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Wednesday, 31 October 2012
Page: 8566


Senator XENOPHON (South Australia) (09:35): I indicate that I will be supporting the second reading stage of this bill, the Australian Charities and Not-for-profits Commission Bill 2012, and I am generally supportive of the intent of these bills subject to concerns in ensuring that the bills are effective and that they will be fair on issues in terms of compliance. I think this is a significant move forward and rather than, as some members of the coalition have said, stifling the not-for-profit sector, I see this as having great potential to nurture the not-for-profit sector, and I think that it is reform that is long overdue.

I also think that these reforms will enhance the role of charities and the not-for-profit sector in this country. We have seen multiple past inquiries held by various organisations from parliamentary committees to the Productivity Commission and the Henry tax review, and they have recommended the establishment of a body to oversee the charity and not-for-profit sector. I am grateful for the briefing from the minister's office and his advisers in relation to this because that has been a very useful part of the exercise.

This is an issue that I came to largely by accident, in the sense that I became aware of difficulties with one part of the not-for-profit sector, if you like, or a religious organisation, the Church of Scientology, several years ago as a result of speaking out about the whole issue of tax concessions for the Church of Scientology. After speaking out about that particular organisation, my office was flooded with many, many letters of concern from individuals that described horrendous and quite terrifying experiences with the Church of Scientology, an organisation that receives, effectively, a subsidy from every taxpayer in the country by virtue of its tax-free status.

That prompted me to introduce legislation, the Tax Laws Amendment (Public Benefit Test) Bill 2010. It was the subject of an extensive inquiry by the Senate Economics Legislation Committee, an inquiry in the very best traditions of a Senate committee process in the sense of the cooperation between both coalition and government members and the way we all worked cooperatively to get the best outcome in terms of establishing the best way forward to deal with a public benefit test for not-for-profits for organisations that receive tax-free status. I would like to place on record my gratitude to the brave people who came forward who were involved in the Church of Scientology and gave evidence and made submissions that articulated their concerns very well. I am sure that that did have an impact, a considerable and beneficial impact on the deliberations of the committee.

Let us look at what the Economics Legislation Committee in a unanimous report said back in September 2010, just over two years ago. The report said, basically, that my bill should not be accepted. I obviously dissented from that, but coalition and government senators took the view that my bill in relation to setting up the specific public benefit test in our tax laws was not the way to go. But the committee unanimously, through every ALP and coalition senator on the committee, made a number of recommendations. They recommended that there ought to be the establishment of a commission which applies a public benefit test. In other words, what the government is doing now, effectively—the same sort of approach. The committee recommended that there be a working group to consider the functions and role of an Australian commission, and that they should include, but not be limited to, the following: promote public trust and confidence in the charitable sector; encourage and promote the effective use of charitable resources; develop and maintain a register of all not-for-profit organisations in Australia using a unique identifying number as the identifier; develop and maintain an accessible, searchable public interface and so on; allow for monitoring and promoting compliance legislation; and stimulate and promote research into any matter relating to charities.

In essence, the committee recommended—and I quote from this unanimous report—that incoming government:

… should follow the emerging international best practice and work with the Council of Australian Governments to amend legislation governing not-for-profit entities to include a definition and test of 'public benefit'.

The reason why we need a public benefit test is that if an organisation is going to receive a tax-free status, it is important that there be a benchmark. The public benefit test, as it has been applied in the United Kingdom and as it has been applied in other jurisdictions—but particularly in the United Kingdom, where the law and practice are best developed—is not an onerous test.

It is a test that effectively sets a benchmark of fairness. The organisation receiving the tax-free status has to show that on balance it does more good than harm. It does not mean that the organisation has to be perfect and it does not mean that the organisation does not make mistakes, but it means that overall the community, or a section of the community, benefits from the work of that organisation. And I want to pay tribute, at this stage, to the enormous good work that the not-for-profit sector does in this country in the many tens of billions of dollars that it provides in net terms as a result of the work of its volunteers and the work of these organisations each year.

The consequence of us not having a strong, viable, robust not-for-profit sector is that it would create a huge chasm that I do not believe any government, even with incredibly deep pockets, could fill. The work they do cannot just be measured in terms of its dollar value or the billions and billions of dollars of good work that is done; it is in terms of the impact that has on the social fabric of our community. The work of those volunteering organisations is something that is tremendous. I know that from his background in Western Australia with not-for-profit organisations and his tremendous contribution, Senator Back paid tribute to that, as he should have. My concern is that the recommendations of a committee of both coalition and government senators made it very clear that we do need not-for-profit commission and that we do need an organisation that is robust and transparent, and one that would actually enhance and benefit the not-for-profit sector.

I think it is important to look at the Charity Commission for England and Wales and to explain their approach, which is at page 19 of the Senate committee report. The charity commission sets out that it is really a question of how the organisation self manages those sorts of issues. It talks about how an organisation functions and the organisation's ability to demonstrate that it satisfies the public benefit requirement. There is, if you like, developed case law or precedents in the United Kingdom which set out how this test has been set out.

I think it is important to set out the reasons why we need a public benefit test, which is not in this legislation. That concerns me, because we simply do not know the extent of the benefits that are provided. I think that the Productivity Commission has estimated it at between $1 billion and $8 billion in tax benefits in this sector. I do not quibble with that, even if it is at the higher end, but I think that it is not unreasonable for there to be a measure of accountability and a measure of robustness; a measure that is not onerous on the sector but a measure that actually increases public confidence in the sector. It is important to make reference to Mr David Gonski, who has been quoted by a number of my colleagues in opposing the bill. Apparently Mr Gonski was concerned—or he is reported as saying—that the liabilities of directors of not-for-profit organisations are actually more onerous than those for for-profit companies—in other words, for public companies. That, to me, bears some examination

It is fair to say that there were some concerns expressed in the earlier drafts of this bill, but the amendments that I have seen from the government indicate that those issues have been dealt with and that the regulatory regime here is tailored to the size of the organisation. If it is a major charity such as World Vision, with a huge budget and huge work that it does here and around the world, there are obviously greater levels of control or scrutiny. I note that World Vision is one of the major charities in this country that is very much on board with this legislation. It welcomes this legislation. But in terms of the smaller not-for-profit organisations—the small community organisations with tiny budgets—the level of compliance is much lower. It just provides a benchmark and a framework. I see it as a support mechanism for those organisations to flourish.

It is interesting to note that there was concern expressed as recently as the end of July 2012. The Chief Executive Officer of Catholic Health Australia, Martin Laverty, expressed concerns in the context of this bill about the regulatory framework. That was at an inquiry by the House of Representatives Standing Committee on Economics into the exposure draft of the legislation. A lot has happened since then and I think that the government has listened to a substantial degree to some of these concerns. I note that a report in the Financial Standard online of 5 September, just under two months ago, said Mr Gonski:

… welcomed the government's response to revise the bill, saying they have listened to industry feedback and that there are now strong grounds for optimism that the ACNC—

the body that this bill sets up—

will not just regulate but also nurture giving in Australia.

I see this bill as having the ability and the potential to nurture giving in Australia rather than stifling it, and to encourage these organisations to do well and to effectively be able to contribute even further to the wellbeing of our society.

At this stage I move the second reading amendment standing in my name in which the Senate calls on the government to introduce legislation relating to definitions of public benefit within 12 months of the bill passing. I move:

At the end of the motion, add:

but the Senate calls on the Government to introduce legislation detailing the definition of 'charities' and 'charitable purposes' and including a public benefit test, within 12 months of the passage of these bills

My concern is that the legislative framework in its current form is somewhat too vague.

If you look at the work that the Senate Economics Legislation Committee has done on this in a bipartisan sense, in the best spirit of the way Senate committees work, it made very clear recommendations of the need to include a public benefit test in any not-for-profit or charity organisation's commission framework. That would allow an extra level of scrutiny. It would ensure that the tiny minority of organisations that are not doing the right thing or acting for the public benefit, on balance, are subject to appropriate scrutiny.

I note that the government will not be supporting the secondary amendment. I am fairly confident that the opposition will not be supporting it either. But I think it is important to put on the record that without these new definitions the commission will not have a strong foundation on which to act. It is important that there be some clarity as to what public benefit means in the context of how this commission works. These two issues are inextricably linked. There is no point in establishing a commission without a strong enough definition of charity to work from. I believe a delay in introducing a new definition will mean the commission is not working as effectively as it could. The government has dedicated $53.6 million over four years to establish the commission, and it has committed to introduce the new definitions, so there is a clear intent that this should succeed. So it is difficult to understand why the government feels it cannot support my amendment. I think it is also vital that the government expand the commission's powers to cover the not-for-profit sector as soon as possible. I acknowledge the government's reasons for this delay, and I think it is important that there be an appropriate transitional approach to ensure the smoothness with which this legislation operates.

I think also that it is worth mentioning that the economics committee's second recommendation from the inquiry into my bill two years ago was that the Attorney-General's Department provide a report on the operation of overseas agencies tasked with monitoring and controlling the activities of cult-like organisations, making specific reference to the MIVILUDES agency in France. I was lucky enough to meet the then head of the MIVILUDES agency here in Canberra at a conference on cults that Senator Sue Boyce, coalition senator for Queensland, played a key role in. We co-sponsored and assisted the organisers of that conference here at Parliament House last year.

I think it is important that we put that in context, because that is at the sharp end of when things go wrong when an organisation receives tax-free status. Clearly there needs to be a level of scrutiny such as there is in France for these cult-like organisations. Again, that is at the very fringes, but I think it is important in the context of any regulation of this sector that there be that level of scrutiny. The government rejected this recommendation, saying that the establishment of an agency like MIVILUDES would restrict religious freedom in Australia, which I find incomprehensible. I subscribe to the view, which I hope is held by everyone in this chamber, that religious freedom is absolutely fundamental in our society, but I see this as being not about beliefs but about behaviour, and that is what MIVILUDES in France deals with. That agency looks at the behaviour of organisations on the fringes which could be described as 'cult-like organisations' and which abuse their positions of trust. I think that it is important that we look at what the French have done in relation to this.

I look forward to the committee stages of this bill. I hope that it does go into the committee stages. I believe that these measures in this bill will lead to greater transparency and confidence in the sector, because the public will know that there will be a 'nurturing organisation', to use the words of Mr Gonski, to deal with the not-for-profit sector. Again, I think it is reasonable to ask the government what the level of regulation will be for those smaller not-for-profit organisations, but my clear understanding from the amendments and from the briefings I have had from the government is that it is a graded level of regulation depending on the size of the organisation and that this bill does actually provide a framework of support and nurturing for the not-for-profit sector. Therefore I support this bill, but I believe it needs to be clearer in definitions and we need, sooner rather than later, to have a public benefit test in any legislative framework, as has existed in the United Kingdom for many years and as has existed in other jurisdictions in a way that ensures accountability and ensures nurturing of the sector but also provides increased public confidence in the sector.