The Federal Government has released an Options Paper (paper) with options for replacement arrangements following the abolition of the ACNC. Click here to access the paper.

The paper confirms what has been widely assumed, that key ACNC regulatory functions will return to the ATO and ASIC. The paper will be considered at consultation sessions with the charity sector being conducted in July and August. We are participating in one of the Sydney sessions, so if any clients have any views on issues in the paper or on regulation of the sector generally, please feel free let us know.

The paper considers options under the below four headings.

Proposed new reporting arrangements

The paper recognises that some level of accountability is appropriate for charities that receive government funding and/or tax concessions, and proposes a publicly accessible website containing:

  • names of responsible persons;
  • details of all funding received from government (Commonwealth, state and local). This is an enlargement of what had to be disclosed under the ACNC regime, and on its face will require disclosure of land tax, water and council rates exemptions/concessions, in addition to Commonwealth tax exemptions and concessions; and
  • financial reports, although exemptions currently applying to small charities and basic religious charities would continue.

For charities that are companies limited by guarantee, the reporting obligations to ASIC that were switched off under the ACNC will be reinstated, including details of directors and secretaries and registered office. Consideration will also be given to exempting reporting where there is already reporting to another Commonwealth entity.

Determining charitable status

This will be returned to the ATO, with objections to ATO determinations being considered either within a separate area in the ATO or by an independent panel of external experts, in either case with a final avenue of appeal to the Administrative Appeals Tribunal.

Proportionate compliance framework

Current regulatory powers for enforcement and removing responsible persons, would be retained by the ATO and the Australian Prudential Regulation Authority. Powers that did not previously exist in relation to small unincorporated charities will be removed. Corporations Act provisions on directors duties and obligations of charities that have been switched off will be reinstated. The government will need to be particularly careful about managing the transition back to ASIC regulation on these issues – we expect many charities have not come to grips with the current ACNC governance requirements, and there will need to be clarity on what rules applied at what times, particularly in the areas of duties of responsible persons/directors.

Transitional arrangements

The government is planning on legislation for the new arrangements being introduced later this year, although charities will have until 1 July 2015 to make their websites compliant.

Until we see the detail of what is finally proposed, it’s difficult to make a judgement about how much less red tape for charities will be achieved post ACNC. On the face of it, most of what is now regulated, reported or disclosed will continue but without ACNC involvement. The transition out of ACNC is likely to be as confusing and irritating as its introduction, and no progress at all will have been made on duplications inherent in separate state and territory regulation of incorporated associations and of charitable fundraising.