AUSTRALIAN CHARITIES & NOT FOR PROFITS COMMISSION BILL 2012 AUSTRALIAN CHARITIES & NOT FOR PROFITS COMMISSION (CONSEQUENTIAL & TRANSITIONAL) BILL 2012 TAX LAWS AMENDMENT (SPECIAL CONDITIONS FOR NOT FOR PROFIT CONCESSIONS) BILL 2012
Assistant Treasurer David Bradbury introduced all three bills in the House of Representatives on the morning of 23 August 2012. The bills have been referred to two committees: the Senate Standing Committee on Community Affairs and the Parliamentary Joint Committee on Corporations and Financial Services. Submissions to those committees closed on 30 August, 2012, after which the Bill will be referred to the next parliamentary sitting (commencing 10 September 2012) for any debate.
In summary, Minister Bradbury explained:
- Recommendations of the House of Representatives Standing Economics Committee had been implemented as follows:
- a "basic religious charity" can receive government
grants up to $100,000 (received in the current financial year or
either of the 2 preceding financial years) and not lose its basic
religious charity characterisation;
The definition remains narrow however, as it still exempts any entity which operates as a company limited by guarantee or an incorporated association, and requires the charity to be registered for the advancement of religion and "not (be) entitled" to be registered as any other type of charity. (There are many religious organisations whose other works would entitle them to registration as an education charity, or a public benevolent institution, or institution relieving the poor, sickness or the aged);
- by including an express object to be to reduce red tape (15-5(1) (c)) and that when the Commissioner is exercising her discretion, she must focus on minimising procedural requirements and duplication (15-10 (f));
- a requirement that the Commissioner must show cause before publishing details on the ACNC register to give an entity a chance to reply to the show cause (35-15) allegation; and a delay of 14 days minimum before the Commissioner can publish any warning, direction, undertaking or injunction 40-5(2) which it is imposed on a charity;
- that the Commissioner not include information which private donors wish to protect;
- with respect to Obligations, Liabilities and Offences, former
text dealt uniformly with all entities, deeming the directors and
committee members liable for amounts due by the organisation, but
(for companies, including trustee companies) it had to be proved
the amount became payable because a director was dishonest, grossly
negligent or reckless, or committed a deliberate act or
Similarly, offences of all organisations were deemed offences of the director or committee member, but for unincorporated associations, the committee member would only have committed the offence if he had aided abetted counselled or procured the act or omission, or was knowingly concerned or a party to the act or omission. For all organisations (except trusts with individual trustees), a director or committee member, was excused if the director or committee member had been ill or could prove he had taken all reasonable steps to ensure the company did not commit the offence;
- now, with respect to Obligations, Liabilities and Offences, the
drafting separates provisions dealing with each type or
organisation, unincorporated, trust and bodies corporate: directors
and committee members of unincorporated entities and trusts are
more accountable than their counterparts of bodies corporates,
because those entities do not have separate legal status.
Directors and committee members of unincorporated organisations are deemed liable for amounts of the organisation, without defence.
They are only guilty of an offence if the organisation is guilty because a committee member aided abetted counselled or procured the act or omission, or was knowingly concerned or a party to the act or omission: the director or committee member is excused if he had been ill or could prove he had taken all reasonable steps to ensure the organisation did not commit the offence.
All criminal liability for offences of directors and committee members of incorporated organisations has been removed.
Directors of incorporated entities are deemed liable for amounts payable by a body corporate, but only if those amounts become payable because or a deliberate act of the director involving dishonesty, gross negligence or recklessness:
- that ACNC will accept reports from organisations prepared for other Australian government bodies during the introductory phase ending 30 June 2015; including the annual report a company limited by guarantee is meant to file at ASIC, because ASIC can access the information from ACNC; and
- that a five year review of the operation of the bill will be conducted at that time.
- a "basic religious charity" can receive government grants up to $100,000 (received in the current financial year or either of the 2 preceding financial years) and not lose its basic religious charity characterisation;
- Amendments to the Corporations Act will be made to facilitate the implementation of the Commission Bill.
- The "in Australia test" will now be imposed on all charities and deductible gift recipients to ensure that they conduct their activities for the benefit of local Australians.
- The draft of the "in Australia test" originally submitted in the exposure draft has been retained so that for a charity to be exempt from income tax it must carry on its objects "principally" in Australia. The threshold for a charity to retain deductible gift recipient status is higher and a DGR must operate "solely" within Australia.
- The following entities and organisations are exempt from the "in Australia test" –
- Overseas aid funds; and
- Environmental organisations, because they already operate under strict standards and integrity requirements.
- The Bill now allows public benevolent institutions which operate overseas aid funds, to retain PBI status for delivering services in Australia and overseas, so long as their exempt overseas aid funds adhere to the overseas aid standards and integrity requirements
- Further exemption has been given to medical research institutes because much of the research work is done overseas. The exemption will be reviewed within three years
- Exemption from the "in Australia test" was not granted to arts organisations who have minor overseas activities, except for the Australian Chamber Orchestra and the Sydney Dance Company, who have been specifically exempted from overseas activity provided it is not greater than 25% of their total activity. Their activities will be reviewed after 3 years.
- The "not for profits" definition still finds its place in this legislation and incorporates the definition that a not for profit organisation must be one which:
- is not carried on for profit or gain, either during its operation or on winding up; and
- is prohibited and does not distribute to members unless to another not for profit entity with a "similar" purpose or to pay reasonable compensation for services rendered or expenses incurred. More clarification of "similar" is required.
- The definition of not for profit will supplant the words "non-profit" which are used throughout all the other tax legislation.
The Liberal Party has indicated it will vote against all bills. A number of State Parliaments have endorsed the operation of the Commission.
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.