The Federal Government’s extensive reforms to not-for-profit (NFP) sector laws continue. Some of these reforms are already operative to a degree. Others are imminent. There is no doubt that the reforms add significantly to the complexity and burden of regulation in the sector. In many cases the laws pose significant liability risks to NFP entities and those who serve in them (often including volunteers).
The changes are principally:
- The establishment of a national regulator – the Australian Charities and Not-for-Profit Commission (ACNC). This will take over the ATO’s role in deciding whether organisations qualify for tax concessions. The ACNC will also oversee sweeping new governance and reporting requirements for the sector. In many cases, and until there is Federal/State co-operative reform, these requirements will result in additional (not substitute) compliance burdens.
- The introduction of measures which will tax NFPs on income ‘unrelated’ to their charitable or altruistic purposes if the income is not applied to the altruistic purposes. In the Government’s view profit generated in truly commercial activity should not be exempt from income tax if not applied for those purposes. The application of this new tax will be complex.
- Tighter governance and compliance for ‘public ancillary funds’ – trusts that are established to provide benefits to other deductible gift recipient (DGR) organisations. These changes are already enacted and operative.
- Tightening of the ‘in Australia’ test which organisations must pass to enjoy tax exemptions and concessions and DGR status.
- A statutory definition of ‘charity’ which takes up a reform abandoned about a decade ago.