The delivery of the Federal budget occurred over a month ago and summaries of the matters impacting the non-profit sector abound.

Here we offer a deeper dive into a couple of issues mentioned in the recent budget that affect the non-profit sector, place the initiatives in context and update a ghost from a previous budget that is just now coming into effect.

Budget – ACNC

The Federal budget allocated $2.9 million over the next 4 years, with $600,000 per year after that on an ongoing basis to disclose information about certain regulatory activities.

The ACNC has advised that it will involve the ACNC publishing deidentified reasons for decisions to accept or refuse applications for registration of charities where these reasons are of educational benefit to the wider charity sector.

The secrecy provisions of the ACNC Act have been a barrier to the publication of such material to date, which has been a topic of concern in many senate estimates hearing and the 5-year review of the ACNC. The Review recommended (page 13) that:

“The secrecy provisions of the ACNC Act are overly restrictive and should be amended to allow the Commissioner to disclose information in a wider range of circumstances, including to protect public trust and confidence in the sector. The ACNC’s inability to make any comment in respect of whether it is (or is not) undertaking an investigation in respect of a complaint against a registered entity is harmful to the perception of the ACNC as an effective regulator.“

In 2021, Treasury conducted a consultation about the recommendation, but no submissions have been released, and no further public comment has been made.

Comparable foreign charity regulators adopt a more transparent approach to disclosing information about their regulatory activities. Generally, these disclosures can be made when it is in the public interest or for a particular purpose, or in situations where not disclosing the information would be against the public interest.  Where a registration decision may be of wider public interest, the UK Charity Commission and New Zealand Charities Services may publish the decision and its reasons.  The UK Charity Commission may also make a public comment about a new or ongoing investigation when it is in the public interest.  In the circumstances an investigation is finalised, the UK, New Zealand and Canadian regulators routinely publish information on the revocation of registrations and the reasons for the resulting compliance action.

The PWC affair about the disclosure of sensitive ATO tax information may influence any ACNC legislative reform about secrecy, and the Attorney-General currently also has a Review of Secrecy provisions addressing concerns raised by multiple reviews about the number, inconsistency, appropriateness and complexity of Commonwealth secrecy offences.

It will be of interest to the sector as to where the balance is struck between protecting personal and confidential information that registered charities provide to the ACNC and also allowing disclosures where it is necessary for ensuring effective government administration in accordance with the ACNC Act.

Budget – specifically listed organisations for gift deductibility

The 2022-23 budget papers also note that the start date for the listing of 28 community foundations announced in the 2022-23 budget as specifically listed DGRs has been pushed back. It will now start on the royal assent of amendments to the income tax legislation that will enable the Commissioner of Taxation to endorse such entities pursuant to a ministerial guideline.  The reforms will also enable the community foundations to receive funding from private philanthropy, including billions of dollars held by private ancillary funds.

The Voice No Case Committee is also listed in the 2023-24 budget papers to be made a specifically-listed DGR the day after it is registered as a charity with the ACNC.

The backstory is that In Australians for Indigenous Constitutional Recognition[1], Australians for Indigenous Constitutional Recognition Ltd (AICR) applied to the ACNC to register as a charity with the sub-types of advancing social or public welfare and a public benevolent institution (PBI). AICR is concerned with advancing education, promoting reconciliation, mutual respect and tolerance between groups of individuals in Australia, and advancing the public debate, for the purpose of achieving self-determination and recognition in the Australian Constitution for indigenous Australians. In short a proponent of the Voice Yes campaign in the coming referendum.

The ACNC refused registration as a PBI, but would permit registration as an ordinary charity. AICR chose to commence its proceedings to appeal this decision in the Federal Court and sought a protective costs order i.e. an order that the maximum costs between party and party that may be recovered from it for the proceeding should be $10.  It was not successful and in the face of the risk of costs being awarded against them, they withdrew.

AICR were later specifically listed as a DGR in the tax legislation by the Government in 2022 by Treasury Laws Amendment (2022 Measures No. 5) Bill 2022. This allowed their donors to receive a tax deduction for gifts.

But wait, there is more to the No campaign DGR registration.

AAP Reports that The Voice No Case Committee, also known as Recognise a Better Way, submitted an application for DGR status on March 6, 2023 to Treasury. However, the group contacted Treasury on May 8, the day before the budget, to advise it wished to withdraw the proposal.  Because the papers had already been finalised, an announcement of the Voice No Case Committee’s DGR status, pending registration with the ACNC, appeared in the 2023/24 budget.  The group withdrew its application in order to merge with another ‘no’ campaign group, Fair Australia, under the new name Australians for Unity.

Budget – a ghost of budget past to begin on 1 July

In our May 2022 bulletin we discussed an initiative in the 2021-22 federal budget when the government announced that it had provided $1.9 million capital funding in 2022-23 for the Australian Taxation Office (ATO) to build an online system to enhance the transparency of income tax exemptions claimed by exempt nonprofit entities.

The budget announcement noted that currently non-charitable, not for profit (NFP) entities can self-assess their eligibility for income tax exemptions without an obligation to report to the ATO.

The requirement comes into effect from 1 July 2023. From this date, the ATO will require NFPs with an active ABN, which self-assess as income tax exempt, to submit a self-review return each year.

The first return will need to be lodged for the 2023–24 income year from 1 July 2024. It will be an online annual self-review form with the information ordinarily used to self-assess eligibility for the exemption.

The ATO is finalising the self-assessment review form, which it will release in the coming months.

The ATO Assistant Commissioner Not-for-profit, in their monthly blog (Straight from the Source – June 2023) described the changes as:

“This is the most significant change to the sector since the introduction of the Australian Charities and Not-for-profits Commission (ACNC) in 2012.”

For those non-profits that are not ACNC registered charities, the first step is to ensure your ABN contact details with the ATO are up to date.

[1] In Australians For Indigenous Constitutional Recognition Ltd v Commissioner of The Australian Charities and Not-for-profits Commission [2021] FCA 435