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MSI Australia & New Zealand - Global Site Memberlink Login

By Bill d’Apice and Anna Lewis, Makinson d’Apice.  

msi - ATO#1Following the Federal election in September, Senator Arthur Sinodinos has been appointed Assistant Treasurer and is now Minister responsible for the Australian Charities and Not-for-Profits Commission (ACNC).  Minister Kevin Andrews is Minister for Social Services and his department also has significant responsibility for the NFP sector more generally.

The Coalition opposed the introduction of the ACNC, and since the ACNC’s establishment has repeated that it would dismantle the ACNC and move its regulatory functions to the Australian Taxation Office (ATO).  This rhetoric has continued since the Coalition took office and Minister Andrews has indicated that the Government will shortly begin consultations with the sector to discuss the Government’s transition plans, with any implementation unlikely to take place before the end of 2014.  Specifically, the Coalition has indicated plans for a Centre for Excellence which it proposes to play an educative role guiding the sector in “best practice”.

Implementation of the Government’s agenda will be difficult not just because of the complexity of unwinding the ACNC but also because of difficulties in repealing and/or amending the many necessary legislative instruments.

A key problem for the Government is that it does not, and will not, control the Senate.  Labor, the Greens and at least one independent senator have indicated that they do not support the unwinding of the ACNC.  It is therefore problematic as to whether any legislation could pass in the Senate either before or after the new senators arrive on 1 July 2014.

The ACNC currently regulates approximately 60,000 charities.  These charities are all busy preparing to lodge their initial annual information statements, adjusting accounting practices to lodge annual financial reports and they are also focused on compliance with recently introduced governance standards.  Although Susan Pascoe (the Commissioner for the ACNC) rightly states that for the ACNC it is “business as usual” until any legislation is passed amending the ACNC’s role, it is fair to say that the future of the ACNC is uncertain and the outcome may in the end depend on the views of the Palmer United Party.

It is our view that the ACNC is likely to survive in light of its general acceptance by charities, the complexity in unwinding it and the political uncertainty to pass the necessary amendments.  It is quite possible that some of the current and more onerous obligations upon charities administered by the ACNC may be relaxed where legislative approval is not required.

The Labor Government pushed for other reforms in the sector and our view in relation to these is as follows:

  • The proposed extension of the ACNC’s reach beyond charities to other NFPs (of which there are approximately 500,000 in Australia) appears highly unlikely.
  • The Charities Act 2013 which was introduced and passed before the election provides a statutory definition of “charity” and is due to commence on 1 January 2014.  In our view, the legislation is unlikely to be repealed.
  • The proposal for taxing non-core activities of charities in some circumstances (generally referred to as the “unrelated business income tax” or “UBIT”) is unlikely to be pursued by the Government.
  • The “in Australia” Bill which was introduced into Parliament to tighten up tax exemptions for charities that do not carry on their activities principally in Australia lapsed with the calling of the election.  In our view it is unlikely that the Coalition will reintroduce this.

Hopefully there will be some more certainty in the sector in the not-too-distant future but meantime it is “business as usual” for compliance with ACNC and other legal requirements.

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