Legal Updates

Uploaded 12 February 2013

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Despite experiencing a number of deferrals some important developments have occurred in the Federal Government's Not-for-profit sector reforms. These include the commencement of the Australian Charities and Not-for-profit Commission (ACNC), greater clarity on the process for agreeing governance standards and signs of harmonising regulatory requirements.Establishment of the ACNCThe ACNC commenced operation on 3 December 2012, initially enabling registration of charities only. Organisations currently registered as charities with the Australian Taxation Office will automatically become registered with the ACNC (unless they choose to opt out). Charities will need to be registered with the ACNC to gain access to tax concessions.Governance and external conduct standardsCharities must comply with governance standards and standards for dealing outside Australia to be registered with the ACNC. Further, failure to comply can result in a charity's registration being revoked. The object of the governance provisions is to achieve accountability and to minimise the risk of mismanagement and misappropriation of the charity's funds. These standards are set out in regulations to be made after the legislation passes. The draft legislation is currently available for consultation by the sector.HarmonisationOne of the aims of establishing the ACNC is to reduce the regulatory burden on charities. To achieve this Federal and State and Territory Governments must co-ordinate so an additional layer of regulation is not created. Recent movements include:

• South Australian announced on 11 October 2012 that it would amend its association incorporation and charitable collections legislation to harmonise reporting and authorisation requirements
• the Federal Government announced on 17 October 2012 that the Commonwealth Grants Guidelines would be amended to ensure organisation seeking grants would not be asked for information that was already available to the Government through the ACNC.

Nonprofits, and particularly charities should monitor and review the ACNC legislation and ascertain what they need to do to ensure compliance, particularly in respect of governance and reporting.

The Federal Government delayed the introduction of the 2011-12 Budget measure "Better Targeting of NFP Tax Concessions" until 1 July 2014.The start date of 1 July 2014 is proposed to apply to activities that commenced after 7:30 pm (AEST) on 10 May 2011. The measure will not impact on tax concessions that were used for these activities prior to 1 July 2014.As part of transitional arrangement, relevant activities that commenced prior to 7:30pm (AEST) on 10 May 2011 will not become subject to the measure until 1 July 2015. The measure will not impact on tax concessions that were used for these activities prior to 1 July 2015."The Government is committed to working closely with the NFP sector to ensure that any taxation or regulatory changes are designed effectively and with a strong focus on the future of the sector and the needs of the community," Assistant Treasurer, David Bradbury MP said." This extension will enable further consultation and engagement with the NFP sector on this measure and ensure there is an opportunity for detailed stakeholder input to be provided."

The Council of Australian governments (COAG) has release a Regulatory Impact Assessment (RIA) for consultation on ways to reduce regulatory duplication between the proposed commonwealth governance and reporting standards and existing State and Territory requirements for charities registered with the Australian charities and Not-for-profits Commission.The RIA process provides stakeholders with an opportunity to provide feedback on proposed options that would address potential regulatory duplication.The closing date for submissions is 21 February 2013.The RIA is available under Announcements on the COAG website at www.coag.gov.au and includes information on how to lodge a submission.The outcomes from this consultation will become part of a final report containing a range of options to reduce regulatory duplication. The report is expected in early March 2013.

The Government has released a consultation paper on governance standards for the Not For Profit sector for public comment until 15 February 2013.The governance standards are intended to be principles-based in that they reflect a minimum set of outcomes for registered charities, rather than mandate 'best practice governance' or detailed procedures and requirements.Six draft governance standards have been put forward, including:

1. purposes and NFP character of a charity: the registered entity must be able to demonstrate its purposes and character as a not-for profit entity, make information about its purposes available to the public and comply with its purposes and its character as a not-for-profit entity.
2. accountability to members: the registered entity must take reasonable steps to ensure that it is accountable to its members and its members have an adequate opportunity to raise concerns about the governance of the registered entity.
3. compliance with Australian laws: the registered entity must not engage in conduct that may be dealt with as an indictable offence under Australian law or by way of a civil penalty of $6,600 or more.
4. responsible management of financial affairs: the registered entity must take reasonable steps to manage its financial affairs in a responsible manner.
5. suitability of responsible entities: the registered entity must take reasonable steps to ensure that its responsible entities are not disqualified from managing a corporation or disqualified by the Commissioner during the preceding 12 months from being a responsible entity of a registered entity. After taking those steps, the registered entity must be and remain satisfied that each responsible entity meets those requirements, or if it is unable to be or remain so satisfied, take reasonable steps to remove that responsible entity.
6. duties of responsible entities: the registered entity must take reasonable steps to ensure that its responsible entities are subject to, and comply with, the following duties:

• to exercise the responsible entity's powers and discharge the responsible entity's duties with the degree of care and diligence that a reasonable individual would exercise if they were a responsible entity of the registered entity;
• to act in good faith in the best interests of the registered entity, to further the purposes of the registered entity;
• not to misuse the responsible entity's position;
• not to misuse information obtained in the performance of the responsible entity's duties as a responsible entity of the registered entity;
• to disclose perceived or actual material conflicts of interest of the responsible entity;
• not to allow the registered entity to operate while insolvent.

The registered entity is taken to have taken all reasonable steps to ensure that its responsible entities have complied with the duties if:

• Protection 1: the responsible entity, in the exercise of the responsible entity's duties, relies, on certain information, in good faith, and after the responsible entity has made an independent assessment of the information.
• Protection 2: the responsible entity made a business judgement decision in relation to the registered entity.
• Protection 3: in relation to the duty not to allow the registered entity to operate while insolvent, the responsible entity had reasonable grounds to expect, and did expect, that the registered entity was solvent or the responsible entity took all reasonable steps to prevent the registered entity from incurring the debt.
• Protection 4: the responsible entity could not take part in the management of the registered entity at the relevant time because of illness or for some other good reason.

The Government is seeking feedback on the content and application of the standards.The closing date for submissions: Friday, 15 February 2013Further details on the consultation paper and submission are at:http://www.treasury.gov.au/ConsultationsandReviews/Submissions/2012/Governance-Standards-for-the-Not-for-profit-Sector

The Australian and Charities Not-for-profit Commission has released its regulatory approach statement for consultation by 1 March 2013.The statement set out the ACNC's preliminary regulatory approach and explains how the ACNC staff will approach their work. The statement will guide the ACNC in making appropriate and consistent decisions and sets out the relationships between the ACNC's values, regulatory approach and decision-making processes.There are five key values of the ACNC:

1. fairness: the ACNC presumes honesty when dealing with a problem; the ACNC will provide timely and accessible general advice, guidance and education to help charities meet their obligations; the ACNC's procedures will reflect principles of procedural fairness; the ACNC will match its actions with the seriousness of the problem and risks involved.
2. accountability: the ACNC is accountable to others for its processes and its work. It will be transparent about its procedures, decisions and actions.
3. independence: the ACNC Commissioner is an independent statutory office-holder.
4. integrity: the ACNC is committed to acting with integrity, adhering to australian laws, policies and values, and the Australian Public Service's Code of Conduct.
5. respect: the approach of the ACNC is founded on respect for charities and those who work with and for them.

The ACNC is interested in feedback on:

• how clearly the statement communicates its approach;
• whether it reflects an accurate understanding of charities and the appropriate approach the ACNC should adopt;
• examples of how it could use out enforcement powers; and
• general suggestions for improvement

Final date for comment: 1 March 2013.Further details on the regulatory approach statement and how to make a submission are at:http://www.acnc.gov.au/ACNC/Contact_us/Pub_consult_comment/RegApCon/ACNC/Edu/Consult_RegApp.aspx

The Australian Charities and Not-for-profit Commission (ACNC) is expected to begin in December this year after the legislation to establish it was passed through parliament last week. One of the first tasks of the ACNC is the delivery of an online register of Australian charities.  Initially only basic information will be available on the ACNC Register, including the name of the charity, its Australian Business Number, the state or territory it is registered in and a link to its entry on the Australian Business Registry.  This information will later include financial and governance information. If you need assistance in understanding the type of information required to comply with the  ACNC, please do not hesitate to contact us.

The new national business names register came online on 28 May 2012. Managed by the Australian Securities & Investment Commission its purpose is to enable the public to better identify the entity that is carrying on business using a particular name. The Register replaces the previous system requiring businesses to register in each State or Territory in which it wished to trade in. Now businesses need only register their business name with ASIC, with registration having effect throughout Australia.What happens to existing business names?

• Each State and Territory registration will be automatically transferred to the new Register - we can assist you to confirm this has been done.
• Your existing period of registration and renewal date will not change.
• ASIC will contact you 2 months before your registration is due to expire. The costs for renewal are $30 for one year and $70 for three years.
• For transitioning purposes only, if your renewal is due between 28 May 2012 and July 2012 (in or around) ASIC will start issuing renewal notices. If your renewal is due July, August or September you may receive your renewal notice one month after expiry of your registration. The renewal payment for these business names will be due approximately 2 months after the renewal notice is issued. ASIC will not cancel registration of these business names until expiry of the extended due date in the renewal notice - should you wish to register beforehand we can assist you.

How do I register a new business name?

• New registrations can be completed online through the ASIC website www.asic.gov.au
• You will be required to submit details such as your ABN, business address, and other business name holder details.

If you require assistance either with your existing business name or new registration please do not hesitate to contact Dr Joanne Redburn on 07 3160 0010.

At their most recent meeting, the Council of Australian Governments (COAG) agreed to establish a NFP Reform Working Group to develop an effective approach to the regulation of Australia’s not-for-profit (NFP) sector.COAG tasked the NFP Reform Working Group with reviewing, developing and recommending NFP regulatory reform options to COAG including:

• considering the adoption or application of a Commonwealth statutory definition of charity;
• a nationally consistent approach to fundraising regulation;
• reviewing legal, governance and reporting regulation for the NFP sector; and
• considering approaches to harmonise the test for determining non-charitable activities ofcharities.

COAG agreed that the NFP Reform Working Group be asked to report to COAG at or before its next meeting, and ahead of the Commonwealth introducing the Australian Charities and NFP Commission legislation.

The Assistant Treasurer has announced that because the legislation establishing the Australian Charities and Not-For-Profits Commission (ACNC) was not passed in Parliament the scheduled start date of 1 October has been delayed. As the Senate will not resume until 9 October the legislation is not expected to be passed until mid to late October.We will notify when the new start date is announced. In the meantime, please contact us for details of what the ACNC will mean for your organisation.

On 1 January 2012, the Work Health and Safety Act 2011 (Qld) (the WHS Act) commenced in Queensland. The WHS Act imposes an obligation on officers of not for profit corporations and associations (both incorporated and unincorporated) to exercise ‘due diligence’ to ensure the company or association complies with its duties under the WHS Act. Due diligence requires that the officers:

• acquire and keep up-to-date knowledge of work health and safety matters;
• gain an understanding of the nature of the operations of the business of their organisation and the hazards and risks associated with those operations;
• ensure resources are available and utilised by the organisation to eliminate or minimise risks to health and safety from those operations;
• ensure the organisation has processes in place for receiving and considering information regarding incidents, hazards and risks and responding in a timely way to that information;
• ensure that the organisation has, and implements, processes for complying with any relevant duty or obligation; and
• verify the provision and use of the resources and processes by the organisation.

Failure to exercise due diligence may result in substantial financial penalties or even imprisonment.If you wish to discuss further the new obligations on officers of your not for profit organisation please contact Dr Joanne Redburn on 07 3160 0010.