Dr Matthew Turnour, Mark Fowler & Rachel Sloper (14 January 2015)
What’s next for the ACNC? Report on replacement consultation released
The long-awaited report summarising feedback on July’s Australia’s Charities and Not-for-Profits Options Paper, which asked the sector for input on options for replacing the ACNC’s regulatory functions, was publicly released on 19 December 2014. One area of consensus amongst respondents was the need to ensure independent decision-making should charity status determinations return to the ATO.
The report suggests that there may be further consultation on an exposure draft of the Bill for the replacement arrangements.
Scott Morrison, former Immigration Minister, was sworn in as the new Minister for Social Services on 23 December 2014, with Kevin Andrews moving to the Defence portfolio. Josh Frydenberg, formerly the Parliamentary Secretary to the Prime Minister with responsibility for deregulation, has been promoted to Assistant Treasurer. Both these changes are likely to have a significant impact on the way that the ACNC repeal discussion unfolds.
We remind readers that the ACNC legislation remains within the Assistant Treasurer’s legislative portfolio of responsibility. Kevin Andrews had a particular interest in civil society. With his move, it will be interesting to see if policy implementation responsibility returns to the Assistant Treasurer.
Is your constitution ready for public scrutiny?
The 2014 ACNC Annual Information Statement, which must be submitted by all ACNC-registered charities, including basic religious charities, includes a request to submit a copy of the charity’s governing rules, if these have not already been supplied. This is in line with section 40-5(1)(a)(vii), of the ACNC Act 2012, which requires the ACNC to include governing rules for each registered entity on the public charity register.
Are your governing rules up to date, relevant, and ready to be viewed by the public? It may be time to consider whether there are elements of your governing rules that you would like to change.
ACNC-registered charities with a 1 July – 30 June financial year have until 31 January to lodge their 2014 Annual Information Statement, after an extension was granted by the Commissioner in December 2014. Charities which do not submit either their 2013 or 2014 Annual Information Statement will have their registration revoked by the ACNC.
If you are interested in legal help to update your rules, contact us.
New state decision on charity and housing, education
Immediately prior to Christmas, the NSW Land and Environment Court delivered a decision concerning local government rates exemption of land held by a charitable housing organisation: Community Housing Limited v Clarence Valley Council [2014] NSWLEC 193.
The decision reflects the traditional dual conditions of charitable purpose and charitable use that are characteristic of the granting of rating exemptions. In the decision the judge rejected rating exemption for Community Housing Limited’s properties on the grounds that the Constitution of the provider, whilst containing some charitable purposes, also contained non-charitable purposes. This was an extension of the general principle under charity law that any non-charitable purpose must only be incidental or ancillary to the charitable purposes.
1) Ostensibly charitable purpose not, in fact, charitable
The non-charitable purpose was the provision of ‘training, vocational and related education’. The Court held this purpose to be outside the charitable head of “education”, with, it must be said, little detailed examination. The decision is a reminder of the need to give careful consideration to the drafting of objects clauses within governing documents, and to consider the consequence of any non-charitable objects.
The decision is based in NSW state law and the common law of charity, rather than the federal Charities Act 2013. However, it may have implications for the interpretation of other state and territory law. Further, at a federal level, the introduction of the ACNC Governance Standards, the enactment of the additional special conditions on income tax exemption in the Tax Laws Amendment (2013 Measures No. 2) Act 2013 and draft tax ruling TR2014/D5 further underscore the need for charities to carefully review their constituent documents. They also underscore the need for charities to ensure that the assets are applied only to charitable purposes.
2) Housing in the context of charity
The decision also contains a helpful discussion on the provision of housing to persons who were described as being of ‘moderate income’ households. The court accepted the submissions of the charity that persons who fit one of the descriptions of very low, low and moderate income within the Housing NSW Community Housing Eligibility Policy were properly charitable beneficiaries. Whilst the decision relates to the facts of the applicant’s operations, it is informative as to the characterisation of these at times nebulous terms. As outlined in our prior update, the Australian Charities Commissioner has recently issued an Interpretive Statement clarifying her position on when the provision of housing may be considered to be charitable for ACNC purposes.
Restrictions for funded organisations whose activities include advocacy
It has come to our attention that the model Queensland Government social services funding contract now contains a prohibition on funded organisations ‘compromising’ the relationship with the Government by involvement in public political affairs. Sub-clause 21.5 reads:
“If You receive 50% or more of Your total income from Us, You must use Your best endeavours to ensure that Your executive officers, employees, volunteers, agents and subcontractors do not become involved in public political affairs in any circumstance where they are identifiable as Your executive officers, employees, volunteers, agents and subcontractors, such that a reasonable person would perceive that Your relationship with Us is compromised.” The contract does not define what ‘compromised’ means, or when a person engaged in political activity in their private capacity will be ‘identifiable’ as involved with a funded organisation.
While directed at political activities of employees and agents of an organisation rather than the activities of an organisation itself, the clause has similarities to a 2012 Queensland Health contracts clause which drew criticism from media and the legal profession, which stated,
“Where the Organisation receives 50 per cent or more of its total funding from Queensland Health and other Queensland Government agencies, the Organisation must not advocate for State or Federal legislative change.” At the time, a representative of then-Health Minister Lawrence Springborg explained that “We’re making it clear that we want to fund outcomes but not advocacy.”
This appears to be part of a general trend in recent years towards restricting the application of government funds to non-advocacy activities.
A number of organisations that did not receive funding in the latest federal Department of Social Services funding round argued that this was because they were involved in advocacy activities. Social Services Minister Scott Morrison explained in an ABC interview on 24 December 2014 that ‘these decisions related to funding advocacy services as opposed to front line support services in the community.’ The Minister also suggested that the Williams v Commonwealth (Williams No 2) High Court ruling in June 2014 meant that funding advocacy services was not within the Commonwealth’s Constitutional powers.
Earlier in 2014, updated federal funding agreements for community legal centres specified that funding is not to be used for advocacy or law reform activities. In November 2014, the Queensland Attorney-General introduced a Bill that would have removed ‘advancement of law reform’ as a permissible purpose for grants from the government fund which is a major source of funding for community legal centres. The Bill has lapsed due to the calling of the State Election.
Snippets:
- The Senate Community Affairs References Committee is conducting an inquiry into the adequacy of residential care arrangements for young people with disabilities, and is accepting submissions until 6 February 2015.
- Not-for-profit companies with very large membership may like to take note of the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014, currently in the Senate. If passed, it will remove the ability of 100 members to call general meetings where they represent less than 5% of possible votes. In its submission on the Draft Report of the national Competition Policy Review, the ACNC asked the Review Panel to consider the issue of inconsistent NFP fundraising regulation, and argued that special treatment for NFPs in funding government human services delivery is not anti-competitive due to their special value proposition.
DISCLAIMER: This update contains general information only. The information is not all inclusive and should not be considered to be legal advice. You should always obtain legal advice for your specific circumstances before relying on general information.