The Department of Social Services has released an options paper regarding the replacement of the embattled Australian Charities and Not-for-Profits Commission (ACNC).

The main driver behind the repeal of the ACNC is to remove unnecessary ‘red tape’, with the Australian Taxation Office (ATO) and Australian Securities and Investments Commission (ASIC) reassuming the functions of the ACNC.

The ACNC Repeal (No 1) Bill 2014, which was introduced on 19 March 2014, does not explain exactly how the Government will replace the ACNC, but the options paper outlines a number of new proposals relating to:

  • reporting;
  • charitable status;
  • compliance; and
  • transition.

Reporting

In respect of charity reporting requirements and the need for public accountability, the options paper proposes that charities be required to maintain a publicly accessible website that details information including:

  • the names of responsible persons;
  • details of Commonwealth, state and local government funding; and
  • financial reports.

The proposals put forward in the options paper would result in charities that are structured as companies being required to report to ASIC once again.

Charities that are exempt from certain reporting requirements under the ACNC regime will continue to enjoy this same treatment. Further, the Government may consider whether a charity will be given an exemption from separate reporting requirements where it also reports to other Commonwealth regulators. Without such a mechanism, it is difficult to see how the Government could meet its commitment of reducing reporting.

Charitable status

The responsibility for determining charitable status will be returned to the ATO, with a dedicated operation holding responsibility for the determination of charitable status and eligibility for tax exemptions and concessions.
This separation is to curb concerns that the ATO would be otherwise influenced by its position of conflict as a revenue collecting body.

It is proposed that organisations will still be able to apply for charitable status online, as has successfully occurred under the ACNC regime.

Compliance

The post-ACNC compliance framework will consist of a mix of ASIC, ATO and state and territory regulatory bodies, each of which will rely on their current powers to enforce compliance.

Directors’ duties, obligations on charities and compliance measures existing under the Corporations Act 2001 (Cth) will be reinstated when the ACNC governance requirements are abolished.

As the ACNC requirements for directors are generally in line with the Corporations Act duties, this is unlikely to have a significant effect on directors of charities structured as companies that are currently complying with the ACNC requirements.

Compliance requirements that were introduced under the ACNC for small unincorporated charities will be removed. The Government will focus on arrangements to support self-reporting, thus focusing its investigations only on areas of high risk, such as cases of wilful non-compliance with reporting requirements. This may have the effect of reducing the reporting obligations on charities.

Transition

The ACNC Repeal Bill will allow charities until 1 July 2015 to ensure their websites are compliant with the reporting conditions, but successor agencies will otherwise assume their new roles immediately.

The current arrangements under the ACNC will remain until the legislation receives royal assent. However, once this occurs, any assessments of charitable status being undertaken by the ACNC will be completed by the ATO.

The recommendations canvassed in the options paper seem imminent, and it is essential that charities and other interested parties are aware of the changes set to occur and what their new responsibilities may be.