Not-for-profit sector « Australian Regulatory Compliance Review from Langes+ Lawyers

April 9, 2013

Draft statutory definition of charity

Treasury has released for comment a draft Charities Bill 2013 which will introduce a statutory definition of “charity”, applicable across all Commonwealth laws for the first time.

The definition is:

charity means an entity:
(a) that is a not-for-profit entity; and
(b) all of the purposes of which are:
(i) charitable purposes (see Part 3) that are for the public benefit (see Division 2 of this Part); or
(ii) purposes that are incidental or ancillary to, and in furtherance or in aid of, purposes of the entity covered by subparagraph (i); and
Note 1: In determining the purposes of the entity, have regard to the entity’s governing rules, its activities and any other relevant matter.
Note 2: The requirement in subparagraph (b)(i) that a purpose be for the public benefit does not apply to certain entities (see section 9).
(c) none of the purposes of which are disqualifying purposes (see Division 3) ; and
(d) that is not an individual, a political party or a government entity.

The definition will apply from 1 January 2014.

As a result of the introduction of a definition of charity and charitable purpose in the Charities Bill 2013, a number of consequential amendments to Commonwealth legislation and transitional arrangements are required. These are set out in the draft Charities (Consequential Amendments and Transitional Provisions) Bill 2013.
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Posted 9th April 2013 by David Jacobson in Charities, Not-for-profit sector, Tax

February 5, 2013

Not-for-profit tax changes deferred

The Government has announced that the 2011-12 Budget measure “Better Targeting of NFP Tax Concessions” will now commence from 1 July 2014.

The changes require that:

income tax exempt entities must comply with substantive requirements in their governing rules and being a ‘not-for-profit’ entity;
income tax exempt entities generally must be operated principally in Australia and for the broad benefit of the Australian community; and
deductible gift recipients generally must be operated solely in Australia and for the broad benefit of the Australian community.

The start date of 1 July 2014 is proposed to apply to activities that commenced after 7:30 pm (AEST) on 10 May 2011. The measure will not impact on tax concessions that were used for these activities prior to 1 July 2014.

As part of transitional arrangements, relevant activities that commenced prior to 7:30 pm (AEST) on 10 May 2011 will not become subject to the measure until 1 July 2015. The measure will not impact on tax concessions that were used for these activities prior to 1 July 2015.

Background

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Posted 5th February 2013 by David Jacobson in Not-for-profit sector, Tax

January 15, 2013

Guide for board members of charities

The Australian Charities and Not-for-profits Commission (ACNC) has published a Guide for board members and others who manage charities.

The Guide covers registering with the ACNC, Commonwealth tax concessions, ongoing obligations and proposed minimum governance standards.

It also includes a “ready reckoner” of key ACNC dates.

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Posted 15th January 2013 by David Jacobson in Charities, Corporate Governance, Not-for-profit sector

December 31, 2012

Draft governance standards for charities

The Government has released for public consultation a discussion paper on development of governance standards for charities registered with the Australian Charities and Not-for-profits Commission (ACNC) and draft regulations on the new ACNC financial reporting framework.

Final standards are expected to commence on 1 July 2013.

The standards will apply to registered charities, excepting basic religious charities. Charities will need to comply with these standards to be, and remain, registered with the ACNC. The governance standards are intended to reflect a minimum set of outcomes for registered charities.

The six draft governance standards cover:
• purposes and NFP character of a charity;
• accountability to members (for those charities with members);
• compliance with Australian laws;
• responsible management of financial affairs;
• suitability of responsible entities; and
• duties of responsible entities.

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Posted 31st December 2012 by David Jacobson in Charities, Not-for-profit sector

November 1, 2012

Charities Bill passed by Senate

The Australian Charities and Not-for-profits Commission Bill 2012 and the Australian Charities and Not-for-profits Commission (Consequential and Transitional) Bill 2012 have been passed by the Senate with amendments.

The bills have been sent to the House of Representatives for approval of the changes.

The amendments include:

clarification that the governance standards will be focussed on outcomes and will specify principles as to how the registered entity must achieve those outcomes, including proportional standards that recognise the size and nature of the registered entity;
provide for the maximum annual revenue for a deductible gift recipient fund (DGR fund) operated by a basic religious charity to be increased from $250,000, in line with changes to the thresholds for small registered entities; and
simplify the transition of entities to ACNC regulation where entities are operating a public benevolent institution (or multiple public benevolent institutions) or a health promotion charity (or multiple health promotion charities) and where the whole of the entity is not such an institution (that is, where the institution is notionally operated or conducted in-house, usually by an unincorporated religious institution) to ensure these entities transition appropriately to the ACNC, and both the operated institution of the entity, and the remainder of the entity keep the existing concessions they currently have access to.

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Posted 1st November 2012 by David Jacobson in Charities, Not-for-profit sector

September 24, 2012

Lehman Brothers (Grange) mislead Councils over CDO’s

In Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in Liq) [2012] FCA 1028, the Federal Court of Australia found that Lehman Bros Australia Ltd (In Liq), which was formerly called Grange Securities Ltd (Grange) is liable to compensate the 3 plaintiff Councils (as representatives in a class action for other councils and not-for-profits) for their losses incurred as a result of their investments in synthetic collateralised debt obligations and some other complex financial products (collectively SCDOs) between 2003 and 2008, before the GFC.

Judge Rares concluded that:

1. Grange used the high ratings of the SCDOs as a significant selling point to its risk averse Council clients.

2. Grange put itself forward to Councils as a financial adviser that understood the investment requirements of local government, including relevant legislative and policy constraints.

3. Grange told the Councils when it dealt with them that its SCDO products were a form of floating rate notes. Grange told them that if the SCDOs were held to maturity the Councils would get their money back and that the products’ high credit ratings put them in the same “universe” of investments as debts of the AAA rated Australian Government and AA- rated four major Australian banks.

4. Grange also represented to the Councils that the investments, including SCDOs that it recommended or made on their behalves, were suitable for a conservative investment strategy. It represented that those products were prudent, capital protective investments and that they complied with statutory and Council policy requirements. Grange also represented to the Councils that those products were as liquid as the bank Fixed Rate Note products that the Councils were familiar with, could readily be redeemed for cash and were easily tradeable on an established secondary market. In addition, Grange represented to the Councils that the maturity dates for the SCDOs were suitable to the Councils’ needs.

5. The SCDOs did not have the characteristics that Grange promised they would have in their individual contracts: that is, the SCDOs did not have a high level of security for the invested capital, were not easily tradeable on an established secondary market or able to be readily liquidated for cash and were not suitable investments for risk averse Councils.

6. Grange was negligent in recommending to and advising councils to make those investments.

7. By using its powers under the investment agreements to invest in SCDOs, Grange breached its obligations under those agreements. That was because it was negligent to use public money in investments with the risks that the SCDOs had. In addition, the SCDOs did not provide that Council with ready access to funds, because of their lack of liquidity.

8. Grange engaged in misleading and deceptive conduct in breach of s 12DA of the ASIC Act when it promoted the SCDOs to the Councils as suitable investments.

The reasons for judgment are over over 440 pages long. Further orders will be made.

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Posted 24th September 2012 by David Jacobson in Consumer Law, Corporations Act, Financial Services, Future of Financial Advice Reforms, Not-for-profit sector

September 21, 2012

Australian Charities and Not-for-profits Commission Bills pass House of Representatives

The bills have been sent to the Senate for debate.

UPDATE 21 September 2012: The Assistant Treasurer has announced that the proposed 1 October 2012 date for the commencement of the Australian Charities and Not-for-profits Commission (ACNC) will be delayed until the Bills are passed by the Senate in October.

According to the Assistant Treasurer, the short delay to the commencement date will not have a material impact on the sector with the governance standards, including the external conduct standards, and the financial reporting framework not commencing until 1 July 2013 and the first financial reports for medium and large registered entities not falling due until after 1 July 2014.

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Posted 21st September 2012 by David Jacobson in Charities, Not-for-profit sector

September 11, 2012

Senate Committee Report on Australian Charities and Not-for-profits Commission Bill

The Parliamentary Joint Committee on Corporations and Financial Services Inquiry into the Australian Charities and Not-for-profits Commission Bill 2012 has published its report.

The report recommends that the Australian Charities and Not-for-profits Commission Bill 2012 and 2 related bills be passed subject to 5 recommendations. The Coalition members of the Committee dissented.

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Posted 11th September 2012 by David Jacobson in Charities, Not-for-profit sector, Tax

August 24, 2012

Australian Charities and Not-for-profits Commission Bill

The Bill incorporates changes made in accordance with the recommendations in the House of Representatives Standing Committee on Economics report into the draft ACNC legislation including:

•Adding a new clause to the Objects in the legislation to make clear that the ACNC’s role includes promoting a reduction in the regulatory burden on the NFP sector;
•Additional procedural fairness requirements where the ACNC Commissioner exercises particular powers under the legislation;
•Adding a statutory review provision to provide for a review of the legislation after it has been in operation for 5 years;
•A new power to make regulations to protect the privacy of private donors such as those who maintain a private ancillary fund;
•A substantial redrafting of provisions relating to directors’ liability, clarifying that a director of an incorporated charity will only be liable under the Act where there is a deliberate act or omission of the director involving dishonesty, gross negligence or recklessness. No criminal offences will now apply to directors of an incorporated charity, as the one criminal offence relating to directors included in the exposure draft of the Bill has been removed.

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Posted 24th August 2012 by David Jacobson in Charities, Not-for-profit sector

July 9, 2012

Draft Australian Charities and Not-for-profits Commission (ACNC) Bill update

The draft Australian Charities and Not-for-profits Commission (ACNC) Bill has been referred to the House of Representatives Standing Committee on Economics, for an inquiry over the Winter Parliamentary break.

The Government will then consider any recommendations made by the Committee prior to introducing the legislation later in the year, ahead of the ACNC’s 1 October 2012 start date.

Changes have been made to the Bills since the December Exposure Draft.

Background

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Posted 9th July 2012 by David Jacobson in Charities, Not-for-profit sector