Government moves to abolish ACNC

By Glenys Hodges
Corporate Governance Government Tax

In brief

The Federal Government has taken the first step towards achieving its announced intention of abolishing the Australian Charities and Not-for-profits Commission and transferring some of its functions to the Australian Taxation Office and the yet-to-be-established National Centre for Excellence. Special Counsel Glenys Hodges and Lawyer Scott Lang report on the latest developments.

How does it affect you?

  • One of two pieces of legislation implementing the Government's commitment to abolish the Australian Charities and Not-for-profits Commission (the ACNC) has been introduced into Parliament.
  • The second piece of legislation, which will contain most of the provisions effecting the transfer of the ACNC's regulatory functions to the Australian Taxation Office (the ATO) and the establishment of the National Centre for Excellence, has not been released or introduced into Parliament.

Government policy to abolish ACNC

As previously reported in our Focus: Statutory Definition of 'Charity' Still to Commence on 1 January 2014, the Federal Government has committed to abolishing the ACNC, and reinstating the regulatory and enforcement powers of the ATO over charities and other not-for-profit entities eligible for tax concessions. In place of the ACNC, the Government proposes to create a National Centre for Excellence focused on assisting charities and other not-for-profit entities to comply with the regulatory requirements of the tax laws administered by the ATO (including by conducting research, publishing information and giving one-on-one assistance to charities).

To implement this policy, the Government has introduced the Australian Charities and Not-for-profits Commission (Repeal) (No. 1) Bill 2014 (Cth) (the first Bill) into Parliament. The operative provisions of the first Bill will commence only when those of the Australian Charities and Not-for-profits Commission (Repeal) (No. 2) Bill 2014 (Cth) (the second Bill) commence. The second Bill has not been released to the public or introduced into Parliament. This two-step approach has been taken to allow the Government to affirm its intention to repeal the ACNC while working through the legislative and administrative issues involved in winding down its operations and establishing the National Centre for Excellence.

The first Bill has been referred to the Senate Economics Legislation Committee for report by 16 June 2014, with submissions to the Committee due by 2 May 2014.

If and when the Bills commence, the first Bill will repeal the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (the ACNC Act), which will abolish the ACNC, and implement some transitional arrangements. These arrangements:

  • require the ACNC to transfer its documents and records to a successor agency nominated by the Minister;
  • ensure that complaints made to, or investigations begun by, the Commonwealth Ombudsman can continue to their conclusion;
  • continue the duties of confidence imposed on ACNC officers, contractors and others by Division 150 of the ACNC Act; and
  • require the successor agency to prepare a final annual report on the ACNC's operations.

The Government seeks to take this first step as soon as possible, before reports relating to the 2013-14 financial year are to be prepared and provided to the ACNC.

Despite the introduction of the first Bill, the future regulation of charities remains unclear. The first Bill does not give any insight as to how charities will be regulated once the ACNC is abolished. Registered charities will have to wait until the introduction of the second Bill to learn what is proposed. It also remains unclear whether the Senate, which will be newly constituted from 1 July, will support the abolition of the ACNC and pass the Bills.