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Tuesday, 18 September 2012
Page: 11043


Mr RUDDOCK (Berowra) (17:35): I wanted to speak on this matter because I am very concerned personally at what I think will be the outcome of the proposal to establish a new statutory office, the Charities and Not-for-profits Commission, which will be the Commonwealth regulator for the non-profit sector. My concern is that of a person who will have been in public life for some 39 years next weekend and as somebody who has been involved with voluntary organisations. I am somebody who has seen voluntary organisations struggle to pursue their fundraising activities and their administration. Often the amounts of money are quite modest, and there is never enough money raised to employ professional staff. My principal concern is that these people, who are going to be involved in running these voluntary organisations that are so much a part of our communities, are going to be concerned about whether they can leave themselves and their families exposed to the risks that this legislation will place upon them.

I cannot understand for the life of me why we would want to put upon those volunteers that level of accountability that is going to, in many cases, lead to the closure of very important community based organisations. So it is important to look at what is being proposed because the legislation, as I understand it, which was designed to initially deal with the problems that arose as a result of the High Court decision in relation to the sorts of bodies the government could fund and support led to the government seeking to put in place special conditions for income-exempt entities to: provide they must be operated principally in Australia and for the benefit of the Australian community; standardise the other special conditions that entities must meet to be income tax exempt such as complying with substantive requirements in their governing rules; and, being not-for-profit entities with some exceptions, standardise the term 'not-for-profit' and replace it with a defined and, might I say, undefined use of 'not-for-profit' through the tax laws to codify the Australian special conditions for deductible gift recipients.

This range of measures, which the government announced in the 2011-12 budget, including the creation of the Australian Not-for-profit Commission, which was originally to come into operation on 12 July, is a part of a total regime involving the Commonwealth in administering some 600,000 entities in the not-for-profit sector. It has been estimated that about 400,000 may access Commonwealth tax concessions through endorsement processes or by self-assessment at the moment.

ASIC has a smaller role in the regulation of the not-for-profit sector at the Commonwealth level. It is currently responsible for regulating approximately 11,000 entities incorporated as companies limited by guarantee. ASIC also regulates the professional trustee companies as well some charities which are incorporated into other types of companies under the Corporations Act. The state and territories regulate incorporated associations and charitable trusts through public and private ancillary funds that are regulated at a Commonwealth level. The states undertake the rest as well as the fundraising activities and imposing some reporting and governance requirements on entities that receive state and territory funding.

Not-for-profit agencies have raised this very issue that I have spoken about—that is, the issue of reporting requirements that are inconsistent, increasingly and excessively complex and burdensome across the sector, requiring these agencies to direct resources away from front-line services and towards complying with the needs of government. The sector is concerned that there is also currently no single reference point for the non-profit sector to access information and education and that is why the coalition has supported a small commission to engage in innovation and advocacy.

But that does not mean you need to have this very significant regulatory approach. What is happening is Labor is reversing the arrangements that are presently in place. It is saying we need a watchdog to promote transparency and trust, that the community trust sector is presumably doing something wrong and that community based organisations are presumably doing something wrong. But, for my part, there has been no identification by the government of the mischief that it thinks warrants the suite of powers that will be granted to this new commissioner. While the government has claimed that it will consult further on the content requirements, it is quite clear that these will involve very considerable additional requirements of what are, in the main, the sort of charitable organisations that all of us are familiar with in our electorates and constituencies.

The bill does provide that this commissioner will have a range of enforcement powers. These powers have been modelled, as I understand it, on those given to other regulators such as ASIC, the Australian Prudential Regulatory Authority and the Australian Competition and Consumer Commission. The bills provide that this new body will have authority to issue warning motions and notices, to issue directions, to enter into enforceable undertakings, to apply to courts for injunctions, to suspend and remove responsible entities, and to appoint acting responsible entities. This is in relation to the local P&C. This is in relation to the group of mothers that raise money for Save the Children.

I look at and think about the nature of the voluntary sector in my electorate and the obligations that are being imposed upon them and I ask myself why. It is remarkable that we have heard a great deal about what has been happening in the trade union movement. Trade unions that handle very much larger sums of money, pay people very large salaries—sometimes much more than members of parliament, as I understand it—are not hit with these sorts of regulatory arrangements. If they were—

Mr Stephen Jones: Their compliance is higher.

Mr RUDDOCK: No, their compliance is not. You have only seen it through the inquiries that have been undertaken in the malfeasance that has been occurring. Yet we hear no allegations of the sort that we have heard in relation to the trade union movement, in relation to the voluntary sector. This is a very considerable concern to me. The sorts of entities we are speaking about are charitable institutions, religious bodies, scientific institutions, public educational institutions, charitable funds, charitable trusts, clubs established for community service purposes, employer and employee associations, public hospitals, clubs established for sports generally and clubs established for musical purposes. The regulations that can be proposed are particularly broad.

It is not as if the government has not been warned about this matter. The stakeholders have been quite vociferous in making the points of concern that they have. What we heard from PilchConnect is that this imposes a very high burden upon cross-border philanthropy. World Vision has said that the measures are too onerous and unclear. World Vision also said that the government should remove these provisions or, in the alternative, that they should be more tightly drafted to identify the mischief that the government is concerned about or to allow reliance on a statement that funds will not be applied offshore. There were concerns expressed as to effect by some legal advisers. It has been argued that donations of funds to another organisation should not jeopardise the tax exempt status of particular bodies, particularly when they have a wider role. There have been calls to clarify that misuse relates only to the extent of misuse and for the financial year in which it occurred. Stakeholders have sought clarification on the time limit for tracing and clarification about having to guarantee that funds are spent. The Uniting Church has expressed concern about the prescribed conditions for the power to disregard the use of grants. These matters are of very considerable concern.

The regulatory burden has been raised with key stakeholders by the opposition. These charities and not-for-profit organisations, which are struggling to meet the demands of providing the services that they now provide, are concerned about these questions. We also have the potential for several layers of authority unless the states and territories agree to hand over their powers to the Commonwealth. I am one of those who has argued very strongly over time that there should be greater harmonisation of Commonwealth and state laws, but it appears that these matters have not been discussed or worked through with the states and territories at this point in time. It is the Commonwealth going its own way and saying to the states, 'It's our way or no way,' as it seems to me.

The stakeholders have expressed concerns that the powers and penalties contained in these bills are heavy-handed and that they will deter members of the public from taking up voluntary roles. It is not just me that has identified that factor. Sector agencies have raised issues in relation to reporting requirements and governance standards and they see enforcement powers that are inconsistent with and overlap the common law of trusts as well as state and territory legislation. This is going to increasingly become an issue in which there will be the potential for considerable resort to legal advice to find out how these new arrangements are going to operate, with the broader community that is involved in charitable efforts being faced with state agencies giving them advice on the one hand, as against the Commonwealth charitable body dealing with them on the other.

What has been remarkable to me has been that this government relies very heavily upon the advice from David Gonski in relation to the education area and yet he, as the Australian Institute of Company Directors chief, said that Australia may be:

… the first country in the world to make being on a not-for-profit as a director more onerous than being on a for-profit.

I think that is a particular concern. I think the government, rather than pressing on with this legislation at this time, for the purpose of, it seems to me, filling the parliamentary program, ought to withdraw the measures. It ought to constrain the extent to which this covers voluntary organisations. I think the government has made a very wrong call about the way in which voluntary organisations work in Australia by imposing burdensome requirements of this sort upon them.

I have been involved, as have many people in this chamber, with political organisations that are faced with regulatory requirements in relation to our own fundraising activities. We rely upon volunteers to be the treasurers of our organisations and we have imposed very significant obligations upon them. We ought to know, from the difficulties we have faced in our own organisations in getting people prepared to the treasurers, what this legislation will do to voluntary organisations in our community when they are faced with the same difficulties in finding people who are prepared to take up those responsibilities when they are so much more onerous.