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Tuesday, 11 September 2012
Page: 10255

Mr ANDREWS (Menzies) (19:42): I rise to speak on the Australian Charities and Not-for-profits Commission Bill 2012. In doing so, I would like to outline the coalition's approach to the not-for-profit sector or civil society, as I would prefer to name it. The description 'not-for-profit' immediately connotes an economic framework; whereas 'civil society' involves a different broader notion of which the economic is just one part. The Productivity Commission itself accepted this broader role for the sector and noted the tensions that arise from the conflict between economic and other objectives.

Civil society comprises the groups of individuals which freely associate to pursue their mutual social, cultural, professional, sporting, religious or other communal interests. They are neither instruments nor agents of the state. They are the local carers groups in the towns and cities of this nation. They are the sporting clubs, the congregations, the communities that fund and build schools, the welfare agencies, the bands of people who work together to support medical research or assist the poor and the afflicted both here and overseas. They are the myriad of large and small associations that provide the organic vitality of our nation. And they have one thing in common: they are neither created nor controlled by the state. Instead they arise from the desire to associate to fulfil common objectives. They are built on mutuality and trust.

Starting with the family and extending to many and varied groups of people, they preceded the state.

It is the coalition's strong, principled belief that the political community—that is, the state, the government and its bureaucratic agencies—should be at the service of civil society. Where the state interacts with civil society, the former should facilitate the latter. A good example of this principle in action is the introduction of associations incorporation legislation in the 1970s and 1980s. This legislation enabled associations to better fulfil their mission. It allowed them to obtain the benefits of incorporation, to ease contractual arrangements, to obtain insurance and to protect individuals. It was light-touch, enabling legislation seeking not as much to regulate as to empower and to enable. It recognised that the sphere of government is separate from civil society. It acknowledged that the all-powerful state ultimately becomes Caesarean. It respected the principle of subsidiarity: that government should remain limited and that the responsibility of the elected arm of government is to ensure that the bureaucratic wing regulates only where and to the extent necessary. It was also built on the premise of trust: that individuals and the organisations they establish are motivated by the common good of their members. This is the common story of associating for the welfare of individuals concerned and their neighbours, whether in local communities or further away.

This understanding is now under assault. Under the pretext of simplifying and easing the regulatory burden on associations, the government proposes a new regulatory body, the ACNC. But what was promised and what has emerged from the bureaucracy are poles apart. The primary concern of the Labor Party's reform as originally proposed was that it should reduce administrative compliance and duplication by reporting agencies, enabling them to direct more of their limited resources to their charitable and related activities. This was reflected in the regulatory impact statement attached to the explanatory materials. Yet the bill, which was developed in a secretive process with minimum time for general comments, fails to meet this basic objective. The bill fails to provide any basis for the reporting requirements of companies limited by guarantee to be transferred to the new commission, for relevant parts of the not-for-profit reporting requirements of Commonwealth agencies to be transferred to the ACNC or for any clear commitment to obtaining the agreement of the rationalisation of government reporting requirements between the commission and the relevant state and territory authorities. I am informed, indeed, that there have been no meaningful discussions with the states and territories about these matters.

To illustrate this failing in the bill, I will take an example—namely, the case of non-government schools. In addition to the proposed ACNC reporting and accountability requirements, schools will continue to be subject to: (a) the DEEWR financial questionnaire and the reporting requirements in accordance with the Australian and state governments funding agreements and the Schools Assistance Act 2008; (b) the ACARA MySchool data collections and reporting requirements that also include sector-neutral collection of financial data; and (c) state and territory government minimum standards and reporting requirements for registered schools, including financial accountabilities—in some states, there are reviews taking place without coordination with the ACNC proposals. Indeed, there is very little indication that the Treasury bureaucrats behind the ACNC proposals have even consulted with officials at the Department of Employment, Education and Workplace Relations in any meaningful or comprehensive way. This is just one realm of activity that would be captured by the ACNC legislation and which illustrates the flaws in the proposal. What had been promised as simplification turns out to be costly and burdensome additional reporting requirements with no reduction in red tape and no reduction in duplication.

Indeed, the responsible minister now concedes that the premises upon which this legislation is being brought forward will not be met. In a recent speech, the minister, Mr Bradbury, acknowledged that the agenda is ambitious, stated that the government is now only 'working to reduce red tape', conceded that it will require 'more time for work to be completed' and agreed that the commission is not going to 'solve all the problems overnight' of a fragmented, inconsistent, uncoordinated approach to regulation. In addition, the new system, far from saving associations the financial resources that could be best directed to their community activities, will cost them more. The experience of the UK was that many associations have had to employ additional employees with regulatory, legal and financial expertise to meet the new requirements. The same would happen here. The Baptist Church, for example, in its submission on the bill, has estimated that it alone will have to spend an additional $1 million per annum of scarce resources to meet the new requirements. Multiply this sum through the many associations upon which this regulatory system is to be foisted, and the cost to the community will be enormous. The cost, I stress, is to that sector of the community which is using scarce resources mostly to deliver services to people in need. It is shameful that the government is putting in place a regulatory system which will have the effect of diverting necessary resources from services into the community to administration. I was in the UK last week, where agencies told me that they had to employ a whole new department of staff with legal, regulatory and accounting expertise just to meet the requirements of the charities commission in the UK.

I turn to some of the other deficiencies in the government's bill. Firstly, many of the regulatory requirements will be introduced by regulation—in other words, one of the most distrusted governments in Australia's history is asking the community to trust it when it cannot even meet the objectives it set for itself. Secondly, the basic religious charities proposal is very narrow and does not reflect the history or practice of religious bodies in Australia over more than a century. The very narrowing of the definition of religious activity is a dangerous precedent. The ACNC was conceived as a body to support charities and not-for-profits to enhance their contribution to society. However, its role, as outlined in the draft of the Australian Charities and Not-for-profits Commission Bill, appears to be mainly policing and enforcement. For example, there are powers to investigate any breach of the law, powers to remove a responsible person et cetera. No evidence has been put forward of either cases of noncompliance by charitable entities which could justify the seemingly heavy-handed reforms or of how the proposed reforms would address any current problems.

Furthermore, the proposed commission has a range of powers to interfere in and remove responsible office bearers, including ministers of parishes and congregations, in a manner which is totally unprecedented in this country. That brings me to the central objection to the government's approach.

The bill gives the commission the power to deregister an organisation if it is conducting its affairs in a way that may cause harm to or jeopardise the public trust and confidence in the not-for-profit sector. The phrase 'public trust and confidence' remains unclear, which creates much uncertainty and the possibility that the meaning of the expression will need to be decided through expensive litigation. This has been the experience in the UK, where, for example, the Charity Commission proposed that independent non-government schools would only qualify for charitable status if they offered bursaries to poor pupils. After expensive litigation the courts reversed that position, restating the age-old view that the provision of education itself was a charitable activity. I invite those who content themselves that common sense finally prevailed in the UK to consider the recent remarks by the UK shadow education secretary, Stephen Twigg, that a future British Labour government could legislate to remove the charitable status of schools not serving the community, whatever that expression may come to mean.

What this demonstrates, I contend, is that once the tentacles of government are allowed to interfere in novel and unprecedented ways with the activities of charities and associations there is no limit to the possible interference. Worse, these and other provisions treat the civil sector with a state paternalism. If entities or their directors break the law, they can be prosecuted. If existing laws need strengthening, let the government make the case for doing so, replete with examples of the breaches that need to be rectified.

Some weeks ago, in a major policy speech I delivered on civil society, I invited the government to outline the mischief that this bill was intended to address. Neither before that speech nor in the weeks since has the mischief that this bill assumes been made out. It is in fact a power grab by government which will extend extraordinary powers to bureaucrats to reach into the affairs of organisations, ranging from local congregations to international charities.

Under the provisions of the bill, individuals ranging from a local parish minister through to the archbishop of a diocese could be suspended and removed by the commission, and every entity will be required to meet a new complex set of reporting requirements that will cost charitable organisations, including local congregations, thousands of dollars. Officers of the commission will have powers to inspect and seize records. As the Associations Forum stated, 'In the work that the Associations Forum does with associations and charities, we do not see that there is any major problem in governance systems.'

Let me give a flavour of the comments that have been made in various submissions to the inquiries into this process, which indicate that this is not just what I am saying; it is what is being said broadly across the charitable and not-for-profit sector. Add-Ministry stated: '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.' The Anglican Diocese of Sydney said:

It is likely that we will need to employ someone on a full-time basis to deal with the compliance issues that this legislation is likely to raise for the Diocese of Sydney. I am sure we will not be alone in this regard.

That is indeed too true. Australian Baptist Ministries said:

The reporting requirements for medium sized entities are too onerous. In our view the increase in compliance obligation will make it more difficult to fill volunteer roles within local congregations as well as requiring more time to be spent on compliance matters and therefore less time on matters that will provide a benefit to the community.

Australian Catholic Bishops Conference stated:

The lengthy list of powers proposed in the ACNC Bill focuses on matters which appear more appropriate for a criminal investigation authority rather than a body which is intended to promote and educate.

They further state that the extent of information required to be disclosed to the ACN register is unnecessary and burdensome in terms of costs and resources.

The Australian Conservation Foundation stated:

The ACF is concerned that rather than remove duplication, the ACNC Bills will duplicate reporting obligations.

The Australian Council for International Development said:

The present drafting of the ACNC Draft Bill does not reassure ACFID or its members that it will actually reduce red tape, for three reasons:

(a) The drafting indicates that there is yet to be agreement with the States;

(b) It does not deliver a “one‐stop‐shop” for the establishment of a charity or

reporting by a charity;

The Australian Council of Social Service—this again illustrates the breadth of the objections and complaints about this bill—stated:

… the Bill does not yet contain any provisions that make it explicit that the reduction of unnecessary compliance and regulatory burdens is a core object of the Bill, nor does it identify these kinds of reforms as policy directions or drivers of the ACNC’s purpose or activities. There must be a direct link between the reduction of red tape and the objectives and functions of the ACNC.

The Australian Institute of Company Directors states:

We have had member feedback … all saying basically the same thing as we have said. I will quote from one which I think is very pertinent. It comes from an aged-care CEO:

Every hour we pay for compliance, we lose about 1½ hours of one-to-one support for our ageing residents.

… Another one from an Indigenous corporation states:

This legislation compounds the barriers that discourage pro bono directors offering their services to the not-for-profit sector.

I turn to someone who is a favourite of the government at the moment, a life fellow of the Institute of Company Directors, David Gonski, who said:

It concerns me massively that we might 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.

That is Mr Gonski, revered in certain circles by this government. When he gives direct advice which is consistent with everything that has been said by all of these other agencies, ranging from the major churches in this country through to the Conservation Foundation, it is obviously ignored.

The Australian Institute of Public Directors stated:

The Bill lacks detail about the proposed interaction between the ACNC, the Corporations Act and other legislation, and about governance and external conduct standards, which we consider make it impossible to provide meaningful comment on the Bill as a whole.

Key parts of the Bill are confusing and overly complex and need to be redrafted.

The Bill in its current form will represent a major retrograde step by imposing substantial and unwarranted compliance costs on charities.

Carers Australia stated that they were concerned about the:

Apparent lack of agreement by the states and territories to give effect to the reduction in red tape.

Further, they state:

… it is quite clear that due to lack of Constitutional coverage the enforcement powers and governance standard regulations can only be used against federally regulated entities or where the organisation is subject to an ‘external conduct standard’. This will clearly lead to a two-tiered approach to enforcement with some registered entities potentially subject to the enforcement and governance requirements, whilst others operating nearby with exactly the same situation will not.

Catholic Health Australia said:

the effect of the Bills would be to add additional regulation to the operation of most not-for-profit organisations.

The CEO, Martin Laverty said:

The principal problem with the bill is that right now I cannot say to any of the chairs or the boards of directors of our organisations that from the time of the enacting of this bill, and indeed in the years ahead as more of the powers of commissions come to be, this is the framework from within which you will govern your organisations.

…   …   …

I ask those who are promoting the bill, and I am genuinely seeking to understand: what is the problem with the Corporations Act and the case law that underpins it that means that, for not-for-profit organisations, we need a new set of laws that oversee their governance and, indeed, determine whether or not a not-for-profit organisation can be registered?

He went on to say:

Our principal concern is that we have not yet seen what problem actually exists that requires the establishment of a new body of law—a new principle at law—to oversee public trust and confidence. It is our view that the Corporations Act currently provides like capacity for government to regulate those circumstances—few and far between as they are—that might give rise to the potential for such a power to have been created.

Catholic Social Services said:

The [role of the Commissioner] falls substantially short of the series of ministerial statements about the reform agenda from 2009 until early 2011. The Exposure Draft does not require either the ACNC, or any other Commonwealth agency, to take action to establish such a 'robust and streamlined regulatory framework' or to be evaluated for making such progress. The specific 'Problem' identified in the EM is left unaddressed—the problem of red-tape.

The Chamber of Commerce and Industry of Western Australia said:

CCI does not support any move for the ACNC to be the 'shop front' for the NFP sector.

Chartered Secretaries Australia said that their main concern with the exposure drafts is the duplication of reporting that will result if the bills are passed in their current form. I could go on and on and on about people and reputable organisations in this country serving the community who make these sorts of objections. Community Employers WA said:

A key objective is the reduction of red tape and duplication with regards to compliance, accountability and transparency. It has not to date, and remains, unclear that the Bill will achieve this.

The Conservation Council of South Australia stated:

[Whilst there is] a national 'one-stop-shop' and a 'report-once, use-often' process, there remains a major problem in that at this stage state regulation will continue to apply.

The Financial Services Council said:

The Bill is not appropriately targeted to the currently unregulated NFP sector and instead extends the cost of compliance to other entities that are not supposed to be the focus of this reform.

Eve Brown, the senior policy manager of trustees, said:

The bill therefore creates a new layer of regulation that applies to trustee companies and public trustees as trustees of registered entities. This is unnecessary and incompatible with current federal, state and territory regulatory regimes.

The Housing Industry Association said that they consider the:

… regulation of charities should be on a completely separate basis from the regulation of other NFPs. HIA also considers that NFPs which are companies should continue to be regulated by ASIC.

The Independent School Council of Australia stated:

The regulatory burden will be increases on individual non-government schools creating costly and confusing duplicative governance and reporting situations.

Bill Daniels, the executive director said:

We spend a lot of our lives meeting with the Commonwealth and state governments through various national forums. I have been with this organisation for more than a decade. I have seen no reduction whatsoever in reporting requirements. There has been no discussion whatsoever with the states or, indeed, with the Commonwealth department that I am aware of that has involved the independent sector on any reduction in reporting requirements. The only discussion that I have had with the Commonwealth apart from the ACNC briefings we had received is a less-than-perfect understanding of what is intended by the commission. So there has been no discussion whatsoever of any reduction or any proposal to reduce reporting.

The Executive Director of the Association of Independent Schools of New South Wales, Geoff Newcombe, said:

I have been in this game over 40 years. This will decimate school boards. There is enough concern out there now.

Again, I can go on and on and on. The Institute of Chartered Accountants in Australia stated:

The initial Bill had two stated aims, one of which was to 'minimise regulatory duplication and simplify such entities' interactions with governments'. The initial Bill did not fulfil such an aim and we notice that this aim is missing from the latest draft of the legislation.

Kerry Hicks, the institute's head of reporting said:

The biggest issue with the legislation is the duplication that it will create. Duplication and red tape reduction was the major theme of the reforms, so we do not feel the legislation has adequately addressed it.

Makinson & d'Apice Lawyers said:

The ACNC Bill will add to the burden of the vast majority of charities who will now have to provide an Information Statement and in many cases a Financial Report each year. In most cases, there will be a need for an auditor or other professional person to review or audit financial statements. This will not reduce red tape but rather add to it.

The sector can have no confidence that this [charity passport] will be achieved based on the contents of the ACNC Bill, the requirement for the sector specific reporting in various areas and the failure at this stage to get co-operation from States and Territories to adopt the standard reporting and the charity passport concept.

Mission Australia said:

[The Bill] is not sufficiently well balanced by a commitment to enable the not-for-profit sector to reduce duplication of reporting and to provide public confidence in the sector.

The National Roundtable of Nonprofit Organisations said:

The Bill does not distinguish between charitable funds and charitable institutions.

Registration [of a charity] will not be voluntary. It is unlikely that existing charities that currently enjoy tax concessions will be in a position financially to forego these benefits. A charity which is structured as a company and is currently income tax exempt would be subject to income tax of 30% if it opted-out.

The Not-for-Profit Sector Reform Council said:

The vast majority of directors in the NFP sector are acting in a voluntary capacity. We are concerned that this not reflect in the draft Bill. Any increase in liability for Directors could result in individuals refraining from taking on these roles.

Research Australia said:

Of particular concern for not for profit entities was the risk that the creation of the ACNC and its registration and reporting requirements would simply impose an additional burden and layer of regulation on the not for profit sector.

RSM Bird Cameron chartered accountants said:

We have particular concern about the possibility of duplication of reporting requirements for registered entities who currently operate as associations under state-based legislation.

The St Vincent de Paul Society said:

Any regulatory regime cannot adopt a 'one size fits' all approach. Furthermore, the development of any regulations ought to be done in consultation with the not-for-profit sector.

…   …   …

The Bill currently contains no requirement for the ACNC to inform or hear an organisation before it makes an adverse decision against it.

Surf Life Saving New South Wales said:

Reducing red tape by reducing duplication of reporting requirements and assisting the efficiencies of the sector, however this will not occur without the involvement of the states and territories to align reporting requirements with the ACNC reporting framework.

The Salvation Army of Australia said:

The Bills suffer from a lack of reinforcement of this purported outcome and does not contain a specific object that addresses this reduction in red tape.

The Uniting Church in Australia said:

It is important to recognise that the introduction of any new reporting obligation on congregations, no matter how minor, will be another layer of legislative obligation and reporting for local members who are generally neither skilled nor trained for this burden.

UnitingCare Australia said:

Many of the implied 'red-tape' reduction benefits of a single national NFP regulator are predicated on State/Territory Government cooperation.

World Vision Australia said:

The constitutional powers on which the Commonwealth relies for the establishment of the ACNC highlight significant gaps in the Commonwealth's power to regulate NFPs. These gaps mean that the ACNC will or may lack the power to effectively regulate all registered entities.

YWCA Australia said:

The most important goal of national regulation should be to remove the current duplication while streamlining requirements to provide consistency and minimise compliance costs.

If I had an hour to speak, rather than half an hour, I could continue with the litany of criticism and complaint about this bill, about the process that the government has engaged in to bring it to this point and about the extraordinary displeasure of the sector. The reality is that this bill is an extraordinary reach by government into the affairs of civil society. It assumes that people who give of their time and efforts, most often in a voluntary capacity, are untrustworthy and tainted.

Furthermore, it is being introduced at a time when international practice is going in the other direction. New Zealand is closing its commission and as reported in Civil Society the head of NFP activities at the Australian Taxation Office has observed that efficiency initiatives in Scotland, Northern Ireland, Singapore and elsewhere also reflect this trend. Why is the Labor government proceeding with a flawed proposal that is being reversed in other jurisdictions?

This is the same government which, when faced with egregious examples of corruption in another sector of society—namely, the union movement—sits on its hands for years, allows investigations to proceed at a snail's pace and does not lift a finger to deploy against the questionable activities of some union officials the kind of powers it proposes for associations. As we observed recently, union officials can blithely threaten to shift the expenditure of hundreds of thousands of dollars of their members' hard earned money from the support of one political leader to another without so much as a raised eyebrow from the Labor government, yet hard-working, decent, community minded individuals who are going about their critical work for the good of our society are threatened with this leviathan proposal. That is why we have announced, for example, that penalties under Fair Work Australia legislation will be changed by the coalition government to reflect the same provisions that apply to directors of corporations.

Let me summarise the coalition's approach. We reject the approach taken with this legislation. We reject it not because of the philosophical basis that I outlined at the outset but because overwhelmingly the sector rejects it as well. The sector sees it as a heavy-handed, unwarranted interference in the activities of civil society in Australia. In government, we would have a small body that would act as an educative and training body to help lift standards without the overbearing regulatory and enforcement powers that are being proposed in this bill. For those reasons, we oppose this legislation.

I give notice that if entrusted with government in the future we would not only continue to oppose this bill, we would repeal these provisions and would take it back to a sensible provision that respects the demarcation between the institutions of civil society, which the government should serve rather than seek to have power over, in the way in which it does. There are two approaches to these matters which can be summed up in two quotes. One approach is summed up in the opening words of the maiden speech of the former Prime Minister Mr Rudd, when he said:

Politics is about power. It is about the power of the state. It is about the power of the state as applied to individuals, the society in which they live and the economy in which they work.

This legislation is a manifestation of that view, that the state should have power over individuals and organisations, which rightly it should not.

The other approach—the coalition's approach—is about empowering people, not exercising power over them. It is the approach that the Leader of the Opposition utilised recently when he referred to as Abraham Lincoln's famous description of democracy as being 'of the people, by the people and for the people'.

In conclusion, the political community should be of service to the associations of civil society. That is what the coalition will endeavour to achieve in government. That is why we oppose this legislation. That is why, if we get the chance, we shall repeal it.

The DEPUTY SPEAKER ( Ms Grierson ): Before I give the call to the member for Blair, I need to confirm that it is the wish of the House to debate this order of the day concurrently with the Australian Charities and Not-for-profits Commission (Consequential and Transitional) Bill 2012. There being no objection, the chair will continue to allow that course to be followed. The question is that this bill be now read a second time.