Www.kellyco.com.au | Australian Charities and Not-for-profits Commission (ACNC) Nick Karagiannis, Partner [email protected]

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Australian Charities and Not-for-profits Commission (ACNC)

Nick Karagiannis, [email protected] 2013

Kelly & Co.

www.kellyco.com.au | Page 2

The Role of the ACNC

New independent regulator of the charity sector Charities must now report to and notify of certain changes The ACNC takes over some functions of the ATO. In particular,

it is now responsible for determining an organisation’s charity status (ITE/DGR remain with ATO)

The ACNC has broad investigatory and disciplinary powers


Rationale

Reduce red tape and reporting burdens Support the not-for-profit sector Maintain trust in the sector Increase transparency and accountability


New Definition of “Charity”

The federal government is expected to introduce a new definition of a “charity” by 1 July 2013

This new definition will be consistent across all States The ACNC will by bound by this definition when it comes

into effect In the interim, the ACNC will continue to apply the existing

common law based definition


Charity

Charitable Purpose: the relief of poverty; the advancement of education; the advancement of religion; or other purposes beneficial to

the community

Not For Profit

For the Public benefit


Registration

Registration with the ACNC is voluntary However, it is necessary to be registered if you want to

benefit from Commonwealth charity tax concessions such as: Income tax concessions Deductible Gift Recipient status GST/FBT concessions

The ACNC maintains a register of charities. This register is publicly available online


Registration: Existing Charities

You are automatically registered with the ACNC if your organisation was registered as a charity with ATO before 3 December 2012

However, if you are a religious charity which self-assessed as being income tax exempt, you will need to register

Charities automatically registered have until 2 June 2013 to opt-out


Registration: Classification of Charities

Upon registration the ACNC will classify your charity according to its size: Small: revenue under $250,000 Medium: revenue $250,000 or more, but less than $1

million Large: revenue of $1 million or more

The size of your charity will determine the scope of the obligations you owe to the ACNC


Registration: New Charities

The ATO will accept the ACNC’s determination of your organisation’s charity status and determine if you are eligible for any Commonwealth tax concessions

In the same application used to register with the ACNC, you can apply for charity tax concessions with the ATO

The ATO remains responsible for ensuring compliance with other requirements


Obligations of Registered Charities

3 important obligations to the ACNC: Reporting Notifying Compliance with governance standards

The scope of an obligation may depend on the size of your charity

Some obligations do not yet apply


Obligations: Reporting

Registered charities must provide an Annual Information Statement

This is a relatively concise document and contains information about your charity’s: operations number of staff type of beneficiaries



The Annual Information Statement is due 6 months after the end of your usual reporting period

For example, if your usual reporting period is 1 July 2012 to 30 June 2013, the statement will fall due by 31 December 2013

Guides on how to complete annual information statement are available from the ACNC

The ACNC has issued a consultation paper noting that additional information (mostly financial) will need to be reported in future annual information statements



From 1 July 2013, medium and large charities will also need to prepare an annual financial report. The nature of these reports vary: for medium charities: a reviewed or audited annual

financial report for large charities: an audited annual financial report

If your reporting period is 1 July 2013 to 30 June 2014, this statement must be submitted by before 31 December 2014.



Content requirements of the financial report not yet finalised

Draft regulations suggest charities will be required to provide: a financial statement for the year; notes to the financial statement; and a declaration by the responsible entity about the

statement


Obligations: Notification

From 3 December 2012, registered charities must notify the ACNC of changes to its: Legal name Address for service Governing/Executive members Governing rules

Small charities must notify the ACNC no later than 60 days after it becomes aware of change

For medium/large charities, no later than 28 days


Obligations: Notification

If your charity is established as a company under the Corporations Act 2001 you will no longer be required to report to ASIC on any: Change to constitution Change of address Change of Governing/Executive members

You should instead notify the ACNC of any such changes


Obligations: Governance

From 1 July 2013, your charity must adhere to minimum governance standards and external conduct standards

‘Governance’ is the set of practices and procedures in place to ensure that an entity operates to achieve its objectives in an effective and transparent manner

Draft regulations currently before Parliament



The Standards are principle-based, specifying the outcome to be achieved, rather than detailing how an entity must meet the Standards:

1. Clear purposes and NFP character of charity2. Accountability to members3. Compliance with Australian law4. Responsible management of financial affairs5. Suitability of “responsible entities” (i.e.

Board/executives)6. Duties of responsible entities



Your charity will be expected to decide how to best meet the standards

The ACNC Commissioner is expected to release guidance material to assist in meeting these standards

The Commissioner will assume that registered charities are in compliance unless there is evidence to the contrary


Exemptions for Small Religious Charities

If your organisation is classified as a small Religious Charity by the ACNC, certain exemptions will apply

You will not be required to: provide financial statements adhere to governance standards

But you must still provide an Annual Information Statement


Liability of Board Members/Executives/Directors

exercising powers with the degree of care and diligence that a reasonable individual would exercise if they were a responsible entity of the charity

acting in good faith in the best interests of the charity, to further the purposes of the charity

not misusing the responsible entity’s position not misusing information disclosing perceived or actual material conflicts of interest ensuring the financial affairs of the charity are managed in a responsible

manner not allowing the charity to operate while insolvent


Liability of Directors

The charity will be accountable to the ACNC for compliance with the governance standards

Directors will liable for any breaches if the: relevant act was deliberate; or omission was dishonest, due to gross negligence or

recklessness


Liability of Directors

If your charity is unincorporated: Obligation imposed on the charity is imposed on each

director Any liability of the charity is payable by each director Directors can avail themselves of the defences of

“illness” or “all reasonable steps taken”


Important Dates – Recap

From 3 December 2012: record keeping notification of any changes to ACNC

From 1 July 2013: provide information statement within 6 months comply with governance standards

From 1 July 2013 (for medium/large charities only) Provide financial report within 6 months of end of

current full financial year


Implications for Charities

You need to be aware of the reporting obligations to the ACNC and observe the reporting and notification deadlines

You will need to keep records sufficient to meet reporting obligations

You need to keep sufficient financial records for the financial reporting obligations


Implications for Charities

You will still need to report at a State level to obtain State charity tax concessions relating to: Stamp duty; Payroll; and/or Land tax


Future Changes

Possible introduction of a “Charity Passport” Charity Passport would phase out the need the report

separately to State and Commonwealth bodies

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Www.kellyco.com.au | Australian Charities and Not-for-profits Commission (ACNC) Nick Karagiannis, Partner [email protected]