Govt Releases Final Report on NFP Regulator

The Federal Government has released the Final report on the scoping study for a national NFP regulator – opting for a single regulator for all Australian Not for Profits.

The announcement comes with the appointment of the Chair of the Implementation Taskforce for the Australian Charities and Not for Profit Commission, Susan Pascoe, the former Commissioner with the Victorian State Services Authority and former CEO of the Catholic Education Commission of Victoria.

The Government has also released the exposure draft consultation paper on restating the 'in Australia' special conditions for tax exempt entities.

Assistant Treasurer Bill Shorten says the Implementation Taskforce will ensure the Australian Charities and Not for Profits Commission is ready for operation by 1 July 2012, consulting on a single general reporting framework and information portal requirements.

The Implementation Taskforce will also engage with state agencies to negotiate use of the portal as a 'one stop shop' for reporting to state agencies.

Shorten says Susan Pascoe has a strong record of achievement in public service and the Government is delighted she has accepted this position.

Community Council of Australia Chair and CEO of World Vision, Rev Tim Costello, says the Community Council for Australia welcomes this appointment.

He says Susan Pascoe knows this area, is respected by the Not for Profit sector and has the capacity to drive reform across government.

The Government will undertake a merit based selection process for the appointment of the Commissioner for the Australian Charities and Not for Profit Commission once legislation has been finalised.

The final report for the scoping study outlines the views put forward by stakeholders during consultation about the design for the ACNPC and makes recommendations on the direction of reforms to strengthen the NFP sector.

The report outline the scope of national regulation in its recommendations as follows:

1. A single regulator should be established for the purposes of governance, accountability and transparency of NFPs.
2. The NFP regulator should, as far as possible, be responsible for regulating all NFPs.
3. Entities that are currently regulated by ASIC should be incorporated within the regulatory framework as soon as new reporting and governance frameworks are implemented. ASIC should still retain responsibility for incorporation.
4. The regulator should administer a principles?based regulatory framework which would apply broadly across the NFP sector, although regulation should be proportional and tailored to address the specific needs and size of NFPs.
5. The options for reform in areas which require the cooperation of the Commonwealth, states and territories should be progressed through the COAG agenda, including the areas of incorporated associations and charitable trusts.
6. Further reviews should be undertaken in areas where there are opportunities for further reform. This may include reviews of existing regulators and the legal form of NFPs, including the company limited by guarantee structure.

Registration

1. The NFP regulator should determine the NFP status of entities, including charities and PBIs. Initially, the regulator’s determination should be accepted by every Commonwealth agency. The regulator should initially focus on determining the status of charities including PBIs, with this focus gradually extending to include all other NFP entities.
2. Through the COAG process, the Australian Government should work with state and territory authorities with the aim of ensuring that the regulator’s registration applies throughout Australia, and be accepted by every government agency.
3. Entities should apply to have their status determined by the regulator on a voluntary basis. However, to access support provided by the Australian Government, and any state and territory governments that agree following conclusion of the COAG process, a NFP entity would need to be registered and regulated by the NFP regulator.
4. Administrative decisions taken by the NFP regulator should be subject to internal review; independent review by the Administrative Appeals Tribunal; and a right to appeal to the federal courts.

Definition of charity

1. The definition should be based on the 2001 Charities Definition Inquiry, noting the recommendations of the recent 2010 Senate Inquiry, and taking into account the findings of recent judicial decisions, such as Aid/Watch Incorporated v Commissioner of Taxation.
2. The definition of charity should be harmonised across Australian jurisdictions.
3. The Government should undertake further consultation on the definition of charity.

All 44 recommendations can be found in the full report here.

The Government announced in the 2009-10 Budget that it would amend the 'in Australia' special conditions in Division 50 of the Income Tax Assessment Act 1997 to ensure that Parliament retains the ability to fully scrutinise those organisations seeking to pass money to overseas charities and other entities.

The exposure draft also amends the 'in Australia' special conditions as they apply to deductible gift recipients.

Restating the 'in Australia' special conditions will provide support to the anti-avoidance measures in the tax law that limit income tax exempt entities, including deductible gift recipients, expending money offshore and ensure tax supported funds remain in Australia and clarify the law to give the sector certainty as to their obligations.

The 'in Australia' special conditions provide additional measures to address possible abuse of Not for Profit entities for the purposes of money laundering and terrorist financing, and ensure the proper operation of Not for Profit entities, their use of public donations and funds, and the protection of their assets.

Consultation is open for six weeks, until Friday, 12 August 2011. More information can be found at www.treasury.gov.au