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Charities already face considerable regulatory and reporting requirements. The Australian Treasury is currently consulting on proposed changes to ACNC Governance Standard. In this Insight, we provide an update on the potential changes and share why – in our view – the proposed changes present more than a few concerns in their increase in regulatory requirements on questionable bases.


 

Treasury is consulting on proposed changes to ACNC Governance Standard 3.

  • Governance Standard 3 currently requires registered charities to comply with Australian laws. A charity must not commit a serious offence (such as fraud) under Australian law or breach a law that may result in a civil penalty of 60 penalty units or more.
  • Proposed changes to Governance Standard 3 will require in addition to the current governance standard, that registered charities:
    • must not engage in conduct that may be dealt with as a summary offence relating to real property, personal property or persons under an Australian law; and
    • must take reasonable steps to ensure their resources are not used, nor continued to be used, to promote or support any entity to engage in unlawful activities prohibited under the standard.

The proposed changes are inconsistent with the recommendations of the Federal Government’s own review of the ACNC Acts Strengthening for Purpose: Australian Charities and Not-for-profits Commission Legislative Review 2018, which recommended ACNC governance standard 3 be repealed. The reviewers noted:

Governance standard 3 is not appropriate as a governance standard. Registered entities must comply with all applicable laws. It is not the function of the ACNC to force registered entities to enquire whether they may or may not have committed an offence (unrelated to the ACNC’s regulatory obligations), advise the Commissioner of that offence and for the ACNC to advise the relevant authority regarding the offence.[1]

According to the Exposure Draft Explanatory Statement,  changes proposed to Australian Charities and Not-for-profits Commission Regulation 2013 to amend Governance Standard 3 are intended to clarify that an entity is not entitled to be registered or remain registered as a charity if:

  • the entity does an act (or omits to do an act) that may be dealt with as a summary offence under an Australian law relating to real property, personal property or causing personal injury or harm to an individual; or
  • the entity fails to take reasonable steps to ensure its resources are not used to promote acts (or omissions) by any entity that may be dealt with as an indictable offence, a relevant summary offence, or a civil penalty of 60 penalty units or more.

Under the proposed amendment, a charity’s resources includes:

(a) its funds; and

(b) its responsible entities, and employees, when acting in that capacity; and

(c) its websites, social media accounts and other publications;

but does not include any of its volunteers who are not one of its responsible entities.

The proposed amendments may place an additional regulatory burden on small charities in two key areas:

  • the potential need to take additional risk mitigation measures in the area of cyber security, privacy and data protection to ensure the charity’s website, social media accounts and other cyber resources are not misused by third parties to cause harm including personal injury or damage to property.
  • the potential need to take additional risk mitigation measures to ensure the charity’s resources (including its financial resources, website, social media accounts, contact lists etc) are not used in furtherance of a disqualifying purpose under section 11 of the Charities Act 2013.

Whilst the first area of potential impact might be reasonably managed by good record-keeping practices and using proprietary security software, the impact of the proposed amendment of Standard 3 on the ability of charities to participate in Advocacy will be concerning to many in the sector.

Section 11 of the Charities Act outlines the disqualifying purposes as:

(a) the purpose of engaging in, or promoting, activities that are unlawful or contrary to public policy; or

(b) the purpose of promoting or opposing a political party or a candidate for political office.

It appears that the Government does not accept the findings of its own inquiry on this issue that the existing legislation gets the balance about right between permitting legitimate advocacy and banning non-charitable political activity by registered charities.

As the inquiry noted, citing the Productivity Commission’s recognition that the for purpose not-for-profit sector makes an important contribution to the Australian economy and society generally:

Advocacy is a key aspect of a vibrant civil society and plays an important role in the development of social policy. It allows Australians to voice their concerns and influence public policy and legislative development.

Yet the role of charities in Advocacy is deeply contentious. Governments baulk at their critics having access to charitable tax concessions. It seems the notion that charity should be ‘seen but not heard’ is deeply engrained.

The High Court of Australia recognised in Aid/Watch Incorporated v Commissioner of Taxation [2010] HCA 42 1 December 2010 that the generation by lawful means of public debate concerning the efficiency  of foreign aid directed to the relief of poverty, itself is a purpose beneficial to the community and thus lawful (non-disqualifying) political advocacy by a charity.

The government’s proposed changes appear to signal a desire to walk back the right of charities to advocate. The Exposure Draft Explanatory Statement refers to:

  • unlawfully gathering or remaining on land or in a building;
  • malicious damage, vandalism or theft of personal property; and
  • common assault or threatening violence against an individual,

in identifying the kind of unlawful summary offences it is intended to prevent charities from engaging in, or having their resources applied to. Yet, no evidence is offered that Australian charities resources are being actively diverted to this type of unlawful political protest.

The government’s approach appears to deliberately confound advocacy and political action with violence and destruction of property.

Will the changes restrict a charity from using its resources (including its financial resources, website, social media accounts, contact lists etc) to engage in certain types of political protest?

Treasury’s consultation on the modifications to ACNC Governance Standard 3 closes 14 March 2021 if you want to have your say.: https://treasury.gov.au/consultation/c2021-149084


[1] Australian Treasury, Strengthening for Purpose: Australian Charities and Not-for-profits Commission Legislative Review 2018 at p.47.

Birchgrove Legal is a boutique Sydney law firm that specialises in the not-for-practice sector. Its market-leading practice is at the cutting edge of innovative approaches to serving NFP sector organisations across the spectrum of entity types. Get in touch with one of our authors to discuss your needs further.

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