Australia: ACNC Update: Fate of Basic Religious Charity (BRC) category uncertain?

Last Updated: 19 April 2018
Article by Merryn Lynch and Josephine Heesh

In a submission to the Federal Government Review of the ACNC legislation, Justice Connect's Not-for-profit Law Service called for the abolition of the category of "Basic Religious Charity". This call is in contrast to the recent recommendation made by the ACNC Advisory Board to extend the Basic Religious Charity category. These contradicting calls leave the future of the Basic Religious Charity category uncertain.

The Category

Under section 205-35 of the Australian Charities and Not-for-profits Commission Act 2012 (NSW), an entity is eligible for registration as a basic religious charity if:

  • it is registered as a charity with the ACNC as an entity with a purpose of advancing religion, and cannot be registered as any other subtype of charity.
  • it is not a deductible gift recipient.
  • it is not incorporated under state, territory, or commonwealth legislation as an incorporation association or a company.
  • the total of the grants received by the entity from Australian government agencies is below $100,000 in any current or preceding financial year.

The appeal of having an entity registered as a Basic Religious Charity are outlined by the ACNC as follows:

If your charity meets the definition of Basic Religious Charity, it does not have to:
  • answer financial information questions in its Annual Information Statement
  • submit annual financial reports to us (regardless of its size), or
  • comply with the ACNC governance standards.

In April 2015 the Community Services Industry Alliance reported that 10,918 of the 44,352 ACNC charities that filed their first Annual Information Statement "claimed BRC status". In 2016, there was a 7.2% decrease in charities identifying as Basic Religious.

The Review

As we reported in our February newsletter "a review panel... has been appointed by the Federal Government to conduct the statutorily imposed 5 year review of the Australian Charities and Not for Profits Commission (ACNC) legislation ("the Review")". While the Review's Terms of Reference do not include an explicit reference to the Basic Religious Charity category, submissions commenting on the category, including proposals for reform, have been received.

In its submission, the ACNC Advisory Committee, which is independent of the ACNC and the ACNC Commissioner, called for the review panel to "affirm the continued operation of the provision" and "extend the reach of the "basic" charity concept".

In its submission, Justice Connect's Not-for-profit Law Service correctly identified that "the current definition of Basic Religious Charity is not confined to 'small' charities". In fact, many Basic Religious Charities might otherwise be classified as large charities by virtue of the amount of yearly revenue raised.

Justice Connect also identified the following facts relating to Basic Religious Charities as "problematic":

  • Currently, there are 14 recognised charity subtypes. It is purely arbitrary that only charities advancing religion are entitled to so many exemptions.
  • Large charities have "more robust report requirements", which "recognises that greater regulatory oversight, and great financial accountability and responsibility, is justified where more money is involved" – which should apply to all charities, regardless of whether they have a purpose of advancing religion. In 2016, 8,188 charities identified themselves as falling into Basic Religious category. According to the ACNC, "6,901 of these were small, 1,046 were medium and 241 were large."
  • Pro Bono News reported that Justice Connect's Acting CEO, Sue Woodward, "supported the abolition of the BRC category (or, at least) its amendment to cover only smaller religious charities."
  • While the category may have been developed to decrease red tape for "small and unincorporated religious communities", the reality is that many Basic Religious Charities are creatures of State based legislation (the example cited by Justice Connect is Roman Catholic Church Communities Lands Act 1942 (NSW)) and "have the benefits of a corporate form, hold significant assets and may have a high annual revenue".

Submissions to the Review were due by 28 February 2018.

The review panel could recommend retention of BRC category for small organisations below a particular threshold value of annual revenue, or might adopt a measure dependent upon number of employees, or if the exemption from filing financial reports is lost, the panel may recommend that cash accounting be acceptable, as in New Zealand. As governance should be the hallmark of all organisations, perhaps the panel will recommend retention of the BRC category, but removal of the exemption from compliance with governance standards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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