Academics Warn of Unintended Consequences of NFP Reform

Two senior law academics have warned of the possible unintended consequences of the Federal Coalition’s plans to abolish the charity regulator and repeal the new Charities Act.

The warning comes from University of Melbourne Professor of Law, Ann O’Connell and University of Melbourne Law Lecturer, Associate Professor, Matthew Harding – academics who have been involved in the Not for Profit sector reforms over a number of years.

The academics said that abolishing the the Australian Charities and Not-for-profits Commission (ACNC) will result in the loss of an independent decision-maker on whether an entity is a charity and a return to a potential conflict of interest where the Commissioner of Tax, primarily concerned with the collection of revenue, will determine eligibility for various tax concessions.

“The lack of a national regulator with a focus on reducing red tape will inhibit the reduction of red tape at the State and Territory level, mean a loss of graduated powers and a return to ATO compliance and a return to under-regulation by State and Territory Attorneys-General and other bodies,” they said.

“Our comments are informed by our own research, as well as discussions with key stakeholders in the NFP sector, including discussions that arose during a Forum held at the Melbourne Law School on 28 February.

“The loss of a specialist regulator means a loss of understanding of context. The very talented staff employed by the ACNC, and their range of skills to deal with charities and charity law will be lost.

“There will be no guarantee of a national Register of charities that can be accessed by the public, promote trust and confidence in the sector and be to inform policy and the lack of comprehensive data is likely to stymie the proposed Centre for Excellence in carrying out research,” the academics said.

The Commissioner of Taxation has indicated that the ATO is prepared to take over the “regulation” of charities (and other NFPs). This could be done by requiring charities (and other tax exempt entities) to submit tax returns under s 161 of the Income Tax Assessment Act 1936.

The academics said that the Charities Act 2013 which came into operation on January has both modernised the language in which the law of charity is expressed in Australia, and also rendered that law accessible to citizens.

“If the Act is repealed, the archaic and obscure common law will be restored; these features of the common law definition of charity are notorious,” they said.

As well, they said, the position in relation to advocacy by charities will be less defined because the limits imposed under the Act are arguably stricter than the position that may be said to follow from the High Court decision in Aid/Watch.

“If the aim of repealing the Act is to restrict the ability of charities to engage in advocacy under the law, it is far from clear that repealing the Act will achieve this aim; there is every reason to think that the jurisprudence in Aid/Watch is more accommodating of advocacy than the Act.

“The promised consultation paper (DSS Media Release 18 December 2013) did not eventuate and despite statements by the Minister’s advisers that consultation has been occurring, this does not appear to have included many stakeholders who have worked for many years on the reform process.

“Importantly, although the Minister (Social Services Minister Kevin Andrews)  has indicated that the reforms are to assist the sector by reducing the red tape, it is evident that a very large proportion of stakeholders in the sector do not want the Charities Act repealed or the ACNC abolished,” they said.

Also on this topic read today’s Opinion by David Gilchrist, the Director of the Not-for-profit Initiative at WA’s Curtin University.