlikely.
- The Charities Act 2013 which was introduced and passed before the election (please refer to our blog Statutory Definition of Charity Passed by Parliament) provides a statutory definition of “charity” and is due to commence on 1 January 2014. In our view, the legislation is unlikely to be repealed.
- The proposal for taxing non-core activities of charities in some circumstances (generally referred to as the “unrelated business income tax” or “UBIT”) is unlikely to be pursued by the Government.
- The “in Australia” Bill which was introduced into Parliament to tighten up tax exemptions for charities that do not carry on their activities principally in Australia lapsed with the calling of the election. In our view it is unlikely that the Coalition will reintroduce this.
What should charities do?
Hopefully the coming year will provide some more certainty to the sector but in the meantime it is “business as usual” for compliance with ACNC and other legal requirements.
If charities would like to have a say on changes to the charity sector we recommend that they contact Senator Arthur Sinodinos or Minister Kevin Andrews.
Should you have questions or would like further information please do not hesitate to contact Mr Bill d’Apice or Ms Anna Lewis of our office.