News & Insights

The Federal Treasury has released exposure draft materials for public consultation related to the proposed introduction of a new governance standard “Governance Standard 6” in the Australian Charities and Not-for-profits Commission Regulation 2013 (Cth).  

Compliance with ACNC Governance standards is a condition of ongoing registration as a charity, and subsequently is a prerequisite for accessing certain Commonwealth tax concessions including income tax exemption and (in some cases) DGR (deducible gift recipient) endorsement.

The draft Australian Charities and Not-for-profits Commission Amendment (2021 Measures No 1) Regulations 2021 will require registered charities to take all reasonable steps to participate in the National Redress Scheme for Child Sexual Abuse (Redress Scheme) if the entity is, or is likely to be, identified as being involved in the abuse of an applicant for redress under the Redress Scheme.

The regulations aim to incentivise charities to participate in the Redress Scheme and thereby help to ensure that survivors of institutional child sexual abuse are compensated appropriately.

The Redress Scheme was originally established in response to recommendations by the Royal Commission into Institutional Responses to Child Sexual Abuse. The Redress Scheme operates on the basis that institutions “opt-in” and the responsible entity pays. The survivors of institutional child sexual abuse may receive redress in the form of:

• a redress payment of up to $150,000;
• counselling and psychological care; and
• an optional direct personal response from the responsible participating institution.

Whilst generally basic religious charities are exempt from complying with ACNC Governance Standards, legislation is before the Senate (having passed the House of Representatives) which amends the definition of a basic religious charity (BRC) in the Australian Charities and Not-for-Profits Commission Act 2012 (Cth) to remove a religious institution’s eligibility to be classified as a BRC if the charity has been named in an application by a survivor or named in the Royal Commission into Institutional Responses to Child Sexual Abuse but refuses to join the Scheme. Schedule 3 of the Treasury Laws Amendment (2020 Measures No 6) Bill 2020 sets out the proposed disqualifying criteria, which provides specifically that the validity of any application for redress made against a charity is not material for determining whether or not the charity is disqualified from being a BRC.

Institutions named in the Royal Commission (or named in an application made to the Scheme) were required to confirm their intention to join the Scheme by 30 June 2020 and are required to join the Scheme by 31 December 2020.

The loss of classification as a BRC has wide ranging effect for charities, including enlivening a requirement to lodge financial reports and the ACNC’s power to remove responsible persons. BRC’s have traditionally enjoyed a lighter level of regulation flowing from their classification.

In this respect, the recent report of the Australian National Audit Office (ANAO) commented that the ACNC’s current approach to regulating compliance with ACNC Governance Standards reflects a “light touch” approach that has been designed on the basis of largely negative assurance — that is, to rely on information and assertions provided by an applicant of compliance with the Governance Standards, unless there is evidence to the contrary.

The ANAO recommended that since compliance with the Governance Standards is a condition of registration and ability to access Commonwealth tax concessions, the ACNC should strengthen aspects of its processes for assessing applications for charity registration (Recommendation no.1, paragraph 2.30).

It is expected therefore that improvements by the ACNC in its approach to assessing and evidencing compliance with the Governance Standards will be similarly reflected, as appropriate, in its approach to assessing and evidencing compliance with the newly proposed Governance Standard 6 and charities’ right to enjoy classification as a BRC.

Interested parties are invited to reach out to Charity and Not-for-Profit lawyers at Macpherson Kelley to discuss the impact of the exposure draft materials. Any submission to Treasury in respect of the draft regulations needs to be made by interested parties by Friday, 8 January 2021.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.