Coalition approach to the NFP Reform

Until recently, the Federal Liberal-National Coalition has been silent regarding its policy direction on NFP reforms. They recently announced their policy approach in an address to the Menzies Research Centre by Kevin Andrews MP.

The Coalition has outlined a number of points of difference from the Government.  However, it is important to note that the address did not contain any future policy direction in respect of many reforms, including:

	Taxation of commercial activities
	The new 'in Australia' requirement
	School building funds
	Public Ancillary Funds and
	Accounting standards for NFP organisations.

As the ACNC and most other reforms are likely to be fully established well before the federal election, NFP entities still need to fully prepare for all proposed reforms.

Australian Charities and Not-for-Profits Commission

The Coalition has announced a very different vision for the role of the ACNC.  They support the establishment of the ACNC, but with a strong focus on education and training rather than regulation.  Key among the Coalition's concerns with the current ACNC bill is that it allows for unnecessary government control of the charities sector.  They suggest that the ACNC bill provides excessive control by government through extensive investigation powers and the Commission's authority to remove persons from the boards of committees of charities.  The Coalition proposes to keep existing regulatory powers with the ATO and ASIC rather than transferring them to the ACNC. 

The Coalition has outlined the following roles of the ACNC:

	Provide education and support services to registered charities
	Provide information to assist with the process of registration for new charities and not-for-profit agencies
	Act as a 'one-stop shop' for information on charitable organisations and agencies operating within Australia
	Advocate for the rights of charities and not-for-profit agencies
	Represent the interests of charities and not-for-profit agencies to government
	Help facilitate the interaction between government and the charitable and not-for-profit sector
	Undertake research and cross-sector evaluations on issues of concern to the sector
	Help foster innovation within the sector.

The Coalition announcement foreshadows that the ACNC would co-ordinate with charities and all levels of government to agree a new common financial reporting standard to reduce duplication.  However, the announcement does not clarify whether there will be any reduction in financial reporting duplication prior to the common reporting standard being finalised.

The announcement did not provide any detail on transitioning from a fully functioning ACNC under the current government to a Charities Commissioner under a Coalition government.  The current ACNC is expected to be assessing new charity applications from 1 October 2012 and accepting lodgements of annual information statements from 1 July 2013. 

Approaches to governance reforms

The current ACNC reforms include a number of key governance requirements for NFP entities.  The Coalition is very concerned about a requirement preventing charities from being managed by individuals who the ACNC believes would undermine public trust and confidence in the governance or operation of the charity.  The Coalition sees the governance reforms as too far reaching and burdensome as they would require an assessment of every board member of charities. 

Accordingly, we expect that the Coalition will be closely reviewing the Government's proposed governance requirements.

Statutory definition of Charity

Under the Government's NFP reforms, a statutory definition of charity will be introduced and the ACNC will be assessing charities against this statutory definition from 1 July 2013.  This statutory definition will also expand the public benefit test and require all charities to show that their purposes and activities are for the public benefit.

The Coalition has announced that it does not see the need for a statutory definition of charity or a stronger public benefit test.  Accordingly, they prefer that the existing common law definition of charity and the rebuttable presumption of public benefit should be retained.

We note that the statutory definition of charity may be enacted early next year.  If elected, the Coalition's proposal may require them to repeal a newly enacted statutory definition of charity after 1 July 2013. 

Family service agencies

The announcement also flagged simplification of the reporting requirements for family service agencies, including reductions in the frequency of audits and types of disclosures.

Transcript of the Announcement

The extract of the entire address can be found on the website of Kevin Andrews MP.

Published : 12 July 2012