The NFP puzzle starts to take shape

The commencement of the Australian Charities and Not-for-profits Commission (ACNC) in December last year saw the register of charities move from the Australian Tax Office to the new regulator immediately. All existing charities were ‘grandfathered’ into the new regulatory framework.

Meanwhile, new charities are providing feedback that the staff at the ACNC is helpful and informative when they seek to register, including clarifying eligibility for tax concessions. The ACNC website is already providing a range of fact sheets and FAQs to assist both existing and new charities to gain clarity on how they fit into the new regulatory framework.

Everyone wants to know what the reporting obligations will be. Consultation has just closed on the proposed governance standards and financial reporting requirements. While CSA thinks the proposed governance standards are consistent with those currently in place for NFP entities and commercial entities in the private sector, we are concerned that they will be very confusing to understand for those without a legal or governance background. This is particularly true of those standards relating to the duties of directors or members of a management committee.

The main problem is the terminology used in the legislation — responsible entity, which refers to a person. This is made even more incomprehensible when used in the same sentence in the standards as the term ‘registered entity’, which refers to the charity itself.

Without the use of plain English, those who most need to understand the particular governance standards about directors’ duties could recoil from reading them due to the complexity of the language. Worse, they may need expensive legal advice to make sense of them. We’ve suggested alternative approaches to the wording of the standards, using ordinary English.

The Commonwealth Government is also working with other Australian governments to reduce the regulatory burden on the sector. Through the Council of Australian Governments (COAG) this work includes reviewing compliance duplication — consultation is open at the moment on a report issued by COAG on this issue - and considering the application of the Commonwealth statutory definition of charity (when introduced) for states and territories.

While we are aware that some jurisdictions plan to ‘turn off’ their incorporated associations legislation, CSA is encouraging all states to support a referral of powers to the Commonwealth. This occurred  when the Corporations Act passed into law — the same process would ensure that NFPs are not burdened with unnecessary duplication and red tape.

 

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