Legal Updates

The end of financial year is fast approaching! With the end of financial year comes increases in cost of wages. Here is an update on all employment related increases that may impact your organisation.

Following its Annual Wage Review, the Fair Work Commission has announced that Australia’s national minimum wage AND award wages will increase by 3.75% from 1 July 2024. The national minimum wage will increase to $915.91 per week on a full time basis which is broadly in line with forecast wages growth across the economy in 2024.

This increase does not necessarily flow on to equivalent, or any increases for workers who are not paid in accordance with the national minimum wage or under a modern award. While generally, wages of non-award employees are a matter for agreement between employer and employee, it is important to note that non-award employees must be paid more than the relevant modern award classification that would otherwise apply to their employment.

The increase may also flow on to increases for employees covered under registered agreements as the base pay rate in registered agreements cannot be less than the base pay rate in the relevant modern award that would otherwise apply.

The new award rates can be estimated by applying the 3.75% increase to current award rates. However, the confirmed rates will be released by the Fair Work Commission before 1 July 2024.

The Fair Work Commission has also announced that it will focus on addressing gender under valuation in modern awards. The Fair Work Commission aims to review awards for childhood education and care workers, disability home care workers and other social and community services workers, dental assistants, medical technicians, psychologists, other health professionals and pharmacists, by the time next year’s Annual Wage Review is completed. We will keep our clients updated on proposed changes to these awards.

In accordance with scheduled increases set by the Superannuation Guarantee (Administration) Act 1992, the Superannuation Guarantee amount, currently 11%, will increase to 11.5% on 1 July 2024. Consequently, employers’ compulsory superannuation contributions for employees will increase in line with this increased rate. Employers will also need to review the effect of the increase on net wages of non-award employees on total remuneration packages.

The final scheduled increase of the Superannuation Guarantee amount will occur on 1 July 2025 when the amount will increase to 12%.

All employers need to be mindful of the increases, and ensure that your payroll is ready for the first full pay period after 1 July 2024.

While employers deduct superannuation contributions from employees’ pay each payday, they are currently only required to pass those contributions on to the employees’ superannuation funds at least quarterly. However, in order to protect workers against unpaid superannuation debts caused by employer bankruptcy, legislation has passed to increase the minimum frequency of payments. From 1 July 2026, employers will be required to pay superannuation contributions every payday. Employers should start reviewing their systems and budgeting to prepare for this change.

Need more information on these changes and how they apply to your organisation? Please do not hesitate to contact us via our contact page.

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Non-charitable NFPs with an active Australian business number (ABN) that self-assess as income tax exempt are now required to lodge an annual self-review return with the Australian Taxation Office (ATO).  This requirement came into effect on 1 July 2023. For NFPs with a financial year ending 30 June 2024, the first self-review return must be lodged between 1 July and 31 October 2024.

Previously, NFPs that are required to self-assess as income tax exempt have not been required to inform the ATO of their self-assessed exempt status or provide an annual return.  

The ATO has been sending correspondence about the changes to NFPs with an ABN in March, April and May and will send a follow-up letter in July when the online return is available.

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Will my NFP be affected by this change?

The change does not alter the self-review exemption categories or their eligibility conditions or affect the responsibility of NFPs to self-review their entitlement to the exemption on an ongoing basis. The change adds a requirement to confirm annually to the ATO as to compliance with the requirements for those categories and conditions.

The new requirement to lodge an annual NFP self-review return does not apply to NFPs that:

-      are registered as charities with the Australian Charities and Not-For-Profits Commission (ACNC)

-      are a deductible gift recipient (DGR) in their own right or for a fund, authority or institution that they

        operate

-      are not eligible for exemption from income tax

-      are certain types of tax exempt government entities, or

-      do not have an active ABN.

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What NFP categories are eligible for self-assessed income tax exemption?

ACNC-registered charities and DGRs are not eligible to self-assess their income tax exemption and must be endorsed by the ATO for income tax exemption, in addition to any DGR endorsement.

Not all non-charitable NFPs are exempt from income tax. To be exempt, the NFP must fall within one of the exemption categories in Division 50 of the Income Tax Assessment Act 1997(Cth) (ITAA 97). The ATO does not issue exemption endorsements for those NFP exemption categories so they must self-assess their exemption entitlement.

Self-assessment exemption categories include:

-      community service organisations, such as Rotary and Lions clubs, playgroups and senior citizens

        associations

-      sporting organisations

-      cultural organisations

-      employment organisations such as employer associations and trade unions, and

-      resource development organisations.

NFPs that would otherwise fit into one of the exemption categories but are an ACNC type of charity are not entitled to self-assess their exemption.

 NFPs that are not tax exempt

Examples of NFPs that are not eligible for income tax exemption because they do not fit into one of the exemption categories are:

-      clubs for recreational activities (other than sporting and cultural activities)

-      social clubs and newcomer clubs

-      public speaking and debating clubs

-      organisations that conduct significant political, lobbying or promotional activities, and

-      professional associations.

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Conditions for eligibility for self-assessment

NFPs that self-assess must meet the relevant definition and special conditions that apply to their relevant exemption category on an ongoing basis. All categories have a special condition that the entity must not be carried on for the purpose of profit or gain of its individual members.  Other special conditions applicable to some categories include that the entity must:

-      comply with all the substantive requirements in its governing rules

-      apply its income and assets solely for the purpose for which the entity is established

-      have a physical presence in Australia and, to that extent, incur its expenditure and pursue its objectives

        principally in Australia.

The questions in the annual self-review return will address compliance with each of the special conditions applicable to the entity’s relevant exemption category.

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Requirement for NFP clause in governing rules

There is currently no requirement in ITAA 97 for a not-for-profit clause to be included in the self-assessing exempt NFP’s governing rules. However, ATO commentary states that NFPs that do not have not-for-profit clauses in their governing documents can continue to self-assess but must update their governing documents by 30 June 2025 and failure to do so will mean loss of income tax exemption back-dated to 1 July 2024.

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Requirement for an ABN

Only self-assessing exempt NFPs with an active ABN are being required to lodge an annual self-review return.  An NFP is only required to have an ABN if it has an annual turnover of $150,000 or more which means it must register for GST, and must have an ABN to do this. However, even if its turnover is below that threshold, an entity is entitled to an ABN if it carries on an enterprise in Australia. The concept of an enterprise includes the activities of charities and other NFPs that are repeated or systematic, organised and carried on in a business-like way. An NFP that is not required to register for the GST may register voluntarily.

An NFP that does not have an ABN is not necessarily exempt from income tax. If an NFP does not fall within one of the exemption categories, it will be required to have a tax file number (TFN) and lodge a tax return if its annual taxable income is more than $416, or advise the ATO that a return is not necessary in a particular year.

NFPs that fall into one of the exemption categories but do not have an active ABN are not affected by the change. However, they must continue to self-review their entitlement to the exemption on an ongoing basis.

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ACNC type of entity

An important special condition applicable to all NFP self-assessment categories is that an entity that is eligible to be registered as a charity by the ACNC (called an ACNC type of entity) is not permitted to self-assess as income tax exempt and will not be exempt from income tax unless it is registered as a charity by the ACNC.

An ACNC type of entity is one that has only charitable purposes. An NFP that has one or more charitable purposes but also other non-charitable purposes is not an ACNC type of entity and may be eligible to self-assess for exemption.

There are self-assessment exemption categories for scientific institutions, organisations and research funds, public hospitals and public educational institutions. However, as the advancement of science, health and education are charitable purposes, many organisations and institutions which have such purposes and no other non-charitable purposes are likely to be an ACNC type of entity.

Other charitable purposes include the advancement of culture and of social or public welfare and the promotion of industry. A number of the NFP self-assessment categories such as cultural organisations, community service organisations and resource development organisations which have such purposes and no other non-charitable purposes may be an ACNC type of entity.

The self-review return gives the NFP the option to answer “Yes” or “Unsure” in response to the question whether it has any charitable purposes. In that case, the ATO may contact the NFP to provide guidance to help determine its charitable status. The ACNC has also provided guidance for organisations that self-assess about eligibility to be registered as a charity - Organisations that have been self-assessing as income tax exempt.

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What does the NFP self-review return look like?

The self-review return will be lodged online. The online return will not be available until1 July 2024 but the ATO has already published a guide to completing the self-review return - How to prepare a NFP self-review return.

The return requires the NFP to designate the exemption category applicable to it. The subsequent questions address compliance with each of the special conditions applicable to the selected exemption category. No explanation of the activities of the NFP or other substantiation of eligibility for the relevant exemption category is required.

NFPs will be required to report on their size based on annual gross revenue for the relevant year:

-      small - $0 to $150,000

-      medium – Over $150,000 to $3 million

-      large – over $3 million.

Other than that, the return does not require any financial or operational details about the NFP.

Upon lodgement, the ATO will respond with a statement either that:

-      the NFP has met its self-review return obligation and must lodge an NFP annual self-review return in

        future years unless its circumstances change so it is no longer income tax exempt, or

-      the organisation is ineligible for income tax exemption.

The ATO estimates the return will take about 10 minutes to complete.

While the NFP self-review return has been designed to be lodged online, the ATO is implementing, as an interim measure, a telephone lodgement channel for NFPs that can’t use the online services. The telephone channel will not be available to NFPs that already report for GST and Pay as You Go Withholding (PAYGW).

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What if my NFP does not have a financial year ending 30 June?

If an NFP’s financial year is not 1 July to 30 June, the NFP will have to apply to the ATO for approval of a substituted accounting period (SAP), if it does not already have approval (see ATO guidance - Substituted accounting periods). Having a SAP will change the lodgement deadline date for the self-review return. NFPs with a SAP ending before 30 June 2024 (such as a year ending 31 December 2023) will have to wait until after 1 July 2024 to lodge the self-review return (see ATO guidance - When the first self-review return is due).

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Consequences for failure to lodge

It is an offence not to give a return when and as required under a taxation law and a penalty may also apply. However, the ATO has stated that it is taking a practical compliance approach to the self-review return with a focus on 2023-24 onwards. Transitional support arrangements will be available including:

-      lodgement deferrals

-      payment plans for organisations that identify they are a taxable NFP for the 2023–24 income year, and

-      remission of general interest charges and other penalties that may apply to taxable NFPs.

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What steps should my NFP take to prepare for this change?

To prepare for the first annual self-review return, NFPs should start now to:

-      review the ATO’s guidance for more information - Reporting requirements to self-assess income tax exemption

-      review activities and operations to check entitlement to self-assess -see the ATO’s self-assessment

        worksheets for sporting organisations (Income tax assessment and sporting clubs) and other NFPs

        (Income tax status review worksheet for self-assessing non-profit organisations)

-      review their governing document to ensure it contains the necessary not-for-profit clauses and that the

        stated purposes are appropriate to what it actually does

-      review the ATO’s guide to completing the self-review return - How to prepare a NFP self-review return

-      set up online access to the ATO or ensure that online contacts are up to date – the NFP will need a

        myGov ID and Relationship Authorisation Manager (RAM) authorisations for its contact person/s  

-      estimate annual gross revenue for the year

-      if the NFP is an ACNC type of entity, consider the regulatory compliance obligations of ACNC-registered

        charities and whether to apply for registration with the ACNC to enable ongoing income tax exemption,

        or alternatively set up systems for the organisation to become a taxpayer.

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NFP Lawyers is here to help. We can provide guidance on what the change means for your organisation and work with you to determine whether your organisation is entitled to self-assess as income tax exempt or could apply for registration as a charity, and guide you through that process.

Major shake-ups in the Australian workplace law landscape are on the horizon. The Fair Work Legislation Amendment (Closing Loopholes) Act2023 (Cth) (Closing the Loopholes Act), which received Royal Assent on 14 December 2023, is set to usher in a series of significant changes aimed at fortifying worker rights and closing long-standing legislative loopholes. From addressing small business redundancy exemptions to introducing a new criminal offence of industrial manslaughter, the amendments signal a move towards creating a more equitable and safe work environment.

In this article, we delve into some of the key changes that are more relevant to NFP organisations that came into effect on 15 December 2023, shedding light on what they mean for NFP organisations and employees alike.

Closing the redundancy exemption loophole

A NFP organisation that employs fewer than 15 employees, at a particular time, is a ‘small business employer’ under section 23 of the Fair Work Act 2009 (Cth) (Fair Work Act).

If the NFP organisation made a role redundant resulting in termination of the employee’s employment the NFP organisation would determine if it were a ‘small business employer’ at the time of termination of employment and if so section 121(1)(b) of the Fair Work Act provides an exemption for the NFP organisation from the obligation to pay redundancy pay to the employee.

A loophole occurred where the NFP organisation has 15 or more employees but incrementally downsizes due to insolvency such that the number of employees falls below 15, the threshold for the small business employer, causing the employees to lose their entitlement to redundancy pay.

The Closing the Loopholes Act amends the Fair Work Act to address the loophole by inserting a new subsection 121(4) which specifically excludes the exception applying where a larger organisation downsizes to become a smaller business employer due to insolvency.

Closing the labour supply loophole

From time to time, NFP organisations are comprised on a group of entities and the staff of one entity may perform their duties in another entity, within the group. In this scenario, generally, the entity is supplying labour rather than providing a service.

If the second entity has an enterprise agreement, a workplace determination or a public service determination that applies to their own employees the first entity was not bound by that agreement or determination and accordingly may pay the labour staff less than entitled under the agreement or determination.  

The Closing the Loopholes Act amends the Fair Work Act to extend the Fair Work Commission’s (FWC) jurisdiction to make ‘same job, same pay’ orders for labour hire workers, requiring that they are paid no less than the minimum they would receive if they were directly engaged by the second entity (host employer). The aim of this is to stop large companies underpaying workers through the use of labour hire, however the amendment has the potential to extend NFP organisations supplying labour amongst the group.

The FWC can make a ‘regulated labour hire arrangement order’ if it is ‘fair and reasonable in all the circumstances, and if:

1.      an employer is supplying its employees to a host employer;

2.      the host employer is not a small business; and

3.      the host employer has an enterprise agreement, a workplace determination or a public service determination that would apply to their own employees who do the same kind of work.

The FWC’s jurisdiction commences from 15 December 2023 however, orders cannot be made until 1 November 2024.

Protections for employees subject to family and domestic violence

The Fair Work Act was recently amended by the Fair Work Amendment (Paid Family and Domestic Violence Leave) Act 2022 (Cth) to introduce 10 days of paid family and domestic violence leave in a 12-month period for full-time, part-time and casual employees. An employee who accesses this workplace right is protected from an adverse action, for example being dismissed.

However, an employee subjected to family and domestic violence that does not exercise that workplace right or another workplace right attributed to discrimination, such as sex, the employee is currently not explicitly protected against adverse action.

The Closing the Loopholes Act amends the Fair Work Act to prohibit such adverse action.

More to Unfold: Future Changes in Workplace Law

From the 1 July 2024, the Work Health and Safety Act 2011 (Cth) will include an offence of industrial manslaughter. This will apply to reckless or negligent conduct which causes the death of a worker. Individuals can face up to 25 years imprisonment and/or fines of up to $18 million for bodies corporate. The penalties have also increased five-fold under the Work Health and Safety Act 2011 (Cth), to $15 million for category one offences involving reckless or criminally negligent breaches of work health and safety duties, while maximum imprisonment will rise from 5 to 15 years.

From the 1 January 2025, the criminalisation of intentional wage theft will come into force. Intentional underpayments of wages and superannuation will have heavy penalties.

Some measures previously proposed as part of the Closing Loopholes Bill will be contained in a separate statute, The Fair Work Legislation Amendment (Closing Loopholes No.2) Bill 2023 which will be debated in the new year. This Bill proposes more complex and highly controversial amendments such as:

·        changes to the definition of casual employees, employees and employers

·        changes to the determination of employment status

·        the regulation of ‘gig’ workers

·        ability to challenge unfair contract terms in the FWC

It is proposed that the FWC will be provided with a new jurisdiction to make minimum standards order and non-binding guidelines for independent contractors. Similar to the FWC’s unfair dismissal jurisdiction, the Bill will also introduce ‘unfair deactivation’ and ‘unfair termination’ for gig workers and regulated road transport contractors respectively.

As we await the Fair Work Legislation Amendment (Closing Loopholes No.2) Bill 2023, it's crucial to stay vigilant and informed. If you would like to discuss the changes in more detail, including what they mean for your organisation, please do not hesitate to contact us.

‍Increase to minimum wages

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The end of the financial year brings a rush of activity for all business and companies, including NFP’s and charities. Whilst your mind may be focused on tax and reporting this time of year, divert your attention to the increase in national minimum wage (NMW) and award wages set to come into force on the 1st of July.

Each year the Fair Work Commission (FWC) decides if the NMW will be increased and if so, by how much. The percentage increase is also normally unilaterally applied to the minimum wages documented in the modern awards.

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As per the decision released on 2June the FWC has decided to increase the NMW to $882.80 per week or $23.23 per hour. This provides an extra $70.3 before tax to minimum wage workers which as increase of 8.65 per cent. The FWC is framing this increase as being a 5.75 percent increase as that is the increase to the C13classification award rate that minimum wage will now be aligned with.

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Most employees are covered by awards that outline minimum pay rates and conditions of employment in the relevant industry. The FWC has announced that minimum award wages will increase by 5.75 per cent.

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The minimum wage increases do not necessarily translate into equivalent increases for workers who are not paid in accordance with the NMW or under a modern award. It remains open for employers to deal with proposed increases for non-award employees at another time, as long as all employees are paid more than the relevant modern award classification that would otherwise apply to their employment. Note however that employees covered by registered agreements may have the increase apply. This is because of the fact that the base pay rate in a registered agreement cannot be less than the base pay rate in the relevant award. When assessing whether an increase must be applied, you will need to take into account increases to penalties and allowances that may be incorporated into an above award payment.

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All employers need to be mindful of the increases, so you can ensure your payroll is ready for the first full pay period after the start of the financial year. Rates can be estimated by applying the increases announced by the FWC. The confirmed rates will be released by the FWC before 1 July 2023.

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Superannuation changes

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The Superannuation Guarantee (Administration) Act 1992 provides for a scheduled increase to the employer contribution percentage over a twelve-year period. On 1 July 2023, the compulsory employer superannuation contribution rate will increase to 11%.Consequently, employers are required to contribute additional money into their employees’ superannuation accounts, in line with the increased contribution percentage rate.

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The Superannuation Guarantee increased to 10.5% on 1 July 2022 and the percentage rate will rise again to11.5% on 1 July 2024. The employer contribution rate will continue rising 0.5%each year until it reaches its final rate of 12% on 1 July 2025.

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Superannuation is currently paidquarterly however this is set to change in 2026. From 1 July 2026, employerswill be required to pay superannuation every payday to protect workers againstunpaid superannuation debts caused by employer bankruptcy.

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Paid Parental Leave Scheme changes

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From 1 July 2023, the current paid parental leave entitlement to 18 weeks will be combined with the current Dad and Partner Pay entitlement to 2 weeks. This means that partnered couples can claim up to 20 weeks paid parental leave between them, with each partner being required to take least 2 weeks (with some exceptions). This effects employees whose baby is born or placed in their care on or after 1 July 2023.Additionally, the payment is flexible which means eligible employees can claim it in multiple blocks until the child turns 2 years of age. There is no longer the requirement to return to work and a family is eligible unless they makeover $350,000 per year.

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Importantly, there are also changes to how employers need to respond to requests for extending unpaid parental leave which applies to requests made from 6 June 2023. Employers must provide a written response to any requests within 21 days which must include details of the reasons for refusal, which must be based on reasonable business grounds among other requirements.

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Changes to flexible working arrangements, pay secrecy, agreement making and bargaining

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From the 6th of June 2023, the right to flexible working arrangements will now apply to employees or a member of their immediate family or household who are experiencing family and domestic violence and employees who are pregnant. Employers also have new obligations before they can refuse a request from an employee regarding flexible working arrangements.

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On the 7th of December 2022, pay secrecy was officially prohibited. This meant that employees have a right to share information about their pay and employment terms and conditions if they chose to do so. Employees were also given the right to ask coworkers about their pay and employment terms and conditions. Employers are no longer allowed to take action against their employees for discussing their pay. From the 7th of June 2023, any pay secrecy terms inconsistent with the new workplace rights cannot be included in contracts or written agreements entered into on or after 7 December 2022. Any pay secrecy terms in employment contracts or written agreements that were entered into before 7 December 2022 will remain enforceable unless the agreement is changed after 7 December 2022.

While your organisation is bringing in the New Year so too are the reforms to DGR endorsement for 4 DGR categories. From 1 January 2024 the ATO will obtain the administered responsibility for those DGR categories. Here is what you need to know.

Further to our article DGR Reform: cutting red tape for environmental, cultural, harm prevention, and overseas aid charities NFP Lawyers, from the 1 January 2024, the requirements for various government departments to maintain 4 different DGR Registers are repealed transferring administrative responsibility to the ATO. The ATO will be responsible for assessing eligibility for DGR endorsement for:

• cultural organisations,
• environmental organisation,
• harm prevention charities, and
• developing country relief funds or organisations  (formerly Overseas aid fund).

Organisations already DGR endorsed in one of the DGR categories

• continue to be endorsed, if they continue to meet the eligibility criteria
• DGR endorsement will change from endorsement for the operation of a public fund to endorsement of your whole organisation
• Your public fund will be treated as your gift fund unless, or until, you establish a replacement gift fund.
• You will receive an updated DGR endorsement notice in early 2024 reflecting this change
• You will no longer be required to lodge statistical information with the relevant department or notify the relevant department of any changes to your organisation.
• If your organisation is an Environmental Organisation that is either a body corporate or a co-operative society, you will no longer be required to principally have members that were bodies corporate or have at least 50 individuals who were financial member who could vote at a general meeting.
• If you continue to operate a public fund, you will still need to follow your public fund rules excluding any rules which are inconsistent with the new law. For example, receipts for gifts and deductible contributions to your organisation must be issued in the name of your organisation and not in the public fund name, regardless of what is required of your public fund rules.
• For Harm Prevention Charities and Environmental Organisations, the transitional provisions provide that if your public fund is wound up, any surplus assets of the public fund are to be transferred to another gift deductible fund, authority or institution. This will remain until you amend your winding up provisions.

Organisations that have an in-progress application with one of the 4 government departments

• Your application will be transferred to the ATO

Organisation yet to start an application for DGRendorsement

• All DGRs are required to be a registered charity, except for ancillary funds and DGRs listed by name
• If you apply for registration as a charity with the Australian Charities and Not for profits Commission (ACNC) then you can apply to the ATO for DGR endorsement on the ACNC registration application form.
• If you are already a registered charity with the ACNC then you can apply directly to the ATO.

From the NFP Lawyers Team, have a merry Christmas and Happy New Year!

If you need any assistance or have any questions in relation to the impact on your organisation we will be back in the office 15 January 2024and happy to assist.

The material distributed is general information only. If yourequire specific advice on how these amendments directly affect yourorganisation, please do not hesitate to contact us.  

Reforms have been made to Queensland charitable fundraising registration and reporting requirements for ACNC registered charities. These changes align Queensland’s approach with that of South Australia and Victoria.

The reforms do not apply automatically. ACNC charities, including those already registered as Queensland charities, must give the prescribed notice to the Office of Fair Trading to be eligible.

While any reduction of reporting requirements for charities is welcome, as our table below illustrates, there remains a mish mash of inconsistent and poorly explained fundraising laws across Australian jurisdictions that continue to impose an unnecessary compliance burden on charities.

‍Queensland update

The reforms were affected under amendments to the Collections Act1966 (Collections Act) made by the Casino Control and Other Legislation Amendment Act 2022 which came into effect on 1 May 2023.

ACNC registered charities that propose to conduct fundraising (called ‘appeals for support’ in the Collections Act) in Queensland no longer need to apply to the Office of Fair Trading (OFT) to become a registered charity under Collections Act. Instead, under new Part 6A, ACNC registered charities can simply notify the OFT of their intention to fundraise via the online Charity ACNC Registration Notification Form (Charity ACNC Registration Notification) and will then be automatically granted deemed registration as a charity. No supporting documentation (such as a copy of the constitution) or information (such as the names of the charity’s responsible persons) is required.

The Queensland Government will still retain oversight of appeals for support conducted in Queensland. This means that deemed registrants remain subject to conduct requirements, record keeping requirements, financial management and offence provisions. However, the regulatory compliance burden is reduced. Deemed registrants:

·        are not required to obtain permission from the chief executive to amend their constitution or notify the          OFT if the constitution is amended;

·        are not required to inform the OFT of any changes to any particulars that the OFT keeps on the charity          register, such as changes to members of the charity’s governing body;

·        do not need to apply to the Minister for exclusive use of devices such as red poppies; and

·        are not required to abide by restrictions in the Collections Act on the use of charity names.

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To take advantage of these reduced compliance obligations, ACNC registered charities that are already registered charities in Queensland must apply to become a deemed registrant using the Charity ACNC Registration Notification Form. Until they do, the current reporting requirements will continue to apply. Any existing conditions or sanctions on a charity’s registration will continue to apply on conversion to a deemed registrant.

The Minister has the power to deregister any deemed registrant or impose, amend or revoke conditions on deemed registration and there is a new offence for persons falsely claiming to have deemed registration. The chief executive may publish a list of deemed registrants on the Department’s website but as at the time of writing has not done so.

These changes follow reduced annual financial reporting requirements for registered charities that apply from 1 July 2022, under the Associations Incorporation and Other Legislation Amendment Regulation 2022. With limited exceptions (see the table below), ACNC registered charities do not have to lodge an annual return or provide financial statements to the OFT.

The current situation with fundraising regimes across Australia 

Watch this space

Assistant Minister for Competition, Charities and Treasury Andrew Leigh insists that the federal government is moving toward installing nationally consistent fundraising rules after the Commonwealth government reached an agreement with State and Territory Treasurers early this year.

It is unclear when the States and Territories will roll out their plans however, NFP Lawyers will be providing updates on further legislative changes as soon as there is more information to hand.

Deductible Gift Recipient (DGR) status allows donors to claim a tax deduction on their gifts and contributions to your charity. There are 52 DGR endorsement categories and a charity must meet certain criteria to achieve endorsement. The ATO is currently responsible for the endorsement of all categories but is not responsible for administering the registers for three register DGR categories and the Overseas Aid GiftDeduction Scheme (OAGDS).

Those 3 register DGR categories and the OAGDS; specifically environmental organisations, harm prevention charities, cultural organisations, and overseas aid organisations, which are administered by other government departments. A charity must seek government approval from the department responsible for assessing and advising the relevant Minister on the eligibility of the charity. The Minister, and the relevant Treasury Minister, direct the departmental Secretary to add the charity to the register. This process typically takes up to two years.

The Treasury Laws Amendment (Refining and Improving Our Tax System) Act 2023, which received royal assent on the 28 June 2023, essentially shifts the responsibility for administration and decision making of the 4 DRG categories from the government departments to the Australian Taxation Office (ATO). The registers maintained by the government departments will be abolished as will the reporting requirements.

In general, the amendments preserve the existing rules as they affect charities seeking endorsement as a DGR. The changes predominately affect how the Government administers the DGR categories. This will drastically reduce the time to obtain approval from up to two years to around one month.

The Act is set to come into force on the 1 January 2024.

A summary of the continuing obligations and change requirements are set out in the table below.

If you have any questions or wish to seek advice on what this means for your charity, please contact reception@nfplawyers.com.au.

Seeking Deductible Gift Recipient (DGR) status allows donors to claim a tax deduction on their gifts and contributions to the charity.  There are 52 categories of DGR and an organisation must meet certain criteria to achieve endorsement as a DGR. The ATO is responsible for the endorsement of all categories. For a number of organisations, they are entitled to DGR endorsement so long as they have an Australian Business Number, have a wind-up clause in their organisation’s rules or constitution for the proper distribution of surplus assets, are registered with the ACNC as a charity, and have a purpose that falls into one of the DGR categories. 

For 4 DGR categories; specifically environmental organisations, harm prevention charities, cultural organisations, and overseas aid organisations, acquiring DGR endorsement is typically slower and more complicated. These organisations must seek approval by government departments responsible for assessing and advising the relevant Treasury Minister and the relevant Minister for that department to direct the departmental Secretary to add the organisation to the register. This process currently can take up to two years.

The Assistant Minister for Competition, Charities and Treasury, Andrew Leigh, stated that this may mean that these charities rely upon the “good graces” of the Minister and the government of the day rather than simply meeting a set of defined rules and requirements for DGR endorsement. This process tends to take much longer than the process for other charities and inflicts stricter reporting requirements on top of other ACNC and ATO reporting.

The Proposed Changes

Under the proposed Treasury Laws Amendment Bill 2023: Deductible Gift Recipient Registers Reform, the process for acquiring DGR status for these organisations will drastically change. The responsibility for administration and decision making of environmental organisations, harm prevention charities, cultural organisations, and overseas organisations will transfer to the ATO and consequently the powers of the Minister and departments that currently facilitate the registration process will be repealed. The registers for the organisations will be abolished as will the reporting requirements. 

It is proposed that endorsed organisations must maintain a gift fund, rather than a public fund, and gifts must be received by the organisation’s gift fund. To assist in the transition, it is proposed that the public funds will satisfy the requirements of a gift fund.

All new organisations seeking DGR endorsement will be required to have a wind-up clause dictating the distribution of surplus assets in their gift fund to another DGR, rather than transferred to another organisation on the register. To assist in the transition, it is proposed that the amending legislation will provide for the transfer of surplus assets to a fund, authority or institution to which gifts can be deducted under Division 30 of the Income Tax Assessment Act 1997.  

Further changes for Overseas Aid Organisations 

The DGR scheme relating to overseas aid organisations has the most significant changes from the previous legislative scheme. Currently, the Department of Foreign Affairs and Trade will assess the eligibility of organisations who wish to become a ‘approved organisation’ for DGR endorsement purposes against the following criteria:

1. The organisation must have a voluntary governing board;
2. Must be registered with the ACNC and comply with ACNC Governance Standards;
3. Must be established for the relief of people in a country declared by the Minister for Foreign Affairs to be a developing country. To determine this point, the organisation must:

•           deliver overseas aid; 
•           have the capacity to manage and deliver overseas aid;
•           deliver such activities in partnership with other in country organisations based on the principles of           cooperation, mutual respect, and accountability; and 
•           manage child protection and terrorism risks. 

The above listed criteria generally will not change under the proposed bill and will be reframed as the ‘principal purpose test’ which is locked into the legislation. This means, to receive DGR endorsement as an overseas aid organisation, the organisation’s principal purpose must be to deliver development or humanitarian assistance activities (or both) to a developing country in partnership with organisations in the country, based on principles of cooperation, mutual respect and shared accountability. This also means that the overseas aid organisations will no longer be under the administration of the Foreign Affairs Minister. These organisations will instead be assessed for DGR endorsement by the ATO. 

The Foreign Affairs Minister will continue to have the power to declare a country to be a developing country. Countries on the official development assistance recipients list, which is maintained by the Organisation for Economic Co-operation and Development’s Development Assistance Committee, will also be considered developing countries under the proposed amendments. This would expand the number of countries which overseas aid organisations can currently provide for. 

What does this mean for my charity? 

These changes are intended to make all the requirements for almost all DGR categories consistent, reduce red tape on organisations, and simplify and speed up the process for those singled-out organisations. 

The Exposure Draft of the Bill is currently open for public consultation until the 19^th of February 2023. Interested parties are invited to comment on this consultation by emailing charitiesconsultation@treasury.gov.au. 

We will be closely following the consultation and Bill progress and will provide updates, as needed. However, if you have any questions in the meantime, please contact reception@nfplawyers.com.au.

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As outlined in our article “The Director Identification Number (DIN) regime has started” published in March, if you:

·        were a director of one or more Australian companies on 31 October 2021;

·        still are a director of one or more of those companies on 30 November 2022 (without being re- appointed in the meantime); and

·        have not been re-appointed as a director or appointed as a director of another Australian company since 31 October 2021,

you must obtain a DIN by 30 November 2022 to avoid penalties for non-compliance. If have been appointed or re-appointed as a company director after 31 October 2021, you should already have obtained a DIN and if not, unless an extension is granted, penalties may apply.

Some directors of Aboriginal and Torres Strait Islander corporations who held office on 31 October 2021 may still have until 30 November 2023 to obtain a DIN.

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For further details, review our article here: “The Director Identification Number (DIN) regime has started"

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The new federal government campaigned heavily on women’s issues and now that they have formed a majority government, we can expect to see some significant changes to legislation relating to workplaces.

High on the agenda is the commitment to implement all 55 recommendations of the Respect@Work report investigating the prevalence and effect of sexual misconduct in Australian workplaces.

When the report was released in March 2020, the sex discrimination commissioner Kate Jenkins released her report with the message:

“I call on all employers to join me in creating safe, gender-equal and inclusive workplaces, no matter their industry or size. This will require transparency, accountability and leadership. It will also require a shift from the current reactive model, which requires complaints from individuals to a proactive model, which will require positive actions from employers,” Jenkins said.

“Ultimately, a safe and harassment-free workplace is also a productive workplace.”

Now employers in the NFP and Charity space should prepare for inevitable changes that will impose on an employer’s positive duties to take “reasonable and proportionate measures to eliminate sex discrimination, sexual harassment and victimisation, as far as possible”.

If the recommendations proceed in their original form, the Australian Human Rights Commission (AHRC), and a proposed independent regulator will have the power to apply to the court for an order requiring an employer to comply with their duties. The AHRC will also likely have increased powers to investigate complaints about sexual harassment and gender discrimination, placing a greater burden on employers to better manage harassment and gender issues in the workplace.

It is foreshadowed that employers can expect a robust, early intervention process specifically catered to sexual harassment, that operates similarly to the Fair Work Ombudsman or work health and safety regulators. The formation of a new regulator is proposed to provide a more effective deterrent to sexual harassment than seeking damages for breach of the Sex Discrimination Act.

Another significant recommendation is the ability of unions and other representative groups to bring claims to court, which could result in more agitation of sexual harassment matters in court where an individual complainant may be hesitant to pursue a claim on their own initiative.

It is expected that resources will be provided for employers “to understand the causes of sexual harassment, how to prevent it, and how to respond to it in a way that minimises harm to workers and also ensures they meet their legal responsibilities.” The focus will be on resources being “clear, practical, victim-centred, easily accessible from a central location and widely publicised”, being flexible enough for use in organisations of all sizes across all industries.

The report highlighted that sexual harassment is a WHS issue because it affects psychological health. Recommendations of the report include that action to be urgently taken to include:

• social change strategies on sexual harassment, including a national campaign to increase knowledge of, and change behaviours that drive, sexual harassment;
• targeted, evidence-based prevention strategies to address sexual harassment of community groups who are at higher risk;
• initiatives targeted towards young people that focus on sexual harassment as a form of gender-based violence.

The recommendations also propose:

• extending the time for a complainant to file a complaint to 24 months;
• ensuring complainants cannot have costs awarded against them if their complaint fails in court;
• organisation boards be educated on good governance in relation to gender equality and sexual harassment.

What can your NFP do to be ready?

The recommendations that were adopted by the previous federal government have given employers a taste of what to expect, but there will be more to do once all of the recommendations are implemented. Organisations should ensure:

• training is sourced for the board and officers;
• they have updated sexual harassment policies;
• implement updated training about sexual harassment in the workplace;
• review grievance policies to ensure they deal with complaints in a manner consistent with the proposed changes;
• review WHS policies and procedures to ensure psychological injuries are effectively managed and wherever possible proactive steps are taken to identify issues.