Why a national regulator
Over the last couple of years particularly, there has been a call, growing into a clamour in some sections of the community, for the establishment of a national regulator for charities and not-for-profits in Australia. This move represents an attractive thought for many not-for-profits who are exhausted from dealing with multiple masters and who are keen to see improvements in transparency and a reduction in red tape. And, indeed, there are a number of positive outcomes associated with the announcement.
There has never been such an opportunity as exists now for governments at all levels to effect change in this sector. Indeed, the establishment of a national regulator and the aspiration for the creation of a “one-stop-shop” to which all not-for-profit organisations in the country can report represents a real opportunity for substantial, long-term and real reform.
The initial targets of the establishment of the one-stop-shop by 1 July 2012, the Public Information Portal by 1 July 2013 and the introduction of a statutory definition of “charity” also by 1 July 2013 (applicable to all Commonwealth law) potentially provide a significant step forward. Additionally, while the budget also indicates that the ACNC will establish a ‘report-once-use-often’ general reporting framework for charities – a potentially positive step perhaps combined with the standard chart of accounts for NFPs – it does not assign a due date for this. The budget also makes provision for the enhancement of the tax regime so that it will focus on increasing compliance activity in the area of income unrelated to the charitable purpose of the organisation.
These ideas have circulated for many years and no one will deny the utility and efficacy inherent in their pursuit. However, it is in the fine print that the devil exists and this is where the real work is very much yet to be done.
More detail needed
Subtly the budget papers refer to charities in relation to the above changes as opposed to not-for-profit organisations (there is a difference) and, given that the Treasury expects to raise an additional $41 million in tax revenue as a result of compliance activities in the area of tax concessions, some fine print would be nice. Especially given the new arrangements are to come into effect on 1 July 2011 and will affect, for instance, the capacity of charities to re-invest profits from business activities back into those activities for expansion or debt reduction.
Indeed, the lack of detail around the taxation concession strategies is matched by a lack of detail across a number of areas. Of particular interest is the one-stop-shop idea and how this will be put into effect given the current role of state governments and the roles of regulators relevant to particular industries in which not-for-profits operate. For instance, not-for-profit insurance providers will simply have an additional regulator to deal with unless there are exemptions in the application of the ACNC arrangements. It is always a trap to consider the not-for-profit sector as one homogeneous group. However, the ACNC arrangement is likely to take a one-size-fits-all approach.
The federal government still needs to negotiate with state governments around reporting and acquittal requirements, the issue of definitions as it applies to state tax concessions and also, presumably, with regard to enabling legislation which would allow for the establishment of a real and workable national regime. Of additional concern is the lack of resources provided in the budget for guidance and training. There is no doubt that the changes identified – particularly in relation to financial reporting, taxation arrangements and concession arrangements – will need to be introduced in a manner that allows the sector to transition with minimal pain and the provision of only $4.1 million over four years to partly fund this task is patently insufficient.
More to come
Overall, there is a positive intent related to this budget initiative that seems to meet many concerns around the country and which provides a logical step off point for real reform. However, the fine print will be developed over time and the sector (at all levels) needs to get involved in the discussions to ensure it serves the overwhelming majority of organisations and that the system allows the nuances to serve rather than retard the sector.
