The Productivity Commission has released its research report on the Contribution of the Not-for-Profit Sector.

The sector comprises around 600,000 organisations  which make up more than 4 per cent of GDP or around $43 billion according to the report.

The recommendations include:

• Establish a national Registrar to:
  • consolidate Commonwealth regulation for incorporation of NFP companies (including Indigenous corporations)
  • register and endorse not for profits (NFPs) for tax concessional status
  • register national fundraising organisations and/or activities
  • provide a single portal for corporate and financial reporting.
• Registrar to endorse Commonwealth tax concession status for NFPs.
  Annual community-purpose statement to be required.
• Establish a separate chapter in the Corporations Act 2001 dealing with NFP companies limited by guarantee.
• States and territories to harmonise Incorporated Associations legislation and reduce impediments to changing legal form
• Registrar to establish a register for cross-jurisdictional fundraising organisations and/or
  activities.
• Australian governments to fast track introduction of Standard Chart of Accounts, expand Standard Business Reporting to NFPs, and encourage agencies to use the information available through the Registrar to undertake organisational ‘health checks’
• An Office for NFP Sector Engagement within a central Commonwealth agency should be established to drive the reform agenda.

The Government will carefully consider the detail of the report before it responds to its recommendations.

At its meeting on 7 December 2009 the Council of Australian Governments agreed that where possible, jurisdictions adopt a standard chart of accounts (excluding gaming and fundraising elements), by 1 July 2010, on all new funding agreements involving the Not for Profit Sector and that remaining jurisdictions adopt a standard chart of accounts by 1 July 2011.

The draft Corporations Amendment (Corporate Reporting Reform) Bill 2010 contains proposals to simplify reporting for the many not-for-profits that are incorporated as companies limited by guarantee, including many sports and recreation related organisations, community service organisations, education-related institutions and religious organisations.

A three tiered differential reporting framework will be introduced exempting small companies limited by guarantee from reporting and auditing requirements and providing other companies limited by guarantee with streamlined assurance requirements and simplified disclosures in the directors’ report. In addition, the process for companies to distribute the annual report to their members will be streamlined.

Companies limited by guarantee will be prohibited from paying a dividend, as the government believes the corporate structure of companies limited by guarantee means that they are not suited for conducting for-profit activities which could legitimately warrant the payment of dividends to members.

Under the first tier, companies would be exempt from preparing the financial report and the directors’ report. This tier comprises of companies limited by guarantee with annual revenue less than $250,000 which do not have deductible gift recipient status.

Under the second tier, companies would:

• prepare a financial report, which they could elect to have reviewed rather than audited;
• prepare a streamlined directors’ report, rather than a full director’s report; and
• be subject to a streamlined process for distributing the annual report to members.

The second tier comprises of the following companies limited by guarantee:

• companies with an annual revenue of less than $250,000 that are a deductible gift recipient; and
• companies with an annual revenue of $250,000 or more but less than $1 million, irrespective of whether the company is a deductible gift recipient.

Under the third tier, companies would:

• continue to prepare an audited financial report;
• prepare a streamlined directors’ report, rather than a full director’s report; and
• be subject to a streamlined process for distributing the annual report to members.

The third tier comprises of companies limited by guarantee with an annual revenue of $1 million or more, irrespective of whether the company is a deductible gift recipient.

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