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2013-2014
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
AUSTRALIAN CHARITIES AND NOT-FOR-PROFITS COMMISSION
(REPEAL) (No. 1) BILL 2014
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Minister for Social Services, the Hon Kevin Andrews MP)
AUSTRALIAN CHARITIES AND NOT-FOR-PROFITS COMMISSION
(REPEAL) (No. 1) BILL 2014
OUTLINE
This is the first of two Bills to implement the Government's election commitment to
repeal the Australian Charities and Not-for-profits Commission.
The Commission is established under the Australian Charities and Not-for-profits
Commission Act 2012, and commenced operation on 3 December 2012.
Registration as a charity by the Commission is required before an organisation can
receive charity tax concessions and other Commonwealth exemptions and benefits
from the Australian Taxation Office.
The establishment of the Commission has introduced new powers in information
collection, monitoring and compliance that are not available to Commonwealth
bodies with comparable roles, such as the Australian Taxation Office, the Australian
Securities and Investments Commission and the Australian Prudential Regulation
Authority.
Repealing the Commission will remove unnecessary regulatory control over the civil
sector, and move instead towards Commonwealth support for the sector to
self-manage. The repeal is consistent with the broader deregulation agenda to boost
productivity by removing any excessive, unnecessary and overly complex red and
green tape imposed on business, community organisations and individuals.
This Bill will repeal the Australian Charities and Not-for-profits Commission Act 2012,
thereby abolishing the Commission.
However, this Bill will not take effect until the enactment of a later Bill, which will
provide the details of the arrangements replacing the Commission.
This Bill will also provide transitional arrangements for matters such as transferring
to the Chief Executive of a successor agency records held by the Commission,
any outstanding Ombudsman investigations, and certain annual reporting
requirements. There will be continued protection for information disclosed for the
purposes of the Australian Charities and Not-for-profits Commission Act 2012.
Financial impact statement
As the Bill does not take effect until a second Bill dealing with the substance of
replacement arrangements is passed by the Parliament, there are no direct financial
impacts to be quantified.
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REGULATION IMPACT STATEMENT
The regulation impact statement appears at the end of this explanatory
memorandum.
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
The statement of compatibility with human rights also appears at the end of this
explanatory memorandum.
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AUSTRALIAN CHARITIES AND NOT-FOR-PROFITS COMMISSION
(REPEAL) (No. 1) BILL 2014
NOTES ON CLAUSES
Clause 1 sets out how the new Act is to be cited, that is, as the Australian Charities
and Not-for-profits Commission (Repeal) (No. 1) Act 2014.
Clause 2 provides a table that sets out the commencement dates of the various
sections in, and Schedule 1 to, the new Act.
Clause 3 provides that each Act that is specified in a Schedule is amended or
repealed as set out in that Schedule.
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Schedule 1 - Repeal etc.
Summary
This Schedule gives effect to one of the Government's election commitments by
repealing the whole of the Australian Charities and Not-for-profits Commission
Act 2012 (the ACNC Act).
Background
The ACNC Act established the Australian Charities and Not-for-profits Commission
(the Commission) in 2013, as a new independent statutory office, to be the
Commonwealth-level regulator for the not-for-profit sector. The ACNC Act
established a new regulatory framework for the not-for-profit sector. The ACNC Act
is being repealed.
Explanation of the changes
Part 1 - Repeal
Item 1 repeals the whole of the ACNC Act.
Part 2 - Transitional provisions
Division 1 - Introduction
Definitions
Item 2 sets out the definitions used in this Part, including the definition of
successor Agency, which has the meaning given by item 3.
Item 3 provides for a successor Agency to be determined by the Minister.
Subitem 3(1) provides that the successor Agency is the Agency specified in a
determination made under subitem 3(2).
Subitem 3(2) provides that the Minister may, by legislative instrument, determine the
successor Agency to the Commission. The successor Agency must be an Agency
as that term is defined in the Financial Management and Accountability Act 1997.
The capacity for the Minister to determine the successor Agency through a
legislative instrument reflects the two-stage approach to replacing the Commission,
with this Bill repealing the ACNC Act, and a later Bill providing the details of the
arrangements replacing the Commission. This two-stage approach allows the
Government to affirm its intention to proceed with the repeal, while working through
the legislative and administrative issues involved in winding down the Commission's
operations and establishing the National Centre for Excellence.
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The legislative instrument providing this key detail of the replacement arrangements
will be fully subject to Parliamentary scrutiny and disallowance.
Division 2 - Transfer of other matters
Transfer of records to the successor Agency
Item 4 provides for the transfer of records and documents to the successor Agency.
Subitem 4(1) provides that records and documents, in the Commission's possession,
before the transition time, will be the records transferred to the successor Agency.
Subitem 4(2) provides for the transfer of the relevant documents and records to the
successor Agency after the transition time.
Transition time is defined in item 2, and means the commencement of this Part of
the Schedule. The Schedule will commence at the same time as Schedule 1 to the
Australian Charities and Not-for-profits Commission (Repeal) (No. 2) Act 2014
(that is, the second Bill in this two-stage approach).
Transfer of Ombudsman investigations
Item 5 sets out how any outstanding complaints to the Ombudsman and
Ombudsman investigations about Commission actions, not finally disposed of by the
Ombudsman in accordance with the Ombudsman Act 1976 (the Ombudsman Act)
before this Part of the Schedule commences, are to be dealt with.
It provides that the Ombudsman Act will apply, after this Part of the Schedule
commences, as if the Commission's actions were taken by the Chief Executive of the
successor Agency.
Protection of information
Item 6 provides for a person to continue to be subject to a condition under
Division 150 of the ACNC Act, after this Part of the Schedule commences, where
information has been disclosed to that person for the purposes of the ACNC Act
before this Part commences, and the person was subject to that condition in relation
to the information disclosed.
Division 3 - Reporting obligations
Final annual report - ACNC
Item 7 provides transitional arrangements for certain reporting requirements.
Subitem 7(1) imposes obligations on the Chief Executive of the successor Agency to
prepare and submit to the Minister, for presentation to the Parliament, a final annual
report on the Commission's operations during its final reporting period.
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Subitem 7(2) requires the Chief Executive of the successor Agency to give the final
report to the Minister within three months after the end of the Commission's final
reporting period. It also gives the Minister discretion to extend the required reporting
timeframe in special circumstances.
Subitem 7(3) requires the Minister to table the report in each House of the
Parliament as soon as practicable.
Subitem 7(4) requires the Chief Executive of the successor Agency to publish the
report on the Department's website as soon as practicable after the report is tabled
in the House of Representatives.
Subitem 7(5) sets out the definition of final reporting period.
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REGULATION IMPACT STATEMENT
Repeal of the Australian Charities and Not-for-profits Commission
Details-stage Regulation Impact Statement
This Regulation Impact Statement (RIS) has been prepared by the Commonwealth
Department of Social Services (DSS). Its purpose is to accompany a first Bill as part
of a two-stage process to implement the Government's election commitment to
repeal the Australian Charities and Not-for-profits Commission (ACNC).
The first Bill proposes to repeal the Australian Charities and Not-for-profits
Commission Act 2012 (ACNC Act), with the substance of replacement arrangements
being dealt with in a later Bill. This approach allows the Government to affirm its
intention to repeal the ACNC while working through the legislative and administrative
issues involved in winding down the ACNC's operations and establishing the
National Centre for Excellence. A further RIS will accompany the second
substantive Bill.
This RIS has been prepared in accordance with the Australian Government Best
Practice Regulation Handbook, July 2013, in conjunction with the Interim Regulation
Impact Statement Process Guidance Note, January 2014, issued by the Office of
Best Practice Regulation (OBPR) within the Department of the Prime Minister and
Cabinet, and in consultation with OBPR.
1. Background
The ACNC commenced operation on 3 December 2012. It is governed by the
following legislation for which the Treasurer is responsible:
Australian Charities and Not-for-profits Commission Act 2012 (Cth);
Australian Charities and Not-for-profits Commission (Consequential and
Transitional) Act 2012 (Cth) (ACNC Consequential Act); and
Australian Charities and Not-for-profits Commission Regulation 2013 (Cth).
The objects of the ACNC are to:
maintain, protect and enhance public trust and confidence in the Australian
not for profit sector; and
support and sustain a robust, vibrant, independent and innovative Australian
not-for-profit sector; and
promote the reduction of unnecessary regulatory obligations on the Australian
not-for-profit sector.
Registration as a charity by the ACNC is required before an organisation can receive
charity tax concessions and other Commonwealth exemptions and benefits from the
Australian Taxation Office (ATO).
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All ACNC registered charities are currently required to submit an Annual Information
Statement. In addition to this, from 1 July 2014, organisations will be required to
submit financial reports, depending on the organisation's income, as follows:
Small (below $250,000) No financial report required
Medium ($250,000-$1m) Reviewed financial report
Large (over $1m) Audited financial report
The ACNC Commissioner's powers are considered to be the same in relation to
enforcement and removing responsible persons as the ATO, the Australian
Securities and Investments Commission (ASIC) and the Australian Prudential
Regulation Authority but the establishment of the ACNC has introduced new powers
in relation to information collection, monitoring and compliance that did not
previously exist at a Commonwealth level.
2. Problem
The Government believes it should not be imposing unnecessary regulatory control
over the civil sector; rather, Government should work with and support the sector to
self-manage. Vesting powers in a separate entity to oversight and regulate charities
runs counter to the deregulation approach, which takes a risk-based approach to
oversighting the institutions of civil society, whether they are for-profit or not-for-
profit.
The repeal of the ACNC is consistent with the broader deregulation agenda to boost
productivity by removing any excessive, unnecessary and overly complex red and
green tape imposed on business, community organisations and individuals by at
least $1 billion per year.
In the absence of harmonisation across all jurisdictions, the ACNC has added
compliance burdens on the charitable sector from additional oversight and reporting
obligations. In particular, it has meant:
The majority of the sector which are unincorporated organisations -
approximately 21,000 of whom are registered charities - are now subject to
this new regulatory regime, whereas they previously fell largely outside of the
sector's regulatory framework.
The large number of incorporated associations (approximately 136,000, with
around 6,000 of whom are charities) already regulated under relevant state
and territory Acts now have duplicated reporting requirements.
Charitable trusts, accountable to the state Attorneys-General, are now
regulated at the Commonwealth level, with obligations or compliance activity
they were not subject to previously.
2
Coalition Members and Senators provided a dissenting view in the Senate
Community Affairs Legislation Committee Dissenting Report in August 2012. The
report did not support passage of the ACNC Bills, noting the ACNC would create
another regulatory body that would add to the red tape burden for charitable
organisations and duplicate state and territory regulation.
It cited concerns by a number of charitable organisations such as Uniting Care
Australia, which had raised doubts about the ACNC's capacity to actually deliver any
tangible red tape reduction measures outside of its own activities, despite having the
promotion of red tape reduction included as one of its objects. It elaborated that the
majority of the proposed red tape reduction benefits of a single national regulator are
predicated on state and territory government cooperation or agreement as well as
other Commonwealth agencies and regulators, which have not yet been secured and
no guarantee that they would be.
The ACNC was established with the intention of it being a single reporting point for
charities. This has not eventuated and the majority of charities continue to provide
information to multiple jurisdictions in the course of conducting their business as a
charity, mitigating one of its key purposes.
Given existing regulators can provide similar regulatory oversight at a lesser cost,
both in terms of administrative costs to Government and in terms of costs imposed
on regulated entities, the introduction of a specialist regulator to monitor and enforce
a codification of generally applicable laws does not represent best use of
Commonwealth funding.
3. Objectives
During the election campaign, a commitment was made to abolish the ACNC and
return its regulatory functions to the ATO and ASIC. The abolition of the ACNC is
part of the broader Government red tape reduction and deregulation agendas.
The Government seeks to take a first step to implement this election commitment to
remove the regulatory impost on the sector as soon as possible, before financial
reports are to be prepared and provided to the ACNC, in respect of the 2013-14
financial year.
4. Options that may achieve the objectives
It is intended that regulatory functions previously transferred to the ACNC from the
ATO and ASIC will return to those bodies. In place of the ACNC, broad support for
the sector will be provided by a new National Centre for Excellence.
As this proposal is implementing an election commitment, there is no requirement to
examine alternative options to the commitment.
Option 1 - implement the election commitment
It is proposed to abolish the ACNC through a two-stage process:
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An initial Bill to be introduced to Parliament in the Autumn sittings that will
repeal the ACNC, but will not take effect until a subsequent Bill containing the
substance of replacement arrangements is introduced and passed during the
Winter sittings and receives Royal Assent.
A second Bill that will outline details for replacement arrangements.
Consistent with the election commitment, this decision indicates the Government's
intention to change the status quo and consider alternative regulatory arrangements.
Implementation options for this election commitment will be canvassed as part of the
RIS for the second substantive repeal Bill.
5. Impact Analysis
Since stage one does not detail the alternative arrangements, there are no direct
impacts that can be quantified as costs and benefits faced by the civil sector. As a
result, no indicative costings are provided in this RIS.
The further RIS to accompany the second bill will provide an analysis of the costs
and benefits of the new arrangements. This will include analysis of the impacts on
different sub groups given the broad diversity in the civil sector.
The intent of the change to be effected through the second substantive bill is to
reduce regulatory and administrative burden on the sector. In the development of
the second Bill, consideration will be given to the impacts on all parts of the sector,
with strategies to address impacts to be identified during consultation.
Relieving regulatory burdens on the sector while preserving public trust and
confidence in the sector will be examined as part of the second stage. The intent is
to provide a framework that has sufficient transparency to meet public expectations
but removes unnecessary regulation.
6. Consultation
A range of stakeholder groups have been consulted on the Government's election
commitment in the course of the Minister for Social Services' discussions with the
sector over the last four years. In addition, the Minister has commented on
international experience, noting his discussions with charities in the UK have
confirmed continuing red tape despite the presence of a Charity Commission; and
New Zealand has abolished its charity regulator.
The Minister continues to discuss these issues with the sector. In addition, various
stakeholders have written to the Minister and the Department stating their views on
the Government's commitments and a number of articles have been published,
offering stakeholder views on this proposal. While stakeholders have spoken about
the benefits or otherwise of the ACNC processes, views in support of the abolition of
the ACNC go to the role of Government in regulating this sector and policing its
governance, as well as concerns about the structure of an entity such as the ACNC.
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Views on the proposal to abolish the ACNC have been mixed. For example,
ProBono Australia recently featured the report by the Centre for Independent Studies
(CIS) which has been highly critical of the ACNC. The CIS report noted that
international experience shows charity commissions have not proven an effective
way to regulate the sector. It further commented that "the only way to slash red tape
for charities [is] by slashing the regulator". This same article quoted Philanthropy
Australia's continued support for the ACNC and concerns about returning
responsibility for the registration and regulation of charities to the ATO.
The Governance Institute of Australia also recently issued a statement indicating its
concern about regulatory functions returning to the ATO and ASIC. In addition,
it expressed concerns about the decline in the data integrity of the ACNC Register
over time given it will no longer be based on information collected through an annual
report .
Views will be further explored during the second stage of the process and
implementation options will give consideration to the impacts on different groups.
7. Conclusion and Recommendation
The Government has committed to repeal the ACNC to remove unnecessary
regulation and reduce the role of the Government's oversight of the charity sector.
This Bill reaffirms this commitment while allowing for a second Bill to canvass the
details of replacement arrangements with a further RIS process to accompany that
proposal.
8. Implementation and Review
The initial Bill to repeal the ACNC will not take effect until a subsequent Bill
containing the substance of replacement arrangements is introduced into the
Parliament (in the Winter sittings), is passed by the Parliament and receives Royal
Assent.
This will allow for a two-stage process whereby the Government can affirm its
intention to repeal the ACNC with the first Bill and outline details for replacement
arrangements in the second Bill.
Given this approach, implementation and review options will be presented as part of
the RIS accompanying the second Bill.
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STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011
Australian Charities and Not-for-profits Commission
(Repeal) (No. 1) Bill 2014
This Bill is compatible with the human rights and freedoms recognised or declared in
the international instruments listed in section 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Overview of the Bill
This is the first of two Bills to implement the Government's election commitment to
repeal the Australian Charities and Not-for-profits Commission.
The Commission is established under the Australian Charities and Not-for-profits
Commission Act 2012, and commenced operation on 3 December 2012.
Registration as a charity by the Commission is required before an organisation can
receive charity tax concessions and other Commonwealth exemptions and benefits
from the Australian Taxation Office.
The establishment of the Commission has introduced new powers in information
collection, monitoring and compliance that are not available to Commonwealth
bodies with comparable roles, such as the Australian Taxation Office, the Australian
Securities and Investments Commission and the Australian Prudential Regulation
Authority.
Repealing the Commission will remove unnecessary regulatory control over the civil
sector, and move instead towards Commonwealth support for the sector to
self-manage. The repeal is consistent with the broader deregulation agenda to boost
productivity by removing any excessive, unnecessary and overly complex red and
green tape imposed on business, community organisations and individuals.
This Bill will repeal the Australian Charities and Not-for-profits Commission Act 2012,
thereby abolishing the Commission.
However, this Bill will not take effect until the enactment of a later Bill, which will
provide the details of the arrangements replacing the Commission.
This Bill will also provide transitional arrangements for matters such as transferring
to the Chief Executive of a successor agency records held by the Commission,
any outstanding Ombudsman investigations, and certain annual reporting
requirements. There will be continued protection for information disclosed for the
purposes of the Australian Charities and Not-for-profits Commission Act 2012.
1
Human rights implications
The Bill does not in and of itself engage any human right, given that the Commission
and existing arrangements will continue until enactment of a later Bill outlining
replacement arrangements for the Commission. Human rights implications will be
discussed in detail in the statement of compatibility for the second Bill.
Conclusion
The Bill is compatible with human rights as it does not raise any human rights issues.
Minister for Social Services, the Hon Kevin Andrews MP
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