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Australian Charities and Not-for-profits Commission Bill 2012

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2010-2011-2012

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

SENATE

 

 

 

AUSTRALIAN CHARITIES AND NOT-FOR-PROFITS COMMISSION BILL 2012

AUSTRALIAN CHARITIES AND NOT-FOR-PROFITS COMMISSION (CONSEQUENTIAL AND TRANSITIONAL) BILL 2012

 

 

REVISED EXPLANATORY MEMORANDUM

 

 

(Circulated by the authority of the

Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

 

 

THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OF REPRESENTATIVES TO THE BILL AS INTRODUCED

 



Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Chapter 1               Background........................................................................... 7

Chapter 2               Constitutional basis for the Bill........................................ 23

Chapter 3               Registration......................................................................... 29

Chapter 4               Australian Charities and Not-for-profits Register.......... 51

Chapter 5               Governance standards and external conduct standards 57

Chapter 6               Reporting and record keeping......................................... 69

Chapter 7               Duty to notify....................................................................... 87

Chapter 8               Information gathering and monitoring powers............. 95

Chapter 9               Education, compliance and enforcement................... 117

Chapter 10            The Commission and the Advisory Board................... 163

Chapter 11            Secrecy framework.......................................................... 177

Chapter 12            Reviews and appeals...................................................... 195

Chapter 13            Miscellaneous.................................................................. 211

Chapter 14            Transitional provisions.................................................... 241

Chapter 15            Consequential amendments......................................... 255

Chapter 16            Regulation Impact Statement:  establishing a regulator for the not-for-profit sector................................................................................. 267

Chapter 17            Statement of Compatibility with Human Rights......... 303

Index............................................................................................................... 309

 



The following abbreviations and acronyms are used throughout this revised explanatory memorandum.

Abbreviation

Definition

AASB

Australian Accounting Standards Board

AAT

Administrative Appeals Tribunal

ABN

Australian Business Number

ACCC

Australian Competition and Consumer Commission

ACN Register

Australian Charities Not-for-profits Register

ACNC

Australian Charities and Not-for-profits Commission

ACNC Bill

Australian Charities and Not-for-Profits Commission Bill 2012 ( Bill)

AFTS

Australia’s Future Tax System

ANA

Australian NFP Administrator

ASIC

Australian Securities and Investments Commission

APRA

Australian Prudential Regulation Authority

APS

Australian Public Service

ATO

Australian Taxation Office

CCC

Charities Consultative Committee

CCF

Clubs Consultative Forum

COAG

Council of Australian Governments

DGR

Deductible gift recipient

FATF

Financial Action Task Force

FBTAA

Fringe Benefits Tax Assessment Act 1986

FMA Act

Financial Management and Accountability Act 1997

FRE

Federally regulated entity

ICCPR

International Covenant on Civil and Political Rights

ITAA 1997

Income Tax Assessment Act 1997

ITSA

Insolvency and Trustee Service Australia

TEQSA

Tertiary Education Quality and Standards Agency

MOU

Memorandum of understanding

NFP

Not-for-profit

PBIs

Public benevolent institutions

PC Report

Productivity Commission’s Report on the Contribution of the Not-for-profit Sector 2010

RIS

Regulatory Impact Statement

SES

Senior Executive Service

Special Account

Australian Charities and Not-for-profits Commission Special Account

SR VIII

Special Recommendation VIII



Australian Charities and Not-for-profits Commission

The Australian Charities and Not-for-profits Commission Bill 2012 establishes a new independent statutory office, the Australian Charities and Not-for-profits Commission (ACNC) which will be the Commonwealth level regulator for the not-for-profit (NFP) sector.  The exposure draft also establishes a new regulatory framework for the NFP sector.

Date of effect The ACNC will commence operations on 1 October 2012.

Proposal announced This reform was announced by the then Assistant Treasurer and Minister for Financial Services and Superannuation and the then Minister for Human Services and Social Inclusion’s joint Media Release No. 77 of 10 May 2011.

Financial impact Establishing the ACNC and the resulting structural changes to the Australian Taxation Office (ATO) has resulted in the following fiscal impact:

 

2011-12

2012-13

2013-14

2014-15

Expense

$8.6m

$14.8m

$10.0m

$10.1m

Revenue

$8.0m

$10.0m

$10.0m

$13.0m

Capital

$1.0m

$9.1m

-

-

Human rights implications :  This Bill does not raise any human rights issue.  See Statement of Compatibility with Human Rights — Chapter 17, paragraphs 17.1 to 17.41.

Compliance cost impact The establishment of the ACNC and related regulatory framework could result in minor transitional compliance costs for the registered charities that will come within the scope of the ACNC.  However, the introduction of a streamlined regulatory framework for the NFP sector, which includes a ‘report-once, use-often’ reporting framework, is expected to reduce compliance costs over the medium to long term.

Summary of regulation impact statement

Regulation impact on business

Impact Registered charities that will come within the scope of the ACNC could experience transitional compliance costs.

Once the sector’s new regulatory system is in place, the Regulation Impact Statement finds that it will lead to a reduction in compliance costs and red tape faced by the sector.  Small entities that currently have no reporting obligations are a minor exception.  These entities would be required to report to the ACNC and may therefore experience a minor increase in compliance burden.  However, they may benefit through other aspects, such as more easily accessing Commonwealth exemptions, concessions and benefits, and by having additional public exposure through a page on the ACNC website at no cost.

Main points :

•        The ACNC Bill establishes a new regulatory framework for the sector and creates the ACNC as the Commonwealth level regulator responsible for administering the ACNC Bill. 

•        The sector’s new regulatory system will establish:

-       a robust and streamlined regulatory framework for the NFP sector, including a ‘report-once, use-often’ reporting framework;  

-       strengthen the sector’s transparency, governance and accountability; and

-       provide the public with information on the sector commensurate to the level of support provided to the sector by the public. 

•        The ACNC will create a ‘one-stop shop’ for ACNC registration, tax concessions, and accessing Australian Government services and concessions.  Registered entities that are involved in a range of activities would only have to apply and report to the ACNC.

•        The move to the ‘report-once, use-often’ approach would reduce the compliance burden associated with duplicative, ad hoc and inconsistent reporting. 

•        Smaller entities with no reporting obligations may have to provide some basic reports, with the level of reporting based on the entity’s annual revenue turnover.  This reporting requirement may introduce a minor compliance burden for these small entities. 

•        The compliance savings from introducing the ACNC and a new regulatory framework are hard to quantify, particularly for this sector, due to limited data availability. 

•        During consultation with the sector stakeholders indicated that a move toward a ‘report-once, use-often’ approach would lead to ‘huge’ savings in administrative and compliance costs. 

•        The Regulation Impact Statement also finds that a truly national NFP regulator would provide the greatest benefits in terms of reducing regulatory overlap, red tape and compliance costs for the sector.

 

 



Chapter 1          

Background

Outline of chapter

1.1                   This Chapter explains the background to the Australian Charities and Not-for-profits Commission Bill 2012 (Bill) and the context for reform.

1.2                   The Bill establishes a national regulator, and a national regulatory framework for the not-for-profit (NFP) sector.

1.3                   Initially, only tax endorsed charities will be regulated by the Australian Charities and Not-for-profits Commission (ACNC).  However, the Bill establishes a regulatory framework that can be extended to all NFP entities in the future.

1.4                   The Bill:

•        establishes the ACNC;

•        charges the ACNC with registering NFP entities (initially charities) and maintaining a register;

•        provides for the powers of the ACNC Commissioner in relation to the regulation of registered entities; and

•        sets out the obligations and responsibilities of registered entities.

Context of reform

The not-for-profit sector

1.5                   The NFP sector broadly consists of entities that seek to achieve a community, altruistic or philanthropic purpose.

1.6                   The NFP sector is diverse, with entities ranging from micro-sized sporting and recreational clubs to large national and multinational charitable organisations. 

1.7                   NFP entities play a unique role in Australian society.  In recognition of this important role, NFP entities are exempted from a range of regulatory requirements and are funded by governments, both directly and through tax concessions, and by donations from members of the public. 

1.8                   NFP entities differ from other entity types which may be accountable to their members or stakeholders.  NFP entities also need to be accountable to the public, including donors, members and volunteers. 

1.9                   Maintaining, protecting and enhancing public trust and confidence in the sector is essential to its ongoing sustainability, including the ability to provide the services that it delivers to the public.

1.10               A national regulatory system that promotes good governance, accountability and transparency for NFP entities will help to maintain, protect and enhance the public trust and confidence that underpins the sector. 

1.11               The ACNC will play a key role in providing information and education to the public about the NFP sector.  The educational role of the ACNC will help to improve public understanding of, and engagement with, the important work of the sector.

1.12               The ACNC will administer a new system of smarter regulation.  The regulation will be proportional to size and risk in order to minimise regulatory duplication and compliance costs, and to allow registered entities to focus on achieving their mission.

1.13               The ACNC will prioritise working with other regulators to minimise regulatory requirements for the NFP sector wherever possible.

1.14               The establishment of a regulatory framework that reflects the unique structures, funding arrangements and goals of NFP entities will support and sustain a robust, vibrant, independent and innovative Australian NFP sector.

Outline of existing regulatory arrangements

1.15               Currently, no single institution is responsible for the regulation of the NFP sector. 

1.16               At present, Commonwealth, State, Territory and local governments regulate different parts of the NFP sector for both different and overlapping purposes.  For example, these laws provide tax concessions, exemptions from registration and permit requirements, exemptions or limitations on legal liability, and impose fundraising and lottery regulations.

1.17               At the Commonwealth level, regulation is undertaken to access Commonwealth taxation concessions and in relation to certain entity types, such as companies limited by guarantee, Indigenous corporations, and some corporate trustees. 

1.18               In the absence of a registration regime, the role of de facto regulator for the NFP sector at the Commonwealth level has generally been shared between the Australian Taxation Office (ATO) and the Australian Securities and Investments Commission (ASIC).

1.19               The ATO acts as a regulator for NFPs that access tax concessions including an income tax exemption, deductible gift recipient (DGR) status, refundable franking credits, and fringe benefits tax (FBT) and goods and services tax (GST) concessions.

1.20               The current law requires charities to be endorsed by the ATO before they can access NFP tax concessions.  Hence, the ATO, by default, is also responsible for determining charitable status. 

1.21               Currently, the ATO’s endorsement process requires applicants to provide information on eligibility for tax concessions, including operational and governance frameworks, and financial position. 

1.22               NFP entities other than charities are generally able to self-assess their access to income tax concessions, and are therefore not regulated by any agency in an ongoing manner.

1.23               There are approximately 600,000 entities in the NFP sector, of which it is estimated around 400,000 may access Commonwealth tax concessions, either through the ATO endorsement process or by self-assessment.

1.24               ASIC has a smaller role in the regulation of the NFP sector at the Commonwealth level. 

1.25               ASIC is currently responsible for regulating approximately 11,000 NFP 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 .

1.26               ASIC also has responsibility for the registration of incorporated associations and cooperatives if they wish to operate outside their home jurisdiction.

1.27               The Office of the Registrar of Indigenous Corporations (ORIC) is an independent statutory office that regulates NFP Indigenous corporations registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 .

1.28               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 impose reporting and governance requirements on entities that receive State and Territory government funding.

1.29               Current reporting requirements across the sector are inconsistent; there is minimal reporting for some organisations and complex and burdensome reporting for others.  There is also no single reference point for the NFP sector to access information, education or guidance.

1.30               There is limited easily-accessible information available to the public on the activities of NFP entities.  The current lack of information available to the public acts as a barrier to the optimal allocation of resources, thus undermining philanthropic engagement and potentially weakening the generosity of donors.

History

Reviews and Inquiries

1.31               There have been several reviews into the regulation and taxation of the NFP sector in Australia over the last 17 years. 

1.32               A consistent theme that emerged from these reviews is that the regulation of the NFP sector would be significantly improved by establishing a national regulator and harmonising and simplifying regulatory and taxation arrangements.

1.33               The 1995 Industry Commission Inquiry Report, Charitable Organisations in Australia , recommended a sector wide focus on best practice to strengthen the contribution the charitable sector makes to Australian society. 

1.34               The 2001 Report of the Inquiry into the Definition of Charities and Related Organisations recommended that establishing a comprehensive national administrative framework for the charitable and related sector and an independent administrative body for charities and related entities, be considered.

1.35               The 2008 Senate Economics Committee Inquiry into Disclosure Regimes for Charities and Not-for-profit Organisations recommended the establishment of a single independent national regulator for NFP organisations.  The Committee recommended a broad role for the regulator, including registering NFP organisations, educating the sector and encouraging compliance and developing and maintaining an accessible, searchable public information portal. 

1.36               The 2010 Review into Australia’s Future Tax System (The 2010 AFTS Review) recommended that a national charities commission should be established to monitor, regulate and provide advice to all NFP organisations.

1.37               The 2010 Productivity Commission Report on the Contribution of the Not-for-profit Sector (2010 PC Report ), recommended the establishment of a ‘one-stop shop’ for Commonwealth regulation by consolidating various regulatory functions into a new national registrar.  The report recommended that the regulator undertake a variety of functions, including assessing organisations for Commonwealth tax concession status, providing a single reporting portal for corporate and financial information, and investigating compliance with regulatory requirements.

1.38               The 2010 Senate Economic Legislation Committee in its Inquiry into the Tax Laws Amendment (Public Benefit Test) Bill 2010 recommended the establishment of a single independent national commission for NFP organisations.

Scoping study for a national regulator

1.39               A scoping study for a national NFP regulator was undertaken to determine the role, functions, feasibility and design options for a ‘one-stop shop’ NFP regulator.

1.40               The Government released a consultation paper in January 2011 to ascertain the views of the NFP sector on the goals of national regulation, the scope of national regulation and the functions and form of a national regulator.  The consultation process demonstrated significant support for a national regulator and national regulation, and for NFP reform to be undertaken as a matter of priority.

1.41               The Final Report on the Scoping Study for a National Not-for-profit Regulator (Final Report), produced by the Treasury, presented the findings of the scoping study and provided a blueprint for implementing a national NFP regulator. 

1.42               The Final Report recommended that a single regulator should be established for the purposes of governance, accountability and transparency of NFPs and that the regulator should, as far as possible, be responsible for regulating all NFPs. 

1.43               The report also recommended that the regulator should administer a principles-based regulatory framework to apply broadly across the NFP sector, although regulation should be proportional and tailored to address the specific needs and size of NFPs.

Budget announcement

1.44               As part of the 2011-12 Budget, the Government announced the first stage of an ambitious reform agenda for the NFP sector. 

1.45               To progress its NFP reform agenda, the Government announced that it would:

•        establish the ACNC as a ‘one-stop shop’ regulator for the NFP sector;

•        introduce a statutory definition of ‘charity’;

•        introduce a general reporting framework and the establishment of a public information portal;

•        better target NFP tax concessions to ensure they are targeted only at those activities that directly further an NFP’s altruistic purposes; and

•        undertake a number of further reviews into the sector.

1.46               The Government further announced that the ACNC would:

•        be headed by an independent statutory office holder, the Australian Charities and Not-for-profits Commission Commissioner (ACNC Commissioner);

•        administer a regulatory framework to simplify the NFP sector’s interactions with the Australian government;

•        initially be responsible for determining the legal status of entities seeking charitable status, including public benevolent institution (PBI) status, on behalf of all Commonwealth agencies;

•        maintain a register of registered entities and, through its website, provide an information portal which will act as the central reference point for information about and for the NFP sector;

•        provide NFPs (particularly small and newly established NFPs) with a first point of call for accessing information and educational materials to answer questions through its website;

•        administer a single Commonwealth governance and regulatory framework for NFPs; and

•        administer a ‘report-once, use-often’ general reporting framework, to simplify reporting arrangements for registered entities.

1.47               The Government also announced the establishment of an Advisory Board of NFP sector experts to provide advice to the ACNC Commissioner. 

1.48               In the long term, the role of the ACNC will expand to include responsibility for the regulation of all NFP entities which access tax concessions or other Australian government benefits, regardless of their legal form. 

1.49               The ACNC may also take additional roles in the future pending the outcome of any reviews into the NFP sector. 

1.50               To take this into account, this Bill, which establishes the ACNC, makes provision for additions to its regulatory responsibilities over time. 

1.51               The Explanatory Materials uses the term NFP when general reference is made to the sector and in expectation of the future expansion of the regulatory responsibilities of the ACNC, although the application of the Bill is currently limited to charities.

Benefits of reform

1.52               The Government’s NFP reform agenda will implement the most significant reforms the sector has experienced over the last century.

1.53               The reforms recognise the vital services and benefits that the NFP sector provides to communities throughout Australia.

1.54               These reforms take into consideration the matters outlined in the Final Report, and the recommendations of the 2010 Productivity Commission Report and the 2010 AFTS Review.

1.55               As stated in the Final Report the current ad hoc approach has resulted in ‘significant disadvantages in having multiple regulators of the NFP sector.  Specifically, it results in complex, overlapping and duplicative regulation, and a lack of transparency, making it difficult for the public to understand the NFP sector.  Ultimately it leads to an unnecessarily high regulatory burden for NFPs’.

1.56               The establishment of a regulatory system for NFP entities will provide significant benefits to the NFP sector by:

•        reducing red tape through processes to avoid or minimise duplication where possible;

•        improving public engagement with the NFP sector through a public information portal;

•        providing the sector with better protection from possible breaches of trust and confidence by a few;

•        offering information to help the public understand the work of the sector; and

•        providing information and guidance to the sector to assist registered entities to comply with their regulatory obligations and to fulfil their diverse and important goals.

Staged approach to reform

1.57               NFP entities generally operate for the broad public benefit, and are relied on by many Australians, often by the most vulnerable in our community.

1.58               NFP entities play a unique role in Australia for which they are given funding from governments, both directly and indirectly, and from donations from members of the public.  This unique and important role means that governments often afford them exemptions, concessions and benefits under a range of laws and fee structures. 

1.59               The Government announced on 17 May 2012 that the financial reporting framework and governance standards, including the external conduct standards, will commence on 1 July 2013.

1.60               The Government will consult on the content of financial reports and the governance and external conduct standards, including with key stakeholders and advisory bodies such as the NFP Sector Reform Council and the public more broadly. 

1.61               The two-staged approach means that the financial reporting requirements and governance standards for registered charities will not come into effect until 1 July 2013.  The extended start dates will give more time for charities to transition to the new regulatory framework and for the ACNC to provide guidance materials to help with the transition.  The first financial reports will not need to be lodged with the ACNC until 31 December 2014.

Consultation

1.62               The Government has undertaken extensive consultation on the ACNC legislation and the establishment of the ACNC.  These consultation processes build upon the findings of past reviews and inquiries, as discussed earlier in this chapter. 

1.63               The consultation process included a consultation paper on the Scoping Study for a National NFP Regulator , which was released on 21 January 2011.  Consultation on the paper closed on 25 February 2011, and over 160 submissions were received from stakeholders. 

1.64               An exposure draft of legislation to establish the ACNC, along with related explanatory materials, was released on 9 December 2011 following almost a year of detailed consultations and discussions.  Consultations on the exposure draft closed on 27 January 2012.

1.65               A wide range of stakeholders participated in the consultation process, including NFP entities, academics, accounting and legal experts, and representatives of States and Territories. 

1.66               The Government also consulted with peak advisory bodies, such as the NFP Sector Reform Council, the Charities Consultative Committee, and the Clubs Consultative Forum.

1.67               The Government has taken these comments into consideration in developing the draft legislation.

1.68               In addition, the Government undertook targeted consultation on the draft legislation in May 2012 with a wide range of NFP representatives including the Charities Consultative Committee, the Clubs Consultative Forum, the NFP Sector Reform Council, NFP sector experts and representatives of the States and Territories.

1.69               A series of ACNC Implementation Taskforce community consultation sessions were held in all Australian capital cities and Townsville, and concluded in February 2012.  These sessions were attended by around 1,600 people, and provided an opportunity for stakeholders to provide comments and seek clarity over various aspects of the reform.

1.70               The Government referred a draft version of the ACNC Bill to the House of Representatives Standing Committee on Economics for an inquiry over the Winter 2012 Parliamentary recess.

1.71               The Treasury made an initial submission to the House of Representatives Committee, and also made an additional submission following the Committee Hearing process.

1.72               The Committee’s comments, as well as issues raised during the inquiry process, have been taken into consideration in the final preparation of the Bill and this Explanatory Memorandum.

The ACNC Commissioner’s functions under the Bill

1.73               The ACNC Commissioner has the general administration of the Australian Charities and Not-for-profits Commission Bill 2012.  The ACNC Commissioner therefore has all the rights, powers, responsibilities and obligations provided to the administrator of such laws under statute and common law.

1.74               As such, the ACNC Commissioner’s role will include providing guidance material to the sector, educating the sector and the public, running a website and communicating with the public as well as administering the powers contained in the Bill such as those relating to registration, collecting reports, enforcement and monitoring. 

1.75               The ACNC Commissioner will primarily achieve the objects of the Bill by providing the NFP sector with guidance and educative materials to assist the sector to understand and comply with regulatory obligations.  This is specifically provided for in the ACNC Commissioner’s education function in the Bill.

1.76               The Bill contains a wide spectrum of enforcement powers reflecting that the ACNC would not have powers of enforcement unless specifically provided for in legislation. 

1.77               Importantly, the legislation also provides for appropriate limitations on these powers and considerations for the ACNC Commissioner to consider in any exercise of these powers. 

1.78               The ACNC Commissioner’s enforcement powers are expected to be exercised in a small number of serious cases where the circumstances require it. 

1.79               However, where enforcement action is required, the ACNC Commissioner’s range of enforcement powers allows the ACNC Commissioner to provide a proportionate, balanced and effective regulatory response.

Objects of the Bill

1.80               The objects of the Bill are: to maintain, protect and enhance the public trust and confidence in the NFP sector; to support and sustain a robust, vibrant, independent and innovative NFP sector; and to promote the reduction of unnecessary regulatory obligations on the NFP sector.  [Subsection 15-5(1)]

1.81               These objects will be pursued through:

•        the establishment of a national regulatory framework specifically focussed on NFP entities to reflect the unique goals, structures and funding arrangements of NFPs;

•        the establishment of the ACNC Commissioner who will be responsible for:

-       registration of entities according to type and subtypes;

-       administering the national regulatory framework; and

-       assisting registered entities to comply with and understand their regulatory obligations. 

[Subsection 15-5(2)]

1.82               Registration with the ACNC is voluntary.  However, NFP entities must be registered with the ACNC in order to access certain Commonwealth concessions, exemptions and benefits which are contingent on registration.  [Subsections 15-5(3)]

1.83               Registration is a necessary prerequisite for access to Commonwealth tax concessions.  Registration may also be necessary for NFPs to access other concessions, exemptions and benefits.  [Subsections 15-5(3) and (4)]

1.84               Registration is explained in Chapter 3 — Registration.

Public trust and confidence

1.85               The terms ‘public trust’ and ‘confidence’ have their ordinary meaning and are used throughout this Bill to refer to the positive ways in which the Australian public views the NFP sector.

1.86               The NFP sector is held in high regard by the Australian community, as it provides vital services, assists the needy and contributes to creating vibrant and diverse communities across the country. 

1.87               This Bill aims to support public trust and confidence in the NFP sector into the future.  It does so in a variety of ways, including by establishing a national regulatory framework for the sector, by creating a publicly available Register, and by ensuring that entities meet principles-based governance standards.

1.88               High levels of public trust and confidence in the NFP sector encourage philanthropic giving, volunteerism and public engagement with the sector. 

1.89               Public trust and confidence is strengthened by information, transparency, accountability, openness and effectiveness.  It may be weakened by misconduct, opacity, misinformation and illegality.

1.90               Just as the positive actions of one NFP entity can reflect positively on the sector, the negative actions of one NFP entity can reflect negatively on the sector. 

Promoting the reduction of unnecessary regulatory obligations on NFPs

1.91               The ACNC will work with other regulators and cooperate with other government agencies to promote the reduction of unnecessary regulatory obligations on the NFP sector.   [Section 15-5(1)(c)]

1.92               The regulatory framework set out in this Bill establishes the ACNC with sufficient powers to enable it to take the central regulatory role for the NFP sector, undertaking functions that were previously performed by the ATO or ASIC. 

1.93               The Bill also provides the ACNC with broad powers to share information with other government agencies (subject to the protections on personal and confidential information, explained in Chapter 11) in order to facilitate regulatory cooperation.

1.94               The ACNC will work collaboratively to ensure that NFPs are regulated appropriately in a balanced manner which maintains an appropriate level of oversight but does not unnecessarily burden the sector. 

1.95               The Bill establishes the ACNC as a single interface for core matters minimising the interactions that NFPs must engage in with government.

1.96               The ACNC will cooperate with other regulators, including the development of memoranda of understanding that will govern the way that regulators will work together.  The ACNC will also work to put in place administrative practices to ensure appropriate levels of regulatory supervision without the imposition of unnecessary procedural requirements including administrative procedures and practices.

1.97               As a regulator, the ACNC will co-operate and work with other agencies to consolidate and standardise information that is sought from NFPs to minimise the burden which repeatedly seeking the same information would impose on NFPs.

1.98               The ACNC will advance initiatives to reduce unnecessary reporting, including implementing a “report-once, use-often” framework and developing the charity passport (which is a collection of core information that has already been gathered by the ACNC as part of the registration process or annual information statement) which can then be provided to other government agencies negating the need for other agencies to collect that information, minimising the interactions that NFPs need to have with government.

1.99               This framework will promote better regulation of the NFP sector, minimising the regulatory burden on NFPs while allowing for the better and less resource intensive management of risk through coordinated action.

Furthering the objects of the Bill

1.100           In undertaking his or her role, the ACNC Commissioner will have regard to a number of factors to ensure that he or she considers all stakeholders (for example, the public and NFPs) in exercising his or her powers and functions, and that the ACNC Commissioner pursues best practice regulation.  [Section 15-10]

1.101           In undertaking his or her role, the ACNC Commissioner will have regard to:

•        the maintenance, protection and enhancement of public trust and confidence in the NFP sector;

•        the need for transparency and accountability of the NFP sector to the public (including donors, members and beneficiaries) by ensuring they have access to information about NFP entities;

•        the benefits of providing information to the public about NFP entities;

•        the maintenance and promotion of the effectiveness and sustainability of the sector;

•        the upholding of principles relating to regulatory necessity, risk and proportionality;

•        the need to cooperate with other Australian government agencies, including in order to minimise procedural requirements and procedural duplication;

•        the effective administration of the laws that confer functions and powers on the ACNC Commissioner;

•        the benefits derived from assisting NFP entities with their obligations under the Bill, including through the provision of education and guidance to NFP entities; and

•        the diversity of the NFP sector. 

[Section 15-10]

1.102           The list of factors that the ACNC Commissioner will have regard to is similar to those provided for other Commonwealth regulators such as ASIC and the Tertiary Education Quality and Standards Agency (TEQSA). 

1.103           As they do for ASIC and TEQSA, this list of factors sets out how the ACNC should approach all its activities so that they are in line with the objects of the Bill. 

1.104           While the nature of these factors means that there will be some overlap between them, each factor is integral to guiding the ACNC’s approach to regulation.

1.105           The ACNC Commissioner will have regard to issues of regulatory necessity, risk and proportionality to ensure that his or her actions are suitable and relative to individual circumstances.  These concepts involve ensuring that regulatory responses give consideration to the different circumstances of different entities, including entity size, revenue and donations received from the public. 

1.106           In furthering the objects of this Bill, the ACNC will work to ensure cooperation with other regulators so as to ensure that procedural requirements and duplication are minimised where possible.  The ACNC will also work to educate the sector about regulatory requirements. 

1.107           The ACNC Commissioner will have regard to the need to ensure that the law is administered effectively, and that it imposes a minimum of procedural requirements on registered entities. 

1.108           The ACNC’s approach will take into account the size, level of risk and history of each registered entity.  This means that the ACNC Commissioner will have regard to the diversity of the NFP sector, and will respond accordingly.

1.109           The ACNC will also provide education to the sector and to the public about the NFP sector.  The ACNC will thus be a platform for greater engagement between the NFP sector and the public and vice versa. 

1.110           The Bill does not allow the Commissioner to collect fees for providing information, or for other purposes.  Therefore, guidance and education provided by the ACNC must be provided for free.

1.111           Taking these factors into account will ensure that when undertaking its role, the ACNC balances these important considerations to provide a regulatory framework which underpins a strong and vibrant NFP sector.



Chapter 2          

Constitutional basis for the Bill

Outline of chapter

2.1                   This Chapter explains the constitutional basis for the Australian Charities and Not-for-Profits Commission Bill 2012 (Bill).

Detailed explanation of new law

2.2                   Under The Constitution , the Commonwealth does not have any legislative power specifically to regulate the not-for-profit (NFP) sector.  As a result, different Commonwealth powers support different aspects of the Bill.

Taxation power

2.3                   Paragraph 51(ii) of the The Constitution (the taxation power) allows the Commonwealth to make laws with respect to taxation.  The taxation power supports the provisions of the Bill that:

•        establish a registration scheme as a prerequisite for NFPs to access certain Commonwealth tax concessions (Part 2-1);

•        empower the Governor-General to make regulations prescribing particular standards that entities need to meet as a prerequisite for being registered and remaining entitled to be registered (Part 3-1);

•        set out the record keeping and reporting obligations applicable to registered entities — to the extent that these are imposed in order to enable an assessment of an entity’s entitlement to registration, compliance with the parts of the Bill or the regulations supported by the taxation power, or compliance with any taxation law as defined in the Income Tax Assessment Act 1997 (Part 3-2);

•        require registered entities to notify the Australian Charities and Not-for-profits Commission Commissioner (ACNC) Commissioner (ACNC Commissioner) of certain matters in circumstances where those matters may affect their entitlement to registration (Division 65);

•        empower the ACNC Commissioner to obtain information for the purpose of determining whether a registered entity has complied with certain provisions of the Bill (or legislative instruments made under the Bill) supported by the taxation power (Division 70);

•        empower the ACNC Commissioner to obtain information for the purpose of determining whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the taxation power is correct (Division 70);

•        empower ACNC officers to monitor whether certain provisions of the Bill (or legislative instruments made under the Bill) supported by the taxation power have been complied with (Division 75); and

•        empower ACNC officers to monitor whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the taxation power is correct (Division 75).

2.4                   The provisions of the Bill supported by the taxation power will apply in relation to all registered entities. 

Communications power

2.5                   Paragraph 51(v) of the The Constitution (the communications power) allows the Commonwealth to make laws with respect to ‘postal, telegraphic, telephonic, and other like services’ — including electronic communications.  The communications power supports the provisions of the Bill that require the ACNC Commissioner to maintain the Australian Charities and Not-for-profits Register, an electronic database that must be made available for public inspection on the internet (Part 2-2).

2.6                   The communications power also supports the provisions of the Bill that:

•        empower the ACNC Commissioner to obtain information for the purpose of determining whether information provided to the ACNC Commissioner by an entity, and included on the Register in accordance with Division 40, is correct (Division 70); and

•        empower ACNC officers to monitor whether such information is correct (Division 75).

Corporations power and Territories power

2.7                   Certain parts of the Bill only apply in relation to ‘federally regulated entities’ (FREs), which are essentially entities that the Commonwealth has power to regulate under paragraph 51(xx) of The Constitution (the corporations power) or section 122 of The Constitution (the Territories power).  The corporations power allows the Commonwealth to make laws with respect to certain types of corporations (paragraph 51(xx) corporations).  The Territories power allows the Commonwealth to make laws for the government of any Territory.

2.8                   Where a registered entity is an FRE because it is a paragraph 51(xx) corporation or a trust whose trustees are all paragraph 51(xx) corporations, the corporations power supports the provisions of the Bill that empower the ACNC Commissioner to:

•        give warnings and directions to that FRE (Divisions 80 and 85);

•        accept and seek Court enforcement of certain undertakings made by that FRE (Division 90);

•        seek, and a Court to grant, injunctions relating to that FRE (Division 95); and

•        suspend or remove a responsible entity of that FRE, and appoint acting responsible entities (Division 100).

2.9                   The Territories power supports these provisions of the Bill in their application to each registered entity that is an FRE because it is a body corporate incorporated in a Territory, a trust whose trustees are all bodies corporate incorporated in a Territory, a body corporate taken to be registered in a Territory under section 119A of the Corporations Act 2001 , or an entity connected to a Territory in the manner described in paragraphs (d) or (e) of the definition of FRE in section 205-15 of the Bill.

2.10               Additionally, the corporations power and the Territories power respectively support the provisions of the Bill that:

•        set out the record keeping and reporting obligations applicable to registered entities — to the extent that these are imposed in order to enable an assessment of an entity’s compliance with the parts of the Bill or the regulations supported by the corporations power / Territories power (Part 3-2);

•        empower the ACNC Commissioner to obtain information for the purpose of determining whether a registered entity has complied with certain provisions of the Bill (or legislative instruments made under the Bill) supported by the corporations power / Territories power (Division 70);

•        empower the ACNC Commissioner to obtain information for the purpose of determining whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the corporations power / Territories power is correct (Division 70);

•        empower ACNC officers to monitor whether certain provisions of the Bill (or legislative instruments made under the Bill) supported by the corporations power / Territories power have been complied with (Division 75); and

•        empower ACNC officers to monitor whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the corporations power / Territories power is correct (Division 75).

External affairs power

2.11               Paragraph 51(xxix) of The Constitution (the external affairs power) allows the Commonwealth to make laws with respect to external affairs.  ‘External affairs’ in this context includes persons, places, matters or things outside the geographical limits of Australia.

2.12               The external affairs power supports section 50-10 of the Bill in Part 3-1, which empowers the Governor-General to make regulations, specifying the ‘external conduct standards’, for the purpose of regulating funds sent by NFPs outside Australia and activities engaged in by such entities outside Australia. 

2.13               Additionally, the external affairs power supports the provisions of the Bill that empower the ACNC Commissioner to take enforcement action in relation to any registered entity in certain circumstances involving the external conduct standards.  In these circumstances, the ACNC Commissioner has power to exercise the same enforcement powers as are available in relation to registered entities that are FREs.  In other words, the ACNC Commissioner may:

•        give warnings and directions to a registered entity (Divisions 80 and 85);

•        accept and seek Court enforcement of certain undertakings made by a registered entity (Division 90);

•        seek injunctions from a Court (Division 95); and

•        suspend or remove a responsible entity of a registered entity, and appoint acting responsible entities (Division 100).

2.14               The external affairs power also supports the provisions of the Bill that:

•        set out the record keeping and reporting obligations applicable to registered entities — to the extent that these are imposed in order to enable an assessment of an entity’s compliance with the parts of the Bill or the regulations supported by the external affairs power (Part 3-2);

•        empower the ACNC Commissioner to:

-       obtain information for the purpose of determining whether a registered entity has complied with certain provisions of the Bill (or legislative instruments made under the Bill) supported by the external affairs power (Division 70); and

-       obtain information for the purpose of determining whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the external affairs power is correct (Division 70);

•        empower ACNC officers to:

-       monitor whether certain provisions of the Bill (or legislative instruments made under the Bill) supported by the external affairs power have been complied with (Division 75); and monitor whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the external affairs power is correct (Division 75).

Mixture of powers

2.15               Other parts of the Bill that comprise overarching or machinery provisions of the ACNC scheme also rely on all of the Commonwealth powers listed above.  These parts of the Bill are supported by different powers depending on the particular function or power being exercised under the Bill, the circumstances of its exercise, or the substantive provision of the Bill to which the particular machinery provision relates.

2.16               The parts of the Bill relying on a mix of powers are the provisions that:

•        establish the ACNC (Chapter 5) and the Advisory Board (Chapter 6);

•        impose secrecy obligations in relation to information obtained under or for the purposes of the Bill, and authorise disclosure of this information in particular circumstances (Part 7-1);

•        provide for reviews and appeals of decisions made under the Bill (Part 7-2);

•        set out the administrative penalties applicable for making false or misleading statements or failing to lodge documents on time under the Bill (Part 7-3);

•        extend the application of the obligations, liabilities and offences of entities under the Bill to the responsible entities of those entities (Part 7-4);

•        govern administrative matters relating to the process for providing material to the ACNC Commissioner (Divisions 190 to 195); and

•        empower the Governor-General to make regulations prescribing certain matters (Division 200).

2.17               Finally, some Commonwealth powers not mentioned above provide support for discrete aspects of the Bill.  For example, to the extent that the information-gathering and monitoring powers in Divisions 70 and 75 relate to provisions of the Crimes Act 1914 or Criminal Code , these powers rely on the Commonwealth powers supporting those criminal laws.

Do not remove section break.



Chapter 3          

Registration

Outline of chapter

3.1                   This Bill provides the Australian Charities and Not-for-profits Commission Commissioner (ACNC Commissioner) with the power to register entities as particular types and subtypes of not-for-profit (NFP) entities. 

3.2                   Such registration is a prerequisite for an entity to access certain Commonwealth tax concessions.  The Bill ensures that these tax concessions are available only to entities that are governed and regulated in accordance with the Bill.

3.3                   Initially, registration with the ACNC is limited to charities.  However, the ACNC’s role is expected to expand over time to include all NFPs.  Further explanation can be found in Chapter 1 — Background.

3.4                   This Chapter explains the registration processes and eligibility requirements for entities that wish to be registered by the ACNC Commissioner.

3.5                   It also explains the processes and grounds for the revocation of registration by the ACNC Commissioner and the consequences of having registration revoked.

Rationale for registration rules

3.6                   The Final Report on the Scoping Study for a National NFP Regulator recommended that a government body should be given the responsibility to endorse and register NFP entities. 

3.7                   It also recommended that registration should be recognised by all agencies at the Commonwealth level. 

3.8                   The Government announced in the 2011-12 Budget that it would charge the ACNC Commissioner with responsibility for registering NFP entities. 

3.9                   The ACNC Commissioner’s responsibilities also include collecting relevant information on NFP entities and using this information as a basis for registering an entity under a type and subtype(s) and monitoring the entity’s ongoing eligibility for registration. 

3.10               Registration is voluntary.  However, registration is a prerequisite for access to certain Commonwealth tax concessions.  As such, these tax concessions can only be accessed by those entities registered and regulated under this law. 

3.11               Other Commonwealth concessions, exemptions or benefits may also be contingent on registration.

3.12               While registration is voluntary, NFP entities accept responsibilities from being registered and the consequences that may follow from having their registration revoked.

Summary of new law

3.13               The Bill provides the ACNC Commissioner with the power to register NFP entities under their type and subtype. 

3.14               Registration by the ACNC Commissioner allows NFP entities to access support in the form of Commonwealth exemptions, concessions and benefits (including tax concessions). 

3.15               To be registered by the ACNC Commissioner and to maintain this registration, charities must: apply directly to the ACNC for registration; operate consistently with 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.

3.16               Transitional rules apply in relation to charities that are endorsed by the Australian Taxation Office (ATO), ensuring a smooth transition to the ACNC.  These rules are explained in detail in Chapter 14 — Transitional provisions.

3.17               The Bill also provides the ACNC Commissioner with the power to revoke the registration of entities.  The ACNC Commissioner may revoke an entity’s registration as a type of entity and as a subtype of entity in certain circumstances.

3.18               The ACNC Commissioner must consider a range of factors before making a decision about revoking an entity’s registration.

Detailed explanation of new law

3.19               The Bill provides for the ACNC Commissioner to register entities as particular types and subtypes of NFP entities.  [Subsection 20-5(1)]

3.20               The Bill also provides for the Commissioner to revoke the registration of registered entities, in certain circumstances.  [Subsection 20-5(1)]

3.21               Registration with the ACNC is a prerequisite for access to certain Commonwealth tax concessions.  [Subsection 20-5(2)]

3.22               Registration may also be a prerequisite for other exemptions, benefits and concessions provided under Australian laws.  [Subsection 20-5(3)]

Registration limited to charities

3.23               Registration is initially limited to charities.  Charities may be registered according to their subtypes, including public benevolent institutions (PBIs) and health promotion charities.  The ACNC’s role may expand over time to the registration of all NFP entities.

Entitlement to registration

3.24               An entity is entitled to be registered by the ACNC if it:

•        meets the description of the relevant type or subtype;

•        is a NFP;

•        meets the governance standards and external conduct standards;

•        has a current ABN; and

•        is not characterised as engaging in, or supporting, terrorist or other criminal activities under an Australian law.

3.25               If the entity has previously been a registered entity, but its registration as a type of entity has been revoked, that entity is entitled to be re- registered if the ACNC Commissioner is satisfied that the matters which led to the revocation have been dealt with, such that the re-registration of the entity would not conflict with the objects of this Bill.  [Subsections 25-5(1), 25-5(2) and 25-5(3)]

3.26               An entity is entitled to registration if it meets the description of the relevant type or subtype.  [Paragraphs 25-5(1)(b) and 25-5(2)(b)]

3.27               Initially, the ACNC will only register charities.  Therefore, in order to be entitled to registration as a type of registered entity, an entity must be a charity.  [Paragraph 25-5(1)(b)]

3.28               The determination of charitable purpose is to be undertaken in accordance with the common law meaning of the term, as affected by the Extension of Charitable Purpose Act 2004 [Subsections 25-5(5) and (6)]

3.29               To be registered as a subtype of an entity the entity must meet the description of that subtype.  [Paragraph 25-5(2)(b)]

3.30               The ACNC Commissioner will also use the common law definitions of the relevant subtypes to ensure that an entity meets the requirements.

3.31               Registration as a type or subtype is voluntary.  However, only an entity that is so registered can access certain types of support provided by the Commonwealth Government.

3.32               To be entitled to registration, an entity must be a NFP entity.  [Paragraph 25-5(3)(a)]

3.33               A NFP entity is generally an entity that is not operating for the profit or gain of its individual members, whether these gains are direct or indirect.  This applies both while the entity is operating and when the entity winds up.

3.34               Additionally, an NFP entity is one that does not provide any private benefit, directly or indirectly, to a related party such as a trustee, member, director, employee, agent or officer of a trustee, donor, founder, or to an associate of any of these entities (other than reasonable remuneration for services provided or re-imbursement of related costs).

3.35               However, the fact that a NFP entity may make a profit does not negate its NFP status so long as any surplus is applied to the NFP purposes of the entity and the profit does not accrue to the benefit of identifiable members either directly or indirectly.

3.36               An entity is entitled to registration if it meets the governance and external conduct standards.  [Paragraph 25-5(3)(b)]

3.37               Further explanation of these standards can be found in Chapter 5 — Governance and external conduct standards.

3.38               An entity is entitled to registration if it has a current ABN.  [Paragraph 25-5(3)(c)]

3.39               An entity must have its own ABN to register as a type or subtype.  A group of entities cannot register with the ACNC as a single entity.

3.40               An entity is entitled to registration if it is not characterised as engaging in, or supporting, terrorist or other criminal activities under an Australian law.  [Paragraph 25-5(3)(d)]

3.41               An entity is characterised as engaging in, or supporting, terrorist or other criminal activities if it is covered by an instrument made by an Australian government agency under an Australian law, such as the Crimes (Controlled Operations) Act 2008 of the Australian Capital Territory.

3.42               An entity which was formerly registered with the ACNC and has had their registration revoked may be registered again if, and only if, in the opinion of the ACNC Commissioner, the matters that led to the revocation of the entity’s registration have been remedied, such that registration of the entity would not cause harm to, or jeopardise, public trust and confidence in the NFP sector.  [Paragraph 25-5(1)(c)]

3.43               Where the ACNC Commissioner registers an entity which has previously had its registration revoked, the second registration does not rescind the ACNC Commissioner’s decision to revoke the first registration of that entity.  That is, the registered entity will lose access to any concessions, exemptions or benefits that are contingent on registration as a consequence of revocation between the period in which the entity’s registration was revoked and the entity being registered again.  [Paragraph 25-5(1)(c) note]

Example 3.1  

The Moments Foundation’s registration was revoked in 2014 and its managing director was convicted of fraud.  Two years later the foundation seeks re-registration with the ACNC.  It has put in place a new management team and governing board and has a comprehensive risk management plan.  The ACNC Commissioner is satisfied that registration is consistent with the object of the Bill, including the maintenance, protection and enhancement of public trust and confidence in the NFP sector.  Accordingly, the ACNC Commissioner registers the foundation. 

The Moments Foundation’s registration remains revoked during the period between revocation in 2014 and re-registration in 2016.  The Moments Foundation will not be eligible to access any Commonwealth tax concessions, exemptions or benefits contingent on registration with the ACNC during the period that it was not registered.

3.44               An entity may be registered as both a type and subtype of entity.  It may also be registered as multiple subtypes of an entity provided that it meets the description of the entity subtype in the table in section 5-10(5).  However, an entity cannot be registered only as a subtype, it must also be registered as a type of entity.  [Subsection 25-5(4)]

3.45               Entities are able to apply for registration under multiple subtypes, provided their activities meet the necessary conditions for registration and the requirements of the subtypes do not conflict.  [Subsection 25-5(4)]

3.46               Some tax concessions are only provided to entities registered as a particular subtype. 

Example 3.2  

The Mockingbird organisation is registered as an entity with the ACNC as the type — charity and as the subtype — public benevolent institution (PBI).  It is able to access the Commonwealth tax concessions available to charities and PBIs, including an income tax exemption and goods and services tax and fringe benefits tax concessions. 

The Mockingbird organisation could also register as the type — charity and both the subtype — the relief of poverty, sickness or the needs of the aged and the subtype — public benevolent institution.

If the Mockingbird organisation was registered only as an entity with the type — charity, and did not register as a subtype of entity, it would not be able to access Commonwealth tax concessions that are only available to PBIs, such as fringe benefits tax concessions.

Types and subtypes

3.47               A table has been included in the Bill to explain the types and subtypes of entity that may register with the ACNC.  [Subsection 25-5(5)]

3.48               The table lists item numbers, type of entity and subtypes of entity.

3.49               In column one, the table currently lists only one type of entity that is entitled to register.  This is an entity that is a charity.  The table may be expanded in the future to list other types of entities.

3.50               The ACNC Commissioner’s determination of an entity’s charitable purpose is based on traditional definitions of charity found in the common law as affected by the Extension of Charitable Purpose Act 2004 [Subsections 25-5(5) and 25-5(6)]

3.51               The ACNC Bill does not change the existing common law definition of charity, nor does it make any changes to the public benefit test that forms part of that definition.

3.52               The ACNC Commissioner’s determination of an entity’s charitable status must be accepted by all other Commonwealth Government agencies, including the ATO. 

3.53               However, being registered as a charity with the ACNC does not necessarily mean that an entity qualifies as being charitable for State or Territory purposes.

3.54               Column two lists subtypes of entities that are entitled to registration.  Items one to four in column two are the heads of charity as recognised in Commissioners for Special Purposes of Income Tax v. Pemsel   (1891).  These are: the relief of poverty, sickness or the needs of the aged; the advancement of education; the advancement of religion; and purposes that are beneficial to the community.  Item five is the tax law definition of a health promotion charity. 

3.55               Items five and six (institution whose principal activity is to promote the prevention or control of diseases in human beings and PBIs) have been included as separate items in column two in recognition of the different Commonwealth tax concessions that these subtypes of entities are eligible to receive.  Generally entities with these subtypes will also be eligible to register under subtype one (relief of poverty, sickness or the needs of the aged) in column two.  [Subsection 25-5(5)]

3.56               Item seven has been included as a subtype to recognise that the Extension of Charitable Purpose Act 2004 extended the definition of charity to include the provision of NFP childcare services.  [Subsection 25-5(5)]

3.57               An entity may register as a type of charity, and as a subtype of charity. 

3.58               An entity may also register as more than one subtype.  For example, an entity that has PBI status may register with the type — charity and with the subtype — entity with a purpose that is the relief of poverty, sickness or the needs of the aged and the subtype — public benevolent institution.  [Subsection 25-5(4)]

3.59               An entity may register with one subtype at one point in time, and register as another subtype at a later point in time. 

3.60               For example, an entity may register as the type charity with the subtype - entity with a purpose that is the advancement of religion at one point in time.  That entity may later register with the subtype - entity with a purpose that is the advancement of education, in addition to its first subtype registration so long as it meets the requirements for both subtype registrations.

3.61               An entity may not register with more than one subtype where the requirements of those subtypes conflict.

3.62               For example, in order to meet the requirements of the subtype - public benevolent institution, an entity could not meet the requirements of the subtype - entity with a charitable purpose described in section 4 of the Extension of Charitable Purpose Act 2004 (provision of child care services).

3.63               An entity may not register only as a subtype.  An entity must register as a type in order to register as a subtype. 

3.64               Registration as a type or subtype is at the entity level.  This is the same as the current ATO registration process.  As described above, an entity must have its own ABN to register as a type or subtype.

3.65               Entities registered separately may be able to report together.  See Chapter 6 — Reporting and record keeping for more information.

Process of registration

3.66               Entities may apply to the ACNC Commissioner for registration as a type or subtype.  [Section 30-5 and subsection 30-10(1)]

3.67               An application for registration must be in the form approved by the ACNC Commissioner and accompanied by any documents that the ACNC Commissioner requires.  The approved form requirements are explained in Chapter 13 — Miscellaneous.  [Subsection 30-10(2)]

3.68               The ACNC Commissioner may require an applicant to provide additional information where that information is necessary to decide whether the applicant is entitled to registration.  In particular, the ACNC Commissioner may require documents that provide proof of identity to be supplied.  [Subsection 30-15(1)]

3.69               This additional information could include, for example, clarification of responses in applications, certified copies of the governing rules of the entity or further details about responsible entities. 

Dealing with an application for registration

3.70               If the ACNC Commissioner is satisfied that the applicant meets all of the requirements for registration, then the ACNC Commissioner must register an entity and specify the type and, where relevant, subtype of entity.  Otherwise, the ACNC Commissioner must reject the application for registration.  [Section 30-20]

3.71               The ACNC Commissioner must provide the applicant entity with written notice of his or her decision.  [Section 30-25]

3.72               The registration has effect from the date specified by the ACNC Commissioner.  This date can be retrospective, subject to limitations expressed in the Bill.  [Subsection 30-30]

3.73               Where the ACNC Commissioner has not made a decision on an application for registration within 60 days of receiving it, the applicant entity may give the ACNC Commissioner written notice, in the approved form, that the entity wishes to treat the application for registration as rejected.  [Subsection 30-15(2)]

3.74               If an entity gives such notice, the ACNC Commissioner is taken to have refused the application on the day in which the notice is given.  [Subsection 30-15(4)]

3.75               This ensures that entities have recourse if a decision is not made in the set time and ensures that entities can have the decision reviewed where appropriate.

3.76               If the ACNC Commissioner requests additional information, the application can be taken to have been refused on the later of:

•        the end of the 28th day after the last day on which the applicant gives the ACNC Commissioner additional information as required; or

•        the end of the 60th day after the application was made. 

[Subsection 30-15(3)]

Example 3.3  

The Mosies Foundation applies for registration on 1 March 2013.  On 20 April 2013, the ACNC Commissioner requests that further details about responsible entities (in this case, the directors of the Foundation) be provided.  The Mosies Foundation provides this information on 1 May 2013.  If the ACNC Commissioner does not notify the foundation of his or her decision by 29 May 2013, the Foundation is entitled to treat the application as refused provided that it gives written notice to the ACNC Commissioner.

Review rights

3.77                         The ACNC Commissioner’s decision to reject an application for registration is a reviewable decision.  [Section 30-35]

3.78                         The entity has the right to object to a decision in line with the review and appeals provisions.  These are explained in Chapter 12-Reviews and appeals.

Revocation of registration

3.79               In certain circumstances, the ACNC Commissioner may revoke the registration of a registered entity.  This power is necessary to ensure that entities accessing public monies operate transparently and in line with the regulatory requirements, and to ensure that public monies are used appropriately.

3.80               The ACNC Commissioner is able to revoke an entity’s registration as a type or subtype of entity if the ACNC Commissioner is satisfied that certain circumstances are present, having considered a number of factors.  If the ACNC Commissioner revokes an entity’s registration as a type of entity, it must also revoke its registration as a particular subtype.  [Section 35-5]

Example 3.4  

Better People is a registered entity.  Better People is registered with a type — charity and the corresponding subtypes — public benevolent institution and entity with a purpose that is the relief of poverty, sickness or the needs of the aged.  Better People changes its activities so that it no longer meets the requirements of the subtype — public benevolent institution. 

The ACNC Commissioner revokes Better People’s registration as a subtype — public benevolent institution, but leaves its registration as a subtype — entity with a purpose that is the relief of poverty, sickness or the needs of the aged. 

Grounds for revocation of registration

3.81               The ACNC Commissioner may only revoke the registration of the entity if he or she is satisfied that at least one of the following conditions is met:

•        at any time after the entity’s registration, the registered entity was not entitled to be registered as that type of entity (or as the subtype of entity) [paragraph 35-10(1)(a)]

•        the registered entity provided information that was false or misleading in a material particular in connection with its application for registration [paragraph 35-10(1)(b)]

•        the registered entity has contravened, or is more likely than not to contravene a provision of this law, or has not complied, or is more likely than not to not comply with a governance standard or an external conduct standard [paragraph 35-10(1)(c)]

•        the registered entity has a trustee in bankruptcy, a liquidator, or a person authorised to manage the affairs of the entity under an Australian law because it is unable to pay all its debts when they become due and payable [paragraph 35-10(1)(d)] ; or  

•        the entity has made a request to the ACNC Commissioner that its registration as a type or subtype of entity be revoked [paragraph 35-10(1)(e)]

3.82               The ACNC Commissioner may only revoke an entity’s registration where one of these grounds is met following consideration of a number of factors. 

3.83               The ACNC Commissioner may revoke the registration of an entity, if, at any time after the entity’s registration, the entity has lost its entitlement to be registered in accordance with section 5-10 of the Bill.  [Paragraph 35-10(1)(a)]

Example 3.5  

The MED organisation is no longer undertaking charitable activities and is not operating on an NFP basis.  It is no longer entitled to registration and its registration can be revoked.

Example 3.6  

The registration of the Green Apple organisation as an entity whose principal activity is to promote the prevention or the control of diseases in human beings is revoked because it no longer meets the requirements of this subtype, however, it still has charitable purposes and remains registered as a charity.

3.84               Revocation of registration can also occur where information that was false or misleading in a material particular has been provided in connection with a registered entity’s application for registration.  This ground for revocation ensures that entities do not fraudulently obtain registration by providing misleading information in their applications for registration.  [Paragraph 35-10(1)(b)]

Example 3.7  

The KIO Trust is registered with the ACNC.  It is brought to the attention of the ACNC Commissioner that the trust provided false information in its application for registration, including making misleading statements about the identity of responsible entities and providing misleading information about the nature of its purpose and activities.  The trust’s registration can be revoked by the ACNC Commissioner.

3.85               Registration may also be revoked where an entity has contravened, or is more likely than not to contravene a provision of the Bill, or has not complied, or is more likely than not to not comply, with a governance standard or external conduct standard.  [Paragraph 35-10(1)(c)]

3.86               The ACNC Commissioner will aim to use education and guidance to assist registered entities to understand and comply with their obligations under this Bill. 

3.87               However, where enforcement action is required the ACNC Commissioner will have a range of enforcement powers, including the power to revoke registration, to ensure he or she can provide appropriate and effective regulatory responses in a range of circumstances.  Further information on the compliance approach of the ACNC Commissioner can be found in the June 2012 Australian Charities and Not-for-profits Commission Taskforce Implementation Report .

Example 3.8  

The FM Foundation contravenes the Bill by not notifying the ACNC Commissioner of a change to the responsible entities of the Foundation.  The change in the responsible entity is brought to the ACNC Commissioner’s attention when that responsible entity commits fraud by entering into a contract with a spouse to acquire assets at a substantial discount.  The ACNC Commissioner directs the foundation not to perform the contract.  The FM Foundation fails to comply with the direction.  The ACNC Commissioner may revoke the registration of the Foundation.

3.88               This ground of revocation allows the Commissioner to consider both contraventions and cases where it is more likely than not that an entity will contravene a provision of the Bill and both non-compliance and cases where it more likely than not that the registered entity will not comply with the governance and external conduct standards.

3.89               This ground only covers a situation where there is a substantial or significant likelihood of a contravention or non-compliance and would not extend to a situation where there was only a small chance of a contravention or non-compliance occurring.

3.90               In determining whether an entity is more likely than not to contravene a provision of this law or is more likely than not to not comply with a governance standard or external conduct standard, the ACNC Commissioner must have sufficient, reliable and accurate evidence which clearly indicates that there will be a contravention. 

3.91               A mere suspicion, rumour or possibility of a likely contravention or likely non-compliance is insufficient for the ACNC Commissioner to take action.

3.92               In addition, a ‘reasonably believes’ test needs to be satisfied which ensures that the ACNC Commissioner will only revoke registration for likely contraventions where a reasonable individual, provided with the set of information available to the ACNC Commissioner, would conclude that it is more likely than not that a registered entity will contravene a provision of the Bill.

3.93               An example of a more likely than not contravention is when a registered entity enters into a contract, the terms of which contravene a provision of this Bill by providing for the transfer of assets contrary to the entity’s charitable purpose.  Until the registered entity performs the contract, it may not have contravened the Bill.  Yet, a contract that has not yet been performed is sufficient evidence that a registered entity is likely to contravene the Bill.  This enables the Commissioner to intervene to prevent the breach from occurring, and proactively protect the charity’s assets before they may be depleted.

3.94               Where a registered entity has a trustee in bankruptcy, a liquidator or a person authorised to manage its affairs because it is unable to pay all its debts as and when they become due and payable, that entity’s registration may be revoked.  [Paragraph 35-10(1)(d)]

3.95               This condition ensures that the ACNC Commissioner is able to act, if it is necessary, where significant charitable assets may be at risk due to the insolvency of the entity and to ensure that the public can rely on their donations to a registered entity being used for NFP purposes. 

3.96               The ACNC Commissioner may also revoke the registration of an entity that wishes to have its registration revoked as a type or subtype of entity.  For instance, where an entity wishes to change its purpose such that its current subtype is no longer appropriate.  [Paragraph 35-10(1)(e)]

Example 3.9  

The Fairsight Foundation is registered as a charity and is registered under the subtypes — entity with a purpose that is the advancement of religion and entity with a purpose that is the relief of poverty, sickness, or the needs of the aged.  The Foundation changes its activities so that it no longer meets the requirements of the subtype — entity with a purpose that is the relief of poverty, sickness, or the needs of the aged.  The Foundation requests that its registration as the subtype — entity with a purpose that is the relief of poverty, sickness, or the needs of the aged be revoked.  The ACNC Commissioner may revoke the Fairsight Foundation’s registration as a subtype.  The Fairsight Foundation continues to be registered with the subtype — entity with a purpose that is the advancement of religion. 

Example 3.10  

The Fairsight Foundation, as described above, is registered with two subtypes.  The Fairsight Foundation merges with another entity and requests that its registration be revoked.  The Foundation’s registration (as both a type and subtypes) can be revoked by the ACNC Commissioner.

Considerations for revocation of registration

3.97               The new law provides for a list of factors that the ACNC Commissioner must consider before deciding to revoke the registration of an entity.  These factors require the ACNC Commissioner to balance different considerations to ensure that any decision to revoke an entity’s registration is proportional and appropriate in all circumstances.  [Subsection 35-10(2)]

3.98               The ACNC Commissioner’s education and guidance will assist registered entities to understand and comply with their obligations under this Bill.  However, where enforcement action is required the ACNC Commissioner has a range of enforcement powers, including the power to issue directions, so that the ACNC Commissioner can provide a proportionate and effective regulatory response.

3.99               The considerations include factors to ensure that, wherever possible, other options to help promote compliance, such as education, are considered before an entity’s registration is revoked. 

3.100           In some situations, such as in relation to minor non-compliance and where other measures such as warning notices or enforceable undertakings are available, it would not be appropriate to revoke an entity’s registration. 

3.101           In other situations revocation will be necessary, even where other enforcement actions are available to the ACNC Commissioner and have not been taken. 

3.102           Revocation of registration will only be used as a last resort, but it is a necessary power to ensure that the ACNC Commissioner can act in circumstances of serious non-compliance where it would be inappropriate for an entity to remain registered.

3.103           In deciding whether or not to revoke an entity’s registration, the ACNC Commissioner must consider:

•        the nature, significance and persistence of any contravention or non-compliance [paragraph 35-10(2)(a)]

•        what action the ACNC Commissioner, the registered entity, or any of the responsible entities could have or have taken:

-       to address any contravention or non-compliance (or prevent any such contravention or non-compliance that is more likely than not); or

-       to prevent any similar contravention or non-compliance [paragraph 35-10(2)(b)]

•        the desirability of ensuring that contributions made to the registered entity are applied consistently with the NFP nature and the purpose of the registered entity [paragraph 35-10(2)(c)]

•        the objects of any Commonwealth laws that refer to registration under this Bill [paragraph 35-10(2)(d)]

•        the extent (if any) to which the registered entity is conducting its affairs in a way that may cause harm to or jeopardise the public trust and confidence in the NFP sector [paragraph 35-10(2)(e)] ;

•        the welfare of members of the community (if any) that receive direct benefits from the registered entity; and  [paragraph 35-10(2)(f)]

•        any other matter that the ACNC Commissioner considers relevant [paragraph 35-10(2)(g)]

3.104           This list of factors should be considered in its entirety and a decision should be made by balancing each of the factors.

3.105           Using this list of factors, the ACNC Commissioner must consider the nature, significance and persistence of any contravention or non-compliance.  Accordingly, the ACNC Commissioner would consider differences in the case for revocation for an entity that has committed a single contravention that is of low significance and the case for an entity that has repeatedly and significantly contravened the Bill.  [Paragraph 35-10(2)(a)]

3.106           The ACNC Commissioner must also consider what action could have been taken or could be taken to address or prevent the contravention or non-compliance by the ACNC Commissioner, the registered entity or any of the responsible entities.  [Paragraph 35-10(2)(b)]  

3.107           This factor ensures that the ACNC Commissioner considers the options available to address or prevent the contravention or non-compliance (for example education or an enforceable undertaking), and what action has been taken.   

3.108           This allows the ACNC Commissioner to acknowledge differences between a registered entity that took steps to prevent or address non-compliance or contravention and one that did nothing or was deceptive. 

3.109           This factor also allows the ACNC Commissioner to consider what action has been taken by the registered entity, responsible entity or ACNC Commissioner themselves, to address the contravention or non-compliance since it was made known. 

3.110           Furthermore, this factor also requires the ACNC Commissioner to consider the range of their enforcement powers to ensure they choose the most appropriate response to remedy the issue in the circumstances.

3.111           The ACNC Commissioner must also consider the desirability of ensuring that contributions made to the registered entity are applied consistently with the NFP nature and purpose of the entity.  [Paragraph 35-10(2)(c)]

3.112           This factor ensures that where contributions have been made by donors, volunteers, funding bodies etc.  For a registered entity to carry out a particular activity or to pursue a charitable purpose, the ACNC Commissioner can act to protect their interests.  This factor also ensures that the ACNC Commissioner can consider whether there is a risk of fraud or misapplication of those contributions, which in the context of NFPs would be a very serious compliance issue. 

3.113           This factor further allows the ACNC Commissioner to consider the need to ensure the proper application of a registered entity’s assets.

3.114           A contribution to a registered entity is defined as the provision of money, property or any other benefit to the entity and includes the following:

•        the provision by an individual of her or his time or reputation to the entity; and

•        the provision by a government of tax concessions or other forms of government support to the entity.

[Section 205-40]

3.115           The ACNC Commissioner is also required to consider the objects of other Commonwealth laws that refer to registration with the ACNC in deciding whether revocation is appropriate.  For instance, it will be necessary to consider the taxation consequences of continuing or revoking the registration of an entity, including the integrity of the tax system.  [Paragraph 35-10(2)(d)]

3.116           The ACNC Commissioner must consider the extent (if any) to which the registered entity is conducting its affairs in a way that may cause harm to or jeopardise the public trust and confidence in the NFP sector.  [Paragraph 35-10(2)(e)]

3.117           This factor allows the ACNC Commissioner to consider whether or not the contravention or non-compliance has harmed or will harm the public trust and confidence in the NFP sector, and accordingly, if revocation of registration is an appropriate consequence. 

3.118           This factor recognises the role of the ACNC Commissioner as the regulator for the whole of the NFP sector. 

3.119           Public trust and confidence, and the ways in which public trust and confidence can be strengthened and weakened are discussed in Chapter 1 - Background.

3.120           The ACNC Commissioner must consider the impact of one registered entity’s actions on other NFPs, for example, where one entity’s misdeeds cause a loss of confidence and could affect the whole sector, particularly its ability to access funding.

Example 3.11  

Sweeland Inc is registered with the subtypes — public benevolent institution and entity with a purpose that is the relief of poverty, sickness or the needs of the aged.  Sweeland Inc changes its activities so that it no longer meets the requirements of the subtype - public benevolent institution.  It continues to conduct charitable activities that help to relieve poverty.  It requests that the ACNC Commissioner revoke its subtype registration as a public benevolent institution. 

The ACNC Commissioner considers that this revocation will not jeopardise the public trust and confidence in the NFP sector, as Sweeland Inc still effectively conducts its relief of poverty activities and meets all its other regulatory obligations.  Considering all the factors listed above, the Commissioner decides to revoke Sweeland Inc’s subtype registration as a public benevolent institution. 

Example 3.12  

Monroe Kids is registered with the ACNC as a charity.  When it first registered it helped to relieve the poverty of teenagers in disadvantaged areas.  It comes to the ACNC Commissioner’s attention that Monroe Kids no longer helps disadvantaged teenagers in poverty, but runs a reputable after-school sports program for all teenagers in the area.  As such, Monroe Kids is no longer entitled to registration as a charity, as after-school sports programs are not considered charitable according to the common law definition. 

The ACNC Commissioner considers that the public trust and confidence in the sector is not at risk, as Monroe Kids is still conducting beneficial activities in the area.  However, considering all the other factors, the ACNC Commissioner decides to revoke the registration of Monroe Kids.

Example 3.13  

Core Pursuits is registered with the ACNC.  It comes to the Commissioner’s attention that the management of Core Pursuits has been using deductible gift recipient (DGR) funds to purchase lavish properties for their own personal use. 

This action may cause future donors to doubt that their donations will be used to further an organisation’s NFP purpose, and may lead to a reduction in philanthropic giving across the sector.  Core Pursuit’s actions place the public trust and confidence in the sector in jeopardy.  Having regard to the other factors listed above, the Commissioner decides to revoke Core Pursuit’s registration. 

3.121           The ACNC Commissioner must consider the welfare of members of the community (if any) that receive direct benefits from the registered entity.  This means that the ACNC Commissioner must consider whether the wellbeing of recipients of charitable services may be improved or worsened by an entity’s registration being revoked.  [Paragraph 35-10(2)(f)]

3.122           The ACNC Commissioner must also consider any other matter that he or she considers relevant.    [Paragraph 35-10(2)(g)]

Example 3.14  

The Orange Book Foundation is a registered entity that purports to provide assistance to needy people in urban centres, however, it has merely been used for money laundering purposes.  This is a significant contravention of the Bill with the potential to severely jeopardise public trust and confidence in the NFP sector.  In considering all the required factors, it would be reasonable for the ACNC Commissioner to revoke the entity’s registration even though it is the only instance of non-compliance and no other enforcement action has been taken. 

Example 3.15  

The Human Charity is a federally regulated entity that is registered with the ACNC.  A responsible entity on the Board of the Human Charity is charged with fraud.  The other responsible entities act quickly to notify the ACNC Commissioner and remove the responsible entity from the Board. 

In this case, while the contravention of the Bill is serious, the ACNC Commissioner could consider that the other board members acted quickly and appropriately to address the contravention, and that this was a single contravention of the Bill.  The issue has been addressed so there is no need for enforcement action or revocation of registration.

Example 3.16  

Aloe Wishes is a federally regulated entity that is registered with the ACNC.  Aloe Wishes enters into a related party transaction, the terms of which contravene the Bill.  Aloe Wishes has yet to complete the transaction and, prior to this, has never contravened the Bill.  Taking into account the list of factors described above, the ACNC Commissioner decides that issuing a direction to the entity not to perform the related party transaction is the most appropriate enforcement action in a situation where the entity appears not to wish to take voluntary action.

3.123           If the ACNC Commissioner decides to revoke the registration of an entity, the ACNC Commissioner must give the entity written notice (and within that notice provide a statement of reasons) within 14 days of the decision to revoke registration which clearly specifies the day on which the revocation takes effect.  [Subsection 35-10(4)]

3.124           If the reason the ACNC Commissioner revokes an entity’s registration is that the entity is not entitled to be registered, the revocation may take effect from the day the entity first ceased to be entitled or a later day, as specified by the ACNC Commissioner.  [Paragraph 35-10(3)(a)]

3.125           If the reason the ACNC Commissioner revokes an entity’s registration is that the registered entity provided, in connection with its application for registration, information that was false or misleading in a material particular, the revocation may take effect from the day on which the registration took effect, or a later day as determined by the ACNC Commissioner.  [Paragraph 35-10(3)(b)]

3.126           In all other circumstances, the revocation takes effect on the day the ACNC Commissioner decides to revoke an entity’s registration or on a later day specified by the ACNC Commissioner.  [Paragraph 35-10(3)(c)]

Show cause notices

3.127           In general, the ACNC Commissioner will pursue all other avenues to address issues before considering revocation of registration.  Where the ACNC Commissioner believes on reasonable grounds that a registered entity is not entitled to registration then prior to taking any revocation action, the ACNC Commissioner is required to give an entity a notice to show cause why an entity’s registration should not be revoked.  [Subsection 35-15(1)]

3.128           The show cause notice must state the grounds on which the notice is given and invite the registered entity to respond in writing within 28 days after the day the notice is given.  [Subsection 35-15(2)]

3.129           The notice provides the entity with the opportunity to give the ACNC Commissioner, within 28 business days, a written statement showing cause why the ACNC Commissioner should not revoke its registration.  [Paragraph 35-15(2)(b)]

3.130           This ensures that prior to the revocation of the registration of an entity, the registered entity has the opportunity to respond to the ACNC Commissioner and explain why its registration should not be revoked.  While the ACNC Commissioner will, as a matter of practice, provide education and other opportunities to remedy any problems in advance of such a notice being issued, this mechanism allows for a final opportunity to ensure that entities have an opportunity to state their case prior to revocation. 

3.131           In certain very serious cases where the Commissioner believes the circumstances warrant more immediate action, the ACNC Commissioner is not required to issue a show cause notice, or to wait for a response to a show cause notice.  [Subsection 35-15(3)]  

3.132           In such circumstances, and having regard to the factors listed in subsection 35-10(2), the ACNC Commissioner may revoke an entity’s registration where no show cause notice has been issued, and where a show cause notice has been issued, where no response has yet been received.  [Subsection 35-15(3)]

3.133           In all other circumstances, the ACNC Commissioner is required to issue a show cause notice before an entity’s registration can be revoked.

3.134           This ensures that in very serious circumstances the ACNC Commissioner is not constrained from taking immediate action where a failure to do so would have very serious implications for public trust and confidence in the NFP sector and the interests of innocent third parties who are relying on the ACNC Commissioner’s continued registration of the entity, for example, donors, volunteers and other government agencies. 

Example 3.17  

The CD Foundation is a registered entity which purports to pursue charitable purposes.  However, it has merely been acting as a conduit for a terrorist organisation.  It would be reasonable for the ACNC Commissioner to revoke the entity’s registration even though no show cause notice has been issued.

Review rights

3.135           The ACNC Commissioner’s decision to revoke the registration of a registered entity is a reviewable decision.  [Section 35-20]

3.136           The entity has the right to object to a decision in line with the review and appeals provisions.  These are explained in Chapter 12-Reviews and appeals.

Do not remove section break.



Outline of chapter

4.1                   The Bill provides for the Australian Charities and Not-for-profits Register (the ACN Register) and specifies the information that the ACNC Commissioner is to maintain in the ACN Register about each registered, and formerly registered, entity.

4.2                   The ACN Register is to be made available on the internet.

4.3                   The ACNC Commissioner may remove or withhold information from the ACN Register in specified circumstances, subject to a public interest test.

Summary of new law

4.4                   The ACNC Commissioner is to maintain the ACN Register and include specified information about each registered, and formerly registered, entity.

4.5                   The specified information includes name, contact and identifying details for each entity, the type and subtype of registration, governing rules, responsible entities, information from financial and information statements, details of any enforcement action taken under Chapter 4 of the Bill and any resolution or response to such a matter and any other information prescribed in regulations. 

4.6                   The ACN Register is to be maintained electronically and made available on the internet.

Detailed explanation of new law

ACNC Commissioner to maintain the ACN Register

4.7                   Currently there is no single source of standardised information where the public can easily obtain information about not-for-profit (NFP) entities. 

4.8                   The Bill provides for a single source of easily accessible public information to increase transparency, enable NFP entities to demonstrate appropriate levels of accountability and governance, provide information to the public about registered entities and promote public confidence, informed choices and philanthropy. 

4.9                   The information to be included on the ACN Register is consistent with information made available on the internet sites of regulators of charities in overseas jurisdictions.

4.10               The ACNC Commissioner is to maintain the ACN Register which will include specified information.  [Subsection 40-5(1)]

4.11               The information includes the contact and identifying details of registered and formerly registered entities.  This includes the entity’s name, contact details (including address for service) and the entity’s Australian Business Number (ABN).  [Subparagraphs 40-5(1)(a)(i) to (iii) and 40-5(1)(b)(i) and (ii)]

4.12               The ACN Register must also provide information about the registration status of entities.  This includes, the type and subtypes under which entities are (or were) registered and the dates of effect of each registration.  [Subparagraphs 40-5(1)(a)(iv) to (vi) and 40-5(1)(b)(iii) to (v)]

4.13               The information also includes the entity’s governing rules (as explained in Chapter 13 — Miscellaneous) and the name of each responsible entity and the position held by that responsible entity.  [Subparagraphs 40-5(1)(a)(vii) and 40-5(1)(b)(vi) and paragraph 40-5(1)(c)]

4.14               The ACN Register contains information statements and financial reports (including any accompanying audit or review report that the registered entity has provided).  The information contained in the information statements and financial reports is explained in Chapter 6-Reporting.  [Paragraphs 40-5(1)(d) and (e)]

4.15               The details of any enforcement action taken by the ACNC Commissioner and any resolution of those matters or response that the entity has made to those matters, as well as any other information prescribed in the regulations is included on the ACN Register.   [Paragraphs 40-5(1)(f) and (g)]

4.16               The ACNC Commissioner must allow a registered entity 14 days to respond to any enforcement action before the details of the enforcement action are published on the ACN Register, unless the ACNC Commissioner considers that the public interest requires the information to be included on the ACN Register earlier.  [Subsection 40-5(2)]

4.17               This provides registered entities with an opportunity to respond to the action, and to make the ACNC Commissioner aware of any factors that he or she may not have otherwise been aware of, before information about the enforcement action is made publicly available.

4.18               This ensures that serious enforcement issues are not kept hidden from innocent third parties such as donors and volunteers while ensuring that appropriate context is provided on the ACN Register, both in terms of allowing any response from the entity to be provided and ensuring that the resolution of these matters is also provided.  [Paragraph 40-5(1)(f)]

Example 4.1  

The SSSF Foundation is registered with the ACNC.  It comes to the Commissioner’s attention that two directors of SSSF have been using deductible gift recipient (DGR) funds to purchase vehicles for their own personal use. 

The Commissioner removes each director from their position.  This misuse of DGR funds is a serious matter and if the Commissioner did not immediately publish that information on the Register, then innocent third parties such as individual donors would be disadvantaged were they to look on the ACN Register and see no problems with SSSF.  Donors may be misled and disadvantaged if they were to make donations based on an incomplete ACN Register. 

Having regard to the other factors listed above, the Commissioner decides to immediately publish these details on the ACN Register.

4.19               Some of the information provided by entities as part of the information statement may not be required to be published on the ACN Register.  The Bill ensures that the information is treated appropriately by providing that information which is classified as “not for publication” is not published on the ACN Register.  [Paragraph 40-5(1)(f)]

4.20               The ACNC Commissioner sets forms in accordance with the approved form rules explained in Chapter 13 — Miscellaneous.

4.21               The ACNC Commissioner may also publish any other information that is specified in the regulations and that the ACNC Commissioner is authorised to collect under a provision of the Bill.  [Paragraph 40-5(1)(g)]

4.22               The ACN Register is to be maintained by electronic means and made available for public inspection on the internet.  Internet availability assists the public to access and search the information easily.  [Subsections 40-5(3) and (4)]

4.23               The ACNC Commissioner can make protected Commission information available only in accordance with the secrecy disclosure regime explained in Chapter 11 — Secrecy.  [Subsection 40-5(4) (note)]

The ACNC Commissioner may withhold or remove information from the ACN Register

4.24               The ACN Register is intended to support the transparency of the NFP sector and enhance public confidence.  Therefore the information specified should generally be provided for all registered entities. 

4.25               However, the Bill provides the ACNC Commissioner with the authority to withhold, or remove, information from the ACN Register under specified circumstances.   [Section 40-10]

4.26               This authority assists the ACNC Commissioner to provide information that is factually correct and genuinely informative, is not offensive and does not raise public safety concerns. 

Sensitive commercial information

4.27               The circumstances in which the Commissioner may withhold or remove information include that the public release of the information may cause detriment to the entity because it is sensitive commercial information.  [Paragraph 40-10(2)(a)]

4.28               For example, in considering whether to release information that may be commercially sensitive, the ACNC Commissioner may consider the implications of not releasing this information, including the effect that this would have on the public interest. 

4.29               The ACNC Commissioner may also consider the implications of releasing the information on the registered entity. 

Example 4.2  

XYZ Organisation is accumulating reserves to purchase property.  The ACNC Commissioner may consider whether releasing the financial information would disadvantage the entity commercially.  The information may be withheld on a temporary basis, with disclosure being postponed until the period of sensitivity has passed. 

Inaccurate, confusing or misleading

4.30               To ensure the integrity and reliability of the ACN Register, the ACNC Commissioner may decline to include information if it is considered inaccurate or likely to be confusing or misleading, or may be offensive to a reasonable individual.  [Paragraphs 40-10(2)(b) and (c)]

Public safety concerns

4.31               The Bill provides grounds to exclude information from the ACN Register if it may endanger public safety.  [Paragraph 40-10(2)(d)]

Example 4.3  

The West Women’s Shelter does not publish its address to protect its clients.  The ACNC Commissioner may withhold the entity’s address from the ACN Register.

4.32               The Commissioner would always consider the publication of an address of a women’s shelter, or similar organisation, as endangering public safety and it would therefore, not be published on the ACN Register.  In such a serious case it would not be possible for the Commissioner to reasonably conclude that a public interest in the publication of that information outweighed the safety concerns.

Regulations

4.33               The Bill provides that regulations may allow for other circumstances in which information may be withheld from the ACN Register.  This allows for any circumstances that arise to be addressed to ensure that the ACN Register provides accurate and reliable information while catering for those circumstances in which publication of information would not be appropriate.  [Paragraph 40-10(2)(e)]

4.34               The Bill provides for two types of regulation making powers.  Regulations may be made which would prescribe information that should not be published on the ACN Register, this type of information is not subject to a public interest test.  [Subsection 40-10(1)]

4.35               The Bill also provides for a regulation making power that allows for prescribed information to be withheld or removed from the ACN Register, subject to a public interest test.  This addresses the types of information where it is appropriate for the Commissioner to balance any adverse effect that may result from the publication of the information against the public interest.  [Subsections 40-10(2) and 40-10(3)]

4.36               The Governor-General may make regulations to address unique circumstances where it may not be appropriate for information or classes of information to be disclosed.  [Subsections 40-10(1) and(2)]

4.37               For example, the regulations could prescribe that certain classes of information should not be published on the ACN register where the information could adversely affect the privacy of individual donors or significantly overburden a charity with administrative costs of responding to members of the public.  The regulations may do this by allowing certain information to be withheld in part, by removing or withholding annual reports in full from publication or by withholding information about certain responsible entities.

4.38               During consultation a number of consultees raised concerns with publishing certain types of information about private ancillary funds and that this may adversely affect the privacy of individual donors and could potentially reduce philanthropic engagement.  The Governor-General will be able to make regulations addressing these concerns in the ways set out in this Chapter. 

4.39               This provides an additional safeguard mechanism to ensure that inappropriate information would not be published on the ACN Register.

Public interest test

4.40               The ACNC Commissioner may include the information on the ACN Register or decline to remove the information from the ACN Register if the ACNC Commissioner considers the public interest in the ACN Register including that information, outweighs any potential adverse effect associated with the release of the information in question.  [Subsection 40-10(3)]

4.41               The ACNC Commissioner may remove information from the ACN Register if the information has been on the ACN Register for more than 5 years, and the ACNC Commissioner considers that the public interest does not require the information to be retained on the ACN Register.  [Subsection 40-10(4)]

 



Outline of chapter

5.1                   This Chapter sets up the framework for:

      the minimum governance standards an entity must satisfy to be and remain a registered entity; and

      the minimum external conduct standards an entity must satisfy to be and remain a registered entity.

5.2                   The Governor-General may make regulations relating to the governance standards and external conduct standards. 

5.3                   The Governor-General is expected to make the standards principle-based, specifying the outcome to be achieved, rather than detailing how an entity must meet the standards in its particular situation.

5.4                   The implications of the governance standards and external conduct standards will vary according to the circumstances of a particular registered entity.  What a large entity must do to satisfy the requirements will be different from what a small entity must do to satisfy the same requirements.

Summary of new law

5.5                   ‘Governance’ is the set of practices and procedures in place to ensure that an entity operates to achieve its objectives in an effective and transparent manner.

5.6                   Governance requirements may be included in:

      existing governing rules, such as constitutions, association rules, cooperative rules, memorandum and articles of association, trust deeds, church laws and statutes;

      contracts that governments enter into with some not-for-profit (NFP) entities; and

      regulatory laws.

5.7                   The current governance requirements of a NFP entity depend on:

      the type of entity — such as whether it is unincorporated, a trust or a company limited by guarantee, subject to the legislation governing that entity type;

      whether the entity is affiliated with a peak body — such as the Australian Council for International Development that has a code of conduct for its members; and

      the sector in which the NFP operates — such as the health and education sectors, which have certain governance requirements that must be complied with for an entity to operate in that sector. 

5.8                   Some NFP entities are currently regulated by Commonwealth legislation, such as companies limited by guarantee, and some are regulated by the States and Territories, such as incorporated associations and charitable trusts.  Most are regulated by a combination of Commonwealth and State laws.

5.9                   In the absence of a registration regime, the role of de facto regulator for the NFP sector at the Commonwealth level has generally been shared between the ATO and ASIC, as discussed in Chapter 1 — Background.

5.10               The ACNC Bill sets up the framework for:

      a set of governance standards which apply to most registered entities; and

      a set of external conduct standards which apply to all registered entities, regardless of entity type; and

allows the Governor-General to make regulations relating to governance standards and external conduct standards.  The Government must publicly consult on any governance standards (or any material changes to the governance standards) prior to them being registered on the Federal Register of Legislative Instruments. 

5.11               These standards can cover such things as:

      the content of a registered entity’s governing rules;

      the conduct of the registered entity; and

      the processes that the registered entity must have in place.

5.12               There may be specific governance standards that apply differently to different groups of entities (such as those with members).

5.13               There may also be governance standards that do not apply to specified kinds of registered entity. 

5.14               The governance standards will not apply to entities that are basic religious charities (see Chapter 13 — Miscellaneous for a definition of ‘basic religious charity’).

5.15               The external conduct standards will apply to all registered entities.

5.16               Only registered entities will have access to certain Commonwealth concessions, exemptions and benefits, including tax concessions.

5.17               To be registered, most entities will be required to meet (both initially, to the extent that they can, and on an ongoing basis) the governance standards established in the regulations.

5.18               To be registered, an entity is required to meet (both initially, to the extent that they can, and on an ongoing basis) the external conduct standards established in the regulations.

5.19               When an entity applies to the Australian Charities and Not-for-profits Commission (ACNC) to become a registered charity, they will initially be required to meet any governance standards which require entities to have certain things in their governing rules in order to be registered, and to show that they have required processes in place.  Any governance standards which require certain conduct from registered entities may not be able to be demonstrated or met initially, but are to be met on an ongoing basis.

5.20               The governance and external conduct standards will set a minimum level of behaviour for all entities registered with the ACNC.  As a result, the public can be confident that the funds the community gives to registered entities are being put to an appropriate use. 

5.21               The standards will provide assurance that registered entities meet community expectations about the use of public monies, volunteer time and donations (such as using their resources efficiently), and minimise the risk of mismanagement and misappropriation.

5.22               Further, the standards will create a framework to protect entities and their mission or purpose from mismanagement, and will ensure that the entity is focussed on its mission, and not the goals or interests of others.

5.23               The standards are expected to be principle-based, specifying the outcome to be achieved, rather than detailing how an entity must meet the standards, in its particular situation.

5.24               A registered entity’s prolonged non-compliance with a governance or external conduct standard could lead to the Australian Charities and Not-for-profits Commission Commissioner (ACNC Commissioner) revoking an entity’s registration.  See paragraphs 5.71 to 5.81. 

5.25               For certain entities, the ACNC Commissioner may invoke the enforcement provisions in relation to non-compliance of the governance standards.  For all entities, the ACNC Commissioner may invoke the enforcement provisions in relation to non-compliance of the external conduct standards (except to remove or suspend the responsible entity of a basic religious charity).

5.26               The ACNC Commissioner’s education and guidance will assist registered entities to understand and comply with their obligations under the Bill.  However, where enforcement action is required the ACNC Commissioner has a range of enforcement powers, including the power to issue directions, so that the ACNC Commissioner can provide a proportionate and effective regulatory response.

5.27               For example, the ACNC Commissioner may suspend a director if the ACNC Commissioner has reason to believe the entity has not complied with the governance standards or external conduct standards, and the removal of that director is necessary to address the breach.  See Chapter 9 — Education, compliance and enforcement.

5.28               Transitional arrangements will be put in place in the regulations to allow registered entities time to make any necessary changes (for example, to internal procedures or their governing rules), to meet the governance standards and external conduct standards when they are established.

5.29               Registered entities must comply with the governance standards and external conduct standards as far as possible during the transition period without breaching their governing rules.

Detailed explanation of new law

Governance standards

5.30               The Bill sets up a framework for a set of principle-based minimum governance standards applying to most registered entities, regardless of entity type.  Registered entities must comply with these standards in order to become registered (to the extent that they can, see paragraph 5.19), and to remain entitled to be registered.  [Subsection 45-5(2)]

5.31               The Governor-General may make regulations establishing governance standards [Subsection 45-10(1)] .   These standards must be prospective see subsection 12(2) of the Legislative Instruments Act 2003 .

5.32               The Government must publicly consult on any governance standards (or any material changes to the governance standards) prior to them being registered on the Federal Register of Legislative Instruments.  Before the Governor-General considers making a regulation relating to the governance standards, the Minister must be satisfied that:

•        appropriate consultation has been undertaken with:

-       the not-for-profit sector (including through entities that represent parts of the sector);

-       entities that have expertise in fields relevant to the proposed regulation;

-       entities that are likely to be affected by the proposed regulation; and

•        relevant input received as part of that consultation has been considered and adequately taken into account.

The Government’s consultation process could involve providing relevant entities with notifications inviting them to make submissions by a specified date, or to participate in public hearings.  The fact that consultation does not occur, or that input is not taken into account, does not affect the validity or enforceability of the regulation.  These changes replace the more general consultation requirements within Part 3 of the Legislative Instruments Act 2003 [Subsection 45-15]

5.33               The standards can introduce principles that an entity must meet about such things as:

      ensuring that its governing rules provide for a specified matter;

      acting, or not acting, in a specified manner; or

      establishing and maintaining processes for the purpose of ensuring certain matters,

in order to be and to remain entitled to be registered.

[Subsection 45-10(2)]

5.34               To be registered, most entities will be required to meet (both initially, to the extent that they can, and on an ongoing basis) the governance standards established in the regulations — see Chapter 3 — Registration.

5.35               There may be standards that do not apply to specified kinds of registered entity.  [Subsection 45-10(3)]

5.36               The governance standards will not apply to entities that are basic religious charities (see Chapter 13 — Miscellaneous for a definition of ‘basic religious charity’).  [Subsection 45-10(5)]

5.37               In addition, there may also be specific governance standards that apply differently to different groups of entities (such as those with members or Indigenous charities).  [Subsection 45-10(4)]

5.38               This could include the regulations requiring members of certain bodies to meet sector developed codes of conduct.  In such a case, a prescribed sector developed code of conduct would be binding only on those members of an association or organisation that are signatories to the code, and a breach of the prescribed sector developed code of conduct would be a breach of the Bill.  By allowing for the adoption of sector developed codes of conduct, the Government can utilise a co-regulatory model of governance where the sector is interested in developing such an approach.

5.39               Further, the ACNC Commissioner can endorse other codes of conduct, for entities who are members of certain bodies, as meeting the requirements of the governance standards.

5.40                The governance standards cannot prevent a registered charity from undertaking an activity where that activity furthers, or is in aid of, its purpose, and that activity is advocating or attempting to change the law or government policy except where that activity is in breach of an Australian law [Subsection 45-10(6)] .   This will protect the independence of registered entities from inappropriate Government interference, and ensure them sufficient autonomy in carrying out their operations by ensuring the governance standards cannot limit a registered entity’s ability to make its own decisions on how to best meet its mission without undue influence and control from the Commonwealth Government and its agencies. 

5.41                 The governance standards will ensure a minimum level of accountability across the sector.  If an entity is meeting the governance and external conduct requirements as established in the regulations, it does not mean that they are meeting best practice governance outcomes (although they may be).

5.42               The governance standards will give members, donors and volunteers of registered entities, and the rest of the public, confidence that a registered entity is operating openly, accountably and transparently, for its stated purpose, and in an effective and efficient manner, and is minimising the risk of mismanagement and misappropriation.  [Subsection 45-5(1)]

Satisfying the standards

5.43               The standards are expected to be principle-based, specifying the outcome to be achieved, rather than detailing how an entity must meet the standards, in its particular situation.

5.44               The implications of the governance standards are expected to vary according to the circumstances of a particular registered entity. 

5.45               Registered entities cannot choose whether to meet the standards in the regulations, but they can choose how they meet the standards, taking into account their specific situation.

5.46               In deciding what processes are reasonable for the entity to implement to satisfy the requirements, the registered entity would consider its size, the extent to which it receives donations, grants and other monies from governments or the public, the number of beneficiaries and the potential impact on them. 

5.47               What a large entity must implement to satisfy the requirements will be different from what a small entity must do to satisfy the same requirements.

5.48               The larger an entity, and the more public monies it receives, the higher the community expectation that the entity is operating efficiently, effectively and consistently with its stated purposes, and therefore the more the entity can be expected to do to meet that expectation.

5.49               Smaller entities are not expected to be less transparent; however, their smaller nature usually means the risk of misuse of funds would be less than for a larger entity. 

5.50               A smaller entity would usually have a smaller risk of funds being mismanaged or misappropriated, as both the value and the volume of transactions would usually be less, and the members would usually be running the entity.  As such, the processes the entity would need to implement to safeguard against mismanagement and to operate openly and transparently would typically be less.

5.51               In addition, smaller entities will often have more limited resources to develop detailed and prescriptive governance policies.

5.52               The ACNC Commissioner will release guidance material to assist entities to determine how to comply with the governance standards. 

External conduct standards

5.53               The Bill sets up a framework for a set of principle-based minimum external conduct standards applying to all registered entities, regardless of entity type, to regulate funds sent by registered entities outside Australia, and activities engaged in by these entities outside Australia.  Registered entities must comply with these standards in order to become registered (to the extent that they can, see paragraph 5.19), and to remain entitled to be registered.  [Subsection 50-5(2)]

5.54               The Governor-General may make regulations establishing external conduct standards [Subsection 50-10(1)] .  Before the Governor-General considers making a regulation relating to the external conduct standards, the Minister must be satisfied that:

•        appropriate consultation has been undertaken with:

-       the not-for-profit sector (including through entities that represent parts of the sector);

-       entities that have expertise in fields relevant to the proposed regulation;

-       entities that are likely to be affected by the proposed regulation; and

•        relevant input received as part of that consultation has been considered and adequately taken into account.

The Government’s consultation process could involve providing relevant entities with notifications inviting them to make submissions by a specified date, or to participate in public hearings.  The fact that consultation does not occur, or that input is not taken into account, does not affect the validity or enforceability of the regulation.  These changes replace the more general consultation requirements within Part 3 of the Legislative Instruments Act 2003 [Subsection 50-15]

5.55               The standards can introduce principles that an entity must meet about such things as:

      ensuring that its governing rules provide for a specified matter;

      acting, or not acting, in a specified manner; or

      establishing and maintaining processes for the purpose of ensuring certain matters,

in order to be and to remain entitled to be registered.

[Subsection 50-10(2)]

5.56               The external conduct standards can only relate to matters that are external to Australia, or to matters that are not external to Australia but that are closely related to, or have or will have a significant impact on, entities, things or matters outside Australia.  [Subsection 50-10(3)]

5.57               Australian NFP entities in the past have sometimes provided support for terrorist and other criminal activities.  Often they did so unknowingly but occasionally did so deliberately, whether to directly help the organisations conducting those illegal activities or as a means to achieving their legitimate charitable ends.

5.58               The purpose of these external conduct standards is to prevent Australian registered entities providing support in the future and so promote transparency and confidence across the sector and the general public that charitable funds and services are applied for legitimate purposes, and are not contributing to terrorist or other criminal activities (from an Australian perspective).  [Subsection 50-5(1)]

5.59               The external conduct standards are expected to be based on the requirements of the Financial Action Task Force’s (FATF) Special Recommendation VIII (SR VIII), and help combat the terrorist and criminal activities covered in the FATF recommendation

5.60               The FATF is an inter-governmental body established in 1989 to promote measures for combatting money laundering, terrorist financing and related threats to the integrity of the international financial system.

5.61               As a member of the FATF, Australia has agreed to comply with the FATF recommendations. 

5.62               FATF SR VIII requires FATF members to ‘combat the misuse of NPOs (nonprofit organisations, that is, NFP entities) for the purpose of terrorism financing’.  In FATF’s last review of Australia’s progress in 2005, it found that Australia was only partially compliant with SR VIII.

5.63               Protecting the NFP sector from misuse by terrorist organisations is both a critical component of the global fight against terrorism and a necessary step to preserving the integrity of Australia’s NFP sector.

5.64               The NFP sector enjoys the trust of the public and has access to a considerable source of funds.  Some entities have a global presence that provides a framework for national and international operations and financial transactions, often within or near areas that are highly exposed to terrorist activity. 

5.65               Depending on the legal form of the entity and the country they are operating in, entities may be subject to little or no governmental oversight of their overseas activities.  There may also be few formalities required for their creation (for example, there may be no skills or starting capital required, and no background checks necessary for employees). 

5.66               Terrorist organisations may take advantage of these characteristics to infiltrate the NFP sector and misuse funds and operations to provide cover for or support of terrorist activities.  Other criminal organisations can also use NFP entities for similar purposes.  The FATF recommendation covers both these situations.

5.67               The external conduct standards will promote transparency and greater confidence in the sector, across the donor community, and with the general public that charitable funds sent, and services provided, overseas are reaching legitimate beneficiaries and being used for legitimate purposes. 

5.68               Systems that promote a high degree of transparency, integrity and public confidence in the management and functioning of all NFP entities are integral to ensuring the sector cannot be misused for terrorist financing.

5.69               Similar to the governance standards, the external conduct standards are expected to be principle-based, specifying the outcome to be achieved, rather than detailing how an entity must meet the standards, in its particular situation.  What a large entity must implement to satisfy the requirements will be different from what a small entity must do to satisfy the same requirements.

5.70               In deciding what processes are reasonable, the registered entity should consider not only its size (see paragraphs 5.46 and 5.51), but also the extent to which it receives donations, grants and other monies from the public (directly or via their governments), the number of beneficiaries and the potential impact on them.

Non-compliance with the governance standards and external conduct standards

Governance standards

5.71               Compliance with the governance standards is a condition of registration.

5.72               Prolonged non-compliance with a governance standard may result in the ACNC Commissioner revoking the registration of the entity — see Chapter 3 — Registration.

5.73               The ACNC Commissioner’s education and guidance will assist registered entities to understand and comply with their obligations under this Bill.  Prior to revoking an entity’s registration, the ACNC Commissioner would be expected to assist the entity in complying with the standard.  Revocation of registration is expected to be a last resort outcome. 

5.74               However, where enforcement action is required the ACNC Commissioner has a range of enforcement powers, including the power to issue directions, so that the ACNC Commissioner can provide a proportionate and effective regulatory response.  The type of enforcement power used by the ACNC Commissioner will ultimately depend on the seriousness of the situation and the particular circumstance that the ACNC Commissioner is addressing. 

5.75               If a non-complying entity is a federally regulated entity (see Chapter 9 — Education, compliance and enforcement for the definition of ‘federally regulated entity’), the ACNC Commissioner may issue a warning notice or direction to the entity if the ACNC Commissioner considers that the entity is not meeting the governance standards. 

5.76               For example, the ACNC Commissioner may suspend a director if the ACNC Commissioner has reason to believe the entity has not complied with the governance standards, and the removal of that director is necessary to address the breach. 

5.77               The ACNC Commissioner cannot remove or suspend a responsible entity of a basic religious charity.

5.78               See Chapter 9 — Education, compliance and enforcement for further information on the situations that the ACNC Commissioner can use these powers, and the extent of the powers.

External conduct standards

5.79               Compliance with the external conduct standards is a condition of registration for all registered entities.

5.80               The ACNC Commissioner may use enforcement powers (such as issuing a warning notice, injunction or suspending a director) on any entity if the ACNC Commissioner considers that that an entity is not meeting the external governance standards (except to remove or suspend the responsible entity of a basic religious charity).  This is different to the governance standards, where the ACNC Commissioner may only use the enforcement powers if the non-complying entity is a federally regulated entity.

5.81               See Chapter 9 — Education, compliance and enforcement for further information on the situations that the ACNC Commissioner can use these powers, and the extent of the powers.

 



Chapter 6          

Reporting and record keeping

Outline of chapter

6.1                   This Chapter outlines a new ‘report-once, use-often’ general reporting framework for registered entities.

6.2                   This Chapter explains:

•        the record keeping obligations of registered entities; and

•        the reporting requirements that apply to registered entities.

Summary of new law

6.3                   ACNC will be responsible for regulating charities from 1 October 2012.  One element of this is a new general reporting framework.

6.4                   All registered entities will be required to provide an annual information statement.  The first annual information statement will be in respect of the 2012-13 financial year, and will need to be lodged with the ACNC by 31 December 2013, unless a substituted accounting period applies.

6.5                   Only medium and large entities will be required to provide annual financial reports to the ACNC.  Large entities will be required to have their financial reports audited, while medium entities can choose to either have a review or an audit.

6.6                   The proposed framework will strike a balance between minimising the compliance burden placed on registered entities, while ensuring appropriate accountability and transparency. 

6.7                   The Government will consult further on the content requirements of financial reports and implement these through regulations.  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.

Detailed explanation of new law

Reporting requirements for registered entities

Record-keeping

6.8                   Registered entities are required to keep records that correctly record and explain its transactions, and the financial position and performance of the entity.  [Subsection 55-5(1)]

6.9                   These records must be thorough enough to enable true and fair financial statements to be prepared and audited.  [Paragraph 55-5(1)(b)]

6.10               Registered entities must also keep records that correctly record its operations.  [Subsection 55-5(2)]

6.11               These records must enable a proper assessment of the entity’s:

•        entitlement to be, and to remain, registered as a type or sub-type.  This assessment is undertaken by the Australian ACNC Commissioner;

•        the entity’s compliance with the Bill and regulations.  This assessment is undertaken by the ACNC Commissioner; and

•        compliance with any taxation law.  This assessment is undertaken by the Commissioner of Taxation.

6.12               This assessment is known as a recognised assessment activity.  The requirements in the Bill that entities keep records, and report on the basis of these records, are to enable such assessments to be conducted.  [Section 55-10]

6.13               In undertaking such an assessment, the ACNC Commissioner will assess the adequacy of records maintained to enable an assessment of compliance with any taxation law.  However, the ACNC Commissioner is not required to assess compliance with any taxation law, as this function will continue to be performed by the Commissioner of Taxation. 

6.14               The records must be in English, or readily accessible and easily convertible into English.  That is, if the records are not in written form (for example, if they are in an electronic medium such as a computer disc or USB), they must be in a form which is readily accessible and convertible into English by way of a computer program.  [Subsection 55-5(3)]

6.15               This allows registered entities to store their records electronically.

6.16               Entities should ensure the conversion of electronic records to a compatible format when upgrading or changing data-processing capabilities.

6.17               These records must be retained by the entity for seven years after the transactions, operations or acts covered by the records are completed (unless the ACNC Commissioner notifies the entity that they do not need to retain their records).  [Subsections 55-5(4) and (5)]

6.18               Failure of the entity to maintain and keep adequate records constitutes an offence by the registered entity, and carries a penalty of 20 penalty units.  [Subsection 55-5(6)]

6.19               The offence is one of strict liability.  Strict liability is the legal responsibility for damages, or injury, even if the person found strictly liable was not at fault or negligent.  [Subsection 55-5(7)]

6.20               The use of strict liability for penalties is consistent with the Commonwealth guide for framing offences.  Strict liability penalties provide a strong incentive to adopt measures to comply with the requirements.  In this case, imposing strict liability is an effective way of ensuring compliance with an obligation to keep financial records. 

6.21               The penalty of 20 penalty units is comparatively low when compared to penalties imposed on for-profit entities for similar offences. 

6.22               Twenty penalty units currently equates to $2,200.

Proportional reporting requirements - revenue thresholds

6.23               In order to minimise the compliance burden placed on registered entities, reporting requirements under the Bill are proportional to the size of registered entities, based on a revenue threshold.  There are three tiers for small, medium and large entities.

6.24               A small registered entity is an entity with annual revenue of less than $250,000.  [Subsection 205-25(1)]

6.25               A medium registered entity is an entity with annual revenue of less than $1 million that is not a small registered entity.  [Subsection 205-25(2)]

6.26               A large registered entity is an entity with annual revenue o f $1 million or more.  [Subsection 205-25(3)]

6.27               Revenue is calculated in accordance with the relevant accounting standards issued by the Australian Accounting Standards Board [subsection 205-25(4)] .  More information on the accounting standards can be found at www.aasb.gov.au

6.28               The ACNC Commissioner has the discretion to treat an entity as either small, medium or large for a financial year.  [Subsection 205-25(5)]

6.29               To exercise this discretion the ACNC Commissioner must be of the opinion that the entity, while not that size for one financial year, has been that size in the past, and is likely to return to that size in following financial years.

6.30               This allows the ACNC Commissioner to take a flexible approach, where, for example, a one-off financial event would require an entity to meet the reporting requirements of a higher tier for a single year.  This ensures that an unnecessary compliance burden is not placed on registered entities.

Example 6.1  

For the past ten years the Food Fabulous Foundation has had annual revenue of between $400,000 and $500,000 per year, and as such has reported as a medium entity every year.

The Foundation receives a bequest of $900,000 in one financial year, meaning that it would fall under the definition of a large entity for that year. 

Under these rules, the ACNC Commissioner may exercise his or her discretion and allow Food Fabulous to report in line with the requirements for a medium entity for that year, including having its report reviewed rather than audited. 

In the following financial year the Foundation has annual revenue of $415,000 and reports as a medium entity.

Information statements

6.31               NFP entities generally operate for a broad public benefit, and are relied on by many Australians, often by those individuals who are the most vulnerable in our community.

6.32               NFPs play a unique role in Australia, and as a result are funded by governments, both directly and indirectly, and by donations from members of the public.  This unique role means that governments often afford them special treatment by way of exemptions, concessions and benefits from a range of laws and fees. 

6.33               It is therefore appropriate that registered entities have some level of accountability to the public and meet community expectations about the behaviour of entities in receipt of public monies and support.

6.34               All registered entities will be required to provide the ACNC Commissioner with an information statement for each financial year [Subsection 60-5(1)] .  The first annual information statement will be in respect of the 2012-13 financial year, and will need to be lodged with the ACNC by 31 December 2013, unless a substituted accounting period applies (further information on substituted accounting periods is provided below).

6.35               The information will be used to carry out recognised assessment activities, including whether entities remain entitled to be registered by the ACNC, and can continue to access exemptions, concessions and other benefits for which registration is a necessary pre-condition (for example, tax concessions).

6.36               Information statements must be submitted in the approved form.  This means that the ACNC Commissioner can decide what information needs to be provided and the way it needs to be provided.  [Section 60-5]

6.37               The ACNC can be expected to require information relating to such things as governance, finances, activities, purposes, objects and beneficiaries of the registered entity. 

6.38               The information statement may be proportional, with the ACNC Commissioner able to approve different forms for small, medium and large registered entities.  [Note in subsection 60-5(1)]

6.39               The information statement must be prepared and lodged with the ACNC Commissioner no later than six months after the registered entity’s reporting year.  This requirement aligns with the maximum times for lodgement of such reports under existing NFP regulation, to facilitate a smooth transition for charities to the ACNC.  The ACNC Commissioner may defer the lodgement date if the circumstances require it.  [Subsection 60-5(2) and section 190-15]

6.40               Failure to provide an information statement to the ACNC Commissioner by the due date may result in administrative penalties being applied to the entity.  Administrative penalties are explained in detail in Chapter 13 — Miscellaneous.

6.41               Information statements submitted by registered entities will be available to the public, except for those parts that are classified as ‘not for publication’ in the approved form [paragraph 40-5(1)(d)] .  The publication of the information statements will assist in increasing transparency of the sector’s operations and activities.

6.42               To ensure the ACNC is able to fulfil its role to act as a ‘one-stop shop’ regulator and to support transparency and accountability for the NFP sector, disclosure of information held by the ACNC is permitted in certain circumstances where authorised under the secrecy framework in Part 7-1 of the Bill.

6.43               Under the secrecy framework, an ACNC officer is prohibited from disclosing any personal information except where consent is given by the responsible entity to which the information relates or where the disclosure is for the purpose of including it on the ACN Register and it is necessary to achieve the objects of the Bill. 

6.44               The Bill provides a comprehensive secrecy regime to ensure that the ACNC appropriately manages the information provided to it.  For further information on protected information, secrecy and disclosure of information, see Chapter 11.

6.45               If a large or medium registered entity identifies a material error in its information statement, it must give the ACNC Commissioner a corrected statement within 28 days of the error being identified.  [Subsections 60-65(1) and (2)]

6.46               If a small registered entity identifies a material error in its information statement, it must give the ACNC Commissioner a corrected statement within 60 days of the error being identified.  [Subsections 60-65(1) and (2)]

6.47               Failure to re-lodge an information statement within the required time period may result in administrative penalties being applied to the entity.

6.48               This ensures that the public and the ACNC have access to the latest and most accurate information and ensures the protection and enhancement of public confidence and trust.

Annual financial reports

6.49               In addition to the annual information statement, medium and large registered entities must prepare and submit an annual financial report.  [Section 60-10]

6.50               This is not a mandatory requirement for a basic religious charity (see Chapter 13 for the definition of basic religious charity).  However, if a basic religious charity chooses to lodge a financial report, it must comply with Subdivision 60-C and any associated regulations.  [Section 60-60]

6.51               The financial report must comply with the content requirements in the regulations.  [Subsection 60-15(1)]

6.52               The regulations will be the subject of further consultation.  The regulations may provide that, in most cases, the financial report will be based on accounting standards issued by the Australian Accounting Standards Board (AASB), although as noted above, these requirements will be finalised following further consultation.

6.53               Financial reports must be prepared and lodged with the ACNC Commissioner no later than six months following the end of the entity’s reporting year.  [Subsection 60-10(2)]

6.54               The ACNC Commissioner has the discretion to extend this period.  [Subsection 60-10(2)]

Substituted accounting periods

6.55               The ACNC Commissioner may approve a substituted accounting period, in lieu of a financial year ending 30 June, for a registered entity.  [Section 60-85]

6.56               Entities that want to seek approval from the ACNC Commissioner to report using a substituted accounting period must apply in the approved form.  [Subsection 60-85(3)]

6.57               Entities that notify the ACNC Commissioner, within six months of the commencement date, that they currently report under an Australian law for a period other than a financial year ending 30 June, will be taken to have been approved by the ACNC Commissioner (on an ongoing basis) to lodge their financial report to the ACNC on the basis of that other period.  That is, existing substituted accounting periods will be grandfathered for such entities, and the ACNC Commissioner’s approval to adopt the alternate accounting period will not be required in these cases.  For further information, see Chapter 14 — Transitional provisions.

6.58               Registered entities which report using a substituted accounting period will still report annually.  Instead of 31 December, these entities will be required to provide their financial reports to the ACNC Commissioner six months after the last day of their accounting period.  [Subsection 60-85(2)]

6.59               To ensure a smooth transition from one accounting period to another, the ACNC Commissioner has the power to impose any conditions that are necessary for this transition.  [Subsection 60-90]

Mistakes and errors in information statements and financial reports

6.60               If a registered entity identifies a material error in their financial report, the registered entity must supply the ACNC Commissioner with a corrected report within 28 days of the error being identified.  [Section 60-65]

6.61               This ensures that the information within the public domain is up-to-date and accurate, and reflects the true position of the entity.  This will help promote public confidence and trust in sector.

6.62               Failure to re-lodge a corrected financial report within the required time period may result in administrative penalties being applied to the entity.  Administrative penalties are explained in Chapter 13 - Miscellaneous provisions.

6.63               This ensures that the public and the ACNC have access to the latest and most accurate information.

Additional reporting requirements where ACNC Commissioner requires

6.64               The ACNC Commissioner has the authority to require a registered entity, or a class of registered entities, to provide additional information in the financial report or information statement, and to lodge additional reports, by making a written determination.  [Subdivision 60-E]

6.65               Any such reports would be used by the ACNC to meet any information requirements that extend beyond the information contained in the financial report or the annual information statement.  This type of additional reporting will only be used where necessary, for example, where there is reason to believe that a registered entity has contravened the Bill.

6.66               The ACNC Commissioner must set out the additional information or requirements.  [Sections 60-75and 60-80]

6.67               The information requested may be in relation to past or future periods, but may not relate to a period more than six years ago.   [Subsections 60-75(6) and 60-80(6)]

6.68               Depending on the circumstances, the additional report or information sought by the ACNC Commissioner may diverge from particular accounting standards.  In such cases, the regulations may require registered entities to apply all relevant accounting standards, except for any that are inconsistent with the ACNC Commissioner’s determination.  However, as noted above, this will be subject to further consultation.

6.69               The ACNC Commissioner’s power to require additional information applies to basic religious charities, consistent with existing obligations under the tax law to provide the Commissioner of Taxation with additional information.

Collective and joint reporting

6.70               The Bill provides the ACNC Commissioner with discretion to allow entities to provide collective or joint reports, in certain circumstances.  [Section 60-95]

6.71               Two or more entities which provide either joint or collective reports are known as a reporting group [Section 60-95]

6.72               A reporting group may lodge a single information statement, and if required, a single financial report for a financial year.  This is referred to as joint reporting [Subsection 60-95(1)]

6.73               A reporting group may also prepare one or more information statements, and if required, financial reports for a financial year, on a basis other than an entity-by-entity basis.  This is referred to as collective reporting [Subsection 60-95(2)]

6.74               This will allow, for example, reporting along certain lines of activity, rather than on an entity-by-entity basis, where the ACNC Commissioner approves such reporting.

6.75               For instance, the ACNC Commissioner could authorise a group of related entities which are engaged in two distinct types of charitable work to report based on the type of activities that they undertake.   [Section 60-95(2)]

6.76               Entities can seek the ACNC Commissioner’s approval, in the approved form, to prepare collective or joint reports.  [Subsection 60-95(3)]

6.77               Before making a decision to allow registered entities to report as a reporting group the ACNC Commissioner must consider a list of factors in order to ensure that the reporting group will represent the most appropriate form of report and will meet the needs of all users, including the public, the entities and regulators.  [Subsection 60-95(4)]

6.78               In deciding whether to allow two or more registered entities to form a reporting group, the ACNC Commissioner must consider:

•        how the public interest in the transparency and accountability of the registered entities is best served, including the possible effect on:

-       the public’s understanding of the activities of the registered entities and the information provided in the information statement or financial report; and

-       the public’s ability to rely upon the information provided in the information statement or financial report;

•        how the altered reporting arrangements would affect the ACNC Commissioner’s ability to conduct recognised assessment activities;

•        whether members of the reporting group have access to the same or different taxation concessions;

•        how the altered reporting arrangements may affect the Commissioner of Taxation’s ability to assess the registered entity’s compliance with taxation laws;

•        the possible effect on the compliance and administrative costs of registered entities proposed to be included in the reporting group;

•        the degree of the affiliation, control and proximity of registered entities proposed to be included in the reporting group;

•        the objects of the Bill; and

•        any other matter that the ACNC Commissioner considers relevant. 

[Subsection 60-95(4)]

6.79               In making a decision to allow registered entities to form a reporting group the ACNC Commissioner must consider all of these factors.

6.80               This assessment could involve weighing competing considerations.  For instance, the ACNC Commissioner may believe that allowing closely related entities with similar purposes to form a reporting group would best serve the public interest in accountability and transparency and would allow recognised assessment activities to be undertaken.  On the other hand, the entities may access different taxation concessions and allowing the entities to form a reporting group may reduce transparency and increase compliance costs for the entities. 

6.81               Furthermore, in a case where a group of closely related, centrally controlled entities which all access the same tax concessions wish to form a reporting group, and this consolidation would be expected to reduce compliance costs, the ACNC Commissioner may refuse to grant this request if allowing the entities to form a reporting group might allow the registered entities to reduce transparency and accountability, particularly in relation to public understanding of the activities of the entities.

6.82               In considering the degree of affiliation, control and proximity of registered entities proposed to be included in a reporting group the ACNC Commissioner would consider such factors as the extent to which the group acts like a group, how they interact together and how close each of their activities are to one another.  [Paragraph 60-95(4)(f)]

Example 6.2 :  An entity that is unlikely to be approved

Youth Help is a youth development organisation that operates in NSW and Victoria.  Its purpose is to advance the education of disadvantaged youth and to reduce youth unemployment and crime.  The organisation operates in 20 branches in locations with high numbers of disadvantaged youths across NSW and Victoria. 

The central branch of Youth Help is located in Melbourne and has a high level of affiliation with each of the other branches.  There is one common binding set of governing rules. 

However, each branch is able to make decisions about its own day to day activities, structure and management, in keeping with the overall purpose of Youth Help. 

Each branch receives different tax concessions from the Commonwealth Government in recognition of their various NFP activities.

One branch of Youth Help operates a band night each Friday night to provide a place for youths to go at night, and to raise funds for its other activities.  Local businesses and individuals donate food, time and services for the band nights, and the branch uses the Band Nights to run raffles to raise funds for its other activities.  The Band Nights are well attended by the local community. 

Another branch of Youth Help runs an op-shop to sell donated clothes, books and furniture.  It uses the funds raised from selling donated goods to provide on the job training to disadvantaged youths.

One of the branches of Youth Help donates funds to an overseas youth development organisation using monies collected from youth group attendees. 

Seven branches of Youth Help are registered as public benevolent institutions and hold DGR status for their youth development activities.

Another branch of Youth Help receives large sums of money from a testamentary trust set up by the mother of a child who benefitted from their help in the past.  The branch receives money from the trust on a quarterly basis and the letter of wishes states that the funds are to be used only for the activities of that particular branch of Youth Help.

In considering whether to approve collective reporting in this case, the ACNC Commissioner would have regard to that fact that the organisation is in receipt of large amounts of public monies from its multiple and varied fundraising activities, and donations from the testamentary trust.  This indicates that a high level of accountability and transparency to the public is necessary.

The ACNC Commissioner would also have regard to the fact that while the governing rules are held at the central branch level, each branch has decision making authority and is responsible for the management of day-to-day activities.

The ACNC Commissioner would also have regard to the fact that one branch of the organisation sends money overseas.

These factors together mean that Youth Help may not be approved for collective reporting.

6.83               The Bill does not prevent a representative member of the reporting group from lodging the report or statement on behalf of the reporting group.  However, the obligation will still remain on each individual entity to comply with their reporting obligations.  This ensures that registered entities do not attempt to use grouping arrangements to avoid individual responsibilities.

6.84               A failure to comply with the reporting requirements could result in the imposition of administrative penalties for each entity that fails to report in the reporting group.  However, the ACNC Commissioner is likely to use their discretion to not impose multiple penalties in such cases, unless the circumstances dictate that as an appropriate response.

Example 6.3 :  An entity that is likely to be approved

The Red Hat Trust is a youth development organisation that operates in NSW and Queensland.  Its purpose is to advance the education of disadvantaged youths and to reduce youth unemployment and crime.  The organisation operates in 20 branches in locations with high numbers of disadvantaged youths across NSW and Queensland.

The central branch of Red Hat Trust is located in Brisbane and has a high level of affiliation with each of the other branches.  The central branch holds the documents that govern the whole organisation.  The central branch is responsible for the day-to-day management and decision making for each branch. 

Half of the branches are registered as public benevolent institutions.  As such, they have DGR status and access to tax concessions such as FBT exemptions and income tax exemptions.  The other half of the branches receive different charitable tax concessions.

Five branches of The Red Hat Trust operate single store op-shops to raise funds from the sale of books, clothes and used furniture.

In considering whether to approve collective reporting in this case, the ACNC Commissioner would have regard to common fundraising, accounting and reporting practices of Red Hat Trust. 

The ACNC Commissioner would further note that the central branch has decision making power over each of the 20 branches.

The ACNC Commissioner would also consider the common purpose of the organisations and the lack of complexity of financial arrangements which could create a lack of transparency. 

These factors together mean that Red Hat Trust may be approved for collective reporting.

6.85               Depending on the circumstances, joint and collective reporting may diverge from particular accounting standards, such as accounting standard AASB 10 Consolidated Financial Statements .  In such cases, the regulations may require registered entities to apply all relevant accounting standards, except for those which are inconsistent with this type of reporting.  However, as noted above, this will be the subject of further consultation.

6.86               The relevant reporting tier that should be applied to joint and collective reports is the tier applying to the largest registered entity that is included in the reporting group.  [Section 60-105]

6.87               For example, if a small and medium entity combine to form a reporting group which is considered large, then the joint report can be prepared on the basis of the medium tier requirements (that is, they would be permitted to have a review rather than an audit).

6.88               Continuing with this example, if the large combined entity seeks to disaggregate into five entities that would each be considered small, and prepare five collective reports, each collective report would be prepared on the basis of the medium tier requirements, as this is the tier applying to the largest entity that is included to form the reporting group.  This will ensure that entities cannot avoid their reporting obligations by disaggregating into smaller entities that would otherwise be exempt from reporting due to their size.

6.89               Where the ACNC Commissioner approves a request to allow registered entities to form a reporting group the ACNC Commissioner may impose conditions on members of the reporting group.  [Section 60-100]

6.90               For example, the ACNC Commissioner may impose a condition that certain items be separately identified or explained in the financial reports and notes to the financial reports.  [Paragraphs 60-100(3)(a) and (b)]

6.91               The ACNC Commissioner may also impose conditions relating to the structure of financial reports.  [Paragraph 60-100(3)(c)]

6.92               For example, the ACNC Commissioner may require certain matters, such as the donations received by a DGR which is a member of the reporting group, to be separately reported.

Audits and reviews

6.93               Large entities must have their financial report audited and obtain an auditor’s report.  [Section 60-25]

6.94               Medium entities can choose to have their financial report reviewed, instead of being audited, unless they are expressly directed by the ACNC Commissioner to have their financial report audited.  [Section 60-20]

6.95               The ACNC Commissioner would only be expected to direct a medium entity to have their financial report audited in particular cases, for example, where there had been previous problems or non-compliance by the entity.

6.96               A review, in contrast to an audit, is not designed to provide assurance that the financial information reported by the entity is free from material misstatement. 

6.97               A review consists of making enquiries, primarily of individuals responsible for financial and accounting matters, and applying analytical and other review procedures.  In contrast, an audit requires undertaking audit procedures, in order to detect material misstatements and carry out specific procedures to reduce fraud risk.

6.98               A review may bring significant matters affecting the financial information to the assurance individual’s attention, but it does not provide all of the evidence that would be required in an audit.

6.99               The objective of an audit of a financial report is to enable the auditor to express an opinion on whether the financial report is prepared, in all material respects, in accordance with an applicable financial reporting framework.  When forming an opinion on the financial report the auditor needs to evaluate whether, based on the audit evidence obtained, there is reasonable assurance about whether the financial report taken as a whole is free from material misstatement.

6.100           An audit must be undertaken by a ‘registered company auditor’, an audit firm or an authorised audit company, within the meaning of the Corporations Act 2001 [Subsection 60-30(1)]

6.101           The regulations may also prescribe other entities that can undertake an audit.  [Paragraph 60-30(1)(d)]

6.102           However, reviews can be performed by a wider class of individuals.  In addition to registered company auditors, audit firms and authorised audit companies, a member of a professional body may conduct a review provided they hold the relevant designation of that professional body  [subsection 60-30(2)].  These designations will be prescribed by the Corporations Regulations 2001 .

6.103           For example, a member of the Institute of Chartered Accountants (CA) in Australia must have CA designation to perform a review of a registered entity.  Similarly, a member of Certified Practising Accountants Australia (CPA Australia) must have CPA designation.

6.104           This effectively allows a broad class of individuals to undertake reviews with some limitations to ensure that reviewers are subject to appropriate professional standards. 

6.105           In practice this means that a reviewer must be a member of a professional accounting body who is not a student member and who is subject to certain minimum standards, such as continuous professional development, in line with the requirements of the professional accounting bodies.

6.106           The audit report or review report must contain a statement from the auditor or reviewer which provides their opinion or conclusion about certain key matters.  The auditor or reviewer must form an opinion (in the case of an audit) or conclusion (in the case of a review) about whether:

•        in the case of an audit, the financial report meets all the requirements in the Bill [subsections 60-30(3) and (4)] ;

•        in the case of a review, anything has come to the reviewer’s attention that causes the reviewer to believe that the financial report does not meet all the requirements in the Bill [subsections 60-30(3) and (4)] ;

•        all information, explanation and assistance necessary for the conduct of the audit or review has been provided [subsections 60-30(3) and (4)] ;

•        the registered entity has kept sufficient financial records for a financial report to be prepared and audited [subsections 60-30(3) and (4)] ; and 

•        the registered entity has kept other records as required by the reporting requirements in the Bill [subsections 60-30(3) and (4)]

6.107           The audit or review must be conducted in accordance with auditing standards.  [Section 60-35]

6.108           A registered entity must obtain from its auditor or reviewer:

•        a written, signed, declaration to the responsible entities of the registered entity stating that, to the best of their knowledge, there have been no contraventions of any applicable code of professional conduct in relation to the audit or review; or

•        a written, signed, declaration to the responsible entities of the registered entity stating that, to the best of their knowledge, the only contraventions of any applicable code of professional conduct in relation to the audit or review are those detailed in the signed declaration.

[Section 60-40]

6.109           This ensures the audit or review is prepared without bias, conflict of interest, or the undue influence of others, and allows the public to have faith that the audit has been done to a high objective standard.

6.110           An explanation must be given if the auditor or reviewer does not believe that the financial report is in accordance with Division 60 of the Bill.  The auditor’s report or reviewer’s report must quantify the effect that non-compliance has on the financial report.  If quantifying the effect is not possible, the report must explain why.  [Sections 60-45 and 60-50]

6.111           The auditor’s report or the reviewer’s report must describe any material defects or irregularities in the financial report, and any deficiencies, failures or shortcomings in respect of:

•        whether the auditor has been given all information, explanation and assistance necessary for the conduct of the audit or review;

•        whether the registered entity has kept financial records sufficient to enable a financial report to be prepared and audited; and

•        whether the registered entity has kept the other records required by the Bill.

[Subsections 60-45(3) and 60-50(3)]

6.112           The auditor’s report or reviewer’s report is also required to include any statements or disclosures that the auditing standards require.  [Subsections 60-45(4) and 60-50(4)]

6.113           A registered entity must ensure that the auditor or reviewer has access to and is given all information that is reasonably requested.  [Section 60-55]

6.114           Further information on auditing requirements can be found at the Auditing and Assurance Standards Board website at www.auasb.gov.au .

 



Chapter 7          

Duty to notify

Outline of chapter

7.1                   This Chapter explains the obligations of entities to notify the Australian Charities and Not-for-profits Commission (ACNC) Commissioner (ACNC Commissioner) of certain matters.

Summary of new law

7.2                   The new law requires registered entities to notify the ACNC Commissioner of certain matters, in particular certain changes to the entity’s details or matters that may affect its entitlement to registration.

7.3                   In order to ensure that the ACNC Commissioner and public are informed of those matters which may affect an entity’s entitlement to registration it is necessary that the ACNC Commissioner is informed of certain changes to registered entities.

7.4                   The duty to notify the ACNC Commissioner of certain matters is also important to ensure that the information about entities that is displayed on the ACN Register is accurate and up to date.  Having the register accurate and up-to-date is necessary for the public to be able to rely on that information when making decisions.

7.5                   Registered entities with similar obligations to notify other Commonwealth Government agencies of some information will no longer be required to notify those other agencies, for example, the ATO or the ASIC.

Detailed explanation of new law

Certain matters must be notified to the ACNC Commissioner

7.6                   Registered entities have a duty to notify the ACNC Commissioner of certain matters.  [Section 65-5]

Changes to entity information

7.7                   A registered entity must notify the ACNC Commissioner, in the approved form, if the entity changes its name or address for service.  [Paragraphs 65-5(1)(a) and (b)]

7.8                   A registered entity must notify the ACNC Commissioner, in the approved form, if an entity has ceased to be, or has become, a responsible entity of the registered entity.  [Paragraph 65-5(1)(c)]

7.9                   This ensures that the details of the entity and contact details are current so that the ACN Register reflects the correct names of entities and that the ACNC Commissioner can contact registered entities or serve documents on them knowing that those documents will be received by the entity.

7.10               Keeping this information up-to-date also ensures that registered entities can receive documents and meet their regulatory obligations under the Bill.

7.11               A registered entity must notify the ACNC Commissioner of a change to its governing rules.  [Paragraph 65-5(1)(d)]

7.12               If a group of entities make changes to a common set of governing rules, it is sufficient that the ACNC Commissioner is notified by one of the entities of the changes affecting them all. 

7.13               The Bill allows  the ACNC Commissioner to approve a form allowing one authorised entity to notify of changes on behalf of all entities in a ‘group’.

7.14               However, notifying as a group does not mitigate the responsibility of each entity to notify the ACNC Commissioner of certain matters.  That is to say, if the authorised entity fails to notify on behalf of the group, each entity in the group is responsible for failing to notify the ACNC.  This ensures that registered entities do not attempt to use grouping arrangements to avoid individual responsibilities.

7.15               However, the ACNC Commissioner is likely to use their discretion to not impose multiple penalties in such cases, unless the circumstances dictate that as an appropriate response.

Other matters for which a duty to notify arises

7.16               Registered entities must notify the ACNC Commissioner of any fact or circumstance that may affect their entitlement to registration as a type or as a subtype of entity.  [Subsection 65-5(2) and paragraph 65-5(1)(e)]

Example 7.1  

The Gauge organisation has changed its activities and is no longer entitled to be registered as a charity.  It does not meet the description of the relevant entity type and must notify the ACNC Commissioner of this change.

7.17               A registered entity must notify the ACNC Commissioner if it contravenes the Bill or does not comply with a governance standard or external conduct standard, and that contravention or non-compliance is significant.  [Paragraphs 65-5(2)(a) and (b)]

7.18               A significant contravention is one that would affect an entity’s entitlement to registration.  [Paragraph 65-5(2)(c)]

Example 7.2  

The responsible entities of the Blue Glass Foundation discover that substantial funds are being sent overseas without being accounted for.  The Foundation must notify the ACNC Commissioner of this matter.

7.19               There is a difference between entitlement to registration and revocation of registration.  Before revoking registration the ACNC Commissioner must consider a range of factors as detailed in Chapter 3-Registration. 

7.20               The requirements for an entity to maintain registration are explained in Chapter 3 — Registration and Chapter 5 — Governance standards and external conduct standards.

7.21               In determining the significance of a contravention or non-compliance, the registered entity should consider:

•        the nature, significance and persistence of any contravention or non-compliance; and

•        the desirability of ensuring that contributions to the registered entity are applied consistently with the NFP nature, and the purpose of the registered entity.  [Subsection 65-5(3)]

7.22               The meaning of the term contribution is explained in Chapter 3 — Registration. 

Example 7.3  

Map It Inc, a registered entity, discovers gross errors in the entity’s financial records for the previous two years.  There is a risk that money has been misapplied.  This is a significant contravention of the Bill and Map It Inc must notify the ACNC Commissioner.

7.23               The matters which must be notified to the ACNC Commissioner are based on notification provisions of other Commonwealth regulators, including:

•        the change of company details provisions of the Corporations Act 2001 ;

•        Division 426 in Schedule 1 to the Taxation Administration Act 1953 ; and

•        the breach reporting requirements of the Banking Act 1959 .

Timing

7.24               The duty to notify arises as soon as the registered entity becomes aware of the matter.  [Section 65-5(4)]

7.25               The entity must notify the ACNC Commissioner as soon as practicable after the registered entity first has knowledge of the matter.  [Paragraph 65-5(4)(a)]

7.26               Entities registered as large or medium entities must give notice to the ACNC Commissioner as soon as possible, but no later than the end of 28 days.  [Paragraph 65-5(4)(b)]

Example 7.4  

Hands to Help is a medium registered entity.  Hands to Help makes a change to its governing rules on 1 January 2013.  Hands to Help must notify the ACNC Commissioner as soon as possible and no later than 29 January 2013.

7.27               Entities registered as small entities must give notice to the ACNC Commissioner as soon as possible, but no later than the end of 60 days for all matters except for significant contraventions of the Bill.  [Paragraph 65-5(4)(c)]

Example 7.5  

Small Helpers is a small registered entity.  Small Helpers changes its name to Big Help on 1 December 2012.  The entity has until the end of 60 days from 1 December 2012 to notify the ACNC Commissioner of the change.  As such, the entity must notify the ACNC Commissioner by the end of 30 January 2013.

7.28               Entities registered as small entities must give notice of significant contraventions of the Bill as soon as possible, but no later than the end of 28 days.  [Paragraph 65-5(4)(b)]

7.29               If multiple notifications arise at the same time in relation to one or more matters then only one notification of all matters needs to be made.  [Subsection 65-5(5)]

Example 7.6  

The Big Plan, a registered entity, moves premises and changes its name to Small Steps on the same day.  The entity may give one notification that notifies the ACNC Commissioner of both changes.

7.30               The notice must be given to the ACNC Commissioner in the approved form  [Section 65-5(1)].  The approved form rules are explained in Chapter 13 — Miscellaneous. 

Incentives to notify the ACNC Commissioner early

7.31               All registered entities must notify the ACNC Commissioner of the matters described in the sections above.

7.32               There are penalties for failing to notify the ACNC Commissioner of the matters outlined above, or for giving notice to the ACNC Commissioner late.  [note in subsection 65-5(1)]

7.33               The administrative penalties regime is proportional and dynamic.  As such, there are more severe penalties for prolonged lateness, attempts to mislead the ACNC Commissioner and for providing deliberately false information.  Conversely, penalties are more lenient where an entity innocently provides incorrect information and discloses this to the ACNC.  Further information can be found in Chapter 13 — Miscellaneous. 

Example 7.7  

J U Crowd Inc moves premises on 15 November 2012.  J U Crowd Inc notifies the ACNC Commissioner of the change to its address for service on 10 December 2012.  J U Crowd Inc has fulfilled its obligations under the Bill.

Example 7.8  

Following on from the example above, J U Crowd does not notify the ACNC Commissioner of the change to its address for service.  The ACNC Commissioner finds out that the entity’s address for service has changed on 15 January 2012.  J U Crowd may be liable for an administrative penalty.   

7.34               The ACNC Commissioner must consider the actions that an entity could have taken, or has taken, before undertaking any enforcement action, including revocation of registration.

7.35               The duty to notify is a part of encouraging cooperation between the ACNC Commissioner and the NFP sector.  The duty to notify allows registered entities to notify the ACNC Commissioner of changes and problems, and demonstrates their willingness to take action to meet their regulatory obligations and to address contraventions and non-compliance.

7.36               In considering an appropriate response to a contravention or non-compliance with the Bill, a notification made by an entity could be used by the ACNC Commissioner as evidence of the entity’s willingness and responsiveness to comply with the Bill.

Example 7.9  

Aussies Inc is a registered entity.  Liam has recently resigned from Aussies Inc and the board of Aussies Inc appoints a new responsible entity, Patrick, and notifies the ACNC Commissioner of this matter.  Upon his commencement Patrick inspects the books of Aussies Inc and becomes aware of significant errors and falsifications made by Liam in Aussie Inc’s financial reports.  Patrick brings these matters to the attention of the board, who had no prior knowledge of the problem.  The board notifies the ACNC Commissioner of the matter immediately.   

The duty to notify the ACNC Commissioner arises once the entity becomes aware of the matter, regardless of the fact that the actual contravention may have occurred many months previously.

Aussies Inc has complied with its duty to notify, although there may still be administrative penalties associated with submitting earlier false financial reports. 

In considering an appropriate response, the ACNC Commissioner may exercise his or her discretion to reduce the administrative penalty to nil, having taken into consideration Aussies Inc’s fulfilment of their duty to notify. 

Example 7.10  

Following on from the example above, Patrick brings the matter to the board’s attention, and they decide not to notify the ACNC Commissioner.  The ACNC Commissioner is made aware of the matter some time later. 

The entity is liable to an administrative penalty for failing to notify the ACNC Commissioner, as well as possible enforcement action for falsifying financial reports. 

7.37               In considering an appropriate response to the falsification of the financial reports, the ACNC Commissioner takes the entity’s failure to notify the ACNC Commissioner of the matter into consideration.  The ACNC Commissioner may exercise his or her discretion to increase the administrative penalty because the responsible entities deliberately attempted to withhold information.

 



Chapter 8          

Information gathering and monitoring powers

Outline of chapter

8.1                   This Chapter:

•        explains the information gathering and monitoring powers of the Australian Charities and Not-for-profits Commission (ACNC); and

•        sets out the scope of information that can be gathered under these powers and the circumstances in which the powers may be used.

Summary of new law

8.2                   The ACNC will be responsible for implementing a report-once, use-often reporting framework, providing education and support to the sector, and establishing a public information portal. 

8.3                   ACNC registration will be a precondition for not-for-profit (NFP) entities to access exemptions, benefits and concessions provided under Australian laws, including Australian taxation laws.

8.4                   The ACNC will be responsible for assessing whether NFP governance structures and financial positions are appropriate for these entities to receive public funds.

8.5                   Commonwealth government agencies that administer exemptions, benefits and concessions provided in Australian laws would no longer be required to assess the adequacy of NFP governance structures and financial position. 

8.6                   The ACNC will take this role over from these other Commonwealth government agencies and will therefore centralise the assessment of the adequacy of NFP governance structures and financial position.

8.7                   For the NFP sector’s regulatory framework to function and remain effective the ACNC needs to be able to access the latest available information through appropriate information gathering and monitoring powers. 

8.8                   Without these powers the ACNC would be unable to gather information beyond that contained in information statements and financial reports, and would be unable to investigate fraud and whether public funds are being used to promote charitable purposes. 

8.9                   The ACNC will administer a report-once, use-often reporting framework.  A part of the framework will be the ‘charity passport’ which will be used by registered entities to meet the majority of their financial and governance reporting requirements. 

8.10               Commonwealth government agencies will use information in the passport to satisfy their particular information requirements and will not be required to verify the accuracy of information.  Through time it is possible that information in the charity passport could satisfy the requirements of State and Territory government agencies.

8.11               Information contained in the passport must be correct and accurate for the report-once, use-often framework to function effectively and reduce the red-tape faced by NFPs.  The information gathering and monitoring power enables the Australian Charities and Not-for-profits Commission Commissioner (ACNC Commissioner) to validate the accuracy of the information contained in the passport. 

8.12               Under its secrecy framework the ACNC will be able to share information with Australian government authorities where the sharing of information is reasonably necessary to promote the object of the Bill.

8.13               The ACNC will not be responsible for ensuring that product and service standards are met.  However, to function effectively as a one-stop shop regulator for the sector, the ACNC will need to have appropriate powers to take samples of products or inspect items on premises with a view to sharing the information gathered with relevant authorities.

8.14               It is also critical for the legislation to contain safeguards to protect the interests of registered entities and the privacy of employees of these entities.  This will be achieved by having specific conditions that are required to be satisfied prior to the ACNC using these powers. 

8.15               Additionally, the scope of the powers will be limited to information that is absolutely necessary for the ACNC to administer the sector’s regulatory framework. 

Information gathering and monitoring powers

8.16               The ACNC Bill provides the ACNC Commissioner with powers to gather information or request documents, search premises and inspect items on premises, and secure documents or electronic equipment found on premises. 

8.17               The ACNC Commissioner can use these powers to determine whether a registered entity has complied with:

•        provisions of the ACNC Bill, including provisions that create offences, or administrative penalties;

•        registration conditions required to maintain ACNC registration; and

•        provisions in the Crimes Act 1914 or the Criminal Code that creates offences related to the ACNC Bill.

8.18               The ACNC Commissioner will also be able to use these powers to determine whether information provided by registered entities, including information required to be provided under the ACNC Bill and information provided on a voluntary basis, is correct and accurate.

8.19                 These powers are required to support the regulatory framework administered by the ACNC and the ACNC’s role as a one-stop shop regulator for the sector. 

Detailed explanation of new law

Information gathering powers

8.20               This Bill provides the ACNC Commissioner with the power to gather information or documents that are reasonably necessary for the purposes of determining whether:

•        a registered entity has complied with a provision subject to monitoring in the ACNC Bill; or

•        information given by a registered entity, either on a voluntary basis or to fulfil an obligation under the ACNC Bill, is correct and accurate.

[Subsection 70-5(1)]

8.21               The ACNC Commissioner would be able to gather the required information or documents from any entity that could reasonably be expected to have the information required. 

8.22               The ACNC Commissioner can send information requests to any entity; requests do not have to be constrained to registered entities.  This includes for example banks and financial institutions that manage the funds of registered entities, or any other entity that is affiliated with the registered entity. 

8.23               The information that can be requested is confined to information that is reasonably necessary to determine whether a provision subject to monitoring has been, or is being, complied with, and whether information subject to monitoring is correct and accurate. 

8.24               Further information on the scope of provisions subject to monitoring and information subject to monitoring is provided in paragraphs 8.54 to 8.59.

8.25               The ACNC Commissioner is required to issue a written notice to an entity requesting the entity:

•        to give to the ACNC Commissioner, within the period and in the manner and form specified in the notice, any information;

•        to attend and give evidence before the ACNC Commissioner for the purpose of obtaining information;

•        to produce to the ACNC Commissioner, within the period and in the manner specified in the notice, any documents; or

•        to make copies of any documents and to produce to the ACNC Commissioner, within the period and in the manner specified in the notice, those copies.

[Subsection 70-5(2)]

8.26               For the purposes of providing the ACNC Commissioner with evidence, the ACNC Commissioner may require information to be given on oath or affirmation and to be given orally or in writing.  The ACNC Commissioner (or an ACNC officer) may administer an oath or affirmation.  [Subsection 70-5(3)]

8.27               If an entity does not comply with the written notice issued by the ACNC Commissioner the entity commits an offence.  The maximum penalty that the entity is liable for is 20 penalty units.  [Subsection 70-5(4)]

8.28               This penalty is low when compared to penalties imposed on for-profit entities for similar offences (see for example Division 353 in Schedule 1 to the Taxation Administration Act 1953).

8.29               To ensure entities have sufficient time to comply with a written request issued by the ACNC Commissioner, entities are required to be given a minimum of 14 days to comply .  [Subsection 70-5(5)]  

8.30               Written notice issued by the ACNC Commissioner must outline the implications of not complying with the request, including the implications of providing false or misleading information or documents under sections 137.1 and 137.2 of the Criminal Code.  [Subsection 70-5(6)]

8.31               As part of the ACNC Commissioner’s general information gathering powers, the ACNC Commissioner is able to inspect documents provided by entities and to make and retain copies of the documents.  [Section 70-10]  

8.32               This power is required in situations where the ACNC Commissioner needs to examine significant quantities of documents and information, and having to do so with limited time would be impractical. 

8.33               To avoid doubt the ACNC Commissioner will be able to retain possession of copies of documents provided by entities to meet their requirements in the written notice given by the ACNC Commissioner.  [Section 70-20]   

8.34               The ACNC Commissioner would have the authority to take and retain for as long as is necessary, possession of an original document provided by entities [Subsection 70-15(1)]  

8.35               Generally, the ACNC Commissioner would take certified copies.  However, in specific cases where originals are required to prevent evidence from being destroyed of altered, the ACNC Commissioner would be able to retain the original document. 

8.36               For example, if the ACNC is provided access to a registered entity’s contractual documentation and there is a risk that the entity could destroy or alter the contract which contains incriminating evidence, the ACNC Commissioner would be able to retain the original.     

8.37               To ensure that the entity providing the document is not disadvantaged by the ACNC Commissioner maintaining possession of the original document, the entity will be entitled to be supplied with a certified copy of the document.  [Subsection 70-15(2)]

8.38               The copy certified by the ACNC Commissioner must be received in all courts and tribunals as evidence as if the documents were original.  [Subsection 70-15(3)]  

8.39               This subsection further ensures that the entity is not disadvantaged by the ACNC Commissioner maintaining possession of the original document.

8.40               As a safeguard, until the ACNC Commissioner supplies the certified copy of the original documents, the entity which provided the ACNC Commissioner with the document will have the right to inspect and make copies of, or take extracts from, the document.  [Subsection 70-15(4)]  

8.41               An individual will not be excused from complying with a notice given by the ACNC Commissioner on the grounds that complying with the notice may incriminate the individual or expose the individual to a penalty.  [Subsection 70-25(1)]  

8.42               However, the use of the information that incriminates the individual will be constrained.  In particular, the information will not be admissible in evidence against the individual in criminal proceedings or proceedings in relation to the recovery of a civil penalty, this includes information obtained as a direct or indirect consequence of the individual providing information.  [Subsection 70-25(2)]     

8.43               Providing a blanket no self-incrimination provision could seriously undermine the effectiveness of the regulatory scheme administered by the ACNC.  Information gathering and monitoring powers are the main channels available to the ACNC Commissioner to gather information and ultimately monitor ongoing eligibility to registration.  The Guide to Framing Commonwealth Offences notes that in these situations overriding the privilege is acceptable. 

8.44               For example, the privilege against self-incrimination does not apply in relation to the Australian Tax Office's coercive information gathering powers under section 264 of the Income Tax Assessment Act 1936 .  As the ACNC is taking over the regulatory responsibilities of the ATO for registered entities it has been provided with equivalent powers.  The Courts have accepted that retaining such a privilege in such cases would frustrate the regulator in the exercise of its functions. [1]

8.45               However unlike the powers of the ATO this legislation constrains the use of any incriminating evidence by providing both use and derivative use immunity to protect the rights of individuals. 

8.46               The ACNC will need to seek information from different types of entities, including from third parties that may be self-incriminatory to those parties.  For example, there may be instances of collusion between the management of a charity and donors.  In the ACNC regulatory context this type of tax fraud may occur where the committee of management of a charity colludes with a large donor for tax avoidance purposes.

8.47               Failing to provide the ACNC with the necessary scope to act as an effective regulator in the situations outlined above would create significant integrity issues and risks of mismanagement of funds intended for charitable and NFP purposes.

8.48               It is important to keep in mind that individuals working in NFP entities manage public funds, at times with limited oversight.  Public companies, for example, have shareholders that ensure the individuals running corporations are accountable.  However, the same kind of market discipline does not apply to those managing NFPs and it is arguable that these individuals should be subject to appropriate levels of oversight. 

8.49               Individuals working in NFP entities manage resources and monies that come from donors or volunteers and are earmarked for the most vulnerable in our community.  It is therefore important that NFP entities are subject to appropriate oversight to ensure those monies are used lawfully to assist our most vulnerable community members. 

8.50               It is recognised that overriding the privilege against self-incrimination can lead to a loss of personal liberty.  Therefore, it has been decided to constrain the use of any self-incriminating information. 

8.51               Constraining the use of any self-incriminating information would generally increase the willingness of individuals to provide information. 

8.52               This is particularly important for NFP entities that may be managed by volunteers who may not be aware of the totality of their regulatory obligations and may therefore hesitate to provide information unless assured that this information will not be used to prosecute them.

8.53               Evidence will be admissible against the individual in criminal proceedings if those proceedings relate to: failure of the entity to comply with the written notice; contravention of section 137.1 or 137.2 of the Criminal Code which deals with false or misleading information; or section 149.1 of the Criminal Code which deals with obstruction of Commonwealth public officials undertaking functions as a Commonwealth public officials.  [Subsection 70-25(2)]              

Monitoring powers

8.54               The Bill provides for ACNC officers to enter the premises of an entity and exercise a range of monitoring powers for the purposes of monitoring compliance with a provision which is subject to monitoring, or to determine whether information subject to monitoring is correct.  [Subsection 75-15(1)]   

8.55               These powers will be used to monitor and investigate specific issues and will complement the ACNC’s more general information gathering powers.  [Division 75]

8.56               ACNC officers will only be able to enter an entity’s premises and exercise monitoring powers when the occupier of the premises has consented to the entry, or the entry is made under a monitoring warrant.  [Subsection 75-15(2)]

8.57               The premises which the ACNC will be able to enter are broader than the premises of NFPs registered by the ACNC.  However, the information which the ACNC will be able to obtain will be constrained to information which is necessary to administer the ACNC Bill.

8.58               Provisions subject to monitoring include:

•        a provision of the Bill that creates an offence; this includes failure to comply with directions given by the ACNC Commissioner and failure by registered entities to keep records as required by the Bill;

•        a provision of a legislative instrument made under this Bill that creates an offence;

•        a provision of the Crimes Act 1914 or the Criminal Code that creates an offence, to the extent that the offence relates to the Bill or a legislative instrument made under the Bill.  This includes section 137.1 or 137.2 of the Criminal Code that deal with false or misleading information;

•        a provision of the Bill, if non-compliance with the provision gives rise to an administrative penalty, this includes a penalty for failing to lodge a document on time;

•        a provision of a legislative instrument made under the Bill, if non-compliance with the provision gives rise to an administrative penalty; and

•        ongoing eligibility for registration including conditions for registration in section 25-5 and for the revocation of registration in section 35-10. 

[Section 75-5]

8.59               Information subject to monitoring includes information given to the ACNC:

•        in compliance or purported compliance with a provision of the Bill or of a legislative instrument made under the Bill, this includes information in annual information statements and financial statements;

•        in compliance or purported compliance with a provision of the Crimes Act 1914 or of the Criminal Code , to the extent that the provision relates to the Bill or a legislative instrument made under the Bill; or

•        any other information given to the ACNC Commissioner, including information given voluntarily, which is included on the Australian Charities and Not-for-profits Register. 

[Section 75-10]

Example 8.1  

A registered entity, WT Inc, makes a statement to the ACNC Commissioner.  The statement is believed to be fraudulent, which is a contravention of the Criminal Code .  The ACNC Commissioner asks WT Inc to provide evidence to support the statement.  WT Inc is not cooperative and refuses to provide the information.

As a last resort the ACNC Commissioner could apply for a monitoring warrant, in order to gain access to the appropriate information and determine the validity of the statement made by WT Inc.

Monitoring powers of ACNC Officers

8.60               ACNC officers have a set of monitoring powers which they may exercise when they have entered a premise either with the consent of the occupier of the premises, or under a monitoring warrant.  [Section 75-20].

8.61               The ACNC requires this set of monitoring powers to ensure that it is able monitor ongoing eligibility to registration and to function as a one-stop shop regulator for the sector. 

8.62               The set of monitoring powers ensures that the ACNC is able to collect information and materials which may also be required by other Australian government agencies in administering their duties. 

8.63               Australian government agency means the Commonwealth, a State or a Territory or an authority of the Commonwealth, a State or a Territory.

8.64               Information and materials would still be required for the purposes of monitoring compliance with a provision subject to monitoring, or to determine whether information subject to monitoring is correct. 

8.65               Where this information could also be required by other authorities the ACNC would have the power to collect this information and share it with these other Australian government authorities. 

8.66               The sharing of information is an important channel available to the ACNC to maintain, protect and enhance public trust and confidence in the sector.  The ACNC secrecy framework empowers the ACNC to share information with Australian government authorities where the sharing of information is reasonably necessary to promote the object of the ACNC Bill.

Example 8.2  

Reduced Poverty Inc is a registered charity established for the relief of poverty.  The entity provides food and housing to the homeless in Sydney.  The ACNC enters the premises of the entity under a monitoring warrant to monitor whether it continues to meet the requirements of registration.  ACNC officers receive concerns raised by beneficiaries of the charity suggesting that the food provided and cooking practices are likely to not meet health standards.  If the public becomes aware of this potentially inappropriate practice it would affect public trust and confidence in the sector. 

ACNC officers therefore take images of the entity’s cooking facilities and a sample of the food provided to the homeless.  Consistent with the ACNC’s secrecy framework, ACNC officers pass this information on to the government agency which is responsible for local food safety inspections. 

Example 8.3  

Australia Overseas Aid Inc is a registered charity established for the control of diseases in human beings in overseas jurisdictions.  The entity provides medication and medical equipment to countries in need of support.  The ACNC receives intelligence that the entity is not complying with all of its registration conditions.  ACNC officers enter the entity’s premises and decide to take a sample of the medicines on the premises which look suspicious.  ACNC officers pass this sample on to the Australian Federal Police. 

8.67               The set of monitoring powers provided to ACNC officers in the ACNC Bill are: 

•        the power to search the premises and anything on the premises; 

•        the power to examine or observe any activity conducted on the premises; 

•        the power to inspect, examine, take measurements of, or conduct tests on, anything on the premises;

•        the power to make any still or moving image or any recording of the premises or anything on the premises;

•        the power to inspect any document on the premises;

•        the power to take extracts from, or make copies of, any such document;

•        the power to take onto the premises such equipment and materials as the ACNC officer requires for the purpose of exercising powers in relation to the premises;

•        the power to sample anything on the premises; and

•        the powers set out in the Bill including the power to operate electronic equipment on the premises and the authority to have other individuals assist ACNC officers.

[Section 75-20]

8.68               The monitoring powers of an ACNC officer include the power to operate electronic equipment on the premises and to use electronic storage devices which are on the premises and are compatible with the electronic equipment.  [Subsection 75-25(1)]

8.69               ACNC officers would have to have reasonable grounds to suspect that electronic equipment contains information relevant to determining compliance with a provision subject to monitoring, or if information subject to monitoring is correct. 

8.70               If an ACNC officer finds relevant information on electronic equipment, ACNC officers will have the power to:

•        convert relevant data into documentary form and remove those documents from the premises;

•        transfer relevant data to a disk, tape or other storage device that is brought to the premises by the ACNC officer or is on the premises; and

•        remove the disk, tape or other storage device from the premises.

[Subsections 75-25(2) and (3)]  

8.71               An ACNC officer can only use a disk, tape or other storage device that is in the premises if it has been agreed in writing by the occupier.  [Paragraph 75-25(3)(b)(ii)]

8.72               These powers are required to ensure ACNC officers are able to convert any relevant information into a usable form.  For example, ACNC officers will have the power to use electronic equipment to print documents and remove these documents from the premises. 

8.73               The powers also ensure that the occupier’s equipment is only used with consent so as to not negatively affect the occupier’s operations.

8.74               ACNC officers are able to operate electronic equipment only if the ACNC officer believes on reasonable grounds that the operation of the equipment can be carried out without damage to the equipment.  [Paragraph 75-25(4)(a)]  

8.75               The ACNC officer also has to have reasonable grounds to suspect that:

•        the equipment contains data relevant to determining whether a registered entity has, or is, complying with provisions subject to monitoring, or if information subject to monitoring is correct; or

•        the disk, tape or other storage device contains data relevant to determining whether a registered entity has, or is, complying with provisions subject to monitoring, or if information subject to monitoring is correct [Paragraph 75-25(4)(b)]  

8.76               These provisions ensure that ACNC officers can access required information and that the interests and privacy of registered entities and their employees are adequately protected. 

8.77               In certain circumstances, an ACNC officer may secure a thing or item that is found on the premises for a period of 24 hours, or more if an extension is provided by an issuing officer which is defined as a Federal magistrate or magistrates under the Bill.  [Section 75-30]

8.78               An ACNC officer can secure a thing for 24 hours when an ACNC officer believes on reasonable grounds that:

•        a provision subject to monitoring has been contravened with respect to the thing;

•        the thing affords evidence of the contravention of a provision subject to monitoring; or

•        the thing is intended to be used for the purpose of contravening a provision subject to monitoring. 

[Paragraph 75-30(2)(b)]

8.79               In addition, ACNC officers have to suspect on reasonable grounds that:

•        it is necessary to secure the thing in order to prevent it from being concealed, lost or destroyed before a warrant to seize the thing is obtained; and

•        it is necessary to secure the thing without a warrant because the circumstances are serious and urgent. 

[Paragraph 75-30(2)(c)]  

8.80               These conditions have been included to ensure that ACNC officers will only secure a thing when it is required, and when there is a serious risk that the thing needs to be secured to prevent it from been destroyed in order to disturb the ACNC investigation. 

8.81               In addition, the circumstances have to be serious and urgent to enable ACNC officers to secure the thing without appropriate search warrants.  This can include a situation where public funds are going to be used in a highly inappropriate manner. 

8.82               The 24 hour period may only be extended in accordance with the Bill.  To extend the time period an ACNC officer has to apply to an ‘issuing officer’ for an extension of the period.  [Subsection 75-30(3)]

8.83               The ACNC officer needs to suspect on reasonable grounds that the extension is required.  The magistrate will take all information into account when deciding whether to provide the extension.  [Subsection 75-30(4)]

8.84               The Bill also allows for the occupier of the premises to be heard in relation to ACNC officers’ extension application.  [Subsection 75-30(4)]

8.85               This ensures that the circumstances surrounding the extension, including the implications of the extension on the operations of the occupier, are taken into account.  For example, the occupier may suggest alternative arrangements which would ensure ACNC officers have access to relevant information and that the operations of the occupier are not unnecessarily affected.

8.86               The issuing officer may issue the extension if the ‘issuing officer’ is satisfied that it is necessary to extend the period over which the thing is secured, in order to prevent the thing from being concealed, lost or destroyed.  [Subsection 75-30(5)]

8.87               ACNC officers would be required to provide information to the ‘issuing officer’ on oath or affirmation. 

8.88               The provisions of this Division relating to the issuance of monitoring warrants, including Subdivision 75-F and Subdivision 75-H apply, with necessary modifications, to the issuance of an extension.  [Subsection 75-30(6)]

8.89               The framework established by Division 75 for the issuance of warrants applies to extensions.  However, in certain sections the provisions need to be modified to apply to extensions. 

8.90               For example, in Subdivision 75-F the condition for issuing a monitoring warrant differs from the condition the ‘issuing officer’ needs to consider when granting an extension.    

8.91               The period may be extended on more than one occasion.  [Subsection 75-30(7)]

8.92               An ACNC officer may be assisted by other individuals in exercising monitoring powers or performing functions or duties under this Division.  ACNC officers can only be assisted if the assistance is necessary and reasonable.  [Section 75-35]

8.93               This may be the case where assistance is required to help carry out documents or where the ACNC officer requires specialised assistance, including for example, assistance to operate electronic equipment. 

8.94               An individual assisting the ACNC officer would have the power to:

•        enter the premises; and

•        perform functions and duties provided for under this Division of the Bill in order assist the ACNC officer to determine if:

-       a provision subject to monitoring has been, or is being, complied with; or

-       information subject to monitoring is correct.

8.95               The individual assisting the ACNC officer would be required to use these powers in accordance with a direction given by an ACNC officer.  [Paragraph 75-35(2)(c)]

8.96               To ensure all provisions in this Division apply to individuals assisting ACNC officers, including section 120-480 on compensation for damage to electronic equipment, powers exercised  and functions undertaken by the by the individual assisting ACNC officers are taken to have been exercised by an ACNC officer.  [Subsections 75-35(3) and  75-35(4)]

8.97               To avoid doubt, any direction given by an ACNC officer to an individual assisting the ACNC officer, is not a legislative instrument.  [Subsection 75-35(5)]

8.98               Where entry is authorised under a monitoring warrant or by consent, an ACNC officer may ask the occupier, or an individual that represents the occupier to answer any questions and produce any document which relates to a:

•        provision subject to monitoring; or

•         information subject to monitoring. 

[Subsections 75-40(1), (2) and (3)]

8.99               An individual will not be excused from answering any questions or producing any document in order to comply with a request from an ACNC officer on the grounds that complying may incriminate the individual or expose the individual to a penalty.  [Subsection 75-40(4)]

8.100           However, the use of the information that incriminates the individual will be constrained.  In particular, the information will not be admissible in evidence against the individual in criminal proceedings; this includes information obtained as a direct or indirect consequence of the individual providing information.  [Subsection 75-40(5)]

8.101           This policy is consistent with that of Section 70-20 which was developed to support the effectiveness of the regulatory scheme administered by the ACNC and ensure the ACNC has access to required information. 

8.102           Evidence will be admissible against the individual in criminal proceedings if those proceedings relate to: failure by the individual to comply with the written notice; contravention of sections 137.1 or 137.2 of the Criminal Code which deals with false or misleading information; or section 149.1 of the Criminal Code which deals with obstruction of Commonwealth public officials undertaking functions as a Commonwealth public officials.  [Subsection 75-40(5)]         

Obligations and incidental powers of ACNC officers

8.103           ACNC officers may enter the premises of an entity and exercise monitoring powers if an occupier of the premises, or an individual that represents the occupier of the premises, consents to the entry. 

8.104           ACNC officers would be required to inform the occupier of the premises that consent is voluntary and that the occupier may therefore refuse consent.  [Subsection 75-45(1)]

8.105           ACNC officers will only lawfully be able to enter premises and exercise monitoring powers if the consent is truly voluntary.  [Subsection 75-45(2)]

8.106           If ACNC officers do not fulfil both conditions mentioned above, the ACNC would not be able to use the information or evidence gathered to administer the ACNC Bill or in criminal proceedings.

8.107           Occupiers of the premises may provide consent for entry for a limited time period.  The consent will only have effect for that period unless the consent is withdrawn earlier by the occupier of the premises.  [Subsection 75-45(3)]

8.108           If consent is not limited to a particular period, the consent will have effect until it is withdrawn.  [Subsection 75-45(5)]

8.109           The occupier has the discretion to extend the period of consent if requested to do so by an ACNC officer and the occupier has no issue with extending consent.  [Subsection 75-45(4)]

8.110           If the occupier of the premises decides to withdraw the consent given to ACNC officers, the ACNC officers and any person assisting the ACNC officers must leave the premises.  [Subsection 75-45(6)]

8.111           When an ACNC officer enters the premises of an entity under a warrant issued by an issuing officer, the ACNC officer is required to announce that he or she is authorised by virtue of a warrant to enter the premises.  [Subsection 75-50(1)]

8.112           ACNC officers are also required to show their identity card to the occupier of the premises and to give the individuals at the premises an opportunity to allow entry to the premises.  [Subsection 75-50(2)]

8.113           However, an ACNC officer does not need to comply with these requirements if the ACNC officer reasonably believes that immediate entry is required.  If this is the case, the ACNC officer must show their identity card as soon as practicable after entering the premises.  [Subsection 75-50(2)]

8.114           Immediate entry will be required where ACNC officers have the reasonable belief that the safety of a person is at risk or that by announcing entry the effective execution of the warrant is at risk.  [Subsection 75-50(2)]

8.115           This power would be used in rare cases, where an ACNC officer determines that information subject to monitoring is at risk of being destroyed if the officer does not move quickly to obtain this information.

8.116           An ACNC officer is, under these circumstances, not required to abide by the above provisions which require ACNC officers to announce that he or she is authorised to enter the premises, and to show his or her identity card.

8.117           When ACNC officers enter under the exception outlined above, the officers would be required to show the occupier of the premises, or a person who represents the occupier, his or her identity card as soon as practicable after entering the premises.  [Subsection 75-50(3)]

8.118           ACNC officers executing a monitoring warrant must be in possession of the warrant, or a copy of the warrant.  [Section 75-55]

8.119           ACNC officers must make a copy of the warrant available to the occupier of the premises, or another individual that represents the occupier, and inform the occupier or individual who represents the occupier of their rights and responsibilities in English.  [Section 75-60]

8.120           This provision ensures that the occupier is satisfied that a warrant has been issued, and that the occupier is made aware of the purposes for which the warrant is issued and the time period for which the warrant will be in force (further details on the content of the warrant are provided in Section 75-85). 

8.121           If ACNC officers suspect on reasonable grounds that there is relevant information or data on the premises, that this information is accessible by an expert operating electronic equipment, and the data may be interfered with, ACNC officers will have the power to secure electronic equipment on the premises.  [Subsections 75-65(1), (2) and (3)]

8.122           This power is required for ACNC officers to gather data which may not be easily accessible and requires an expert to extract and convert into a usable form.  This power could be used in situations where data is encrypted.

8.123           The equipment may be secured by locking it up, placing the equipment under the watch of a guard or any other means [Subsection 75-65(2)]

8.124              ACNC officers are required to inform the occupier of their intention to secure the equipment.  The officers must also inform the occupier that the equipment may be secured for a period of up to 24 hours.  [Subsection 75-65(4)]

8.125           The electronic equipment may be secured until the 24-hour period ends or for a shorter period if the equipment has been operated by the expert.  [Subsection 75-65(5)]

8.126           ACNC officers may apply to an issuing officer for an extension of the 24-hour period if the ACNC officer suspects on reasonable grounds that the equipment needs to be secured for longer.  [Subsection 75-65(6)]

8.127           ACNC officers would use this power when they can’t get an expert to operate the equipment after the 24-hour period has passed, or when the expert was unable to operate the equipment and the officer engages another expert to operate the equipment. 

8.128           Before ACNC officers make the application to the ‘issuing officer’, the officers must give notice to the occupier of the premises, with the occupier being entitled to be heard in relation to the application for the extension.  [Subsection 75-65(7)]

8.129           This requirement ensures that occupiers are given a chance to respond to the officers’ intention to apply for an extension.

8.130           The ‘issuing officer’ may issue an extension if satisfied that it is necessary to do so to prevent the destruction, alteration or inference with the relevant data.  [Subsection 75-65(8)]

8.131           The framework under which a monitoring warrant is issued applies to cases where an ‘issuing officer’ extends the time period which electronic equipment is secured under this Section.  [Subsection 75-65(9)]

8.132           In general, the framework established by Division 75 for the issuance of warrants applies to extensions.  However, in certain sections the provisions need to be modified to apply to extensions. 

8.133           For example, in Subdivision 75-F the condition for issuing a monitoring warrant differs from the condition the ‘issuing officer’ needs to consider when granting an extension.    

8.134           The 24-hour period may be extended more than once.  [Subsection 75-65(10)]

8.135           If damage or corruption occurs to the electronic equipment because insufficient care was exercised in selecting the expert to operate the equipment, or insufficient care was exercised by the individual, the Commonwealth must pay the owner of the equipment reasonable compensation for the damage or corruption.  [Subsection 75-70(1)]

8.136           The Commonwealth and the owner have to agree on a reasonable amount.  [Subsection 75-70(2)]

8.137              If the owner and the Commonwealth do not agree on a compensation amount, the owner or user may institute proceedings in a Court for a reasonable amount of compensation.  The Court would have the responsibility of determining the reasonable amount of compensation.  [Subsection 75-65(3)]

8.138           In coming to a view on the reasonable amount of compensation regard is to be had to whether the occupier of the premises, or the occupier’s employees or agents, were available and provided any appropriate warning or guidance on the operation of the equipment.  [Subsection 75-70(4)]

8.139           For these subsections to apply, damage has to be caused to the equipment, or data recorded on the equipment has to be damaged or programs associated with the use of the equipment, or with the use of the data have to be damaged or corrupted.  [Subsection 75-70(1)]

Occupier’s rights and responsibilities

8.140           The occupier of premises to which a monitoring warrant relates, or another person who represents the occupier, is entitled to observe the execution of the monitoring warrant if present at the premises while the warrant is being executed.  [Subsection 75-75(1)]

8.141           ACNC officers continue to be able to execute the warrant in 2 or more areas of the premises at the same time.  [Subsection 75-75(3)]

8.142           The occupiers will lose the right to observe the execution of the warrant if the occupier or other person impedes the proper execution of the monitoring warrant.  [Subsection 75-75(2)]

8.143           Occupiers must provide ACNC officers that are executing a warrant and individuals assisting the ACNC officer with reasonable facilities and assistance for the effective exercise of their powers.  [Subsection 75-80(1)]

8.144           The occupier commits an offence if the occupiers do not provide ACNC officers with reasonable facilities and assistance for the effective exercise of their powers.  The penalty for this offence is 20 penalty units.  [Subsection 75-80(2)]

Monitoring warrants

8.145           The ACNC Commissioner may apply to an ‘issuing officer’ for a monitoring warrant under the Bill.  [Subsection 75-85(1)]

8.146           The magistrate may issue the monitoring warrant if satisfied, by information on oath or affirmation provided by the ACNC Commissioner, that it is necessary that one or more ACNC officer should have access to the premises for the purpose of determining whether:

•        a provision subject to monitoring has been, or is being, complied with; or

•         information subject to monitoring is correct. 

[Subsection 75-85(2)]

8.147           The ACNC Commissioner or their delegate must give the magistrate any information required concerning the grounds on which the warrant is being sought.  This information can be provided orally or by affidavit.  [Subsection 75-85(3)]

8.148           The monitoring warrant must contain certain information which is set out in the Bill, including the premises to which the warrant relates, the purpose for which the warrant is issued, and the day on which the warrant ceases to be in force .  [Subsection 75-85(4)]

8.149           The monitoring warrant will be in force for a period of no more than one month after the issue of the warrant.  [Paragraph  75-85(4)(f)]

Powers of issuing officers

8.150           Power conferred on an ‘issuing officer’ to issue a monitoring warrant is conferred in a personal capacity, not as a court or a member of a court.  [Subsection 75-90(1)]

8.151           The issuing officer does not need to accept the power conferred by this Bill.  [Subsection 75-90(2)]

8.152           An issuing officer will have immunity when exercising the power under this Division as the court of which the issuing officer is a member; or as a member of the court of which the issuing officer is a member.  [Subsection 75-90(3)]

General provisions

8.153           The ACNC Commissioner must issue an identity card to an ACNC officer who the ACNC Commissioner considers is likely to exercise monitoring powers and functions under this Bill.  [Subsection 75-95(1)]

8.154           The ACNC Commissioner would provide these individuals with the appropriate training making them aware of their obligations and responsibilities.

8.155           The identity card must be in the form set out by the ACNC Commissioner, and contain a recent photograph of the ACNC officer.  [Subsection 75-95(2)]

8.156           A photograph is required to ensure that the occupiers of the premises are satisfied that the ACNC officers mentioned in the warrant are actually executing the warrant.

8.157           An ACNC officer would commit an offence if the officer ceases to be an ACNC officer and does not return the identity card to the ACNC Commissioner within 14 days of ceasing to be an ACNC officer.  [Subsection 75-95(3)]

8.158           The penalty for this offence will be 1 penalty unit.  The offence will be a strict liability offence.  [Subsection 75-95(4)]

8.159           The officer would not commit an offence if the identity card was lost or destroyed.  The officer would bear the evidential burden in relation to the offence.  [Subsection 75-95(5)]

8.160           ACNC officers must carry their identity card at all times when exercising the monitoring powers.  [Subsection 75-95(6)]

 



Chapter 9          

Education, compliance and enforcement

Outline of chapter

9.1                   The object of this Bill is to maintain, protect and enhance the public trust and confidence in the NFP sector. 

9.2                   The ACNC will primarily achieve the object of the Bill by providing the NFP sector with guidance and educative materials to assist the sector to understand and comply with regulatory obligations.

9.3                   The Bill contains a wide spectrum of enforcement powers reflecting that the ACNC would not have powers of enforcement unless specifically provided for in legislation. 

9.4                   In cases where the ACNC’s educative function fails to induce the required action, the ACNC Commissioner will have the ability to use a range of enforcement powers. 

9.5                   The range of enforcement powers this Bill provides enable the ACNC to take strong, proportional and targeted actions to address actions or lack of actions that could threaten public trust and confidence in the NFP sector.

9.6                   This Bill provides the ACNC with 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. 

9.7                   This chapter specifies the application and necessity clauses that must be met prior to the ACNC Commissioner using enforcement powers; the range and scope of the ACNC’s enforcement powers; and the penalties associated with failing to comply with the ACNC Commissioner’s enforcement powers.

Summary of new law

Enforcement powers

9.8                   The new law provides the ACNC Commissioner with a range of enforcement powers to assist in maintaining, protecting and enhancing public trust and confidence in the sector’s new regulatory framework. 

9.9                   Enforcement powers are modelled on those given to other Commonwealth regulators such as the ASIC, the Australian Prudential Regulation Authority (APRA) and the Australian Competition and Consumer Commission (ACCC).

9.10               The ACNC will focus on education in order to minimise and address non-compliance.  However, the ACNC Commissioner will require powers to deal with serious and significant wrong-doing and must be able to take appropriate and targeted action against contraventions of the Bill. 

9.11               Enforcement powers are an important tool for regulators to deter entities from acting in an inappropriate manner and provide mechanisms to protect assets from inappropriate use. 

9.12               This Bill provides the ACNC with the authority to:

•        issue warning notices [Division 80] ;

•        issue directions [Division 85] ;

•        enter into enforceable undertakings [Division 90] ;

•        apply to the courts for injunctions [Division 95] ;

•        suspend or remove responsible entities [Division 100] ; and

•        appoint acting responsible entities [Division 100] .

9.13               The Bill specifies the conditions that must be satisfied before the ACNC Commissioner can use enforcement powers, the scope and range of the ACNC’s enforcement powers, and the associated penalties for contravening enforcement powers issued by the ACNC Commissioner.

9.14               The ACNC Commissioner would be able to exercise enforcement powers only over registered entities. 

9.15               The ACNC Commissioner may generally only use enforcement powers against ‘federally regulated entities’ (defined below), however, the ACNC Commissioner may revoke the registration of any registered entity.  The ACNC Commissioner’s enforcement powers in relation to external conduct standards apply to all registered entities. 

9.16               The ACNC’s enforcement powers are consistent with those available to other regulators under Commonwealth laws, and are similar to the enforcement powers available to NFP regulators in comparable jurisdictions, for example, the Charities Commission of England and Wales, and the Office of the Scottish Charity Regulator.

9.17               The reviews and appeals provisions in Chapter 12 will generally apply to the ACNC Commissioner’s enforcement powers including decisions taken by the ACNC Commissioner to issue or vary directions and decisions to suspend or remove responsible entities.

Detailed explanation of new law

Enforcement powers

9.18               The ACNC will primarily achieve the objects of this Bill by providing the NFP sector with guidance and educative materials to assist the sector to understand and comply with regulatory obligations.

9.19               In cases where the ACNC’s educative function fails to induce required action, the ACNC Commissioner will have the ability to use a range of enforcement powers. 

9.20               The final report on the Scoping Study for a National Not-for-profit Regulator recommended that a regulator for the NFP sector should be given appropriate enforcement powers to take proportional and targeted compliance actions.

9.21               The report recommended that the enforcement powers should include asset protection powers, the power to remove or suspend responsible entities, and information gathering powers.

9.22                More broadly, enforcement powers are an important tool for regulators which deter entities from acting in an inappropriate manner and provide mechanisms to protect assets from inappropriate use. 

9.23               This Bill provides the ACNC with the authority to:

•         issue warning notices [Division 80] ;

•        issue directions [Division 85] ;

•        enter into enforceable undertakings [Division 90] ;

•        apply to the courts for injunctions [Division 95] ;

•        suspend or remove responsible entities [Division 100] ; and

•        appoint acting responsible entities [Division 100] .

9.24               This range of enforcement powers will enable the ACNC to take proportional and targeted compliance action. 

9.25               This is a fundamental change from the sector’s current regulatory framework where the default Commonwealth regulator, the ATO, only has the power to remove an entity’s access to tax concessions and is unable to take action commensurate to the circumstances being addressed.

9.26               Australian regulators, including APRA, the ACCC and ASIC are generally given a range of enforcement powers which can include the authority to issue directions, the authority to enter into enforceable undertakings, and the right to apply to the courts to have injunctions imposed.   

9.27               The ACNC will take over the roles of other Commonwealth level regulators in cases where these other regulators are responsible for overseeing the governance structures and financial performance of NFP entities.  The enforcement powers provided by this Bill are therefore modelled on the powers given to these other regulators. 

9.28               Prior to using enforcement powers the ACNC Commissioner would have to satisfy standard application and necessity clauses which are generally consistent across the range of enforcement powers.

9.29               The ACNC Commissioner would also be required to take into account a range of policy matters, including an entity’s compliance track record, prior to using enforcement powers. 

9.30               The type of enforcement power used by the ACNC Commissioner will be determined by the kinds of actions which are required to address the contravention or non-compliance.  In some cases, all that will be required is the issuance of a warning notice to compel self-correction; in other cases where an entity has persistently failed to meet regulatory obligations, the ACNC Commissioner may have to remove a responsible entity.

9.31               Where possible, and in line with the regulatory approach to be adopted by the ACNC, the ACNC Commissioner will attempt to obtain self-correction through its educative role.

Application clause and necessity clause

9.32               The application and necessity clauses represent high thresholds designed to ensure that these powers are only used when necessary. 

9.33               The ‘application clause’ constrains the provisions the ACNC Commissioner is able to enforce, and the types of entities the ACNC Commissioner is able to apply enforcement powers toward.   

9.34               The application clause and necessity clause that are required to be satisfied would generally be consistent across the range of the ACNC Commissioner’s enforcement powers. 

9.35               The ACNC Commissioner is able to use enforcement powers if:

•        an entity is a federally regulated entity, and the ACNC Commissioner reasonably believes that the entity has contravened, or is more likely than not to contravene, a provision in the Bill; 

•        an entity is a federally regulated entity, and the ACNC Commissioner reasonably believes that the entity has not complied, or is more likely than not to not comply, with a governance standard; or 

•        the ACNC Commissioner reasonably believes that the registered entity has not complied, or more likely than not to not comply, with an external conduct standard. 

9.36               The ‘reasonably believes’ threshold ensures the ACNC Commissioner can only use enforcement powers if any reasonable individual, provided with the set of information available to the ACNC Commissioner, would deem that a particular registered entity has contravened a provision of the Bill, or has failed to comply with a governance standard or external conduct standard.

9.37               It would be inconsistent with this requirement for the ACNC Commissioner to use enforcement powers in situations where information on an entity’s compliance with regulatory obligations is inconclusive or does not clearly point to a likely contravention or case of likely non-compliance.

9.38               The ACNC Commissioner would be able to use enforcement powers in cases where it is ‘more likely than not’ that a registered entity will contravene a provision in the Bill, or will fail to comply with governance standard or external conduct standard.

9.39               The ACNC Commissioner would need to have reliable information which clearly indicates that, barring any discretionary change, the registered entity will contravene a provision in the Bill, or will fail to comply with a governance standard or external conduct standard.

9.40               Two implicit conditions are required to be satisfied prior to the ACNC Commissioner using enforcement powers for cases where contraventions or non-compliance are more likely than not.

9.41               Information needs to be reliable.  Generally, reliable information includes information contained in financial statements, information statements, annual reports, governing documents, contractual agreements and any other information, forms or statements that the ACNC Commissioner obtains from a reliable source. 

9.42               Information that would not be considered reliable includes rumours, opinions and subjective and unsubstantiated complaints and information provided to the ACNC Commissioner. 

Example 9.1  

The Paul Bird Foundation is a charity established for the advancement of religion.  The ACNC is made aware that the Foundation will use its funds to sponsor a professional sporting team.  Using its monitoring powers the ACNC obtains a copy of the contract between the charity and the sporting organisation.  In this case the entity will not be using its charity funds to promote its charitable purpose resulting in a contravention of the ACNC Bill.  The ACNC could use enforcement powers to ensure the entity does not contravene the Bill.

9.43               Additionally, the situations where an entity is ‘more likely than not’ to contravene a provision in the Bill or more likely than not to not comply with a governance or external conduct standard, but the circumstances that led to this conclusion are more likely than not to be temporary and rectified without discretionary action are also excluded.

Example 9.2  

The CFO of Moments Foundation, a registered charity, has taken sick leave in the lead up to the end of the financial year.  Given the length of leave it is more likely than not  that the entity will not submit its annual financial statement by the due date, rather it will be marginally late and be submitted when the CFO returns from leave.  In this case, the ACNC Commissioner could use its enforcement powers for the ‘more likely than not’ contravention but would choose not to because no actual discretionary change would be required for the entity to become compliant.

9.44               The ‘necessity clause’ ensures that the ACNC Commissioner can only use enforcement powers when use of the power is necessary to directly address the contravention or more likely than not contravention of the ACNC Bill, or the non-compliance or more likely than not non-compliance with a governance standard or external conduct standard.

9.45               The necessity clause constrains the outcomes the ACNC Commissioner can achieve, through the use of enforcement powers, to outcomes which directly address the contravention or non-compliance.    

9.46               The ACNC Commissioner would not be able to direct a registered entity to undertake a specified act which is unrelated to the contravention or case of non-compliance. 

9.47               This requirement addresses concerns that any open-ended enforcement power could provide for the ACNC to inappropriately interfere in a registered entity’s operations. 

Example 9.3  

OPD Inc has persistently failed to provide the ACNC Commissioner with annual information statements.  The ACNC Commissioner may direct OPD Inc to complete and provide an information statement to the ACNC Commissioner for the years for which OPD Inc has failed to lodge.  The direction contains a specified act which addresses the contravention.  The ACNC Commissioner would not be able to direct the OPD Inc to change other aspects of its operations as this would be inconsistent with the necessity clause. 

Example 9.4  

The Better Humans Fund submits a duty to notify notice which proposes a change to its charitable purpose that would render it ineligible for registration.  The ACNC Commissioner may direct the Fund to not change its governing rules in a specified manner.  However, the ACNC Commissioner could not direct the registered entity to undertake other acts, such as require the entity to cease to transfer funds to meet contractual obligations.     

Matters ACNC Commissioner must take into account

9.48               The ACNC Commissioner would be required to consider a range of policy matters (outlined below) prior to using any enforcement power or revoking an entity’s registration.  [Subsection 35-10(2)]

9.49               These matters are wider than the factors considered in developing a view on whether the application clause and necessity clause have been satisfied.

9.50               The matters ensure that the ACNC Commissioner considers the registered entity’s track compliance record, the nature and persistence of the contravention or non-compliance, and the implications that result from the contravention or non-compliance.

9.51               Requiring the ACNC Commissioner to consider this broader range of matters provides the ACNC Commissioner with the scope to act appropriately when faced with identical cases of non-compliance.

9.52               In deciding whether to use enforcement powers, the ACNC Commissioner must consider:

•        the nature, significance and persistence of the contravention or non-compliance [paragraph 35-10(2)(a)] ;   

•        the actions the ACNC Commissioner, the registered entity, or any of the responsible entities could have taken:

-       to address the contravention or non-compliance (or prevent the more likely than not  contravention or non-compliance); or

-       to prevent any similar contravention or non-compliance in the future [paragraph 35-10(2)(b)] ;   

•        the desirability of ensuring that contributions made to the registered entity are applied consistently with the NFP nature, and the purpose, of the registered entity [paragraph 35-10(2)(c)] ;   

•        the objects of any Commonwealth laws that refer to registration under this Bill [paragraph  35-10(2)(d)] ;   

•        the extent (if any) to which the registered entity is conducting its affairs in a way that may cause harm to, or jeopardise, the public trust and confidence in the sector [paragraph 35-10(2)(e)] ;  

•        the welfare of members of the community (if any) that receive direct benefits from the registered entity [paragraph 35-10(2)(f)] ; and

•        any other matter of policy that the ACNC Commissioner considers relevant [paragraph 35-10(2)(g)]

9.53               This list of matters should be considered in its entirety and a decision should be made by balancing each of the factors.

9.54               The individual matters are outlined and discussed in the paragraphs below. 

Nature, significance and persistence of contravention or non-compliance

9.55               The ACNC Commissioner must consider the nature, significance and persistence of any contravention or non-compliance.  [Paragraph 35-10(2)(a)]

9.56               Under this matter, the ACNC Commissioner must consider:

•        whether any contraventions have occurred;

•        whether the responsible entity has persistently contravened or not complied with the Bill;

•        the implications associated with the breaches; and

•        the nature or underlying cause of the breach.

Example 9.5  

Two registered entities commit the same breach.  Both entities fail to notify the ACNC Commissioner of major changes to their governing rules which could impact on their registration entitlement.

One of the registered entities has a track record of failing to comply with regulatory obligations including, for example, failing to lodge information statements by the required time.

In both cases a contravention occurs and the ACNC Commissioner may use enforcement powers to direct both entities to comply with the duty to notify requirement in the Bill.   

However, the ACNC Commissioner must consider other aspects, including the registered entities’ track records of compliance with regulatory responsibilities.  The ACNC Commissioner could choose to use one of its enforcement powers against the registered entity with a track record of breaching regulatory requirements.

Actions taken

9.57               In deciding whether to use any of the enforcement powers available under this Bill, the ACNC Commissioner must consider what action the ACNC Commissioner, the registered entity, or any of the responsible entities could or have taken to address any contravention or non-compliance (or prevent any more likely than not  contravention or non-compliance), or to prevent any similar contravention or non-compliance.  [Paragraph 35-10(2)(b)]

9.58               This matter ensures that the ACNC Commissioner takes into account any discretionary actions taken by the registered entity or the responsible entities to address the breach.

9.59               Discretionary actions may include any actions taken in response to other enforcement powers used by the ACNC Commissioner.  It also includes changes to the legal and operational framework of the registered entity which addresses the current contravention or case of non-compliance as well as reducing the likelihood of future breaches. 

9.60               By mandating that the ACNC Commissioner considers the actions which the responsible entity could have undertaken ensures that responsible entities are held accountable for matters which they have control over and gives them opportunities for self-correction. 

Ensuring contributions are applied consistently with nature and purpose of NFPs

9.61               The ACNC Commissioner must also consider how to ensure that ‘contributions’ made to the registered entity are applied consistently with the NFP nature, and the purpose, of the registered entity.  [Paragraph 35-10(2)(c)]

9.62               What constitutes contributions under the Bill is defined broadly.  Contribution includes provision of money, property, or an individual’s time or reputation or other gift.  Contributions also include Government tax concessions, grants and other forms of support.  [Section 205-40]

9.63               Registered entities are registered under a type and subtype, and are eligible to receive public monies which are used to promote the registered entity’s charitable purpose. 

9.64               The regulatory framework developed by this Bill helps to ensure that monies are used consistently with the purposes for which the funds were given to the NFP entity. 

9.65               Therefore, when coming to a view on whether to use any of the enforcement powers available, the ACNC Commissioner needs to consider whether the use of the enforcement power increases the likelihood that charitable funds are protected and used appropriately. 

Other Commonwealth laws

9.66                The ACNC Commissioner must take into consideration the objects of any Commonwealth laws, the operation of which are affected by registration under this Bill.  [Paragraph 35-10(2)(d)]

9.67               Registration has implications for the entity in relation to the operation of other Acts, mostly notable the tax laws.  For example, to access tax concession earmarked for the sector an entity must be registered by the ACNC. 

9.68               Registration helps ensure that entities are appropriately regulated as well as operating under appropriate governance arrangements.  The ACNC Commissioner must therefore consider the implications of using or not using enforcement powers on the objects of these other Acts. 

9.69               For example, the ACNC Commissioner must consider whether not using enforcement powers to ensure compliance with the Bill would have severe implications for the integrity of the tax law. 

Maintaining, protecting and enhancing public trust and confidence

9.70               The ACNC Commissioner must consider the extent to which the registered entity is conducting its affairs in a way that may cause harm to, or jeopardise, the public trust and confidence mentioned in the objects clause.  [Paragraph 35-10(2)(e)]

9.71               This matter ensures the ACNC Commissioner considers broader issues related to the public’s trust and confidence in the sector when coming to a view on whether to use enforcement powers.

9.72               For example, the ACNC Commissioner may consider the implications on the public’s trust and confidence in the sector resulting from not taking action and suspending a responsible entity that is defending significant criminal charges in court.

9.73               Further explanation of public trust and confidence can be found in Chapter 1 - Background.

Welfare of members of the community

9.74               The ACNC Commissioner must consider the welfare of members of the community (if any) that receive direct benefits from the registered entity.  [Paragraph 35-10(2)(f)]

9.75               In considering whether to use an enforcement power, or which power to use, the ACNC Commissioner must consider whether a course of action would improve or worsen the welfare of any members of the community that benefit directly from the registered entity.

Other matters

9.76               The ACNC Commissioner can also take into consideration any other matter that he or she considers relevant.  [Paragraph 35-10(2)(g)]

Example 9.6  

The Ciaro Organisation is a federally regulated entity that is registered with the ACNC.  All registered entities are required to comply with the governance standards in this Bill as a condition of registration. 

The Ciaro Organisation is providing short-term direct care to animals that have been mistreated and their governing rules state that their purpose is to relieve poverty.  The ACNC Commissioner considers this is a contravention of the governance standard. 

The entity puts processes in place to ensure it is operating to relieve poverty, and the ACNC Commissioner is satisfied with those processes.  However, the entity decides it wants to expand its purposes over the long term.  The entity applies to the ACNC Commissioner to change its governing rules and expand its purposes.

In this case there is no need for the ACNC Commissioner to suspend or remove the responsible entity, or use other enforcement powers.

If, on the other hand, the entity did not to address the non-compliance, the ACNC Commissioner could use an enforcement power, such as the power to suspend or remove responsible entities, in order to ensure compliance. 

Example 9.7

The Moments Foundation is a registered entity established for the advancement of religion.  It has several individuals appointed as responsible entities. 

One of these responsible entities has recently been declared bankrupt.  The entity may contravene a governance standard.  The Moments Foundation takes steps to effectively address the contravention.  The ACNC Commissioner does not have to remove the responsible entity to ensure compliance in this situation. 

Example 9.8 :

Company Go-To was established to promote education in rural communities.  The director falls ill and is unable to send the ACNC its information and financial statements.  As such the entity does not meet its obligations. 

A minor contravention, like failing to lodge statements when due for the first time, are unlikely to result in the ACNC Commissioner using enforcement power. 

However, if this continues, the ACNC Commissioner may consider using one of the enforcement powers to ensure compliance. 

Federally regulated entity

9.77               The ACNC Commissioner may generally only use her or his enforcement powers against federally regulated entities.  The ACNC Commissioner’s enforcement powers in relation to the external conduct standards apply to all registered entities. 

9.78               Federally regulated entities are entities that the Commonwealth has power to regulate under section 51(xx) of The Constitution (the corporations power) or section 122 of The Constitution (the Territories power). 

9.79               The corporations power allows the Commonwealth to make laws with respect to constitutional corporations.  The Territories power allows the Commonwealth to make laws for the government of any Territory.

9.80               Constitutional corporations include a financial corporation, a trading corporation or a foreign corporation, and a body corporate that is incorporated in a Territory.  [Section 205-20]

9.81               Federally regulated entities are also entities based in a Territory and relate to the Territories power, such as:

•        a body corporate incorporated in a Territory [paragraph 205-15(c)] ; or 

•        a trust, all of the trustees of which are bodies corporate incorporated in a Territory [paragraph 205-15(d)] ; or 

•        an entity, the core or routine activities of which are carried out in or in connection with a Territory [paragraph 205-15(e)]

9.82               The ACNC will bring matters concerning non-federally regulated entities to the attention of the relevant State or Territory regulators.  These regulators operate under their own laws.  The ACNC is expected to work with State and Territory regulators to ensure that they are aware of matters concerning non-federally regulated entities for the purposes of administering their own laws.

9.83               The Commonwealth Government is negotiating a statement of principles with States and Territories to facilitate cross-jurisdiction regulatory cooperation.

Warning notices

9.84               The ACNC Commissioner has the power to issue written warning notices to registered entities.  [Division 80]

9.85               Warning notices are an effective tool to strengthen the sector’s transparency and accountability and to induce change where appropriate. 

9.86               The ACNC Commissioner must make warning notices publicly available through the ACN Register.  [Note in subsection 80-5(2)]

9.87               Warning notices provide the public with a source of information on contraventions or non-compliance with regulatory obligations, and limit the gravity of any contraventions or non-compliance by triggering appropriate behavioural responses. 

9.88               For example, if the public becomes aware of a charity misusing funds it is likely that donations to the entity would fall as a response.  In severe cases, the ACNC Commissioner may also wish to use other enforcement powers to protect charitable funds.

9.89               Warning notices therefore provide registered entities with greater incentive to comply with regulatory obligations as notices generally have significant implications for an entity’s goodwill, revenue, and public engagement.

9.90               The Bill contains safeguards to protect the interests of registered entities and their beneficiaries.  The ACNC Commissioner can only issue warning notices if the application clause is satisfied, that is if:

•        the ACNC Commissioner has considered the factors listed in subsection 35-10(2) [subsection 80-5(3)]; and

•        an entity is a federally regulated entity, and the ACNC Commissioner reasonably believes that the entity has contravened, or is more likely than not to contravene, a provision in the Bill [paragraph 80-5(1)(a)] ; or 

•        an entity is a federally regulated entity, and the ACNC Commissioner reasonably believes that the entity has not complied, or is more likely than not to not comply, with a governance standard [paragraph 80-5(1)(b)] ; or 

•        the ACNC Commissioner reasonably believes that the registered entity has not complied, or is more likely than not to not comply, with an external conduct standard [paragraph 80-5(1)(c)]

9.91               As explained in the general enforcement power section under the heading ‘detailed explanation of the new law’, the ‘reasonably believes’ threshold ensures the ACNC Commissioner only issues warning notices if any reasonable individual provided with the set of information available to the ACNC Commissioner would deem that a particular registered entity has contravened a provision of the Bill, or has failed to comply with a governance standard or external conduct standard.

9.92               Additionally, the ACNC Commissioner is able to issue warning notices in cases where it is ‘more likely than not’ that a registered entity will contravene a provision in the Bill, or where it is more likely than not that the registered entity will not comply with the governance standards or external conduct standards.

9.93               Rumour or mere suspicion on the part of the ACNC Commissioner would not be sufficient to trigger the requirement.  The ACNC Commissioner needs to have reliable information which clearly indicates that the registered entity will contravene a provision in the Bill, or will fail to comply with a governance standard or external conduct standard.

9.94                  This enables the Commissioner to intervene to prevent contraventions or non-compliance from occurring, and to take action where necessary, such as to proactively protect the charity’s assets before they may be depleted

9.95               Warning notices inform the registered entity of circumstances in relation to the contravention or non-compliance, or the more likely than not contravention or non-compliance.  [Paragraph 80-5(2)(a)]

9.96               Warning notices also outline actions that could be taken by the ACNC Commissioner in response to the contravention or case of non-compliance.  [Paragraph 80-5(2)(b)]

9.97               Warning notices may generally include a:

•        description of the relevant provision which the ACNC Commissioner believes the registered entity has or is more likely than not to contravene;

•        description of the governance standard or external conduct standard which the ACNC Commissioner believes the registered entity has or is more likely than not to contravene;

•        actions and activities which in the ACNC Commissioner’s view has led to the contravention or non-compliance, or is more likely than not to lead to a contravention or case of non-compliance;

•        actions which the entity should take to address the contravention or case of non-compliance; and

•        the actions, if any, the ACNC Commissioner intends to take if the entity does not address the contravention or case of non-compliance.

Directions

9.98               The ACNC Commissioner has the authority to give a registered entity a written direction to take specified actions.  [Division 85]

9.99               Directions provide the ACNC Commissioner with a mechanism to direct registered entities to address any actual or highly likely contraventions of provisions to the ACNC Bill, or cases of non-compliance with governance standards or external conduct standards. 

9.100           Directions must be given to a registered entity through a written notice.  The notice must clearly specify the ground or grounds on which the direction was issued and the period of time the registered entity has in order to comply with the direction.  [Subsection 85-5(3)]

9.101           The Bill outlines a set of circumstances under which the ACNC Commissioner may issue directions.  The circumstances provide a safeguard for the sector and ensure that directions are only issued when there are significant concerns. 

9.102           The ACNC Commissioner may issue a direction if the application clause is satisfied; that is, if:

•        the entity is a federally regulated entity, and the ACNC Commissioner reasonably believes that the entity has contravened, or is more likely than not to contravene, a provision in the Bill; or  [paragraph 85-5(1)(a)]

•        the entity is a federally regulated entity, and the ACNC Commissioner reasonably believes that the entity has not complied, or is more likely than not to not comply, with a governance standard; or  [paragraph 85-5(1)(b)]

•        the ACNC Commissioner reasonably believes that the registered entity has not complied, or is more likely than not to not comply, with an external conduct standard [paragraph 85-5(1)(c)].

9.103           As explained in relation to the general enforcement powers, the ‘reasonably believes’ threshold ensures the ACNC Commissioner can only issues warning notices if any reasonable individual provided with the set of information available to the ACNC Commissioner would deem that a particular registered entity has contravened a provision of the Bill, or has failed to comply with a governance standard or external conduct standard.

9.104           Additionally, the ACNC Commissioner is able to issue warning notices in cases where it is ‘more likely than not’ that a registered entity will contravene a provision in the Bill, or will fail to comply with a governance standard or external conduct standard.

9.105           This only covers a situation where there is a substantial or significant likelihood of a contravention and would not extend to a situation where there was only a small chance of a contravention occurring

9.106           Rumour or mere suspicion on the part of the ACNC Commissioner would not be sufficient to trigger the requirement.  The ACNC Commissioner needs to have reliable information which clearly indicates that the registered entity will contravene a provision in the Bill, or will fail to comply with a governance standard or external conduct standard.

9.107           This enables the Commissioner to intervene to prevent contraventions or non-compliance from occurring, and to take action where necessary, such as to proactively protect the charity’s assets before they may be depleted.

Example 9.9  

Make it Better, a registered entity, remunerates its Director with an annual salary of $3 million.  This salary is excessive compared to other similar registered entities.  This suggests that the entity is not being run as a NFP entity.  The ACNC Commissioner may issue an direction to Make it Better to act to remedy the situation.

Example 9.10  

The B Good Organisation, a registered entity, has not held an annual meeting for its members in two years.  This means that the B Good Foundation could potentially not comply with a governance standard or its governing rules.  The ACNC Commissioner may issue a direction to the B Good Organisation to direct it to hold an annual meeting. 

Example 9.11  

The Lightbulb Organisation, a registered entity whose  purpose is to provide welfare for disadvantaged youths in Western Australia, collects money from donations and sends it to Japan to help victims of a tsunami.  The purpose of the Lightbulb Organisation is to provide welfare for disadvantaged youths, not to provide disaster relief overseas.  The ACNC Commissioner may issue a direction to the Lightbulb Organisation directing the Organisation to stop sending funds overseas and to redirect funds to its purpose. 

9.108           In deciding whether to give a registered entity a direction, and the content of the direction, the ACNC Commissioner must take into account the standard set of matters outlined in the general enforcement powers.  [Subsection 85-5(2)]

9.109           The ACNC Commissioner must take these factors into account to ensure that any direction, and its content, issued to a registered entity is proportional, adequate and targeted.

Kinds of direction

9.110           To issue a direction the ACNC Commissioner has to reasonably believe that the ‘application threshold’ has been satisfied (see above), and that it is necessary to direct an entity to undertake a specified act in order to address the actual or likely contravention, or the actual or likely case of non-compliance.  [Subsection 85-10(1)]

9.111           The necessity threshold is used to narrow the scope of acts the ACNC Commissioner can direct a registered entity to undertake. 

Example 9.12  

The PB Fund has persistently failed to provide the ACNC Commissioner with annual financial statements.  The ACNC Commissioner may direct the Fund to complete and provide annual financial statements to the ACNC Commissioner for the relevant years.  The ACNC Commissioner is not able to direct the PB Fund to change other aspects of its operations. 

9.112           The ACNC Commissioner is not able to direct a registered entity to undertake a specified act which is unrelated to the contravention or non-compliance. 

9.113           This requirement addresses concerns that any open ended enforcement power may allow the ACNC to inappropriately interfere in a registered entity’s operations. 

Example 9.13  

The JRC Fund submits a duty to notify notice which proposes a change to its governing rules that would render it ineligible for registration.  The ACNC Commissioner may direct the JRC Fund to not change its governing rules in a specified manner.  However, the ACNC Commissioner cannot direct the registered entity to undertake other acts such as appointing an acting responsible entity.    

9.114           A specified act may include directing an entity to ensure that a ‘shadow’ responsible entity does not have any influence over decisions that affect the whole or a substantial part of the business of the registered entity.  [Paragraph 85-10(2)(a)]

9.115           A ‘shadow’ responsible entity is an entity that is not formally appointed but has a significant influence over the registered entity’s business activities and practices, or over the decisions and actions taken by formally appointed responsible entities.  [Subsection 85-10(3)]

9.116           In this case, the registered entity is required to take the specified act.  If the responsible entities continue to be influenced by the ‘shadow’ responsible entity when making decisions and taking actions related to the activities of the registered entity, the registered entity would be liable for an offence. 

Example 9.14  

Helping Australians Ltd is a registered entity which has decided to alter the charitable purpose included in the entity’s governing documents.  The entity’s staff prepare a duty to notify statement in accordance with Division 60 of the ACNC Bill.  An individual directs staff to not submit the notice.  The ACNC Commissioner is made aware of the situation and directs the entity to put procedures in place to ensure that the activities of the registered entity are no longer influenced by this individual.     

9.117           In practice, the responsible entity that continues to be influenced is liable for the offence through Division 180 of the Bill. 

9.118           The definition of ‘shadow’ responsible entity adopts the precedence established in the Corporations Act 2001.  The definition includes an individual:

•        who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the registered entity; or

•        who has the capacity to affect significantly the registered entity’s financial standing; or

•        in accordance with whose instructions or wishes the responsible entities of the registered entity are accustomed to acting (excluding advice given by the individual in the proper performance of functions attaching to the individual’s professional capacity or his or her business relationship with the responsible entities of the registered entity).

9.119           The ACNC Commissioner may also direct a registered entity to not enter into a specified commercial transaction, financial transaction or other transaction, including:

•        borrowing any amount;

•        repaying any money on deposit or advance;

•        paying or transferring any amount or asset to any entity, or creating an obligation (contingent or otherwise) to do so. 

[Paragraph 85-10(2)(b)]

9.120           This direction is required to protect the assets of registered entities.  It provides the ACNC Commissioner with an instrument to move rapidly in cases of fraud and misappropriation. 

Example 9.15  

The Community Assistance ADFT Fund is a registered charity established for the relief of poverty.  The ACNC Commissioner receives intelligence that the entity is being used as a conduit for an elaborate tax avoidance scheme.  To ensure charitable funds remain within the sector, the ACNC Commissioner directs the Fund to not pay any amount of funds or assets to any of its affiliated entities over a particular time frame.  This direction is required to address the contravention (expending public monies in a manner which is not consistent with the entity’s charitable purpose) and also promotes the objects of the Bill.

9.121           The ACNC Commissioner may specify a particular class of acts or particular classes of acts in a single direction.  [Paragraph 85-10(4)(a)]

9.122           This ensures that the ACNC Commissioner has flexibility in issuing directions that require multiple acts to be performed by a registered entity.

Example 9.16  

The responsible entity of the PDMB Trust has entered into ten contracts to transfer assets to other affiliated entities.  The ACNC Commissioner has reason to believe that the transfer of assets is likely to be a contravention of this Bill.  The ACNC Commissioner may issue a single direction to the registered entity directing the entity to not execute the ten contracts to transfer the assets to the other entities. 

9.123           The ACNC Commissioner may make different provisions with respect to different acts or different classes of acts.  [Paragraph 85-10(4)(b)]

9.124           This ensures that the ACNC Commissioner has flexibility in issuing directions that require multiple and varied acts to be performed by a registered entity.

Example 9.17  

The responsible entity of the Bell-Swain Memorial Foundation enters into five contracts that the ACNC Commissioner believes contravene this Bill.  The ACNC Commissioner may issue a single direction that directs the responsible entity to not execute four contracts, and to change the details of one contract so that it does not contravene the Bill. 

9.125           Directions issued by the ACNC Commissioner in relation to the payment or transfer of money do not override an order of a court or a process of execution.  [Subsection 85-10(5)]

9.126           Registered entities issued with a direction are required to comply with the direction despite any clauses or provisions in governing rules or contracts the entity has entered into.  [Section 85-15]

9.127           This ensures that a registered entity can comply with a direction issued by the ACNC Commissioner even if its governing rules or if any contract or arrangement to which the entity is a party would prevent the entity from complying with the direction.

9.128           The Commissioner may issue such a direction in the case where the registered entity is already contravening its governing rules.

Variation and revocation of directions

9.129           Directions can generally be used by the ACNC Commissioner as short term instruments to direct an entity to undertake a specified act in order to address the actual or likely contravention, or the actual or likely case of non-compliance. 

9.130           Directions remain in force until the expiration of the time period specified in the direction notice, or until the ACNC Commissioner revokes the direction.

9.131           The ACNC Commissioner may, by notice in writing to the registered entity, vary or revoke the direction, if he or she considers the variation necessary and appropriate.  [Subsections 85-20(1) and 85-20(3)]

9.132           In deciding whether to vary or revoke a direction, the ACNC Commissioner must take into account the matters set out in subsection 35-10(2).  [Subsections 85-20(2) and (4)]

9.133           The ACNC Commissioner may use this authority in situations where a registered entity has addressed the contravention or non-compliance by taking the specified act in the direction notice. 

Example 9.18  

The ACNC directs a registered entity to ensure that a shadow responsible entity does not influence the business activities of the registered entity.  The shadow responsible entity’s contract expires and he parts ways with the registered entity.  In this case the ACNC Commissioner revokes the direction as there is no longer a threat that the shadow responsible entity will influence the activities of the entity.

9.134           If the ACNC Commissioner does not amend or revoke the enforceable direction for a period of 12 months after it was issued the ACNC Commissioner must consider within a reasonable time after the end of the 12 months whether it would be reasonable to vary or revoke the direction.  [Subsections 85-20(5) and 85-20(6)]

9.135           As noted above, directions are generally used as short term instruments.  The required statutory review ensures the ACNC Commissioner reconsiders the appropriateness of directions at the later time. 

9.136           In certain situations, it is possible that the other enforcement powers, such as the removal of responsible entities may be better suited to achieve the intended outcomes.

Objections

9.137           If a registered entity is dissatisfied with the decision taken by the ACNC Commissioner to:

•        give a direction,

•        vary a direction, or

•        not vary or revoke a direction after a 12 month period has passed,

the registered entity may seek to review or appeal the ACNC Commissioner’s decision.  [Section 85-25]

9.138           Further information on the reviews and appeals procedure can be found in Chapter 12 - Review and appeal.

Non-compliance with a direction

9.139           A registered entity must comply with a direction issued by the ACNC Commissioner within the timeframes specified in the direction notice.

9.140           If a registered entity does an act, or fails to do an act, and doing or failing to do the act results in a contravention of a direction, the registered entity commits an offence.  [Subsection 85-30(1)]

9.141           A separate offence is committed on each day that the registered entity fails to comply with the direction issued by the ACNC Commissioner.  The maximum penalty for each offence is 40 penalty units [Subsection 85-30(2)]

9.142           Where a body corporate is convicted of an offence for failing to comply with a direction issued by the ACNC Commissioner, subsection 4B(3) of the Crimes Act 1914 allows a court to impose a fine of up to five times the maximum penalty of 40 penalty units.  [Subsection 85-30(2)]

9.143           These penalties are lower than those of other Commonwealth regulators that have the power to issue directions, including section 11CG of the Banking Act 1959 administered by APRA.

Enforceable undertakings

9.144           Enforceable undertakings are court-enforceable agreements voluntarily entered into by the ACNC Commissioner and a registered entity. 

9.145           A written undertaking specifies an action or a series of actions that a registered entity has agreed to take, or refrain from taking, in order to comply with a provision that is enforceable.  [Division 90]

9.146           Enforceable provisions are:

•        a provision of this Bill;

•        governance standards or external conduct standards; and

•        a provision of a legislative instrument made under this Bill. 

[Subsection 90-5]

9.147           Enforceable undertakings have successfully been employed as an alternative to other enforcement actions by Australian regulators to influence behaviour.

9.148           The standard application and necessity clauses outlined above do not apply to enforceable undertakings.  Instead, a modified application clause applies, as there does not need to be a contravention or case of non-compliance for the ACNC Commissioner to enter into an enforceable undertaking.

9.149           The ACNC Commissioner must make information relating to enforceable undertakings available to the public through the ACN Register.  [Note in subsection 90-10(3)]

Acceptance of undertakings

9.150           The ACNC Commissioner has authority to accept enforceable undertakings relating to the powers or functions under the Bill.    [Section 90-10]

9.151           The ACNC Commissioner is able to accept a written undertaking from a registered entity that is a federally regulated entity, specifying that the entity will:

•        take specified action or refrain from taking specified action to comply with an enforceable provision; and

•        take specified action to ensure that the entity does not contravene or is more likely than not to not contravene an enforceable provision in the future.

[Subsection 90-10(1)]

9.152           The ACNC Commissioner is also able to accept a written undertaking from any registered entity specifying that the entity will:

•        take specified action or refrain from taking specified action to comply with an external conduct standard; and

•        take specified action to ensure that the entity does not contravene or is unlikely to contravene an external conduct standard in the future.

[Subsection 90-10(2)]

9.153           The modified application clause allows the ACNC Commissioner to accept a written undertaking when there has, or there is likely to be, a contravention, or situations where there has been no contravention but an entity wants to make changes to ensure it does not contravene an enforceable provision or external conduct standard in the future. 

9.154           Any undertaking agreed to by the ACNC Commissioner must be expressed to be an enforceable undertaking under Division 90 of the Bill for the undertaking to have effect.  [Subsection 90-10(3)]

9.155           The registered entity which entered into the enforceable undertaking may withdraw or vary the undertaking at any time, but only with the consent of the ACNC Commissioner.  [Subsection 90-10(4)]

9.156           The ACNC Commissioner may cancel the undertaking by giving written notice to the registered entity.  [Subsection 90-10(6)]

Example 9.19  

The PMB Memorial Foundation enters into an enforceable undertaking with the ACNC Commissioner.  The Foundation agrees to comply with a voluntary governance standard.  After a change in circumstances, the Foundation decides that it will withdraw from the enforceable undertaking so that it does not need to comply with the voluntary governance standard.  The ACNC Commissioner gives consent for the Foundation to withdraw from the enforceable undertaking.  The Foundation is no longer required to comply with the voluntary governance standard.

9.157           The written consent of the ACNC Commissioner is not a legislative instrument within the meaning of Section 5 of the Legislative Instruments Act 2003 [Subsection 90-10(5)]

Enforcement of undertakings

9.158              If the ACNC Commissioner considers that a registered entity has breached any of the terms of an enforceable undertaking, the ACNC Commissioner may apply to a ‘designated court’ to have the undertaking enforced.  [Subsection 90-15(1)]

9.159           Designated court includes the Federal Court of Australia, or a Supreme Court of any State or Territory. 

9.160           A ‘designated court’ may issue an order directing a registered entity to comply with the terms of an enforceable undertaking only if the Court is satisfied that:

•        the registered entity has breached the enforceable undertaking;

•        the entity continues to be registered by the ACNC; and

•        if the undertaking relates to an enforceable provision, excluding the external conduct standards, the entity continues to be a federally regulated entity.

[Subsection 90-15(2)]

9.161           If the latter two requirements are not satisfied the ACNC Commissioner is not authorised to accept the undertaking, therefore, a ‘designated court’ does not have the authority to enforce the undertaking. 

9.162           If all the requirements are satisfied, a court may use relevant judicial powers to order a registered entity to comply with the terms agreed to in the undertakings.  Providing a court with the power to enforce undertakings is necessary to provide entities with the required incentive to comply with the undertaking.

9.163           The orders that a court may make are outlined below.  Failure to comply with an order of a court is a criminal offence. 

9.164           A court may order a registered entity to comply with the undertaking.  This order ensures that the registered entity takes or refrains from taking the actions agreed to in the undertaking.  [Paragraph 90-15(3)(a)]

9.165           A court may order a registered entity to pay to the Commonwealth an amount up to the amount of any financial benefit that the entity has obtained directly or indirectly and that is reasonably attributable to the breach.  [Paragraph 90-15(3)(b)]

9.166           The possibility of issuing this order limits the financial incentive associated with breaching undertakings. 

Example 9.20  

Camp for Youths Ltd is a registered charity that has agreed to an undertaking to avoid revocation of registration.  The charity continues to access tax concessions.  Through its monitoring power, the ACNC Commissioner finds that the entity has not complied with the undertaking and has inappropriately maintained its registration and access to concessions.  A court orders the entity to repay the financial benefit, in this case the amount of tax the entity did not pay by virtue of its registration, gained as a result of the breach.

9.167           The ACNC Commissioner may apply to a court for an order directing the entity to compensate any third party that has suffered loss or damage as a result of the breach.  [Paragraph 90-15(3)(c)]

9.168           This type of order is required to ensure that third parties that suffer a financial or physical loss or damage as a result of the breach are adequately compensated.

Example 9.21  

The PBusta Foundation maintains deductible gift recipient status as a result of registration.  Individual donors can claim an income tax deduction for donations made to the Foundation.   The ACNC Commissioner finds that the Foundation has breached the terms of an undertaking and revokes the entity’s registration retrospectively. 

Based on ACNC registration, the ATO also revokes the entity’s endorsement as a deductible gift recipient retrospectively.  Individuals that claimed an income tax deduction for donations made to the Foundation could in theory be required to repay the tax deductions they claimed. 

In this situation the Foundation may have to compensate an individual who has a tax liability as a result of the breach. 

9.169           The ACNC Commissioner may apply to a ‘designated court’ for an order that the ‘designated court’ considers appropriate.  [Paragraph 90-15(3)(d)]

9.170           The court will be able to order the registered entity to do anything which is not covered by the other orders in this Chapter, in order to undo or rectify the consequences of the breach.

Injunctions

9.171           The ACNC Commissioner has the authority to apply for injunctions to restrain registered entities from contravening an enforceable provision, or to compel compliance with an enforceable provision.  [Division 95]

9.172           An injunction generally specifies actions which a person is required to take, or is required to refrain from taking, in order to become compliant with enforceable provisions.

9.173           The definition of person in the Bill includes all legal persons (such as registered entities) that can legally own or have property vested in their person.    

9.174           Injunctions can generally be sought by the ACNC Commissioner in circumstances where:

•        a registered entity has engaged in serious and persistent contraventions and court involvement is desirable; or

•        the ACNC needs to move rapidly to ensure that public monies are used appropriately. 

9.175           Injunctions can also be used in circumstances where a registered entity has not complied with a direction notice which has been issued by the ACNC Commissioner under Division 85 of the Bill. 

9.176           Enforceable provisions are:

•        a provision of this Bill;

•        governance standards or external conduct standards; and

•        a provision of a legislative instrument made under this Bill [section 95-5].

9.177           The standard application and necessity clauses apply to injunctions.  Consistent with the application clause that applies to the other enforcement powers of the ACNC Commissioner, the ACNC Commissioner may only apply to a court, and the court may only grant an injunction or an interim injunction if:

•        the injunction or interim injunction relates to a registered entity that is a federally regulated entity; or

•        the injunction or interim injunction relates to an external conduct standard.

[Section 95-10]

9.178           The application requires that injunctions are only issued to federally regulated entities, unless the injunction is issued to ensure that an entity is compliant with an external conduct standard.  In the latter case the injunction can be issued to any registered charity.

9.179           A court issuing injunctions under Division 95 of the Bill must take into account the object of this Bill.  The objects of the Bill must be considered when coming to a view on whether to issue an injunction and on the content of the injunction.  [Section 95-35]

9.180           Division 95 of the Bill provides courts with the authority to remove or vary any injunction that has been issued by courts under this Division [Section 95-25]

Grant of injunctions

Restraining injunctions

9.181           The ACNC Commissioner has the authority to apply to a court for a restraining injunction.  [Section 95-15]

9.182           Restraining injunctions can be used where a person has engaged or is proposing to engage in conduct that can be deemed a contravention of an enforceable provision.  [Subsection 95-15(1)]

9.183           The standard necessity clause applies to injunctions as a court is only able to issue injunctions to:

•        restrain the person from engaging in the conduct deemed to have contravened an enforceable provision; and

•        require a person to do a thing if it is desirable to do the thing in order to address the contravention.

[Subsection 95-15(1)]

Example 9.22  

The Fairsight Foundation is a registered entity.  The ACNC Commissioner through its monitoring power has obtained a copy of the employment contract under which one of the responsible entities is been engaged.  The contract enables the responsible entity to receive large bonuses which is inconsistent with the entity’s charitable purpose.  The ACNC Commissioner applies for an injunction to restrain the registered entity from acting in the manner which would result in a contravention of an enforceable direction.  The injunction can only be used to restrain the action which would lead to a contravention and cannot be used to influence the operations of the foundation.

9.184           The power of a relevant court to grant restraining injunctions may be exercised:

•        whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of that kind [paragraph 95-30(1)(a)]

•        whether or not the person has previously engaged in conduct of that kind [paragraph 95-30(1)(b)] ; and 

•         whether or not there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind [paragraph 95-30(1)(c)]

9.185           This is intended to make it clear that a court is able to issue an injunction :

•        where a person has engaged in the conduct in the past and apparently does not intend to engage in this conduct again;

•        in cases where the person under question has not previously engaged in the conduct; or

•        if the implications of engaging in the conduct, for other entities, are relatively minor.

Performance injunctions 

9.186           The ACNC Commissioner has the authority to apply to a court for a performance injunction.  [Section 95-15]

9.187           Performance injunctions can be used where a person has refused or failed, is refusing or failing, or is proposing to refuse or fail to do a thing that ensures the person would comply with enforceable provisions.  [Subsection 95-15(2)]

9.188           The standard necessity clause applies to performance injunctions as a court is only able to issue injunctions requiring the person to do the thing which would ensure compliance with enforceable provisions.  [Subsection 95-15(2)]

Example 9.23  

Helpers Inc is a registered entity.  The entity has refused, and is continuing to refuse, to develop and put in place processes which ensure that the registered entity is promoting the charitable purpose for which it was registered.  The ACNC Commissioner has issued warning notices to the entity which have been ignored.  The ACNC Commissioner applies to a court for a performance injunction which requires that the entity put in place appropriate processes. 

9.189           The power of a relevant court to grant performance injunctions may be exercised:

•        whether or not it appears to the court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that thing [paragraph 95-30(2)(a)]

•        whether or not the person has previously refused or failed to do that thing [paragraph 95-30(2)(b)] ; and 

•        whether or not there is an imminent danger of substantial damage to any other person if the person refuses or fails to do that thing [paragraph 95-30(2)(c)]

9.190           This ensures that a court is able to issue an injunction where:

•        a person has failed to do a thing in the past and apparently does not intend to fail to do the thing again;

•        in cases where the person under question has not previously refused or failed to do that thing; or

•        if the implications of refusing or failing to do the thing, for other entities, are relatively minor.

Consent injunctions

9.191           A court has the authority to grant consent injunctions.  [Subsection 95-15(3)]

9.192           Consent injunctions can be used where the ACNC Commissioner has begun the process of applying for a restraining injunction or a performance injunction, and all the parties involved have agreed to the course of action. 

9.193           The court does not have to be satisfied that the person has contravened, or will contravene, an enforceable provision.  [Subsection 95-15(3)]

Example 9.24  

The TYX Trust is registered by the ACNC.  New trustees have been appointed and discover that previous trustees engaged in practices that have contravened enforceable provisions.  The ACNC Commissioner and the new trustees agree on a course of action and apply to a court for a consent injunction.  The injunction puts a halt to the activities which led to the contravention while the new trustees and the ACNC Commissioner develop longer term solutions to address any shortcomings in the trust’s operational framework.

Interim injunction

9.194           The ACNC Commissioner may apply for an interim injunction pending determination of an application for either a restraining or performance injunction.  [Subsection 95-20(1)]

9.195           A relevant court may grant an interim injunction:

•        restraining a person from engaging in conduct; or

•        requiring a person to do a thing.

9.196           Interim injunctions are required to ensure the ACNC can rapidly move to protect charitable assets on a temporary basis prior to the agreement of more permanent arrangements. 

9.197           The court must not require the ACNC Commissioner to give an undertaking for damages as a condition of granting an interim injunction.  [Subsection 95-20(2)]

9.198           The powers conferred on a court under Division 95 are in addition to, and not instead of, any other powers of the court.  [Section 95-40]

Suspension and removal of responsible entities

9.199           The ACNC Commissioner has the power to remove or suspend responsible entities, and to appoint acting responsible entities.  [Division 100]

9.200           The standard application and necessity clauses apply to the ACNC Commissioner’s power to remove or suspend responsible entities.  [Section 100-5]

9.201           The ACNC Commissioner generally has the authority to remove or suspend responsible entities of federally regulated registered entities.  Where the non-compliance or likely non-compliance relates to an external conduct standard, the ACNC Commissioner has the authority to remove or suspend a responsible entity of any registered entity.  [Subsection 100-5(1)]

9.202           In the same manner as the other enforcement powers discussed above, a rumour or mere suspicion on the part of the ACNC Commissioner would not be sufficient to be considered to be more likely than not.  Rather, the Commissioner needs reliable and accurate evidence which clearly indicates that there will be a contravention in order to meet this test.

9.203           The ACNC Commissioner does not have the authority to remove or suspend responsible entities of an incapacitated entity, which includes a receiver, a liquidator, an administrator of a deed of company arrangement, a trustee in bankruptcy or other entity administering a compromise arrangement between the registered entity and someone else (see section 205-30(c) for a definition).  [Subsection 100-5(2)]

9.204           Incapacitated entities fall under the regulatory oversight of the ASIC or the Insolvency and Trustee Service Australia (ITSA). 

9.205           ASIC and ITSA have established appropriate expertise to deal with these entities as they relate to for-profit and NFP entities.  Therefore, this function appropriately remains under the purview of ASIC and the ITSA.

9.206           The ACNC Commissioner does not have the authority to remove or suspend responsible entities of a basic religious charity.  [Subsection 100-5(3)]

9.207           The ACNC Commissioner must make information relating to the removal or suspension of responsible entities available to the public through the ACN Register.  [Note in subsection 100-5(3)]

9.208           For further information about the publishing of information on the ACN Register see Chapter 4 - Australian Charities and Not-for-profits Register.

9.209           The Scoping Study for a National Not-for-profit Regulator process found that there was sector support for responsibility for the supervision of charitable trusts to be undertaken by a national regulator.

9.210           Unlike State Attorneys-General, who currently have the responsibility for supervising charitable trusts, the ACNC has both supervisory and investigatory powers in relation to registered entities.  These powers allow the ACNC Commissioner the means to investigate claims of misconduct and contraventions of the Bill, and to gather evidence if necessary.

9.211           Affording the ACNC Commissioner the power to suspend or remove trustees, in appropriate circumstances, moves this power from being a judicial function to a regulatory function. 

9.212           There are a number of benefits to this movement.  Firstly, a regulator can ensure that the approach taken is proportional in the circumstances.  Secondly, a regulator can act in a timely manner, without the need for lengthy court proceedings.  Thirdly, the decisions of regulators are subject to an appropriate review and appeal process throughout the levels of the judicial system.  Finally, a regulator can provide more cost-effective and accessible redress, negating the need for costly court proceedings.  This ensures that the beneficiaries of charitable trusts have improved access to justice.

9.213           The movement of this function from the judiciary to the executive is reflected in reforms that have occurred internationally, and is a movement that is progressively being adopted in Australia.  For example, APRA has the power to suspend or remove trustees of most superannuation funds and the Commissioner of Taxation has these powers in relation to self-managed super funds and charitable ancillary funds.  Allowing the ACNC Commissioner, as the regulator of the NFP sector, to suspend or remove trustees brings Australia into line with international best practice.

Suspension of responsible entities

9.214           The ACNC Commissioner is only able to suspend a responsible entity if the necessity clause has been satisfied. 

9.215              Thus, the ACNC Commissioner needs to consider whether suspending a responsible entity is necessary to address the contravention or non-compliance (or prevent more likely than not contravention or non-compliance).  [Subsection 100-10(1)]

Example 9.25  

Shadys Ltd is a registered charity established to provide subsidised housing for the direct relief of poverty.  The entity has several responsible entities.  One of these entities is a director of a for-profit affordable housing provider that competes with the charity in the affordable housing segment of the market.  This responsible entity has a clear conflict of interest in this situation and may therefore not be promoting the purposes for which the charity was registered. 

The entity continues to function in its capacity as a responsible entity, as such; the registered entity may not be complying with regulatory obligations.   To address this case of non-compliance the ACNC Commissioner could suspend the responsible entity.

9.216           The ACNC Commissioner must give the responsible entity written notice setting out the decision to suspend it.  The written notice must set out the ACNC Commissioner’s decision, provide reasons for the decision and set out the time the suspension ends.  [Subsection 100-10(3)]

9.217           Before suspending or removing a responsible entity the ACNC Commissioner must give a show cause notice to the registered entity that states the grounds on which the ACNC Commissioner has made his or her decision and which invites the registered entity to respond within 28 days.  [Subsections 100-10(4) and (5) and subsections 100-15(3) and (4)]

9.218           The ACNC Commissioner is not required to give a show cause notice, or to wait for a response to a show cause if, taking into account the matters in 35-10(2), more immediate action is necessary.  [Subsections 100-10(6) and 100-15(5)]

9.219           The suspension of a responsible entity starts when the ACNC Commissioner gives the responsible entity notice of his or her decision to suspend the entity.  [Subsection 100-10(2)]

9.220              The ACNC Commissioner may change the end time of the suspension.  [Subsection 100-10(7)]

9.221           The ACNC Commissioner is required to give the responsible entity a written notice setting out a decision to extend the suspension, providing reasons for the decision and setting out the new time the suspension ends.  [Subsection 100-10(8)]

Removal of responsible entities

9.222           The ACNC Commissioner can only remove a responsible entity if the necessity clause has been satisfied. 

9.223           Thus, the ACNC Commissioner needs to consider whether removing a responsible entity is necessary to address the contravention or non-compliance (or prevent the more likely than not  contravention or non-compliance).  [Subsection 100-15(1)]

Example 9.26  

Continuing from example 9.25 above, if the suspended individual returns to his position as a responsible entity once the suspension period ends, and the registered entity, through the remaining responsible entities, has not put in place appropriate processes to manage this conflict of interest and ensure the entity is promoting the purposes for which the charity was registered, the ACNC Commissioner can remove the responsible entity to address the case of non-compliance.

9.224           The ACNC Commissioner must give the responsible entity written notice setting out his or her decision to remove the responsible entity.  The written notice must set out the ACNC Commissioner’s decision and provide reasons for the decision.  [Subsection 100-15(2)]

Matters ACNC Commissioner must take into account

9.225           The ACNC Commissioner is required to consider the standard range of matters outlined in subsection 35-10(2) prior to suspending or removing responsible entities.  [Subsections 100-10(9) and 100-15(6)]

9.226           The matters that are required to be considered ensure that the ACNC Commissioner balances a range of different considerations when a forming a view on appropriate enforcement actions. 

9.227           The matters include factors which would help ensure that, where possible, other options to help promote compliance are considered before a responsible entity is removed or suspended. 

9.228           In some situations, such as in relation to minor non-compliance and where other mechanisms such as warning notices or enforceable undertakings are available, it may not be appropriate to suspend or remove a responsible entity.

9.229           In other situations the removal or suspension of responsible entities may be necessary, even where other enforcement actions are available to the ACNC Commissioner and have not been taken. 

9.230           For example, the suspension or removal of a responsible entity may be necessary where a registered entity has significantly and persistently contravened the law and there is a significant risk that assets may be applied in an inappropriate manner. 

Review of decisions

9.231           A responsible entity that is dissatisfied with the ACNC Commissioner’s decision to remove or suspend (or change the time a suspension of the responsible entity ends) may object against the decision in the manner set out in Part 7-2.  [Subsections 100-10(10) and 100-15(7)]

9.232           For further information on the review and appeal procedures see Chapter 12 — Review and appeal. 

Effect of suspension or removal

9.233           A responsible entity that has been suspended cannot become a responsible entity of the registered entity until the suspension ends.  [Subsection 100-20(1)]

9.234           A responsible entity that has been removed cannot become a responsible entity of the registered entity.  [Subsection 100-20(2)]

9.235           When a responsible entity is removed or suspended, the responsible entity is removed or suspended only from the position or office which led the entity to be considered a responsible entity for the purposes of this Bill.  [Subsection 100-20(1) and subsection 100-20(2)]

9.236           The relevant positions or offices are outlined in the definition of ‘responsible entity’ and include:

•        in the case where the registered entity is a company — a director of the registered entity; or

•        in the case where the registered entity is a trust — a trustee of the registered entity, and if a trustee is a body corporate, a director of the trustee.

9.237           Where the suspended or removed responsible entity is a director of a registered entity, or a director of a corporate trustee, the individual ceases to be to be a director of the company or trustee, indefinitely for the case of a removal, or in the case of suspension, until the suspension ends.  [Subsection 100-20(3)]

9.238           This ensures that a removed or suspended responsible entity cannot be reappointed (prior to the end of the suspension) after the removal or suspension.

9.239           The provision also clarifies that the suspended or removed responsible entity can continue to function, or work, for the registered entity in another capacity if considered appropriate. 

Example 9.27  

Holdspoint primary is a NFP school which is registered by the ACNC.  The registered charity has contravened a provision of the Bill and the ACNC Commissioner decides to suspend one of the schools responsible entities (the Principal of the school who is also a Director) in order to address the contravention.  The Principal will continue to be able to teach and provide other educative services related to the role of school Principal, however, this individual would not be able to function as a Director of the school until the suspension period ends.

9.240           A removed or suspended responsible entity is generally not able to function as a responsible entity of another registered entity during the period of suspension or removal, if the appointment would result in the other registered entity contravening a governance standard. 

9.241           A suspended or removed responsible entity commits an offence if the responsible entity makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the registered entity.  [Subsection 100-25(1)]

9.242           The maximum penalty for this offence is 50 penalty units or imprisonment for one year, or both.  [Subsection 100-25(1)]

Example 9.28  

The XAY Inc is a registered charity that has had one of its responsible entities suspended.  The responsible entity no longer formally holds the office of Director but continues to attend Board meetings and participate in making Board decisions that affect substantial parts of the registered entity’s business.  Under this section the responsible entity would has committed an offence and may be liable for a penalty. 

9.243           A suspended or removed responsible entity commits an offence if the responsible entity exercises the capacity to significantly affect the registered entity’s financial standing.  [Subsection 100-25(2)]

9.244           The maximum penalty for this offence is 50 penalty units or imprisonment for one year, or both.  [Subsection 100-25(2)]

Example 9.29  

Camp Farah Ltd is a registered charity which has had one of its Directors removed by the ACNC.  The Director that was removed continues to work for the entity in a different capacity.  The ACNC is made aware that the individual continues to influence the decisions and strategies of the working group of the Board of Directors by influencing the views of the remaining responsible entities.  Decisions taken by the working group relate to the entity’s long-term funding and investment plan, which significantly affects the registered entity’s financial standing and position.  The individual is liable to an offence.     

Example 9.30  

The Campo Foundation is an ancillary fund registered by the ACNC.  The Foundation is a federally regulated entity with all of its trustees being constitutional corporations.  The ACNC Commissioner removes one of the Directors of one of the trustees.  The suspended individual continues to work for the trustee in a different capacity and is responsible for managing the stationery inventory of the corporations including the payments for stationery.  In this case the individual’s decisions will have a minor effect on the entity’s financial standing.      

9.245           An offence is committed by a suspended or removed responsible entity, that is an individual who communicates instructions or wishes to the responsible entities of the registered entity:

•        knowing that responsible entities are accustomed to act in accordance with the suspended or removed individual’s instructions or wishes; or

•        intending that those responsible entities will act in accordance with those instructions or wishes; and

•        the communication of those instructions or wishes is not advice given by the entity in the proper performance of functions attaching to the entity’s professional capacity or his or her business relationship with the responsible entities of the registered entity.  [Subsection 100-25(3)]

9.246           The maximum penalty for this offence is 50 penalty units or imprisonment for one year, or both.  [Subsection 100-25(3)]

Example 9.31  

PCA Help Ltd is a registered charity which has had one of its Directors suspended by the ACNC.  The ACNC is made aware that the individual continues to influence the decisions of the Board of Directors by influencing the views of responsible entities.  The responsible entities of the entity are accustomed to act in accordance with the suspended Director’s instructions and the Director communicates the instructions with a view to compelling the responsible entities to act in accordance with instructions.  The individual has committed an offence.     

9.247           Offences included in this section of the Bill are strict liability offences as defined in section 6.1 of the Criminal Code.  [Subsection 100-25(4)]

9.248           The offences ensure that responsible entities are strictly liable for their actions that are taken to influence (directly or indirectly through other responsible entities) the whole or a substantial part of the registered entity’s business or financial standing (that is, liable regardless of fault). 

9.249           This liability has been established to compel responsible entities which have already been removed on the grounds of misconduct to refrain from influencing the activities of the registered entity in order to ensure the registered entity addresses the contravention or case of non-compliance. 

9.250              It is expected that the ACNC Commissioner only takes action to remove or suspend a responsible entity in situations that involve serious contraventions or non-compliance.      

If a responsible entity is removed or suspended

9.251           The ability to appoint an acting responsible entity provides the ACNC Commissioner with the power to ensure that registered entities are able to operate effectively and continue to promote their charitable purpose when responsible entities have been suspended or removed. 

9.252           If the ACNC Commissioner removes or suspends one or more responsible entities, the ACNC Commissioner has the authority to appoint one or more persons (acting responsible entities) to undertake the duties of the responsible entity during the period of suspension or until a permanent replacement responsible entity is appointed.  [Subsections 100-30(1) and 100-30(3)]

9.253           If the ACNC Commissioner removes or suspends all of a registered entity’s responsible entities, the ACNC Commissioner is required to appoint one or more persons (acting responsible entities) to act in the place of the suspended or removed entities during the period of the suspension or until at least one of the vacancies created by the removal or suspension is filled.  [Subsections 100-30(2) and 100-30(4)]

9.254           To clarify, the ACNC Commissioner is required to appoint a director of a corporate trustee if the corporate trustee is a responsible entity of a trust which is a registered entity, and the ACNC Commissioner suspends all of the directors of the trustee.

9.255           The ACNC Commissioner is also required to appoint an acting responsible entity where all trustees of the trust have been suspended or removed. 

Example 9.32

A registered entity has two responsible entities, both of which are corporate trustees.  The ACNC Commissioner suspends all of the directors of one of the corporate trustees. 

While the registered entity still has one of the responsible entities, suspending all the directors of one of the corporate trustees leaves it with no directors.  The ACNC Commissioner is therefore required to appoint an acting director of the corporate trustee.

9.256           The ACNC Commissioner has discretion to determine the number of responsible entities that will be appointed to ensure the effective operations of the registered entity.  This may include a minimum number of directors as specified in other laws, for example the Corporations Act 2001

9.257           Where the ACNC Commissioner suspends or removes a responsible entity of a trust which is a ‘federally regulated entity’, to the extent possible, the ACNC Commissioner generally looks to appoint a constitutional corporation to fill any vacancy that results from the suspension or removal of responsible entities.  [Subsection 100-35(1)]

9.258           Additionally, the ACNC Commissioner will strive to appoint the same type of constitutional corporations.  [Subsection 100-35(2)]

9.259           Constitutional corporations include financial corporation, a trading corporation or a foreign corporation, and a body corporate that is incorporated in a Territory.  [Section 205-20]

9.260           The ACNC Commissioner may appoint a person that is not a constitutional corporation if it is not practical to appoint a person that is a constitutional corporation.  [Subsection 100-35(3)]

9.261           In cases where the ACNC Commissioner is unable to appoint the same type of constitutional corporation, an acting responsible entity is only able to act as a responsible entity for a maximum period of 6 months.  [Subsection 100-35(4)]

9.262           This may be required when the ACNC Commissioner wants the acting responsible entity to be a government authority or an incapacitated entity.

9.263           The ACNC Commissioner has the authority to determine the terms and conditions of the appointment of the acting responsible entities.  The determination has effect despite anything in any Australian law the registered entity’s governing rules or the governing rules of a corporate trustee.  [Subsection 100-40(1)]

9.264           The ACNC Commissioner generally requires that the acting responsible entities’ fees are to be paid out of the assets of the registered entity including the assets of a trust.  This is required as the acting responsible entity provides the registered entity with a service from which the registered entity benefits.  [Subsection 100-40(2)]

9.265           The ACNC Commissioner may terminate the appointment of an acting responsible entity at any time.  [Section 100-45]

9.266           This authority enables the ACNC Commissioner to remove an acting responsible entity if required.  For example, the ACNC Commissioner may want to remove an acting trustee to appoint an incapacitated entity if circumstances so require. 

9.267           An acting responsible entity may resign by writing given to the ACNC Commissioner.  The resignation does not take effect until the end of the seventh day after the day on which the notice was given to the ACNC Commissioner.  [Section 100-50]

9.268           The acting responsible entities may exercise all the rights, title and powers, and must perform all the functions and duties, of the removed or suspended responsible entities.  [Subsection 100-55(1)]

9.269              The registered entity’s governing rules (and, if the suspended or removed responsible entities were directors of a trustee of the registered entity, the governing rules of the trustee), and every Australian law that applies in relation to the acting responsible entities as if the acting responsible entities were a director, or a trustee.  [Subsection 100-55(2)]

9.270           This ensures that the responsible entities are able to function effectively as responsible entities and do all that is required or possible for the registered entity to fulfil its charitable purpose. 

9.271           The ACNC Commissioner may give a written notice directing an acting responsible entity to do, or not to do, one or more specified acts or things in relation to the registered entity.  [Subsection 100-60(1)]

9.272           These powers ensure that the ACNC Commissioner has the power to address the contravention or case of non-compliance which led to the removal or suspension of responsible entities.

9.273           Such directions are provided to the acting trustee so that they are aware of the contravention or case of non-compliance which led to the suspension and removal and can therefore act to address the problem. 

9.274           An acting responsible entity commits an offence if the registered entity engages in conduct which contravenes a notice given by the ACNC Commissioner.  [Subsection 100-60(2)]

9.275           The maximum penalty attached to this offence is 40 penalty units.  [Subsection 100-60(2)]

9.276           This section does not affect the validity of a transaction entered into in contravention of a notice given under subsection.  [Subsection 100-60(3)]

9.277           This is required to ensure any arrangements or agreements are still valid even though this may contravene the direction to do or not do an act given by the ACNC Commissioner to the acting responsible entity. 

9.278           Furthermore, it protects parties relying in good faith on a valid appointment.

Special provisions about acting trustees

9.279           If the ACNC Commissioner appoints an acting responsible entity to act in the place of a suspended or removed trustee of the registered entity, the ACNC Commissioner must make a written order vesting the property of the registered entity in the acting responsible entity.  [Subsection 100-65(1)]

9.280           If the appointment period ends, the ACNC Commissioner must make a written order vesting the property of the registered entity in the new acting responsible entity, the previously suspended trustee or trustees, or the new permanent trustee or trustees (whichever is applicable).  [Subsection 100-65(2)]

9.281           If the ACNC Commissioner makes an order under this Bill vesting property of a registered entity in a person or persons, generally the property immediately vests in the acting responsible entities appointed by the ACNC Commissioner.  [Subsection 100-65(3)]

9.282           If the assets or property held by the trust is of a kind whose transfer or transmission may be registered under an Australian law; and the law:

•        enables the registration of such an order; or

•        enables the person or persons to be registered as the owner or owners of that property;

the property does not vest in the person or persons until the requirements of the law referred to are complied with.

[Subsection 100-65(4)]

9.283           If the ACNC Commissioner makes a property vesting order to vest the property of a registered entity in an acting responsible entity, the former trustee or former trustees are required to give the acting responsible entity all books relating to the registered entity’s affairs that are in the former trustee’s or former trustees’ possession, custody or control.  [Subsections 100-70(1) and (2)]

9.284           If the former trustee or former trustees do not, within 14 days of the ACNC Commissioner making the property vesting order, comply with the requirement to give the acting responsible entity all books relating to the registered entity’s affairs, the entity commits an offence.  [Paragraph 100-70(1)(c)]

9.285           The maximum penalty for this offence is 50 penalty units.  [Paragraph 100-70(1)(c)]

9.286           This is required to ensure that the acting responsible entity has all the information required to effectively manage the affairs of the trust.  Without the books of the trust, the acting responsible entity is unaware of the financial position and performance and related information required to formulate an appropriate business strategy for the trust.

9.287           If the ACNC Commissioner makes a property vesting order to vest the property of a registered entity in an acting responsible entity, the acting responsible entity may, by notice in writing to the former trustee or former trustees, require the trustee or trustees:

•        to identify property of the registered entity; and

•        to explain how the former trustee or former trustees have kept account of that property.

[Subsection 100-70(3)]

9.288           The former trustee(s) commit an offence if they fail to comply with the requirement in the notice within 28 days of the notice being given.  [Subsection 100-70(5)]

9.289           The maximum penalty for this offence is 50 penalty units.  [Subsection 100-70(5)]

9.290           The acting responsible entity may also require the former trustee or former trustees to take specified action to transfer property vested in the former trustee or former trustees to the acting responsible entity.  [Subsection 100-70(4)]

9.291           This provision only covers properties that are vested in the former trustee(s) which are vested in this trustee(s) by virtue of the trustee’s position as a responsible entity.

9.292           The former trustee(s) commit an offence if they fail to comply with the requirement in the notice within 28 days of the notice being given.  [Subsection 100-70(5)]

9.293           The maximum penalty for this offence is 50 penalty units.  [Subsection 100-70(5)]

9.294           Offences included in this section of the Bill are strict liability offences as defined in section 6.1 of the Criminal Code.  [Subsection 100-70(6)]

9.295           The offences ensure that former trustee(s) are strictly liable for their actions relating to books, identification of property and transfer of property (that is, liable regardless of fault). 

9.296           This liability has been established to compel former trustee(s) which have already been removed on the grounds of misconduct to deal fairly with the trust’s property during the handover period. 

9.297           It is expected that the ACNC Commissioner will only take action to remove or suspend a trustee in situations that involve serious contraventions or non-compliance.

Do not remove section break.



Outline of chapter

10.1               This Chapter:

•        explains the establishment and functions of the Australian Charities and Not-for-profits Commission (ACNC);

•        explains the establishment, functions and powers of the Australian Charities and Not-for-profits Commission Commissioner (ACNC Commissioner);

•        sets out the terms and conditions of appointment of the ACNC Commissioner, and the ACNC Commissioner’s powers of delegation; and

•        explains the establishment, functions and powers of the Advisory Board, including the membership of the Advisory Board.

Summary of new law

10.2               The ACNC is a new Commonwealth statutory office which will be responsible for the regulation of the not-for-profit (NFP) sector. 

10.3               This Chapter addresses how the ACNC is established, as well as the terms and conditions of appointment of the ACNC Commissioner, and the ACNC Commissioner’s powers of delegation, in order to administer the national regulatory framework.

10.4               The ACNC will also provide assistance and support for the NFP sector through the provision of educational material and other guidance.

Detailed explanation of new law

The Australian Charities and Not-for-profits Commission

10.5               This Bill establishes the ACNC.  [Section 105-5]

10.6               The ACNC consists of:

•        the ACNC Commissioner; and

•        any staff assisting the ACNC Commissioner that are engaged under the Public Service Act 1999 and are subject to the directions of the ACNC Commissioner. 

[Section 105-10]

10.7               Staff assisting the ACNC Commissioner are provided by the Commissioner of Taxation; however, they will be officers of the ACNC and report to the ACNC Commissioner in respect of all matters for which the ACNC Commissioner is responsible.

10.8               The function of the ACNC is to assist the ACNC Commissioner in the performance of his or her functions.  [Section 105-15]

10.9               The ACNC enjoys the same privileges and immunities as the Crown.  This means that the ACNC is legally and financially part of the Commonwealth.  This confers on the ACNC the non-statutory privileges and immunities of the Crown, and the benefit of the presumption that legislation does not generally apply to the Crown.  [Section 105-20]  

The ACNC Commissioner

10.10           This Bill establishes the position of the ACNC Commissioner.  [Subsection 110-5(1)]  

10.11           Once the Bill is enacted, the ACNC Commissioner has the general administration of the law, and the other powers and functions that this Bill, or any other laws, confers on the office.  [Subsection 110-5(2)]

10.12           The ACNC Commissioner has the function of assisting registered entities in complying with and understanding the Bill, by providing them with guidance and education.  [Subsection 110-10(1)]

10.13           The ACNC Commissioner also has the function of assisting the public in understanding the work of the NFP sector, in order to support the transparency and accountability of the sector, by giving the public relevant information on the ACNC’s website.  This function does not limit the ACNC Commissioner’s other functions.  [Subsections 110-10(2) and (3)]

10.14           The ACNC Commissioner has the power to do all those things necessary or convenient to be done for, or in connection with, the performance of his or her functions.  However, this power does not extend to the spending of public monies without a proper delegation in place.  [Subsection 110-15]

10.15           This means that the ACNC Commissioner is able to administer general activities associated with the Bill such as the running of a website and the provision of educational information to the sector, as well as other powers and functions as described in detail in the Bill.

10.16           The position of ACNC Commissioner is an independent statutory office.  In the exercise of his or her functions, the ACNC Commissioner is not subject to the direction or control of any Minister or of another government department or agency.

10.17           The ACNC Commissioner may have regard to the advice and recommendations of the Advisory Board (see paragraphs 10.58 to 10.70 below) in carrying out his or her functions and exercising his or her powers, but he or she is not obligated to act in accordance with this advice.  [Subsection 110-20(1)]

10.18           These provisions mean that the Advisory Board is not a decision-making body.  While the Advisory Board can provide advice and suggestions, it is the ACNC Commissioner who is responsible for making decisions on behalf of the ACNC.

10.19           The ACNC Commissioner may attend Advisory Board meetings only upon an invitation from the Chair of the Advisory Board.  [Subsection 110-20(2)]

Terms and conditions of appointment

10.20           The Bill sets out the terms and conditions of the ACNC Commissioner’s appointment.

10.21           The Governor-General is responsible for appointing the ACNC Commissioner by written instrument.   [Subsection 115-5(1)]

10.22           The ACNC Commissioner is to be appointed on a full-time basis.  [Subsection 115-5(2)]  

10.23           The written instrument of appointment contains the period of appointment, which must not exceed 5 years.   [Section 115-10]

10.24           The person currently occupying the office of ACNC Commissioner is eligible for re-appointment.  [Note in section 115-10]

10.25           The Bill provides for circumstances when there needs to be an Acting ACNC Commissioner.  The Bill gives the Minister the power to appoint an Acting ACNC Commissioner when there is a vacancy in the office, or if the ACNC Commissioner is out of Australia or unable to perform the duties of the office.  The rules that apply to acting appointments are set out in section 33A of the Acts Interpretation Act 1901 [Section 115-15]

10.26           The Remuneration Tribunal is responsible for determining the remuneration and leave entitlements of the ACNC Commissioner.  The regulations may prescribe a remuneration amount that is to apply in the absence of a determination by the Remuneration Tribunal.  The regulations may also prescribe any allowances due to the ACNC Commissioner.  [Section 115-20]

10.27           Recreation leave entitlements of the ACNC Commissioner are determined by the Remuneration Tribunal.  The Minister also has discretion to grant the ACNC Commissioner a leave of absence.  The Minister may grant a leave of absence, for example, if the personal circumstances of the ACNC Commissioner require it.  [Section 115-25]  

10.28           The ACNC Commissioner must disclose to the Minister, in writing, all interests, pecuniary or otherwise, that the ACNC Commissioner has or acquires which may conflict with the proper performance of the ACNC Commissioner’s functions.  [Section 115-30]  

10.29           The ACNC Commissioner is not allowed to engage in other paid employment without the Minister’s approval.  [Section 115-35]  

10.30           The above two conditions ensure that the ACNC Commissioner is not compromised by other interests in his or her duties.

10.31           The Minister may set other terms and conditions of the ACNC Commissioner’s office which are not covered by the Bill.  This may include setting out additional specific leave entitlements.  [Section 115-40]  

10.32           The ACNC Commissioner may resign from the office by giving the Governor-General a signed notice of resignation.  The ACNC Commissioner’s resignation will take effect from the day the notice is received by the Governor-General, unless the notice specifies another day in the future, in which case resignation will take effect from the later day.  [Section 115-45]  

10.33           The Bill provides for the Governor-General to terminate the ACNC Commissioner’s appointment:

•        for misbehaviour or incapacity (either physical or mental) [subsection 115-50(1)] ; or 

•        if the ACNC Commissioner:

-       becomes bankrupt;

-       applies for bankruptcy;

-       compounds with his or her creditors; or

-       assigns his or her remuneration for the benefit of creditors [Paragraph 115-50(2)(a)] ; or 

•        if the ACNC Commissioner is absent without a leave of absence [paragraph 115-50(2)(b)]

•        if the ACNC Commissioner engages in paid employment without approval [paragraph 115-50(2)(d)] ; or 

•        if the ACNC Commissioner fails to comply with any terms or conditions of employment provided for by the Bill or by the Minister in accordance with the Bill [paragraph 115-50(2)(c)] .    

10.34           This standard provision is included to ensure that the ACNC Commissioner is able to perform his or her duties without interference, while acknowledging that there may be circumstances where it is both appropriate and warranted for the ACNC Commissioner to be replaced to ensure the proper function of the office of ACNC Commissioner.

10.35           The ACNC Commissioner’s appointment may be terminated in cases where her or his personal finances have been compromised.  These circumstances are included to ensure the ACNC Commissioner’s ability to perform her or his duties is not compromised by his or her personal financial situation.

10.36           The ACNC Commissioner is able to delegate his or her powers or functions in accordance with the Bill.  The delegation must be in writing to an SES employee, or an acting SES employee, that is engaged under the Public Service Act 1999 and made available to ACNC Commissioner by the Commissioner of Taxation.  [Subsection 115-55(1)]

10.37           Delegates must exercise their powers in accordance with any lawful written directions provided by the ACNC Commissioner.  [Subsection 115-55(2)]

10.38           Lower level staff of the ACNC will be involved in the day-to-day decisions of the ACNC; however, decision-making authority will rest with the delegate.  This is in line with the practices of most Commonwealth authorities.  Consistent with those practices, other Australian Public Service (APS) staff may act as an agent of the delegate in carrying out the ACNC Commissioner’s functions. 

10.39           Before signing or executing any notice, determination, instrument or other document which gives rise to a reviewable decision, officers must ensure that they have been authorised by a delegate of the ACNC Commissioner to exercise the power in question on his or her behalf, and in accordance with any instructions given to the officer acting for, and on behalf of, the delegate.

Staffing and consultants

10.40           The Bill provides details of the staffing of the ACNC, and the ability of the ACNC to engage consultants.

10.41           The ACNC Commissioner has members of staff which are engaged under the Public Service Act 1999 .  The staff are provided by the Commissioner of Taxation, however, they are responsible to the ACNC Commissioner when performing their duties under their employment.  [Section 120-5]

10.42           This ensures that staff provided to the ACNC Commissioner by the Commissioner of Taxation are accountable to the ACNC Commissioner in the performance of their duties under the ACNC Bill and act independently of the Commissioner of Taxation in making decisions about the registration and regulation of entities under this Bill.  [Note in section 120-5 and section 120-5]

10.43            This Bill does not displace the existing common law duty of employees to comply with lawful and reasonable directions by the employer (the Commissioner of Taxation in relation to APS staff provided to the ACNC Commissioner), or the existing duty of APS employees to comply with a lawful and reasonable direction under the APS Code of Conduct as set out in section 13 of the Public Service Act 1999 .

10.44           In the rare event that a conflict should arise between a direction from the Commissioner of Taxation and the ACNC Commissioner, staff must comply with the directions of the ACNC Commissioner in relation to the ACNC Commissioner carrying out functions under the ACNC Bill.

10.45           The ACNC Commissioner may engage consultants to assist in the performance of the ACNC’s functions.  These consultants will be engaged on behalf of the Commonwealth.  [Subsection 120-10(1)]

10.46           The ACNC Commissioner is not allowed to engage a member of the Advisory Board as a consultant [Subsection 120-10(2)] .  This is to ensure that Advisory Board members provide independent advice to the ACNC Commissioner to assist him or her in carrying out the functions of the ACNC.  To have a member of the Advisory Board engaged as a consultant has the potential to interfere with this independence.

Special account for the ACNC

10.47           A Special Account for the purposes of the Financial Management and Accountability Act 1997 (FMA Act) is established by the Bill.  This will be the Australian Charities and Not-for-profits Commission Special Account (Special Account).  [Section 125-5]

10.48           The Special Account is an appropriation mechanism that sets aside amounts within the Consolidated Revenue Fund for expenditure for special purposes, which, in this case, relates to expenditure for the special purposes of funding the operations of the ACNC.

10.49           The Special Account sits within the Australian Taxation Office’s (ATO) portfolio budget statements; however, it is accounted for as its own item, similar to how the Tax Practitioners Board is reported on in the ATO’s portfolio budget statements.

10.50           A memorandum of understanding (MOU) is proposed to exist between the Commissioner of Taxation and the ACNC Commissioner.  This will set out in detail how the two agencies will work together, including how the ACNC Commissioner will independently manage the ACNC budget. 

10.51           However, the ACNC Commissioner must comply with the requirements of the FMA Act.  [Section 110-15 note]

10.52           The FMA Act sets out the way in which officials must handle public money, public property and other resources of the Commonwealth.  It also sets out general integrity rules that apply to the financial management of other Commonwealth regulators such as Australian Securities and Investment Commission (ASIC) and Australian Competition and Consumer Commission (ACCC).

10.53           The Special Account may be credited by amounts equal to the following:

•        amounts received by the Commonwealth in connection with the performance of the ACNC Commissioner’s functions under the Bill;

•        amounts of any gifts or bequests made for the purposes of the account; and

•        amounts received by the Commonwealth in relation to property paid for with amounts debited from the ACNC Special Account.

[Section 125-10]

10.54           The Special Account is used to pay or discharge costs, expenses and other obligations incurred by the Commonwealth in relation to the performance of the ACNC Commissioner’s functions; to pay for remuneration or allowances to persons in accordance with the Bill; and to meet any expenses associated with administering the Special Account.  [Section 125-15]

Reporting

10.55           The ACNC Commissioner must provide an annual report to the Minister as soon as practicable after the end of the financial year (1 July to 30 June) for presentation to Parliament.  The report provides details on the ACNC Commissioner’s operations during that year.  [Subsection 130-5(1)]

10.56           The report must also include an evaluation of the ACNC’s overall performance during the year.  [Subsection 130-5(2)]

10.57           The provisions about annual reports in section 34C of the Acts Interpretation Act 1901 apply in relation to the presentation of the ACNC Commissioner’s annual report.  For example, subsection 34C(2) provides that the ACNC Commissioner must furnish the report to the Minister within six months after the end of the financial year.  This means that ‘as soon as practicable’ is read to mean no longer than six months.  [Note in subsection 130-5(1)]

10.58           Subsection 34C(4) of the Acts Interpretation Act 1901 also applies so that the ACNC Commissioner may apply to the Minister for an extension of the period if the ACNC Commissioner is of the opinion that it will not be reasonably possible to comply with the six-month time requirement. 

The Advisory Board

10.59           The Bill establishes an ACNC Advisory Board.  [Section 135-5]

10.60           The Advisory Board consists of two to eight general members.  Collectively, the general Advisory Board members must have expertise relating to charities and NFP entities, or experience and appropriate qualifications in relation to law, taxation or accounting.  Each member may have expertise and experience in a number of these areas.  [Paragraph 135-10(b)]

10.61           The members are expected to have a detailed knowledge of the NFP sector and how it operates.

10.62           The Advisory Board may also consist of a number of ex officio members as determined by the Minister.  [Paragraph 135-10(a)]

10.63           The Advisory Board’s function is to provide advice and make recommendations to the ACNC Commissioner in relation to the ACNC Commissioner’s functions under this Bill.  The Advisory Board is to provide advice to the ACNC Commissioner in response to a request for such advice from the ACNC Commissioner.  [Subsection 135-15(1)]

10.64           The Advisory Board cannot provide advice that is not in response to a request from the ACNC Commissioner.

10.65           The Advisory Board can do anything which is necessary or convenient in connection with performing its function.  [Subsection 135-15(2)]

10.66           However, this broad power does not extend to the spending of public monies without a proper delegation in place.  The Advisory Board must not spend money without a delegation from the Commissioner of Taxation.  However, it is not expected that the need will arise for the Advisory Board to spend public money, and therefore, no delegations for the spending of public money are likely to be put in place.  These matters are to be set out in the MOU between the Commissioner of Taxation and the ACNC Commissioner.

10.67           The ACNC Commissioner is not bound to act in accordance with any advice from the Advisory Board because the Advisory Board is not a decision-making body.  [Subsection 135-15(3)]

10.68           The Advisory Board is a body that can provide sector-specific advice to the ACNC Commissioner, to assist the ACNC Commissioner in his or her decision-making role.  The Advisory Board is not a governing body and has no operational oversight role. 

10.69           The Advisory Board has no decision-making power.  It is intended to be a resource for the ACNC Commissioner as it can provide the ACNC Commissioner with a pool of broad knowledge and experience in the NFP sector, law, accounting and taxation which the ACNC Commissioner can draw on to assist him or her to effectively fulfil the role of ACNC Commissioner.

10.70           For example, the ACNC Commissioner may request the Advisory Board to consider the implications of certain decisions on the sector, what the next piece of guidance material that the ACNC Commissioner releases should be or what sort of education and support for the sector is necessary to assist the sector in response to emerging issues. 

10.71           Commonwealth regulators are normally structured in this way so that mechanisms to ensure accountability are in place.   

Appointment

10.72           The Minister may appoint a general member of the Advisory Board by written instrument.  [Subsection 140-5(1)]

10.73           The term of appointment for general members is as specified in the written instrument, however the period must not exceed 3 years.  [Section 140-10]

10.74           Members of the Advisory Board are eligible for reappointment.  [Note in section 140-10]

10.75           A member of the Advisory Board is appointed on a part-time basis, and must be an ordinary resident in Australia.  [Subsections 140-5(1) and 140-5(2)]

10.76           One of the members of the Advisory Board is to be appointed by the Minister as the Chair of the Advisory Board.  Another member is to be appointed as the Deputy Chair.  [Subsection 140-5(3)]

10.77           A person’s appointment as a general member, the Chair or the Deputy Chair is not invalid merely because of a defect or irregularity in connection with the person’s appointment.  This protects the ACNC in the event that they would receive advice from a possibly, and only technically, mis-constituted board.  [Subsection 140-5(4)]

10.78           A defect or irregularity could include such things as an incorrect date, a signature in the wrong place or incorrectly numbered pages.

10.79           A general member of the Advisory Board is not an ‘officer’ for the purposes of Appendix E of the Legal Services Directions .  This means that the Commonwealth will not be liable to pay the costs if a member of the Advisory Board is sued in their capacity as Advisory Board member.

Remuneration

10.80           The remuneration of the general members of the Advisory Board is determined by the Remuneration Tribunal.  If no remuneration determination is in place, general members are paid in accordance with the remuneration amounts set out in the regulations.  [Subsection 140-15(1)]

10.81           The regulations may prescribe any allowances payable to the general members [subsection 140-15(2)] Any regulations have effect subject to the Remuneration Tribunal Act 1973 [subsection 140-15(3)]

Disclosure by members

10.82           Members of the Advisory Board must provide the Minister with written notice of all interests, pecuniary or otherwise, that the member has or acquires which may conflict with the proper performance of their functions as Advisory Board members.  [Subsection 140-20(2)]

10.83           A member must disclose these interests to the Minister as soon as practicable after becoming aware of a possible conflict of interest.     [Subsection 140-20(2)]

Other terms and conditions

10.84           The Minister may determine, in writing, other terms and conditions to limit the operations of the Advisory Board and its members.  [Subsection 140-25]

Resignation and termination

10.85           General members of the Advisory Board may resign from their position on the Board by giving the Minister a signed notice of resignation.  [Subsection 140-30(1)]

10.86           The Chair and the Deputy Chair are able to resign from those positions while remaining a general member on the Advisory Board.  [Subsections 140-30(2) and 140-30(3)]

10.87           A resignation takes effect on the day it is received by the Minister, unless the notice specifies a day in the future, in which case resignation takes effect on the later day.  [Subsection 140-30(4)]

10.88           The Minister has the power to terminate a member’s appointment at any time.  [Section 140-35]

Meetings of the Advisory Board

Holding meetings

10.89           The Chair of the Advisory Board has additional responsibilities in relation to the convening of meetings.

10.90           The Chair must convene at least four Advisory Board meetings in each financial year but can call additional meetings if these are necessary for the efficient performance of the Advisory Board’s function.  [Subsection 145-5(1)]

10.91           For example, the Chair may convene an additional meeting to respond to a request for advice from the ACNC Commissioner.

Procedure of meetings

10.92           The Advisory Board can determine for itself how it operates.  However, it must comply with any written matters determined by the ACNC Commissioner in relation to the operation of the Advisory Board.  [Subsection 145-5(2) and  (3)]  

10.93           A determination made by the ACNC Commissioner in this regard is not a legislative instrument.  [Subsection 145-5(9)]

10.94           The Chair must ensure that minutes of the Advisory Board meetings are kept.  [Subsection 145-5(4)]

Disclosure of interest by a member

10.95           If a matter arises during a meeting to which a member of the Advisory Board has a direct or indirect financial interest, being an interest that could conflict with the proper performance of the Advisory Board’s function, then the member must disclose that interest to the other Advisory Board members as soon as possible.  [Subsection 145-5(5)]

10.96           This duty relates specifically to meetings, and does not override the duty which requires members to give notice to the Minister of all interests, pecuniary or otherwise, that could conflict with the proper performance of the Advisory Board’s function (see paragraphs 10.82 to 10.83 above). 

Disclosure to be recorded in the minutes of the meeting

10.97           An interest that arises during a meeting, and the subsequent decision made by the Advisory Board, must be recorded in the minutes of the meeting.  [Subsection 145-5(6)]

10.98           The member with the interest must exclude themselves from the discussion and any subsequent advice provided by the Advisory Board, unless given permission by the Chair to participate.  [Subsection 145-5(7)]

10.99           If the member with the interest happens to be the Chair of the Advisory Board, then the ACNC Commissioner must give permission for the Chair to participate in the discussion and any subsequent decisions relating to that member’s interest.  [Subsection 145-5(7)]

Attendance by ACNC Commissioner

10.100       The Chair of the Advisory Board may invite the ACNC Commissioner to attend all or any part of an Advisory Board meeting.  [Subsection 145-5(8)]

10.101       The ACNC Commissioner must not attend an Advisory Board meeting without such an invitation.

Do not remove section break.



Chapter 11      

Secrecy framework

Outline of chapter

11.1               This Chapter explains the secrecy framework of the Australian Charities and Not-for-profits Commission (ACNC), including:

•        the overview and objectives of the secrecy framework;

•        the general prohibition that applies to the use and disclosure of protected information;

•        the exceptions that apply to the general prohibition to allow for use and disclosure in certain specified circumstances; and

•        penalties for unauthorised disclosures of protected information.

Summary of new law

Overview of the secrecy framework

Objectives of the secrecy framework

11.2               Under the Bill, the secrecy framework is intended to balance the need to protect personal and confidential information that entities provide to the ACNC with the need to enable disclosure of that information where it is necessary to disclose that information in accordance with the objects of this Bill.  [Section 150-5]

11.3               Engagement with and the trust of the not-for-profit (NFP) sector could be at risk if responsible entities and registered entities do not have confidence that their information is being handled appropriately, which would, in turn obstruct the ACNC in undertaking its powers and functions under the Bill.  [Paragraph 150-5(a)]

11.4               However, as the NFP sector receives substantial assistance through taxpayer funded concessions and public donations, the information provided to the ACNC needs to be disclosed to the public in certain circumstances in order to promote transparency and accountability of the sector and ensure public confidence that taxpayer resources and public donations are being used appropriately.  [Paragraph 150-5(b)]

Structure of the secrecy framework

11.5               Under the Bill, the secrecy framework has been designed so that where certain entities have access to personal or confidential information, obtained by the ACNC in accordance with the Bill, they are subject to a general prohibition on the use and disclosure of that information. 

11.6               However, to ensure the ACNC is able to fulfil its powers and functions under the Bill, including promoting good governance, transparency and accountability, and acting as a ‘one-stop shop’ regulator for the NFP sector, disclosure of the protected information is permitted in specified circumstances detailed within the Bill. 

11.7               By structuring the secrecy framework in this manner, it ensures that it is fundamentally clear to those entities handling protected information that the disclosure of that information is prohibited in all circumstances except where it is clearly set out in the Bill that it may be disclosed and for what purpose.

Interaction with other privacy and secrecy regimes

11.8               Whilst the secrecy framework in the Bill provides for an overarching protection of information provided to the ACNC, that information may also be protected under other related privacy or secrecy regimes. 

11.9               For example, information that is provided to the Commissioner of Taxation under a taxation law is protected under the tax secrecy framework within Division 355 in Schedule 1 to the Tax Administration Act 1953 .

11.10           Similarly, the Office of the Australian Information Commissioner also protects information that is personal and relates to an individual under the Privacy Act 1988 (Privacy Act).  In particular, the Information Privacy Principles under the Privacy Act apply to the ACNC and set out the standards for the handling and protecting an individual’s personal information.

11.11           Of note, Information Privacy Principle 11 operates to limit the disclosure of personal information by a Government agency, except to the extent that disclosure is required or authorised by or under law.  Consequently, in the specified circumstances set out in the Bill where disclosure of protected information is authorised, the secrecy framework is consistent with the requirements under Information Privacy Principle 11 and the Privacy Act.

11.12           There is also other Commonwealth legislation that overrides the secrecy framework in the Bill and authorises disclosures in limited circumstances.  These laws either permit particular entities such as the Auditor-General or Commonwealth Ombudsman to access protected information or provide immunity for ACNC officers and other entities who are compelled to disclose information that is protected under the Bill for circumstances specified in the following provisions (this list is not exhaustive):

•        sections 32 and 33 of the Auditor-General Act 1997 ;

•        section 9 of the Ombudsman Act 1976 ;

•        section 44 of the Privacy Act;

•        section 12 of the Parliamentary Privileges Act 1987 ; and

•        schedule 6 to the Anti-Terrorism Act (No. 2) 2005 .

Evidential burden

11.13           Under this Bill, there are certain exceptions that apply to the general prohibition on the use, disclosure and on-disclosure of information protected under the secrecy framework.

11.14           Where an entity seeks to rely on these exceptions, the entity will bear the evidential burden to prove that they used the information or disclosed/on-disclosed the information in accordance with that exception.

11.15           Under subsection 13.3(3) of the Criminal Code , ‘evidential burden’ means the burden of adducing or pointing to evidence that suggests a reasonable possibility that the matter exists or does not exist. 

11.16           In the context of the ACNC secrecy framework, this would mean that an entity seeking to rely on one of the exceptions will need to point to evidence, by way of a document or email, that suggests a reasonable possibility that they were entitled to use the information or disclose/on-disclose the information under the Bill.

11.17           It is common amongst Commonwealth secrecy regimes to place the evidential burden on the defendant where the defendant seeks to rely on an exception or defence to the general prohibition on disclosure of information (an offence-specific defence). 

11.18           This is consistent with the Attorney-General’s Department’s publication entitled A guide to framing Commonwealth offences, infringement notices and enforcement powers where it states that an evidential burden of proof should generally apply to a defence where there is an offence-specific defence.  In these situations, the defendant is in the best position to provide evidence justifying why they undertook the act that triggered the offence-specific defence. 

11.19           Therefore, where an entity does disclose or use information they will be aware of the general prohibition and will be seeking to use the offence-specific defence that the disclosure was an authorised disclosure.  In that case, placing the evidential burden on the entity is justified as they will be able to point to the authorised disclosure provision they relied upon and provide emails or written directions which support the use of the authorised disclosure.

11.20           Despite the evidential burden resting on the entity, the prosecution retains the ‘legal burden’ of proof and is required to prove each element of an offence beyond reasonable doubt, consistent with the requirements of Article 14 of the International Covenant on Civil and Political Rights .

Detailed explanation of new law

Scope of the secrecy framework

Information protected under the secrecy framework

11.21           Under the Bill, the information that is protected under the secrecy framework is protected ACNC information

11.22           This is defined in the Bill to include all information that was disclosed to, or obtained by an ACNC officer for the purposes of the Bill where the information relates to the affairs of an entity other than the ACNC officer and where the information identifies, or is reasonably capable of being used to identify an entity.  [Section 150-15]

11.23           For example, protected ACNC information includes information that is not currently in the public domain and may have been provided to the ACNC on a registration or compliance document such as an application form for registration or under a duty to notify as explained in Chapter 7 — Duty to notify.

11.24           Personal information that is provided to the ACNC related to responsible entities, management, and employees of a registered entity is also protected ACNC information and as it pertains to an individual is also subject to the Information Privacy Principles under the Privacy Act. 

11.25           Information that is either in the public domain or in no way identifies an entity, or is reasonably capable of being used to identify an entity, is not considered protected ACNC information. 

11.26           Information that has been made public through the ACNC Register under Division 40 is not considered protected ACNC information after it has been displayed on the ACNC website.

Entities subject to the secrecy framework

11.27           Under the Bill, Part 7-1 applies to ACNC officers (as defined under section 900-5) but it also extends to other entities and refers to them within Part 7-1 as if they were ACNC officers.  [Section 150-10]

11.28           These non-ACNC officer entities that are within scope of the secrecy framework  include:

•        an entity engaged to provide services relating to the ACNC [paragraph 150-10(a)] ;

•        an individual employed by an entity referred to in the dot point above [paragraph 150-10(b)] ;

•        an individual appointed or employed by, or performing services for, the Commonwealth or an authority of the Commonwealth that is          performing functions or exercising powers under or for the purposes of the Bill [paragraph 150-10(c)] ; or

•        a member of the Advisory Board [paragraph 150 10(d)]

Example 11.1  

Todd is an IT contractor who has recently been contracted by the ACNC to develop an internet based product.  Todd is a non-ACNC officer entity that is subject to the secrecy framework under the Bill.

Example 11.2  

Johan is an IT sub-contractor and works for Todd (as per Example 11.1) and is supporting him in testing his internet based product.  As he is an individual employed by Todd to provide services relating to the Commission, he is also a non-ACNC officer entity that is subject to the secrecy framework under the Bill.

Example 11.3  

Gerald works for the Department of Families, Housing, Community Services and Indigenous Affairs.  However, as part of a secondment program he is working for the ACNC and performing audits on charities.  Gerald is a non-ACNC officer entity that is subject to the secrecy framework under this Bill.

Example 11.4  

Ashley is a member of the Advisory Board and appointed under Division 140 of this Bill.  Ashley provides advice and makes recommendations to the ACNC Commissioner in relation to the ACNC Commissioner’s functions under the Bill and is therefore a non-ACNC officer entity that is subject to the secrecy framework under the Bill.

11.29           In addition to the non-ACNC officers that are covered by section 150-10, the secrecy framework also applies, to some extent, to entities that acquire protected ACNC information in accordance with an authorised disclosure detailed in the Bill. 

11.30           In that situation, they are subject to a prohibition on on-disclosure of that information except where allowed under Subdivision 150-D.  This is discussed further at paragraph 11.64 of this Chapter.

Example 11.5  

Eliz works for the ATO and in the performance of her duties acquired protected ACNC information through an authorised disclosure under section 150-40 for the purpose of administering the tax law.

Whilst Eliz is not an ACNC officer or an entity covered by section 150-10, she is still subject to the secrecy framework as she is prohibited from disclosing or using the protected ACNC information  pursuant to Subdivision 150-D.

General prohibition on use or disclosure of protected ACNC information

11.31           The secrecy framework in the Bill prohibits the use or disclosure of protected ACNC information by an entity (as described at paragraph 11.27 of this Chapter).  [Section 150-25]

11.32           The unauthorised use or disclosure of protected ACNC information by an entity is an offence and a court can impose upon an individual a penalty of imprisonment of up to two years or 120 penalty units or both.  [Subsection 150-25(1)]

11.33           The Crimes Act 1914 prescribes rules for converting penalties for natural persons into a penalty that applies to a body corporate.

Meaning of ‘use’ and ‘disclosure’

11.34           Under this Chapter, the terms ‘use’ and ‘disclosure’ are intended to take their ordinary meaning.

11.35           The term ‘use’ includes situations where an ACNC officer has access to the protected ACNC information and records the information, takes the information or recalls the information and takes advantage of the information or exploits it for some kind of outcome.

Example 11.6  

Harry has access to protected ACNC information, he writes down sensitive financial information about a charity from a file and puts it to use by changing his share portfolio to account for the information he has used.

By exploiting the information for a personal benefit and altering his share portfolio, Harry has ‘used’ the protected ACNC information in contravention of the general prohibition under this Bill.

11.36           The term ‘disclosure’ includes situations where an ACNC officer has access to the protected ACNC information and then divulges or releases that information to another entity. 

11.37           Information may be disclosed by publishing, writing, speaking, transmitting or conveying it in any form that enables the other entity to identify the entity to which the information relates.

Example 11.7  

Finn has access to protected ACNC information; he then publishes the information on his blog which is publicly available on the internet.

By publishing the information on the internet, which can be viewed by the public, Finn has disclosed the protected ACNC information in contravention of the general prohibition under this Bill.

Exceptions to the general prohibition on use or disclosure of protected ACNC information

11.38           The general prohibition operates to make it an offence to use or disclose the information, however, in order to give effect to the balance between protection of information and disclosure for the objects of the Bill, the secrecy framework permits use or disclosure of information in certain circumstances.  [Subparagraph 150-25(1)(c)(i) and subsection 150-25(3)]

11.39           These exceptions to the general prohibition which give rise to authorised use or disclosures include:

•        disclosure to the entity to whom the information relates [subparagraph 150-25 (1)(c)(i) and subsection 150-25(2)] ;

•        disclosure or use in the performance of duties under the Bill [section 150-30] ;

•         disclosure on the Australian Charities and Not-for-profits Commission Register (ACN Register) to achieve the objects of the Bill [section 150-35]

•        disclosure to an Australian government agency [section 150-40]