Take note – charity governance changes are on the way
By Yoni Ungar
30 March 2021
All those involved in the charity space should be aware of a number of recently foreshadowed changes to charity regulation, which are likely to have a real and significant impact on charity operations in Australia.
We summarise two key changes which are currently in the works.
Changes to reporting thresholds
Currently, registered charities are required to submit annual financial reports to the Australian Charities and Not-for-profits Commission (ACNC). There are different requirements for these reports depending on the size of the charity. Size is defined according to a charity’s annual turnover.
As part of the 2018 ACNC legislative review, recommendations were made to increase annual financial reporting thresholds for registered charities. The Federal Government has supported this recommendation and has released its proposal for public comment. Whilst the Government has not proposed to fully implement the figures recommended in the legislative review, it has proposed for a significant increase in the reporting thresholds. The table below summarises the respective positions.
As you can see, even under the more modest proposals by the Government, the goalposts could be shifted considerably. It is extremely important that all charities take note of these proposed changes as they will have a significant and material impact on a charity’s operations and its annual reporting processes.
The Government is considering stakeholder feedback on these proposed changes and hopes to announce the new framework prior to 30 June 2021.
Changes to Governance Standards
Charities that are registered with the ACNC generally have to comply with the ACNC’s governance standards. There can be severe consequences for non-compliance including the possibility of losing charity registration and tax concessions.
Treasury has recently released an Exposure Draft and Explanatory Statement including details of proposed changes to Governance Standard 3. This governance standard currently prohibits charities from committing indicatable offences under Australian law or committing offences with a civil penalty of 60 penalty units or more.
The proposed changes would expand this governance standard to prohibit charities from also:
- Doing acts that would be a summary offence under Australian law relating to property, personal property or personal injury/harm; or
- Failing to take reasonable steps to ensure that its resources are not used to promote acts (or omissions) that may be dealt with as indictable offences, relevant summary offences or significant civil penalties.
The Explanatory Standard released explains that conduct covered could include unlawful gatherings, malicious damage, vandalism or assault. The aim is to strengthen the rules regarding activist operations by charities. If the proposed rules are adopted, then charities may risk losing their charity status or tax concessions even if actual offences are not committed.
It is extremely important to now monitor these changes and to keep careful watch on what changes, if any, are adopted and implemented by the ACNC. Treasury is currently considering public responses and feedback to its proposal before it takes any further steps.
If you have any questions regarding this, please reach out to our team.