The Federal Government has announced amendments to governance standard three to ensure that Australian charities that engage in unlawful behaviour face enforcement action.
The move equally applies to charities that use resources to promote illegal behaviour.
The new regulations will empower the ACNC commissioner to investigate charities engaging in or promoting serious unlawful acts of trespass, vandalism, theft, assault, and threatening behaviour.
They will amend ACNC governance standard three to require that charities must not engage in these kinds of offences irrespective of their description as indictable or summary.
“[…] Australians support charities through donations and tax concessions with the expectation that a charity’s resources are directed towards charitable works. By making these regulations, the government is ensuring [that] charities that misuse and take advantage of their status to take part in or actively promote illegal activity can be stripped of tax concessions and other benefits,” Assistant Treasurer Michael Sukkar said
Charities will also be required to maintain reasonable internal controls over resources such as funds, social-media accounts, and employees to ensure that they do not use them to encourage others to commit offences.
Governance standard three requires charities to comply with Australian laws. Acting lawfully protects a charity’s assets, reputation, and the people it works with. Compliance with Australian laws sets a minimum benchmark by which all charities should govern themselves.
Charities will still be able to participate in advocacy activities provided they are consistent with their charitable purpose and conducted lawfully.
The ACNC will provide guidance and education once the regulation comes into effect to help charities understand and comply with the new rules.
Under reforms agreed to by the Council on Federal Financial Relations, financial-reporting thresholds for small and medium-sized charities registered with the ACNC will be lifted.
The move will affect more than 5,000 charities.
The new threshold for small charities will increase to annual revenue of less than $500,000. This will mean that nearly 2,500 charities will no longer be required to produce reviewed financial statements under the regulations.
The threshold for medium-sized charities will increase to less than $3 million annual revenue, meaning that less than 2,700 charities will no longer be required to produce audited financial statements unless required by their governing documents.
The thresholds will take effect from 1 July next year.
From the same date, big charities with two or more key management personnel will be required to report remuneration paid to responsible persons (directors) and senior executives on an aggregated basis in their 2022 annual information statements.
From 1 July 2023 charities will be required to report related-party transactions in their annual reporting to the ACNC. This will increase transparency of transactions with related people and organisations that pose a high risk of conflicts of interest.
The ACNC will work with the charity sector to develop appropriate guidance and education resources to allow the sector to understand and meet the new requirements.
Amendments to regulations will be released shortly.
The ACNC is encouraging charities to include in annual information statements the addresses of their activities and services.
ACNC data shows that charities reported more than 55,000 programs in their 2020 statements. The information is available on the commission’s charity register.
Later this year the register will have an enhanced geosearch feature that will enable users to search for programs by location. So, charities should be specific when submitting location details of their activities.
As the new financial year begins, the ACNC is urging charities to review their governing documents to ensure that they are still working towards their stated purposes.
Charities are responsible for ensuring that they maintain eligibility for registration, which includes meeting their obligations to the ACNC and fulfilling their charitable purposes.
Data from the Australian Charities Report (seventh edition) showed that many charities on the ACNC register have been in operation for decades – on average 32 years.
“Over the lifecycle of a charity, if it is successful and grows, its activities may also expand, which is great,” ACNC commissioner Gary Johns said. “However, it is important that charities don’t drift away from their purposes inadvertently”.
“A charity’s activities and programs should reflect its documented purposes.”
A charity’s governing document sets out its activities. Responsible persons and staff should be familiar with it and ensure that its objectives reflect its mission.
“Drafting your governing document is not a set and forget activity,” said Dr Johns. “Charities must ensure they are staying true to their purposes.”
Charities should also check that information on their charity portal is accurate.
Charities may check on the ACNC website that their current activities and purposes match their charity subtype.
As part of its regular regulatory work, the ACNC reviews charities’ entitlement to registration.
Official data has shown that Australia’s charity sector was robust just before the advent of COVID-19 and the 2020 bushfires, employing 11% of Australia’s workforce and generating revenue of $166 billion.
The ACNC has released its annual sector analysis in the seventh edition of the Australian Charities Report. It analysed data submitted to the regulator by more than 48,000 charities in 2019 annual information statements.
As charities’ financial years vary, this edition of the report includes information from charities with financial years between 1 July 2018 and 31 December 2019.
In the 2019 reporting year:
- The most common activities for charities were religious, primary, and secondary education
- Small charities (annual revenue less than $250,000) made up 65% of the sector
- Large charities (annual revenue of $1 million or more) made up 19% of the sector and medium charities (annual revenue of $250,000 to $999,999) made up 16%
- Charity revenue grew by 6.8% on the previous year
- Revenue rose by $10.5 billion to $166 billion
- Revenue from goods and services increased by $3.5 billion to $56.7 billion
- Donations rose to $11.8 billion – an increase of $1.3 billion from the previous year
- Government funding accounted for $78.1 billion, an increase of $4.4 billion
- Charities employed 1.38 million people – about 11% of total employment in Australia
- Charities spent $85.9 billion on employee expenses, up 6% from $81.1 billion the previous year
- Volunteer numbers decreased by about 200,000 to 3.6 million
- More than half of all charities (51%) operated without any paid staff
- Overall, Australia’s charities operated at a surplus, supported by substantial assets, and
- Assets increased by $30 billion to $354 billion.
A measure requiring non-government deductible-gift recipients to be registered with the ACNC is before federal parliament.
The Treasury Laws Amendment (2021 Measures No. 2) Bill 2021 includes an explanatory memorandum that contains more information about the measure’s policy intent.
Fewer than 2000 DGRs will be required to register as a charity with the ACNC for them to maintain their DGR status.
Key messages are:
- A transition period of 12 months will be provided to allow current DGRs to retain their status while they register as a charity
- DGRs that have not successfully registered as charities with the ACNC within the 12-month period must apply for an ATO commissioner’s time-limited exemption to maintain DGR endorsement
- Applications for an exemption must be received within the 12-month transition period and will be time-limited to an extra three years after the end of the initial 12-month transition period
- DGRs will be able to indicate that they wish to apply to the ATO for the exemption in their ACNC application for charity registration. A streamlined process will enable the ACNC to forward relevant information to the ATO, and
- The government has postponed remaining measures (relating to the transfer of the administration of the four DGR registers to the ATO and ACNC and the removal of certain public-fund requirements for DGRs) and there is no timetable for their adoption.
It is intended that the amendments will begin three months after royal assent.