Legal Updates

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.

A company limited by guarantee is a type of incorporated legal structure that is suitable for some Not-For-Profit organisations.In a company limited by guarantee, the members of the company have limited liability.  The members agree in writing (‘guarantee’) to pay a nominal amount (usually $10-$100) to the property of the company.  If the company is wound up, the liability of the members is limited to the nominal amount that they have guaranteed.

Benefits of a company limited by guarantee

Some of the benefits of this structure include:

• it is facilitative of not-for-profit status
• as a public company it has the extra scrutiny, transparency and accountability that is required of such companies, giving it a level of credibility and independence that will give confidence to funders and members alike
• it can be established as a ‘special purpose’ company
• it is a straight forward structure familiar to organisations wish to provide funding or be involved
• it provides operational flexibility
• the liability of members is limited to a fixed amount, being the sum of the guarantee
• it allows for perpetual succession
• the company has capacity to enter into and enforce contracts
• the company has the capacity to sue and be sued
• it has all the benefits of corporate status
• the activities of the organisation may be carried out throughout Australia

Checklist to establish a Public Company Limited by Guarantee (PDF)

On 2 October 2014 the Commonwealth Government introduced the Freedom of Information Amendment (New Arrangements) Bill 2014 (Bill) in the Australian Parliament. The Bill proposes to implement the Government's 2014-15 budget measure, Smaller Government – Privacy and Freedom of Information functions. If it passes into law, the Bill would:

• repeal the Australian Information Commissioner Act 2010 (Cth) and abolish the Office of the Australian Information Commissioner (OAIC); and
• amend the Privacy Act 1988 (Cth) (Privacy Act), the Freedom of Information Act 1982 (Cth) (FOI Act) and the Ombudsman Act 1976 (Cth).

From 1 January 2015:

• the Australian Privacy Commissioner would undertake the OAIC's current functions under the Privacy Act, including handling of privacy complaints, undertaking investigations and other regulatory activities, and providing guidance and advice on privacy to individuals, organisations and agencies; and
• the OAIC's functions under the FOI Act would be undertaken by the Attorney‑General’s Department (advice, guidelines, annual reporting), the Administrative Appeals Tribunal (merits review) and the Commonwealth Ombudsman (complaints).

The Explanatory Memoradum for the Bill states that this would largely restore the system for the management of privacy and FOI issues that operated before the OAIC was established on 1 November 2010.For further information on how the OAIC will deal with privacy and FOI matters up to 31 December 2014 please contact us.