The Commonwealth Government has announced it will create a new independent statutory authority to provide oversight for the not-for-profit sector. The Australian Charities and Not-for-profits Commission will begin operation from the 1st of July 2012 with a task force charged with meeting this time frame.
Several government commission reports have highlighted the potential need for an independent statutory authority, including the 2010 Productivity Commission Report into the Contribution of the not-for-profit sector and the 2010 Australia’s Future Tax System Review, commonly known as the Henry Tax Review.
The Commonwealth Government has allocated $53.6 million over four years to establish the Australian Charities and Not-for-profits Commission (ACNC) to provide regulatory oversight for the $43 billion community sector.
The Commonwealth Government has flagged discussions with State and Territory Governments to provide consistency across Australia for the not-for-profit sector. In the interim the Commonwealth Government intends to create a legislated definition of charity, which will take effect from the 1st of July 2013. In this regard the Commission will be responsible for determining charitable, public benevolent institution, and any other not-for-profit status for all Commonwealth purposes.
Reforms are also expected in regard to regulatory compliance by the sector, including a report-once framework, which will establish clear reporting guidelines for charities and community organisations. The Commission will also be responsible for education and support to the sector.
Changes are also underway in regard to the taxation status of businesses conducted by not-for-profit organisations. This will require not-for-profit organisations to pay income tax on profits from unrelated commercial activities that are not directed back to their altruistic purpose. These changes have taken effect from the 1st of July 2011 and will initially apply to new enterprises established after the 10th of May 2011. A time frame for transitional arrangements for existing enterprises is yet to be established.
The Commonwealth Government has stated that these taxation changes will not apply to entities that conduct commercial activities that relate back to the organisation’s altruistic purposes. In this regard the Government has provided examples of op-shops and not-for-profit childcare organisations as entities that would not be affected by these changes.
Coupled with harmonization of State and Territory Laws, the Australian Charities and Not-for-profits Commission (ACNC) could deliver a more consistent framework for not-for-profit organisations and provide certainty in regard to charitable statuses.