Legal Updates

‍The ATO has developed a new checklist to help NFPs hand over its tax affairs to a new administrator, see Handover checklist: not-for-profit administrators (QC 45475)NFP organisations experience regular turnover of their administrators, for example treasurers, office bearers or employees involved in the tax administration of the organisation. ‍The checklist aims to help NFPs provide key information about the organisation, along with other relevant documentation, to the new administrator. It covers the following topics:

• registrations
• legal structure
• tax concessions
• your workers
• reporting and paying tax
• record keeping handover.

On 19 March 2015, the Corporations Legislation Amendment (Deregulatory and Other Measures) Act 2014 (Act) became law. As a result of the changes implemented by the Act small companies limited by guarantee and most other companies limited by guarantee with annual revenue of less than $1 million are no longer required to maintain the appointment of an auditor. Exemption from auditor appointment requirement for small and certain other companies limited by guarantee Section 327A(1) of the Corporations Act previously required a public company to appoint an auditor within one month of its incorporation. This requirement extends to companies limited by guarantee, despite section 292(3) of the Corporations Act exempting small companies limited by guarantee from the requirement to prepare an annual financial report and section 301(3) of the Corporations Act allowing most companies limited by guarantee with annual revenue of less than $1 million (whether on an individual or consolidated basis) to review, rather than audit, their annual financial statements. In recognition that the requirement to appoint an auditor is superfluous for many companies limited by guarantee, section 327A has now been amended to exempt companies limited by guarantee from the requirement to appoint an auditor where the company is a small company limited by guarantee or where the directors reasonably believe that the company will fall within the scope of section 301(3) and, accordingly, the company will no longer be required to have its annual financial statements audited.

The Office of the Australian Information Commissioner has released its Guide to Securing Personal Information. This replaces the previous "Guide to Information Security". The new Guide will help agencies and organisations to meet their obligations under the Australian Privacy Principles (APPs) to take reasonable steps to protect personal information. It puts more emphasis on the information lifecycle and specifically addresses the requirements in APP 11 (security of personal information).For the first time, the Guide includes a cloud computing section which outlines the requirements that apply when information handling is outsourced to a third party provider, and a checklist to help organisations determine whether to use a cloud computing service. You can view the Guide here.

The Australian Charities and Not-for-profits Commission (ACNC) has published an exposure draft of a Commissioner's Interpretation Statement on health promotion charities.The Exposure Draft sets out the Commissioner's current understanding and views on the meaning and scope of the charity sub-type of "health promotion charity".Public comment on the Exposure Draft must be made to the ACNC by 15 February 2015. For further details please see http://www.acnc.gov.au/ACNC/Contact_us/Pub_consult_comment/ConsultationHPC/ACNC/Edu/Consultation_Health.aspx

The ATO has published draft taxation determination TD 2014/D17 Fringe benefits tax: when are the duties of the employment of an employee of a government body exclusively performed in, or in connection with, a public hospital or ‘non-profit hospital’ for the purposes of the Fringe Benefits Tax Assessment Act 1986, for comment.The TD explains the circumstances in which an employer can access the FBT exemption in subsection 57A(2) of Fringe Benefits Tax Assessment Act 1986 for employees of government bodies who work in, or in connection with, a public or non-profit hospital.The draft determination explains that the employee’s duties must satisfy one of two tests:

1. the duties are exclusively performed ‘in’ a hospital, which means that the employee is working within a hospital facility at a place where the hospital activities are conducted, or
2. the duties are exclusively performed ‘in connection’ with a hospital, which means the employee is performing hospital related duties, irrespective of the physical location.

Comment must be made to the ATO by 28 November 2014.  For further details please see https://www.ato.gov.au/Non-profit/Non-profit-News-Service/In-detail/Articles--2014-15/Non-Profit-News-Service-No--0415/

When an association is incorporated, the people named in the application as office holders (that is, the president, treasurer and secretary) are appointed from the date of incorporation. Following the appointment of these first office holders, any replacement office holder should be appointed in accordance with the regulations and the association’s constitution (or rules).Separately, to the officeholders, the appointment of the association’s other directors must also be in accordance with the regulations and the association’s constitution. Generally, the constitution will allow the existing directors to fill any causal vacancy in their number by themselves or by the member by ordinary resolution.This Checklist sets out the statutory requirements and best practices that a NFP incorporated association registered in Queensland must comply in appointing a new director.

A not for profit organisation can change its legal structure.  In fact, it is common for an incorporated association to change its legal structure to a company limited by guarantee.  However, any change to the legal structure of a not for profit organisation will have consequent legal and administrative costs, and without the right legal advice can be time consuming.Some other common transitions include transferring a company limited by guarantee or a co-operative to an incorporated association and if the group is and indigenous organisation, transferring its registration as an incorporated association or company limited by guarantee to an indigenous corporation.

Any individual (including sole traders), company, unincorporated or incorporated association, body corporate, partnership or trust (organisation) that is a small business operator is exempt from complying with the Privacy Act 1988 (Cth) (Privacy Act) and the Australian Privacy Principles (APPs) set out under the Privacy Act. This Fact Sheet describes the types of organisations that are categorised as small business operators.

For many not for profit organisations in Queensland (NFPs) the latter half of the calendar year brings a flurry of activity in preparing for the annual general meeting (AGM). The purpose of an AGM is to give members a report on the NFP’s activities and finances for the previous year, to allow time for members to ask questions, and often to elect members of the governing body for the coming year or next term.These Guidelines set out the legal requirements that a NFP incorporated association registered in Queensland must comply with when calling and holding its AGM.

A not for profit organisation can exist as a group of people with a common purpose.  It can be a community group or membership based.  There is no legal requirement for the not for profit organisation to become incorporated.  However, there are a number benefits.

Benefits of ‘incorporation’

legal entity - The Not For Profit organisation becomes a legal entity that stays the same even if its members change. It can do the following things in its own name:

• accept gifts or bequests
• buy and sell property
• invest and borrow money
• open a bank account
• sue and be sued
• take out public liability insurance

limited liability - Members are liable for the amounts each member owes the Not For Profit organisation in respect of their membership. For most this means the fees or subscriptions due to the Not For Profit organisation.  Members of the board or management committee of a Not For Profit organisation also have limited liability for the debts of the Not For Profit organisation, as long as they follow accepted business and community standards.perpetual succession - This means that property acquired by the association remains with the association regardless of changes in its membership.funding - It may seek funding from government or philanthropic organisations that may only be able to fund incorporated groups.taxation - An incorporated group may be able to obtain further tax benefits.legal protection for members - Members and office bearers are protected against personal liability for the Not for Profit organisation’s debts and other legal obligations.

Practical considerations – deciding whether to ‘incorporate’

Whether the Not For Profit organisation should incorporate is a decision about assessing risk – you may want to seek legal advice on this decision.  Some relevant issues:liability for debts or civil legal actions  – Will the activities of the Not for Profit organisation involve risks where someone could get hurt (e.g. campaign activities, use of equipment)? Will the Not for Profit organisation enter into an agreement or contract where the Not For Profit organisation will owe money (e.g. leasing office space)? Will the Not for Profit organisation be hiring employees or independent contractors?Incorporation has the benefit of limited liability which is one way to protect the group’s board or management committee members from being personally liable for any compensation, debts, or legal costs.  Insurance and a risk management plan is also advisable.ownership of goods and property Who has ownership of goods and property of a Not for Profit organisation is unclear because the group members must own the property on behalf of the Not For Profit organisation or on trust for the Not For Profit organisation.  If a member leaves the Not For Profit organisation there is a need to transfer ownership or trusteeship of property to a new memberAn incorporated Not For Profit organisation can own goods and property in its own name.  Therefore there is no issue of ownership of goods or property as the membership changes.particular activities Activities carried on by Not for Profit organisations for example in housing, aged care are required by State and commonwealth legislation to be incorporated.