1. All DGRs to be registered charities
On 2 September 2021, the Treasury Laws Amendment (2021 Measures No. 2) Bill 2021 (Bill) passed both houses of Parliament and is now awaiting royal assent. The new law will impact deductible gift recipients (DGRs) that are neither charities nor operated by charities or government agencies. Charities registered with the ACNC are not affected.
Once the Bill commences, all DGRs will be required to be charities registered with the Australian Charities and Not-for-profits Commission (ACNC), or to be operated by a registered charity or an Australian government agency. This does not apply to ancillary funds or to entities specifically listed by name in the Income Tax Assessment Act 1997 (Cth).
The affected DGR categories include:
- Health — public fund for hospitals (item 1.1.3 in section 30-20)
- Health — public fund for public ambulance services (item 1.1.8 in section 30-20)
- Education — public fund for religious instruction in government schools (item 2.1.8 in section 30-25)
- Education — Roman Catholic public fund for religious instruction in government schools (item 2.1.9 in section 30-25)
- Education — school building fund (item 2.1.10 in section 30-25)
- Education — public fund for rural school hostel building (item 2.1.11 in section 30-25)
- Research — approved research institute (item 3.1.1 in section 30-40)
- Welfare and rights — public fund for persons in necessitous circumstances (item 4.1.3 in section 30-45)
- Environment — public fund on the Register of Environmental Organisations (item 6.1.1 in section 30-55)
- Cultural organisations — public fund on the Register of Cultural Organisations (item 12.1.1 in section 30-100), and
- Fire and emergency services — fire and emergency services fund (item 12A.1.3 in section 30-102).
It is important to note that these amendments will be retrospective. Current DGR-endorsed entities in the 11 categories listed above will need to become compliant, as will new DGRs.
The new requirements will come into effect three months after the Bill receives royal assent. Under the transitional arrangements, existing DGRs will have 12 months after the requirements come into effect (that is, 15 months after the Bill receives royal assent) to become registered charities. There is also an option to apply to the Commissioner within this window for an extension (of up to three extra years). Subordinate legislation will be released outlining eligibility for transitional periods.
It is anticipated the ACNC will receive a large number of applications so your organisation should take action in relation to these changes now. Although 12 months may seem like ample time, charity applications can be complicated and governing documents may require amendment. If you need any assistance in preparing your application, please contact a member of our team.
2. Increased financial reporting thresholds
From 1 July 2022 (for reporting against the 2021-22 financial year) the reporting obligations for a number of Australian charities will change.
The changes to the charity size thresholds and the corresponding financial reporting obligations that will need to be satisfied are set out in the table below.
|Size of charity
|Minimum ACNC reporting requirements
|Less than $250,00
|Less than $500,000
|ACNC Annual Information Statement
|Less than $1 million
|Less than $3 million
|Annual Information Statement and a financial report reviewed by an auditor
|$1 million or more
|$3 million or more
|Annual Information Statement and an audited financial report prepared by an auditor
The following additional reporting obligations, intended to increase accountability to donors, beneficiaries, and the public, will also apply:
- From 1 July 2022, large charities with two or more management personnel will be required to report remuneration paid to responsible persons and senior executives on an aggregated basis in their Annual Information Statement.
- From 1 July 2023, all charities will also be required to report related party transactions in their annual reporting to the ACNC.
If you are unsure which size category applies to your charity, you can refer to your entity’s ACNC charity portal to determine which reporting rules will apply to you.
3. Electoral expenditure and political donations transparency
The ACNC regulations have been amended to require the ACNC Commissioner to publish on the charities register an electronic link to the Australian Electoral Commission Transparency Register, maintained under the Commonwealth Electoral Act 1918 (Cth).
Relevant to registered charities, the Transparency Register publishes information about electoral expenditure and political donations made by political campaigners and third parties. If your charity has information included on the Transparency Register this will now be displayed on your charity registration page in the form of a link to the AEC’s Transparency Register.
Charities will not be required to take any action and no changes will be made to the ACNC reporting requirements. The change will be automatic.
4. Changes to income tax exemption reporting
As part of the 2021-22 Federal budget, the Commonwealth Government announced reforms to not-for-profit (NFP) entities that self-assess for income tax exemptions. This will not affect ACNC registered charities. Organisations that will be affected include sporting clubs and non-charity community service organisations.
From 1 July 2023, non-charity NFPs with active ABNs will be required to lodge an annual self-review return in order to access an income tax exemption. These NFPs will need to submit information to the ATO ordinarily used by them to self-assess their eligibility. The self-review return may be confirmed or amended in subsequent years, avoiding the need to submit the same information every year.
If a return is not lodged, the NFP may become ineligible for an income tax exemption and penalties may apply.
This measure is designed to enhance transparency in the NFP sector and ensure only eligible NFPs are accessing income tax exemptions.
5. Review of ACNC secrecy provisions
In July this year, as part of its response to the Strengthening for Purpose: Australian Charities and Not-for-profits Commission Legislation Review, tabled on 22 August 2018, Treasury released a consultation paper to amend the secrecy provisions of the ACNC Act.
Currently, there are only limited circumstances in which an ACNC officer can disclose information the ACNC holds in relation to a registered charity. For example, disclosure is allowed where information must be published on the Charities Register, or where the registered charity provides consent.
In our view, the current secrecy provisions appropriately balance the need to protect registered charities’ personal and confidential information with the need to allow disclosures of such information in appropriate circumstances. Legislative amendment is not required. Our Public Interest team will closely watch this space for any proposed legislation.
Arnold Bloch Leibler’s submission in relation to this consultation can be read here.
6. Proposed amendments to Governance Standard 3
On 16 February 2021, Treasury released exposure draft legislation proposing to expand the scope of ACNC Governance Standard 3, greatly increasing the circumstances in which a registered charity might find itself in breach of Governance Standard 3.
Arnold Bloch Leibler’s submission to Treasury strongly opposed the Exposure Draft. In our view the amending regulations are an over-reach and unnecessary. Our submission can be read here.
Despite strong opposition from many prominent organisations in the charities sector, the Australian Charities and Not‑for‑profits Commission Amendment (2021 Measures No. 2) Regulations 2021 were made on 24 June 2021 and tabled in Parliament on 3 August 2021.
Under the amended regulations, the ACNC Commissioner will have the power to deregister a charity if the Commissioner reasonably believes that either:
- a charity has engaged, or might in the future engage, in conduct (including by omission) that may be dealt with as a relevant summary offence, or
- a charity has not maintained reasonable internal controls to prevent the use of its resources to actively promote another charity engaging in such conduct.
The amending regulations are currently subject to a disallowance motion, which has been postponed to 18 October 2021. If the disallowance motion does not succeed the amended regulations will become law.
Our Public Interest team will provide a further update in late October.