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Tuesday, 18 September 2012
Page: 11049


Mr IRONS (Swan) (18:06): I rise to contribute to this debate on the Australian Charities and Not-for-profits Commission Bill 2012 and the Australian Charities and Not-for-profits Commission (Consequential and Transitional) Bill 2012. At the outset, I want to say that, in this place, we should be doing all that we can to facilitate the work of charities. Charities perform a role that is essential yet hard to quantify and sometimes ignored by governments. The health of our charities and not-for-profits reflects on the health of our society as a whole, and we must be mindful that our charities can withstand only so much regulation and intervention from governments.

Charities have traditionally been the domain of state government law, a point which I will discuss in more detail later. One of the state governments across Australia to recognise not only the importance of charities but the potential they have to deliver social benefits for the state has been the Barnett government in Western Australia.

In its 2011-12 budget, Mr Barnett won widespread plaudits from not-for-profit groups for the $1 billion social services package which included an innovative $604 million for sustainable funding and contracting with the not-for-profit sector. I was particularly pleased to see a million dollars in that budget for Youth Focus, a youth suicide prevention charity based in my electorate of Swan. I see the Special Minister of State here and I know he is a strong supporter of Youth Focus as well. He would understand that the last thing an organisation like Youth Focus would want is more red tape and more regulatory burden. We can achieve much by financially supporting these dedicated groups on the ground and we see this with Youth Focus. What the Barnett government has shown us is that supporting charities or civil society is not about hard regulatory measures. It is about facilitation, it is about enabling and it is about creating an environment in which charities and volunteers can do what they do best.

This idea of easing the regulatory burden was cited by the government as the reason for the legislation being debated by the House today. That is why, when this legislation was first announced by the then minister, Bill Shorten, the charities and not-for-profits were pleased. In fact they were positively enamoured. However, the legislation we are debating today, several years after that announcement, has turned out very differently from what was initially envisaged. It has morphed into a piece of legislation which would deliver the opposite of the minister's initial aim.

These bills would increase the regulatory burden and have, naturally, alarmed charities and not-for-profits across the country. This is evidenced by the many substantial submissions by the not-for-profits to the inquiry of the House of Representatives Standing Committee on Economics. Ultimately, for the charities, the ramifications of the extra regulatory burdens are significant. As Dr Matthew Turnour said:

Every time you introduce more regulation, you discourage more volunteers. It really can be very hard to get people to volunteer when they know that there is potentially personal liability attached.

It will of course be the small charities which will struggle the most, much as it has been small businesses which have suffered most from Labor's economic policies.

As I said, voluntary organisations can only withstand so much regulation. For the local resident who wants to start a charity, adding even more regulation might create just too much of an impediment. It is essentially for this broad reason that I oppose these bills and will cast my vote accordingly when the opportunity arises. By imposing a new federal layer of bureaucracy, these bills will make it more difficult, not easier, for charities to go about their work. That new layer of bureaucracy is being imposed despite the fact that there is no agreement with the states on harmonisation.

At stake is the future of our finely balanced Australian civil society. The volunteer wetlands groups operating out of my electorate, the ladies that run the Langford Senior Citizens Centre, the good citizens manning Vinnies in East Victoria Park—they need us to strike the right balance and this bill does not. There are many other not-for-profits in my electorate of Swan which will be affected by this legislation—the Esther Foundation; SIDS and Kids, of which I am the patron in Western Australia; Southcare; NGALA; and many early learning centres and schools. As a result of the deficiencies in this legislation, the shadow minister has said that, if the Labor government continues with this bill and forces it through the House and Senate, an elected coalition government would repeal its provisions and return us to a sensible framework which respects the demarcation between the institutions of civil society—institutions the government should serve rather than seek to have power over.

One of the main unresolved issues of this bill is the question of federal and state responsibilities. The regulation of charities, as I said before, is traditionally the domain of the states. Therefore, unless the states and territories agree to hand over their powers to the Commonwealth regulator and harmonise their laws, these bills are going to add an additional layer of red tape for the sector to deal with. Yet we understand that the states have not agreed to hand over to the Commonwealth any of their powers with respect to charities and not-for-profits, such as their powers with respect to incorporated associations. Moreover, based on the coalition's discussions with relevant state ministers, we do not believe it is likely that they are going to submit to handing over their powers in this space to the Commonwealth in the foreseeable future. As Susan Pascoe, head of the implementation task force for the Australian Charities and Not-for-profits Commission, said:

We are only going to achieve full red-tape reduction with the involvement of the states and territories.

I recommend that the government goes back to the drawing board and consults with the states on this legislation.

The two Australian Charities and Not-for-profits Commission bills provide for the establishment of a new regulator, to be called the Australian Charities and Not-for-profits Commission. They also provide for the role of the ACNC Commissioner. This change to the current regulatory situation is in fact a reversal. Presently, the ATO and ASIC oversee and make determinations on income tax exemption, deductible gift recipient status, refundable franking credits, fringe benefits tax and goods and services tax concessions. By determining whether charities and not-for-profits are eligible for these concessions, the ATO is at present the default regulator for determining charitable status. This new regulator will have additional powers, including oversight of registration and the power to enforce reporting, record-keeping and duty-to-notify requirements. With these powers, the commission will have the authority to issue warning notices, issue directions, enter into enforceable undertakings, apply to the courts for injunctions, suspend or remove responsible entities and appoint acting responsible entities.

It is also worth noting as background that ASIC has a smaller role in the regulation of the sector at the Commonwealth level and is currently responsible for regulating 11,000 not-for-profit entities incorporated as companies limited by guarantee under the Corporations Act 2001. ASIC also regulates professional trustee companies as well as some charities which are incorporated as other types of companies under the Corporations Act 2001. ASIC also has responsibility for the registration of incorporated associations and cooperatives wishing to operate outside its jurisdiction.

The bills would grant a number of powers to the proposed ACNC and its commissioner. In the area of registration, the bills provide the ACNC Commissioner with the power to register not-for-profit entities under their type and subtype. The commissioner will also be responsible for maintaining a register keeping specified information about each registered and formerly registered entity. The bills set the framework for a set of governance standards and external conduct standards to cover such things as the conduct of a registered entity's governing rules, the conduct of the registered entity and the processes that the registered entity must have in place.

Enclosed within the Australian charities and not-for-profits commission bills is a fair bit of change and large doses of regulation. What does that mean for the charities? Charities and not-for-profit organisations will have a number of new requirements to fulfil. To comply with the registration requirements, charities must apply directly to the ACNC for registration, operate consistently within the definition of 'charity' specified in Australian law, or the requirements of any other type or subtype, and comply with prescribed registration conditions and requirements. All registered entities will be required to provide an annual information statement, with the first needing to be lodged with the ACNC by 31 December 2013. The proposed legislation will require registered entities to notify the ACNC commissioner of certain matters.

Stakeholders have expressed concerns that the powers and penalties contained within the bill are so heavy-handed that they might deter members of the public from taking up voluntary roles within the sector. These are burdensome requirements to say the least and, as I am sure members can imagine, have prompted great concern from charities across the nation. As Add-Ministry said:

what we now have still appears to be a document that is designed to tightly control the Charity Sector with a plethora of regulatory obligations.

…   …   …

… we have a legal document full of red tape and inflexible regulation to show us what we must do, or risk being penalised.

ACOSS said that it is 'regrettable that cabinet determined to locate the ACNC within the framework of the law and the ATO, against the sector's advice.' From a legal perspective, John Colvin of the Australian Institute of Company Directors said:

… why should we have a system in Australia, which would make us a laughing-stock around the world, of having liabilities for volunteers greater than those for for-profits?

In WA the Chamber of Commerce and Industry went further, stating: 'CCI does not support any move for the ACNC to be the "shop front" for the NFP sector.' And, from the education sector, Reverend Brian Lucas of the Australian Catholic Bishops Conference said:

Schools constantly complain about the burden of detailed regulation. Just as it was said, for every 1½ hours of compliance you lose an hour of doing good work …

I could go on, as it seems difficult to find a single charitable body that approves of this proposal—again, it seems that the government has not listened. Consultation is easy, but acting on the results of the consultation often is not. I see time and time again, in my role as the member for Swan, government bodies put out a document for consultation when they really have already made their minds up and are just looking for someone to rubber-stamp the project—as is the case with this legislation. It is tokenism at best.

I know that, in the case of these bills, key stakeholders have described the consultation process for the ACNC as having been excessively secretive and unnecessarily rushed, with not-for-profit agencies in some cases being provided with as little as nine working days to make submissions on important aspects of the exposure draft. Nine days is not long enough for a consultation on such a substantial piece of legislation. It makes one wonder whether the government was really interested in what people had to say. Still, in that short space of time dozens of submissions were received, as can be seen by many of the quotes read into Hansard from members on this side of the House. We heard the member for Wannon list at length the corporations and not-for-profit and charity organisations that oppose this legislation. It is clear from the legislation we are discussing today that the government has not listened to the charities, which is a great shame. One of the areas we in my electorate office take pride in is the number of surveys we run on local issues to consult with constituents. Ultimately, we listen to what they have to say and do our best to help our community.

I will mention briefly another relevant bill, the Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012. This bill stems from the Commissioner of Taxation's unsuccessful 2008 High Court case Commissioner of Taxation of the Commonwealth of Australia v Word Investments Ltd and is in essence an attempt to change the 'in Australia' requirement. Briefly, Word Investments, a tax-exempt charitable institution, carried on a funeral business and also received donations. It paid its profits to another organisation, also an income-tax-exempt charity, which used its funds in overseas missionary activity. Under this bill, the 'in Australia' test will require tax-exempt entities to operate principally in Australia and pursue their purposes principally in Australia. The controversial amendments relate to situations where a tax-exempt institution provides money, property or benefits to another entity that is not itself an exempt entity, a so-called 'conduit not-for-profit entity'. In this situation, if the entity uses the money, property or benefits outside Australia, the exempt entity must take that into account in determining whether it is operating principally in Australia.

As one can imagine, charities have raised concerns about these provisions. World Vision, for example, has said that they are 'too onerous and unclear' and 'the provisions should be more tightly drafted'. I can see potential problems for a range of charities. With their links to the UK and the work that they do for the lost innocents, I can imagine that Care Leavers Australia Network might potentially run into some difficulties with this provision.

To conclude, there is significant concern here about the regulatory burden that will be faced by charities across the country should these bills go through. I think the government has recognised some of the problems in the legislation, and there is talk of some 15 amendments being drafted at the moment. The time to debate these amendments will no doubt come, so there is still some degree of uncertainty with respect to this legislation. I note, at the end, that the New Zealand government is currently in the process of undoing its equivalent legislation in that country.