The Australian Charities and Not-for-profits Commission (“ACNC”) was officially launched on 10 December 2012.
The ACNC touts itself as a “one stop shop” overseeing and regulating the not-for-profit (“NFP”) sector in Australia. Appointed by the Commonwealth Government and accountable by way of reporting to Parliament through the Assistant Treasurer, the ACNC Commissioner is responsible for determining the status of charitable institutions, public benevolent institutions and other NFP entities.
The purpose of the ACNC is to regulate charities. The ACNC will also be charged with registering those charities (and eventually NFPs, though not initially). It is only those organisations endorsed by the ATO that will be regulated by the ACNC.
The ACNC has identified three overarching objectives:
to maintain, protect and enhance public trust and confidence in the sector through increased accountability and transparency;
to support and sustain a robust, vibrant, independent and innovative not-for-profit sector; and
to promote the reduction of unnecessary regulatory obligations on the sector.
The ACNC has been charged with powers of enforcement that range from investigatory processes through to the imposition of penalties and deregistration of charities.
What is a charity?
A statutory definition of charity, though currently non-existent, is expected to be seen at the beginning of the 2013-2014 financial year and will be applicable to all federal laws. Until such time as this occurs, the ACNC will continue utilizing the common law definition of charity to assess whether an entity is eligible for registration as a charity.
Change of regulator
In several circumstances the ACNC will replace the Australian Securities and Investments Commission (ASIC) as the key regulator. Where charities are set up as public companies limited by guarantee or proprietary companies limited by shares, they will be registered with ASIC. Additionally, charities that are registered Australian bodies and foreign companies will also be registered with ASIC.
The introduction of the ACNC makes several key changes regarding requirements for those companies and bodies registered with ASIC, which include but are not limited to the following:
public companies will no longer need to notify ASIC of changes to or adoption/repeal of constitution, nor will they be required to send a constitution to members who request it;
it will no longer be necessary to notify ASIC of changes of address (including place of business);
it will no longer be necessary to inform ASIC of appointment, resignation or retirement of directors (and alternate directors), secretaries or to submit personal details thereof; and
ASIC will not be sent annual statements on review dates for companies nor will an annual review fee be required (except in certain circumstances where last review date was prior to registration with ACNC).
ASIC will still maintain involvement to some extent, however this will be in conjunction with the ACNC.
Registration with the ACNC will not be compulsory for charities. However, failure to register will result in loss of benefits and concessions offered by the Commonwealth. Thus, it is in the best interests of the charity to obtain registration. Organisations endorsed as receiving tax concessions by the Australian Taxation Office (‘ATO’) prior to the introduction of the ACNC will automatically be registered.
Registration is conditional upon organisations complying with specific standards of governance as set out in the regulations. (The Treasury is currently accepting submissions for these regulations; interested parties are invited to make submissions by 15 February 2013. This can be done through the Treasury website.)
The ACNC offers a free public register that enables searches to be undertaken on any registered charity. ‘Whilst the information currently shown on each charity is limited to simple details (including ABN, the legal name and state of registration of the entity), in time it is envisaged that this information will be extended to include the charitable purpose of the charity, responsible persons, governing rules, registration date, and, importantly, annual information and financial statements.’
Registered charities will be required to report annually to the ACNC. Initially, for the 2012-2013 period, registered charities will only be required to provide an annual information statement. This basic report will require information such as how the charity works towards the charitable purpose, staffing details (voluntary and paid employees) and beneficiaries that benefit from the activities of the charity.
In subsequent years, reporting requirements will extend to encompass financial information. Though not yet finalised, it is anticipated that the extent of the financial reporting will be commensurate with the size of the charity.
Charity size is classified according to annual revenue:
small charity – annual revenue under $250,000 (financial report not required)
medium charity – annual revenue over $250,000 but under $1 million (reviewed or audited financial report required)
large charity – annual revenue over $1 million (audited financial report required)
The ACNC allows two or more charities to apply for joint reporting, potentially enabling a single information and/or financial report to cover all members of the reporting group.
The ACNC will also utilise a “Charity Passport”. This facility will enable entities to report once and have such information securely held, yet accessible by other government agencies - a ‘report-once, use-often’ framework.
Charities should be aware that these reporting requirements are additional to those requirements already in place, except where charities are established as companies, in which case reporting of financial reports and compliance with auditing requirements may change.
The ACNC aims to become thoroughly familiar with the sector it regulates and seeks to engage regularly with stakeholders and the community alike. Although initially only charities will be regulated by the ACNC, regulation of other NFPs is anticipated in the future.
The introduction of the statutory definition of charity may also impact organisations currently benefitting from tax and other concessions. Charities should be mindful of this change and remain aware of the potential effects. If in doubt, professional advice should be sought to gain clarification.
Whilst currently only charities are regulated by the ACNC, all NFPs should be aware of the changes currently taking place and potential future changes.
If you have any questions regarding the ACNC, registration and regulation, or potential impacts on an entity, please don’t hesitate to contact Jason Watson on 9642 2252.
Authors: Christy Roth, Lawyer and Jason Watson, Partner
10 January 2013