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Community Affairs Legislation Committee
09/12/2013

COSTELLO, Reverend Tim, Chair, UnitingCare Australia

CROSBIE, Mr David, Chief Executive Officer, Community Council for Australia

MACDONALD, Mr Nathan Daniel, Acting Director, Justice Connect (Not-for-profit Law)

ZABAR, Mr Joe, Director, Services Sustainability, UnitingCare Australia

[17:38]

E vidence from Mr MacDonald was taken via teleconference—

CHAIR: The committee will now move to schedule 1A—Delaying the definition of a 'charity' in the Australian Charities Act 2013. I welcome representatives from UnitingCare and the Community Council for Australia, and Justice Connect are joining us by phone. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to everyone. I now invite each of you to make a short opening statement. At the conclusion of your remarks, I will invite members of the committee to put questions to you. Mr MacDonald, would you like to kick off with your opening statement?

Mr MacDonald : Sure. I will keep it brief. Thanks for the opportunity to address the committee this evening. Not-for-profit Law was formerly known as PilchConnect. We are ourselves a charitable, not-for-profit organisation providing free and low-cost legal information to community organisations. We see our role as helping the helpers by providing legal information, advice and training to not-for-profits. Our model suggests that, by relieving the burden of legal and regulatory issues, community organisations can better focus their time and energy on achieving their missions. Specific to this forum, our policy work focused on reducing red tape for the not-for-profit sector, helping not-for-profits to be more efficient and better run, and ensuring that law reform takes into account impacts on the community sector.

In relation to the statutory definition of 'charity', our view has been and continues to be that the statutory definition as contained in the Charities Act is very much a codification of the existing common law that has been developed over the past 400 years. Currently, small, volunteer led organisations have the unenviable task of trying to comply with charity laws that are unclear and at times inconsistent. Unless an organisation is large enough to be able to afford a specialist charity tax lawyer, they are unlikely to be able to work through the common law and lengthy tax rulings to work out whether their organisation might meet the legal definition of a charity.

In our view, the Charities Act is a step towards certainty and clarity for those seeking charitable endorsement and goes some way towards addressing the proliferation of statutory definitions of 'charity'. For example, in 2007, the National Roundtable of Nonprofit Organisations noted that, in the absence of a single statutory definition, there were 15 pieces of Commonwealth and 163 pieces of state legislation under which various definitions are used to determine charitable purpose or status. The move to a single federal definition of 'charity' and the possibility of cooperation between governments at federal and state levels offers the opportunity to rectify this situation.

We feel the Charities Act represents a piece of policy that is long overdue, having been considered and recommended by several major inquiries, including the 2001 charities definition inquiry and, more recently, the Productivity Commission inquiry in 2010. Consultation on the current definition was adequate and, while a number of the 200-plus submissions asked for some degree of tinkering to the bill, it is fair to say that there was broad support for a single definition of 'charity' across the Commonwealth, with the end result being a definition that largely preserves and clarifies the common law.

Finally, with regard to the government's broader commitments to the civil sector being the instigator of this proposed delay, we take the view that deferring any statutory definition of 'charity' would be a missed opportunity and one that need not be embroiled in the current conversations about the future regulation of the charitable sector—in particular, the future of the Australian Charities and Not-for-profits Commission. In this sense, regardless of the agency responsible for interpreting or applying this definition, the policy principles of certainty, clarity and accessibility should remain a priority and, in our view, are more achievable through a single statutory definition. Thank you.

CHAIR: Mr McDonald, can I just clarify: you are saying that disbanding the ACNC can be achieved without delaying the definition of 'charity'?

Mr MacDonald : The definition of 'charity' is not contingent on one agency over the other in applying it, so that is correct.

CHAIR: Okay. Thank you. Mr Crosbie.

Mr Crosbie : Thank you for the opportunity to make this presentation. The Community Council of Australia is an independent, nonpolitical-based member organisation dedicated to building thriving communities by supporting and enhancing the work of the not-for-profit sector in Australia. On our board we have the CEOs of Good Beginnings, Lifeline, DRUG ARM!, RSPCA, Mission Australia, Musica Viva, The Smith Family, Wesley Mission, Benevolent Society and The Big Issue, and of course Tim from World Vision is our chair. We have been working in this space for almost three years trying to support and strengthen what is one of the most critical sectors to Australia's economy and to our community, employing over a million Australians and generating around five per cent of GDP.

We have also been heavily involved in negotiations to establish a new definition of 'charity'—something that the Howard government initiated back in 2000. Like Nathan and PILCH, we recognise, as would everybody who has ever looked at the legislation and the definition of 'charity', that the current provisions are woefully inadequate, that they discriminate against small charities who cannot afford tax lawyers, and they are complex even for the most well-resourced charity in terms of understanding what is charitable and what is not. It was a massive step forward to get the level of consensus that was agreed through the 2011 consultations, the 2013 consultations and the 2001 consultations on a new statutory definition of 'charity', and we, like most of the charitable sector, celebrated the fact that we had clarity and some sense of being able to plan our activities based on a clear, concise definition of 'charity' that included things previously not included like advocacy, Indigenous disadvantage, housing and disaster relief. For that to be now put on hold for nine months is beyond our comprehension. We cannot understand on what basis you would do that. It creates uncertainty, it serves no useful purpose and it leaves the charity sector again wondering what the motive of the government is in seeking to further delay a piece of legislation that has been widely supported and is very long overdue.

Rev. Costello : Let me add to that, and I am speaking in the World Vision capacity but, as you have heard, there is a Mission Australia, The Smith Family, Wesley Mission and lots of other members of CCA. They are not just the family services area—they include animal welfare and arts and Indigenous. This new definition is extraordinarily important for all of us. With the consultations and over 200 submissions made, I have not heard of anyone in the sector who was troubled by this definition. They all feel it gives greater clarity and certainty. I have not heard anyone in the sector saying we need more time to consult on a definition. When you say that maybe this is now going to be pushed out to September and there will be consultation, in my capacity as chair of CCA members ask why that will happen when this was the least contested, least difficult issue. This is the thing that everyone in the sector is united around. It could begin seamlessly on 1 January.

As David has said, adding Indigenous disadvantage is incredibly important for Indigenous organisations who can benefit from a clarification and consistency of decision making under the Charities Act, potentially assisting Indigenous native title or traditional owner groups in registering as a charity. I could talk about housing and, in my area, disaster relief. This clarification is incredibly important for these sectors and, as I say, it has been welcomed and people have rejoiced over it.

In echoing what David has said, I do not understand—I can take you through so many quotes of charities welcoming this—why we are now postponing this. Jamaica's upper house has just passed a charities act, this month. It will introduce a new charities commission. The UK passed their charities act in 2011, Northern Ireland in 2008; Scotland in 2006; New Zealand in 2005. To overcome 400 years of Elizabethan rule and have clarity is cause for great joy and is welcomed by the sector.

Mr Zabar : On behalf of UnitingCare Australia I would like to thank the committee for the opportunity to share our assessment of the Social Services and Other Legislation Amendment Bill 2013. UnitingCare Australia is the Uniting Church's national body supporting social services and advocacy for vulnerable and disadvantaged people and families. We represent a network of agencies operating nationally across more than 1,300 sites in urban, rural and remote Australia. Our network makes a strong contribution to the economy by providing services to over two million people each year, with an annual turnover in excess of $2 billion. We employ 35,000 staff and 24,000 volunteers. My comments today to the committee focus on the delay of the Charities Act.

UnitingCare Australia has been an active participant in the national not-for-profit reform agenda for many years, and I will say I have been here before this committee previously. We have long advocated for legislative measures that will help Australia's not-for-profit sector maximise its resources, expertise and skills whilst upholding its independence and diversity. I want to emphasise that issue of independence because I think it is critical.

UnitingCare Australia was actively involved in the consultation process for the Charities Act. The process of consultation in our view was sound, with the final bill addressing many of the concerns that we had with the original drafts. We believe that the Charities Act 2013 offers the sector greater certainty with which to manage our activities, in particular in dealing with the issue of political advocacy.

In considering whether the commencement of the Charities Act is delayed, we ask the committee to be mindful of two points. Firstly, the bill has been through a comprehensive consultation process; the sector has invested significant resources and good will in the bill in the form in which it was passed in June 2013, and it would be unfortunate if that investment was lost or had to be repeated at a later date.

Secondly, while the mission or purpose of the not-for-profit sector is charitable, it nonetheless operates in the same economic environment as the business sector and is similarly affected by legislative uncertainty. So delaying the implementation of the Charities Act will cause unnecessary uncertainty for the sector. Accordingly, we see no reason to delay the implementation of the Charities Act and we ask the committee to recommend that it commence as planned on 1 January 2014. I am happy to take any questions.

CHAIR: Thank you. Senator Siewert will start.

Senator SIEWERT: My question to all of you is: what do you think is motivating the government's desire to delay the implementation of the Charities Act?

Rev. Costello : I do not know. I would like the government to tell us. I really am—

Senator SIEWERT: Have you asked them?

Rev. Costello : puzzled by it. Our members ask the same question: 'Is it that the advocacy part troubles the government?' I can only say that working with the charity World Vision it is impossible for us to do our charitable work without advocacy being part of that charitable work. In the most basic case it is asking when we are building a school: 'Why isn't your education department building the school? Where has the money gone?' Then teaching them how to lobby and organise and put the acid on government. My colleague Kelvin Alley from the Salvation Army—which I do not think is known as a radical left-wing organisation in this country—

Senator SIEWERT: It depends where.

Rev. Costello : Okay. Tell me where it is radical. You have just heard Kelvin advocating. I am only surmising: is it advocacy that is troubling the government? I don't know. I would like to know.

Senator SIEWERT: Mr Zabar?

Mr Zabar : I am in the same boat. I just do not know.

Senator SIEWERT: Mr Crosbie?

Mr Crosbie : It is certainly confusing and I have to say that across the sector a lot of questions are being asked. The problem is that, because it is not clear, people are assuming. I think this is a sector that wants to work with the government on its positive plans for the sector, the reducing of red tape, the better grants administration, the encouraging of more charitable giving, the creation of community business partnerships—we have been involved already in pushing around the commission of audit for more effective engagement with the sector. We think there is lots that can be achieved. Then, in the middle of that, we suddenly find that legislation that we worked very hard on for over a decade is being delayed with no explanation. So I have to say that some of my members are saying well this is a coalition government that supports advocacy; it supports charity; it does not support the two together.

Senator SIEWERT: Mr MacDonald?

Mr MacDonald : I would reflect those statements. I would be guessing if I were to talk about motivation, so I had best not.

Senator SIEWERT: When did you first know that this was going to happen?

Mr Crosbie : I was with Joe, I think—we were at a reducing red tape seminar with the Australian Charities and Not-for-profits Commission at the ANU.

Senator SIEWERT: What day was that?

Mr Crosbie : Wednesday.

CHAIR: But you would have been aware that the then opposition opposed this act when it was put through parliament?

Mr Crosbie : Yes, but the opposition opposes lots of bills and regulations. I did not think they were going to turn around and say that they were going to introduce legislation that actually postponed its implementation. I can quote from Prime Minister Howard about how unacceptable the current situation is and why we need a statutory definition of 'charity'. That has been the case for over a decade. We are really floundering. What worries me about this kind of discussion is that if we were an industry group that employed a million Australians and you were telling us that you were going to change the rules under which we operated and we had already spent a long time and lots of consultation finalising those rules, developing our forward plans and activities around those rules, and they had passed through parliament and you now tell us you are going to delay them, I wonder whether the government would do that, if it was an industry group or a business group.

CHAIR: But you would be discussing it with the government, not with a Senate committee.

Mr Crosbie : You would expect the government to discuss it with you before they introduced the legislation. A million Australians are employed in the sector.

Senator SIEWERT: You would have been consulted and I would have thought it would have made newspaper headlines. I am sure you have read the concluding comments of Mr Andrews in discussion of the bill in the House of Representatives where, to my mind, he aligned this with getting rid of the ACNC process. Linking the two—we know the government's policy on that—do you need to delay the implementation of the Charities Act in order to facilitate getting rid of ACNC? Do the two have to be linked?

Mr Zabar : In my opinion, no. They are two quite separate issues.

Senator SIEWERT: That is what I understood, so why would the minister link the two?

Mr Zabar : You would have to ask the minister—I do not know.

Senator SIEWERT: You cannot speculate?

Mr Zabar : No, I cannot. As David said, this certainly took us by surprise. We did not know that this was coming until it happened, and at the end of the day the issue for us is that the two are separate. The ACNC question is very different from the statutory definition question.

Senator SIEWERT: Could it be that you would be taking some of the ACNC's job away?

Mr Crosbie : I do not see how that could possibly be the case. Someone has to determine whether you are a charity or not, unless we are saying that anyone who wants to be is a charity. You have to register in some way. The question is are you going to make it clear, concise, easy, modern and accessible or are you going to rely on statutes from 1601? Everyone says it is silly to rely on statutes from 1601 and all the court cases since, which is why for so long we have been trying to get a statutory definition. It does not matter whether the ACNC is overseeing who is a charitable organisation, or the ATO, or the Department of Social Services, although I do not think the latter two do it very well. It does not matter who does it—you still have to have a legal reading about whether you are a charity or not.

Senator SIEWERT: My question specifically is about, if the government does not want the ACNC, if it is the ACNC that is doing it under the current system, taking away part of their workload by delaying augmentation of the Charities Act.

Mr Crosbie : There are lots of people who want to be charities and you still have to determine that. Who do they apply to? What are you going to say—no more charities in Australia, or everyone is a charity? I am not sure how that works. We have two lawyers here—Nathan and Tim are both lawyers.

Mr MacDonald : As I said in my opening address, the two are in my view mutually exclusive. As David said, what agency is making that determination of charitable status is irrelevant. The question before us is whether that determination is based on a piece of legislation or common law.

Senator XENOPHON: The legislation that was passed last year gave some certainty and clarity to the charity sector. Are you aware of any concerted effort within the charity sector to repeal the legislation?

Rev. Costello : I am not.

Mr Zabar : I am not.

Mr Crosbie : I am not.

Mr MacDonald : No.

Mr Crosbie : All our members are very supportive. We have over 60 members. I do not know of anyone anywhere who has been—

Rev. Costello : It may have been someone in a minister's ear. It is very surprising, but I do not know who.

Senator XENOPHON: But it is fair to say that the charities represented would represent 80 or 90 per cent of charitable donations and charitable work in this country?

Rev. Costello : Yes.

Senator XENOPHON: So the overwhelming majority. I do not have the 1601 definition in front of me, but I am familiar with it. Hopefully I will get a chance to read it.

CHAIR: It is getting played around with a little bit.

Senator XENOPHON: Yes, but will repealing this legislation actually mean more compliance costs, more red tape and more uncertainty for the sector?

Mr Crosbie : Yes, if you do not have a clear set of principles about how you are going to determine charitable status. Perhaps I can quote from John Howard. He said on 18 September 2000 in announcing the establishment of the charity definition inquiry:

We need to ensure that the legislative and administrative framework in which they—

charities—

operate is appropriate to the modern social and economic environment. Yet the common law definition of a charity, which is based on a legal concept dating back to 1601, has resulted in a number of legal definitions and often gives rise to legal disputes.

The difficulty of working out whether you are a charity under common law is quite challenging, and it is especially challenging for smaller not-for-profits. So I fail to see why anyone would oppose a clearer, cleaner definition that has been supported by the vast majority of the sector after extensive consultation.

Senator XENOPHON: I have an extract from the Charitable Uses Act 1601. It includes 'the marriages of poor maids; the supportation, aid and help of young tradesmen, handicraftsmen and persons decayed'. So that must be very useful to you!

Mr Crosbie : We often refer to that!

CHAIR: There are a lot of decayed persons around!

Rev. Costello : You are included, Senator Xenophon!

Mr MacDonald : Could I please add something to that. I think that, if this definition were to be repealed—going back to your point, Senator Siewert—it probably places more importance on the charities commission in their ability to produce plain-language guidance material if we are going to be sticking with the common-law definition of 'charity'. I think it really promotes the importance of having a sector-based regulator that can produce readable guidance for smaller not-for-profit organisations trying to determine their charitable status.

CHAIR: Nevertheless, this legislation is not about repealing the current definition or the proposed new definition; it is about delaying it, isn't it?

Mr MacDonald : That is right.

Senator SIEWERT: Until after the new Senate is in place.

Rev. Costello : Yes. Why? We would genuinely like to know.

Senator XENOPHON: I am trying to get my head around this. The charity sector do not want this legislation delayed. They certainly do not want it repealed. Has the minister explained to you why they are doing this—the rationale for it?

Senator SIEWERT: That is what I asked.

Senator XENOPHON: Sorry.

CHAIR: We have been there.

Senator SIEWERT: Ask again, because it is—

Rev. Costello : None of us know.

CHAIR: Have you sought information on it?

Senator XENOPHON: Have you had a meeting with the minister yet?

Senator SIEWERT: They only found out on Wednesday.

CHAIR: No, that is not quite true.

Senator SIEWERT: Yes, it is.

Mr Crosbie : We only found out on Wednesday that this was happening. We did not know that there was going to be any delay or that there was even a policy to delay the implementation of this legislation.

Senator XENOPHON: Have you sought a meeting with the minister as a sector?

Mr Crosbie : We have sought meetings, and I have to say the minister has been very willing to meet with the Community Council for Australia. He has met with us on four occasions over the past 12 months and attended our AGM. But I cannot recall ever having this discussion with the minister about the Charities Act being our concern.

Senator XENOPHON: Will you seek an urgent meeting with him, since you are all here?

Rev. Costello : Absolutely.

Senator MOORE: I just want to clarify what the impact of the delay is. Everyone was ready for it, after years of discussion and so on. Everyone was ready for 1 January. Given that, what is the impact of the delay now until September?

Mr Zabar : I would answer that in three parts. There are three parts to this. In terms of our interactions with Commonwealth agencies, it probably will not make a lot of difference. The second part is that we are now going to go down the path of another set of consultations. I tried to outline the size of the UnitingCare network; it is hard work to go out and do a full consultation and come down with a position. It is a lot of investment. It is appropriate investment because we are actually representing our network and our agencies, and it is important that we get it right, but it is something that we have to resource. Our agency staff go offline to help us. The third part is that it just creates more uncertainty for the sector. That is the issue. It is another thing that is hanging over us—we are not quite sure what is going to happen. That is the issue for me. You just have another thing sitting there that we are not clear about. The consultation may lead anywhere. I do not know where it will lead.

CHAIR: No current charity is about to lose its status in the next—

Mr Crosbie : Yes, they are. There are charities right at the moment in the High Court where issues around advocacy are being discussed. I think it was John Howard who said that even the biggest charities struggle to know which of their activities are charitable and which are not.

Rev. Costello : We at World Vision raise $350 million a year, and we found ourselves in court at the hands of the ATO, who were threatening to withdraw out charitable status because we applied to do work in Indigenous Australia. It was thrown out and it was ridiculous, but we spent donors' dollars on that ridiculous claim. And, to answer your question, this is going to be more cost, more time, for the sector, more sheer confusion. We have settled this. We have done this. Herding our sector together takes a lot of work because they are out there rolling their sleeves up and doing things. That is what is distressing about it.

Senator SIEWERT: I want to go back to Senator Xenophon's question. As far as you are aware all of the charities are supporting the act. I know that you know that there are some charities and not-for-profits that do not support ACNC. So, even the charities that do not support ACNC are still supporting the Charities Act. Would that be a correct understanding?

Mr Crosbie : That is my understanding from talking with representatives of groups. Even those who are hesitant about their support of the ACNC are not hesitant about their support for the new definition of charity.

Senator SIEWERT: I want to go back to that point that you just made around the High Court. You said that there are currently organisations in court around issues to do with advocacy?

Mr Crosbie : Yes. There are cases in court at the moment. I am not sure what my legal status is in terms of talking about them, but there are certainly cases involving organisations that advocate around wind farms in court at the moment and in dispute. There is one involving a former senior coalition minister who is their president. This issue of where advocacy sits, where housing sits, where disaster relief sits and—as Tim has pointed out—where Indigenous disadvantage sits is quite complex for organisations involved in those areas. If you have the wrong wording in your constitution, then you can lose your charitable status. You really need to use a very good lawyer, Nathan, in order to ensure that you are not putting your charitable status in jeopardy. Not every not-for-profit who wants to be a charity can afford a very good lawyer.

Senator SIEWERT: I will take you through a scenario, and you tell me where I have it wrong.

The Charities Act is delayed until September. We get rid of ACNC, because we know that is on the agenda. The task of ACNC goes back to ATO and we do not have a definition of 'charity', particularly as advocacy has gone, so the only place protecting advocacy is the bill that came in—I always forget its name—

Mr Zabar : The Not-for-profit Sector Freedom to Advocate Bill 2013.

Senator SIEWERT: I always call it the gag bill. That would be the only piece of legislation to protect advocacy.

Mr Crosbie : But it does not protect advocacy on charitable status.

Senator SIEWERT: I know it is only about government funding, so Australia has got rid of all the legislative protections for advocacy.

Mr Crosbie : No, only within charitable standards.

Senator SIEWERT: That is highly important for those organisations.

Mr Crosbie : One of the changes the sector wanted to the Charities Act was raised in the discussions—I know you were involved in the discussions, I was involved and other people were involved. The change was to ensure that the findings of the High Court around AID/WATCH were reflected in the new definition of charity, because we were trying to codify the existing common law application. One of the concessions was that rather than refer to it in the bill itself it was referred to in the explanatory memorandum, so that the AID/WATCH case is referred to as part of explaining what is meant by it.

Senator SIEWERT: We had the full text put in.

Mr Crosbie : Across a lot of the sector this capacity to be an advocate is really important, because achieving a better life for your community or the people you are representing or working with often involves a level of advocacy, whether it is trying to get a ramp at the local school hall or a major policy change. It often involves advocacy and people are very concerned that they will put their charitable status in jeopardy if there is no clear definition of advocacy in the definition of charity.

Senator SIEWERT: That is a real-case scenario if we lose. This is delayed implementation.

Mr Crosbie : We go back to common law. You can be challenged and have your charitable status questioned by the ATO. Then you go through the Administrative Appeals Tribunal and end up in court. Unless you have a significant amount of money, a good legal team and a significant amount of time, people will avoid that at all costs.

CHAIR: That concludes today's hearing. We thank all witnesses who appeared.

Committee adjourned at 18:13