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Monday, 29 October 2012
Page: 8303


Senator CORMANN (Western Australia) (21:19): Whenever this government introduce a piece of legislation, it is generally because they want to impose a new tax or they want to impose more red tape on the Australian community. This bill is all about imposing more red tape and on this occasion on our charities and not-for-profit sector. This bill provides for the establishment of a new statutory office, the Australian Charities and Not-for-profits Commission, which will be the new Commonwealth-level regulator for the not-for-profit sector. This bill supposedly sets up more bureaucracy at the federal level on the promise that eventually, perhaps one day, it will lead to less bureaucracy at the state level, except that none of the states have agreed to it. So we will have yet another level of government, another level of additional red tape, which will make it harder for one of the very important sectors in our community to do its business on a promise that eventually, one day, perhaps in the never-never, it might lead to less red tape.

This Australian Charities and Not-for-profits Commission is proposed to have far-reaching powers that will elevate it to one of the most powerful Commonwealth regulators. The coalition opposes this proposed great big new bureaucracy for charities and not-for-profits because it treats the sector as untrustworthy and the people involved in it as tainted. It introduces a new regime of red tape for the not-for-profit sector and it will hinder the activities of charities and not-for-profits, and it will discourage involvement from the community in our charities and not-for-profits.

The states generally oppose the creation of this new regulator, except for the Labor state government in South Australia. The states have not agreed to handover their powers with respect to charities and not-for-profits. The states' powers in this area are quite extensive, as I am sure you would be well aware, Madam Acting Deputy President Moore. The states have not agreed to handover to the Commonwealth their powers with respect to charities and not-for-profits—such as powers with respect to incorporated associations, fundraising and reporting. If this legislation passes the Senate, the new regulator will be an additional layer of red tape and will not achieve its primary objective of reducing regulation. This government is quite extraordinary: it can say that something does one thing when quite manifestly it does the exact opposite. The government is saying that the objective is to lead eventually to less red tape, but, 'Trust us, we have to go through this phase of increased red tape in order to get to this ultimate phase of less red tape.'

In our judgement, Labor's approach would hurt the sector, hindering the activities of charities and not-for-profits and discouraging involvement in this very important part of our community. Labor is creating a roadblock for the operation of charities and the not-for-profit sector and for people's involvement in community organisations. Labor's approach reverses the cornerstone assumption of trust, essentially creating legislation that assumes people involved in those charities and not-for-profit organisations who volunteer are untrustworthy and tainted. The Australian Charities and Not-for-profits Commission would discourage involvement in the voluntary sector. In our judgement, we should trust the voluntary sector. We should trust those people who get themselves involved in charities and not-for-profit organisations.

The coalition's plan will help support volunteers who get themselves involved in those many community organisations across Australia that do such a good job. We believe the government should get out of the way of those organisations and let them do what they do best: help people and help the community. We support a small commission to focus on innovation, education and advocacy, but our approach is to cut red tape. An example of our approach, of course, is the proposal in the family services area, where contracting reforms and cutting red tape out of contracting for services will make it easier for agencies that get involved in this area.

The sector, incidentally, does not support the government's proposed creation of a big new regulator for charities and not-for-profits. The Uniting Church in Australia, as part of our inquiry into this legislation, 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.

From the same organisation:

… we remain yet to be convinced that the proposed legislation will work for the sector and its donors, eliminate the red-tape overload, and be adequately reflect the sector’s diversity in terms of compliance requirements.

From a totally different corner of the community organisations sector, Surf Lifesaving 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.

That, of course, is not happening as part of this legislation.

The Australian Baptist Ministries have submitted:

… 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,

There is also an assumption of state uniformity and co-operation in various parts of the proposed legislation. If this does not eventuate the result will be an additional compliance burden for charities and not-for-profit organisations, particularly those that operate in multiple states,

We of course know from the states that that is exactly what will happen. There is not going to be this cooperation from the states around state uniformity and cooperation for the foreseeable future.

There are approximately 600,000 entities in the not-for-profit sector, of which it is estimated around 400,000 may access Commonwealth tax concessions either through the Australian Taxation Office endorsement process or by self-assessment. The Australian Securities and Investment Commission has a smaller role in the regulation of the sector at the Commonwealth level. ASIC is currently responsible for regulating approximately 11,000 not-for-profit entities incorporated as companies limited by guarantee under the Corporations Act 2001. That is a mere 11,000 out of 600,000-odd entities that there are across Australia, so it is a very small level of involvement in terms of regulatory oversight currently at the federal level, with most of the oversight happening at the level of the respective states.

ASIC regulates professional trustee companies as well as some charities which are incorporated as other types of companies under the Corporations Act 2001 and ASIC also has responsibility for the registration of incorporated associations and cooperatives if they wish to operate outside their home jurisdictions. The states and territories regulate incorporated associations and charitable trusts—although public and private ancillary funds are regulated at the Commonwealth level—as well as fundraising activities and imposing reporting and governance requirements on entities that receive state and territory government funding. Not-for-profit agencies have raised the issue that reporting requirements are inconsistent across the sector. The reporting requirements are increasingly and excessively complex and burdensome. The reporting requirements do divert resources away from frontline service delivery and towards complying with the needs of government. The sector is also very concerned that there is currently no single reference point for not-for-profits to access information, education and guidance.

This is why the coalition supports a small commission to engage in innovation, advocacy and education but not in this massive, superpowerful Commonwealth regulator on top of all the other regulatory arrangements—one that will choke charities and not-for-profit organisations in excessive and unnecessary additional red tape. Labor is effectively reversing the current approach, telling the sector they need a watchdog to promote transparency and trust from the sector. The community trusts the not-for-profit sector, and there is no identification from the government of the mischief that warrants the suite of powers that would be granted to the new commissioner. What is the problem that this government is trying to fix? Why do they want to provide all of these additional powers to a Commonwealth bureaucrat here in Canberra to make life more difficult for not-for-profit organisations and charities across Australia? People across Australia do not overwhelmingly welcome more power for a Canberra based bureaucrat to make their lives more difficult, and the government have not provided a justification for these powers or stated what sort of mischief they are trying to address.

The government claims it will consult further on the content requirements of financial reports and implement this through regulations: 'Trust us, we are from the government; we are here to help!' But registered entities will be required to prepare their first financial reports for the 2013-14 financial year, with the first financial reports due by 31 December 2014 unless a substituted accounting period applies. We on this side of the chamber know only too well that any such commitment to consult is worthless. Just look at the track record under this government so far.

At best, they will bungle the consultation. At worst, it will be much like their approach to a range of other legislation—a complete sham process. At this point I am forced to point out that what we have here is the government's attempt at legislating a policy that they announced back in May 2011 to create an Australian Charities and Not-for-profits Commission, which was to come into operation on 1 July 2012. The start date of the Australian Charities and Not-for profits Commission has been delayed. It was then expected to start on 1 October 2012. Who knows what the ultimate timetable is going to be.

This reflects yet again the rushed approached to legislation, where the government is trying to meet deadlines and failing. This package of charities legislation was of course introduced on 23 August, the last sitting day before a fortnight's break in parliamentary proceedings. Yet, on 18 September, less than a month later, the Assistant Treasurer had the nerve to introduce 2½ pages of amendments to the package of charities legislation and a supplementary explanatory memorandum of 15 pages in relation to legislation which was due to come into effect less than two weeks later. And, of course, everybody across Australia would be expected to comply with all of the requirements.

The government cannot get their policy right, and that, of course, is why their legislation keeps changing. Clearly the bills were not ready to be introduced on 23 August. They should not have been introduced on 23 August. The government should have done their homework first. But, as on so many occasions before, they did not and now they are trying to patch things up as they go along. They are just making it up as they go along. We also have some more amendments to deal with in front of us now in the context of dealing with this legislation in the Senate this week. The government have the numbers in this chamber, I suspect. The fact that the bills are coming up for debate at this juncture indicates their sense of priorities. The Assistant Treasurer, in our view, should accept responsibility for a state of affairs where they are having to chop and change and make amendments as they go because they got things wrong when they first introduced the legislation.

The main bill, the Australian Charities and Not-for-profits Commission Bill 2012, provides the Australian Charities and Not-for-profits Commissioner with a range of enforcement powers. These powers are modelled on those given to other Commonwealth regulators, such as ASIC, the Australian Prudential Regulatory Authority and the Australian Competition and Consumer Commission. They provide the ACNC with the authority to issue warnings, issue directions, enter into enforceable undertakings, apply to the courts for injunctions, suspend or remove responsible entities and appoint acting responsible entities.

Of particular concern to us are the information gathering, monitoring and sanctioning powers, including the ability of the ACN Commissioner to remove a director. The bill specifies the conditions that must be satisfied before the ACN Commissioner can use enforcement powers, the scope and range of the commissioner's enforcement powers and the associated penalties for contravening enforcement powers issued by the ACN Commissioner. The ACN Commissioner will be able to exercise enforcement powers only over registered entities. The ACN Commissioner may generally only use enforcement powers against federally regulated entities. However, the commissioner may revoke the registration of any registered entity.

Groups in the not-for-profit sector have raised the issue that the reporting requirements, government standards and the ACNC enforcement powers are inconsistent with or overlap the common law of trusts and state and territory trustee legislation, are inconsistent with or overlap the Corporations Law and ASIC's regulatory role, are inconsistent with or overlap the ATO's guidelines on public and private ancillary funds, are possibly inconsistent with the Australian Constitution and are inconsistent with the overarching purpose of the ACNC legislation. I consider these comments about the ACNC's extensive powers by the Australian Catholic Bishops Conference to be a particularly appropriate description of this issue:

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.

…   …   …

All groupings of systemic schools, independent Catholic secondary schools and many primary schools will be classified as "large charities" and therefore be subject to the highest level ACNC financial reporting and accountability requirements.

The outcome for schools is an unreasonable compliance burden …

This is what this government is imposing on not-for-profit schools across Australia—an unreasonable compliance burden.

In the same vein is the submission of World Vision Australia:

WVA considers that the tone and structure of the enforcement powers continue to suggest a heavy-handed approach weighted against the interests of registered entities and responsible entities. Further efforts should be made to ensure that the powers are better targeted, fairer, not used to inappropriately interfere with an organisation's legitimate operations and do not impose undue costs on an entity in taking action against the ACNC.

Unless and until the states and territories agree to hand over their powers to the Commonwealth regulator and harmonise their laws, these bills are going to necessarily add an additional layer of red tape which the sector will be forced to comply with. The smooth functioning of the ACNC is also dependent on a number of Commonwealth departments agreeing to either hand over their regulatory powers to the ACNC or to harmonise their regulatory requirements with the ACNC. From listening to the evidence at our various inquiry hearings, that is far from certain to happen.

The coalition believes that a reduction in red tape should be a priority issue where any reform of the not-for-profit space is concerned. It is our contention that these bills will actually take us in the wrong direction if the objective is genuinely to create less red tape for this sector.

Stakeholders remain concerned that these bills create unnecessary uncertainty with respect to the obligations and responsibilities of both the entity and those charged with governance of the entity. This issue arises from the fact that the requirement of the financial report and the requirements of those charged with governance with respect to financial reports are not presently specified with these provisions to be enacted by regulation by the minister. The sector is concerned that this will lead to a situation where not-for-profit agencies have limited input into decisions regarding how they are to be governed. Moreover, it exposes the risk that these standards can be subject to change frequently and at the whim of the minister or the government of the day.

The extraordinary range of services the not-for-profit sector provides covers programs extending from parenting skills, training, through marriage and family education and counselling, to divorce, mediation, drug and alcohol assistance, family violence—providing information and support to hundreds of thousands of Australians annually. Many agencies are motivated by charitable intentions; they are professionally conducted and often utilise the valuable contributions of volunteers. Taking the area of family services as an illustration of the current red-tape burden and inefficiency which I say will be exacerbated by these bills, we must not lose sight of the fact that government contractual reporting requirements costs family service agencies significant sums of money to administer. Much data is collected but little of it is every used.

The coalition supports transparency and accountability in the use of taxpayer funds. We also support simplicity and efficiency. The community sector has a long history of responsible governance and management. The coalition will respect and trust this. We will not support the creation of a heavy-handed regulatory body that would add to the red-tape burden for charitable organisations and duplicate state and territory legislation.