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Charities update: 5 key developments

ABL Private, Native Title & Public Interest Law
Change word written on wooden blocks
There have been a number of changes for charities over the last few months. While much of the focus has been on foreign donations and election funding law reform, there are other changes afoot. To help you to stay up to date, we have outlined five key developments to be aware of.

1. The new ACNC Website

Updates to the Australian Charities and Not-for-profits Commission (ACNC) website, effective 12 October 2018, have given rise to a number of changes.

The new look Charity Register is much faster to use and has improved search functions. Charity profiles now more prominently feature financial information, including a visual representation of income and expenses.     

Technical issues with the Charity Register mean that many governing documents for registered charities have been temporarily removed. The ACNC expected that this would be remedied by early November.  You may wish to check your charity’s entry on the register to confirm that the correct governing documents are uploaded and all other information is accurate.

2. The ACNC Act Review 

On 22 August the Strengthening for Purpose: Australian Charities and Not-for profits Commission Legislative Review 2018 was tabled in Parliament. 

The review is a very balanced and useful assessment of the strengths and weaknesses in the ACNC legislative regime.   

The Panel made 30 recommendations in total. 

We support the recommendations which seek to reduce the administrative burden that otherwise inhibits the work of Australia’s thriving, diverse and generous not-for-profit sector.  

Governance Standard 3 is a good example of where charities are over-regulated.  We agree with the Panel that Governance Standard 3 should be removed as it is not appropriate as a governance standard and it is not the function of the ACNC to have oversight of offences unrelated to the ACNC’s regulatory obligations. 

We also support the recommendations to streamline Australia’s fundraising legislation and clarify the application of Australian Consumer Law to fundraising activities.

The review report was tabled just two days before Australia’s 30th Prime Minister was sworn in.

We will continue to monitor developments.  

3.  Accounting standards 

A big change to not-for-profit accounting is around the corner.  From 1 January 2019 new accounting standards will apply to not-for-profits.  These are AASB 15 Revenue from Contracts with Customers and AASB 1058 Income of Not-for-profit Entities.  These new standards may affect the way your entity recognises revenue.  The ability to recognise volunteer services under AASB 1058 is another interesting development.   

Your charity may have already implemented these standards.  If not, charity directors should speak with managers and their accountants about the new standards to understand what impact they might have on financial statements and systems as well as if, and how, any changes to financial statements should be communicated to stakeholders. 

4.  DGR reform in progress

On 22 August 2018 Treasury released a discussion paper on deductible gift recipient (DGR) reforms and the consultation process concluded in late September.  

This follows the Treasury review of the DGR framework in 2017 (discussed here) and the Government’s announcement of reforms on 5 December 2017 (discussed here).

If enacted the proposed reforms will require all non-government DGRs (other than those that are exempted) to be registered as or operated by charities.  In addition, responsible persons will no longer be needed to manage public funds and a single public fund will be able to be used for multiple DGR purposes.
   
The discussion paper suggests that DGRs that are not currently charities will have 12 months from 1 July 2019 to either register as a charity using a streamlined registration process, or apply for an exemption.  Consultations, particularly in relation to workable transition arrangements, are ongoing.

5. Draft external conduct standards

The Government has released draft external conduct standards for registered charities. The purpose of these standards is to regulate the overseas activities of charities, including the sending of funds overseas. This aligns with the ACNC’s regulatory focus on terrorist financing and money laundering.

The draft external conduct standards would, if legislated in their current form, place an undue burden on charities.  The joint ACNC and Austrac review released in August 2017 found that the risk level for both money laundering and terrorism financing in the charities sector is ‘medium’.  The significant additional regulatory burden that would be imposed by these external conduct standards is unnecessarily high considering such a risk assessment.   

We are concerned that the draft external conduct standards do not promote the effective use of charitable resources, may undesirably discourage small charities from performing charitable work overseas, and are drafted with such ambiguity as to make them difficult to comply with, which is unacceptable given the harsh consequences of failure to do so. 

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