Not-for-Profit (NFP) Sector Reforms

Streamlining regulation and providing greater clarity and simplification for NFPs

In the 2011-12 Budget, the Government announced a range of measures to make it easier for the NFP sector to deliver vital assistance to Australia's most vulnerable people. These long awaited reforms include:

the establishment of an independent statutory office – the Australian Charities and Not-for-profits Commission (ACNC) – by 1 July 2012, with general reporting and a public information portal to go live by 1 July 2013;
the implementation of a statutory definition of 'charity' to take effect from 1 July 2013; and
the better targeting of NFP tax concessions.

These reforms will reduce the regulatory burden on NFP entities, and provide greater clarity and simplification for the sector.

They will also streamline the sector's interactions with government, allowing organisations to focus on vital service delivery.

Establishment of the ACNC

The Government will provide $53.6 million over four years for the establishment of a new independent statutory office – the ACNC – by 1 July 2012, and is progressing national regulation and a national regulator for the NFP sector through the Council of Australian Governments (COAG).

An implementation taskforce has been established within Treasury to ensure the ACNC is ready for operation by 1 July 2012, and to consult with the NFP sector on reporting requirements and the public information portal.

The Commissioner of the ACNC will be appointed by the Government and report to Parliament through the Assistant Treasurer. The Commissioner will have sole responsibility for determining charitable, public benevolent institution, and other NFP status for all Commonwealth purposes.

The ACNC will also initially be responsible for providing education and support to the sector; implementing a 'report once use often' general reporting framework for charities; and implementing a public information portal by 1 July 2013.

The Government will also undertake negotiations with the States and Territories on national regulation and a new national regulator for the sector, with the aim of minimising reporting and other regulatory requirements through coordinated national arrangements.

This reform progresses another recommendation of the Australia's Future Tax System Review, and continues the process of reform started in May last year with the release of the Government's Stronger, Fairer, Simpler package of reforms.

Statutory definition of charity

The current definition of charity is mostly based on over 400 years of common law. It is complex, inconsistent between Australian jurisdictions, outdated and creates considerable uncertainty for the sector.

A statutory definition will clarify the key principles of the common law, be more accessible to the charitable sector, reduce their administrative costs, and provide greater clarity.

This reform will move core responsibility for the ongoing development of a definition of charity to Parliament, ensuring that Australia has a modern definition, which reflects the needs of a contemporary Australian society. Initially this definition will be based on the 2001 Report of the Inquiry into the Definition of Charities and Related Organisations and will take account of recent court decisions such as Aid/Watch Incorporated v Commissioner of Taxation [2010] HCA 42.

Importantly, a statutory definition for charity will provide a basis for greater harmonisation between the Commonwealth and the States and Territories.

The Government will provide the ACNC with $2.9 million over four years to develop new guidance and educational materials for the sector, implement system changes, and re-assess the charitable status of entities on the basis of the new statutory definition.

The better targeting of NFP tax concessions

As part of this package of reforms, the Government also announced an integrity measure to ensure that the valuable tax concessions provided to NFPs are being used to further the altruistic activities of NFPs.

The Government has consulted broadly with the general public on this issue to ensure that there are no unintended consequences from these reforms. Consultation on this measure closed on 8 July 2011, and exposure draft legislation is currently being drafted. The Government will consult on draft legislation shortly. Further, the Government is consulting with the States and Territories with the aim of ensuring a coordinated approach to resolving these issues is adopted.

Consultation

The Government is committed to consulting with stakeholders, including the States and Territories, at every stage of the reform process.

Consultation will be undertaken on a range of issues, including the new regulator and the definition of charity.