Speech to Defining, Taxing and Regulating Not-for-profits in the 21st Century Conference
Melbourne Law School, Melbourne
19 July 2012
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Thank you for the invitation to speak to you today and open what will certainly be one of the most significant conferences on not-for-profit (NFP) reform in Australia in 2012. And thank you in particular to Professor Ann O'Connell for your introduction.
Looking at your conference program for the next two days, it is apparent that you have brought together some of the leading experts on NFP matters, both from across Australia and also from abroad.
Many of you, as well as many of your guest speakers have been working with the Government as we deliver our NFP reform agenda.
Individuals such as Ms Linda Lavarch, the Chair of the Australian Government's NFP Sector Reform Council; Ms Susan Pascoe, the Australian Government's Nominee for the position of the inaugural Commissioner of the Australian Charities and Not–for–profits Commission (ACNC); and Mr Robert Fitzgerald, the inaugural Chair of the ACNC Advisory Board and the presiding Commissioner of the Productivity Commission's 2010 report on the Contribution of the Not for Profit Sector.
I would like to thank you all for the important and valuable work you have been doing.
The Government Not-for-profit Reform Agenda
As you know, the Gillard Government has a wide-ranging NFP reform agenda.
As part of the 2011-12 Budget, the Government announced that it would establish Australia's first national regulator for charities and not-for-profits, the ACNC.
The Government is also working to reduce red tape for government funded not-for-profit organisations, and is focusing on harmonising and simplifying Federal, State and Territory NFP regulation in areas such as fundraising.
Certainly, this reform agenda is ambitious.
But it is not just reform for reform's sake; there are clear reasons why the Government is undertaking this reform.
The Gillard Government recognises and values the work that charities and other NFPs do, and we want a policy framework which will be effective in supporting their work into the future.
Charities and NFPs are an essential component of the fabric of our society. All around Australia charities and NFPs do important work in our communities, ranging from assisting and empowering those who are disadvantaged, providing care to the sick and elderly, all the way to providing our kids with the opportunity to play sport on Saturday mornings.
This reflects the diversity of the NFP sector - and it is certainly a diverse and large group of organisations, estimated to consist of around 600,000 entities, with approximately 55,000 of those being charities endorsed for taxation purposes. It is also a growing and expanding sector, which makes a major contribution to Australia's GDP and employment.
In the context of this growth and expansion, over recent years there have been numerous reviews of the charitable and NFP sector.
These have included the 2001 Report of the "Inquiry into the Definition of Charities and Related Organisations", the 2009 "Review into Australia's Future Tax System" and the Productivity Commission's 2010 report, "Contribution of the Not-for-Profit Sector".
A consistent and strong theme has been evident in these reviews and their recommendations - that the regulation of the NFP sector would be significantly improved by establishing a national regulator.
A national regulator will allow certain existing Commonwealth Government regulatory functions to be better performed.
It will address the dual and potentially conflicting duties, currently undertaken by the Australian Taxation Office (ATO), which is currently expected to be both the de-facto regulator of the NFP sector as well as the Government's primary taxation collection agency.
Having a national regulator will also support transparency and accountability in the sector.
The ACNC will provide a public information portal to enable donors to make informed choices and will assist the sector through the provision of education and guidance.
A new national regulator will assist Government to drive reform to reduce the regulatory burden on the sector.
The ACNC will also provide a platform for delivering a national approach to NFP regulation. The existence of a national regulator will be an important step along the road to a more harmonised, national approach to regulation. The Commonwealth is committed to working cooperatively with the States and Territories to bring this about.
The Australian Charities and Not-for-profits Commission
The establishment of the ACNC is the foundation stone of the Government's NFP reform agenda.
The ACNC will initially focus on regulating charities only, however in the future the regulatory framework will be able to be extended to all NFP entities.
In terms of the establishment of the ACNC, a lot of work has been taking place over recent months.
Staged Approach to the Introduction of the ACNC
On 17 May, the Government announced a staged approach to the introduction of the ACNC.
Under this approach, charities regulated by the ACNC will not be required to comply with the governance standards and financial reporting framework until 1 July 2013 with the first financial reports to the ACNC not falling due until 31 December 2014.
In effect, the ACNC is initially being set up as a registrar for charities.
This approach will enable further consultation with stakeholders on the contents of governance standards and the financial reporting framework.
It will assist charities with the transition to the new regulatory framework, enabling the ACNC to provide them with guidance and education once the contents of the governance standards and the financial reporting framework have been settled.
It will also provide more time for work to be completed to address reporting duplication and overlap across the Commonwealth Government.
Nomination of Ms Susan Pascoe as the Inaugural Commissioner of the ACNC
In June, the Government announced that it intends to nominate Ms Susan Pascoe to become the inaugural Commissioner of the ACNC.
I know that many of you here today will have had some interaction with Susan either in her capacity as Head of the ACNC Implementation Taskforce or in one of her previous roles.
Of course, Susan has an outstanding record working in both the private and public sectors.
In my time as Assistant Treasurer, I have been very impressed with her work leading the ACNC Implementation Taskforce, her in depth understanding of the NFP sector and awareness of the opportunities and challenges for the sector.
Susan and her team at the ACNC Implementation Taskforce have worked very closely with the sector to communicate the changes associated with the establishment of the new regulatory framework.
I know that many stakeholders have been very complementary of Susan and her team's work, and it is pleasing that she will be able to continue this work into the future.
Release of the ACNC Implementation Report
Speaking of the work that Susan and the ACNC Implementation Taskforce have been undertaking, on 12 June the Taskforce released its implementation report.
This document sets out how the ACNC will approach its role as a regulator in a number of key action areas.
The completion of the report followed extensive stakeholder engagement, including the release of a discussion paper in December 2011 and community consultations in capital cities and also Townsville throughout January and February of this year.
Whilst legislation will set out the role and powers of the ACNC, the Implementation Report provides stakeholders with a clear indication that the ACNC will be an organisation committed to delivering best practice regulation, and that engaging with the sector and providing them with education and guidance will be a key element of their regulatory approach.
Importantly, the implementation report sets out how the ACNC will continue its work leading the development and implementation of the "charity passport" as a means of implementing the Government's objective to develop a "report-once, use-often reporting framework".
The charity passport is a collection of data that charities will report once to the ACNC to meet the baseline corporate and financial reporting requirements of Australian Government agencies, and will be a vital component of how the ACNC will be able to deliver reductions in red tape over time.
Referral of the Draft ACNC Legislation to the House Standing Committee on Economics
On 6 July, the Government referred the Draft ACNC Legislation to the House Standing Committee on Economics for an inquiry over the Winter Parliamentary sitting break.
Referring the ACNC Bills to the House Committee for an inquiry over the Winter Parliamentary break provides for appropriate Parliamentary scrutiny and also allows for further public consultation on the ACNC legislation.
The draft legislation reflects the outcomes of extensive consultation undertaken with stakeholders over recent months.
This includes public and targeted consultation on the ACNC Bills conducted in December 2011 and May 2012, during which stakeholders provided very constructive and thoughtful feedback to Treasury, and I would like to thank those who have provided input into the process for their important contribution.
Throughout this process, the Government has listened to stakeholders and made extensive changes to the draft legislation.
This includes the addition of a new object to the ACNC Bill, which reflects the fact that the ACNC is being established both to maintain, protect and enhance public trust and confidence in the NFP sector and, importantly, to support and maintain a robust, vibrant, independent and innovative NFP sector.
Additional direction has been given to the Commissioner specifying that its role involves working with other Government agencies to address regulatory burden and duplication, and also making clear the importance of not only providing education and guidance to organisations registered with the ACNC but also providing information to the public - something which I think is important given that public understanding of a new regulatory framework is necessary to ensure its effectiveness.
Other changes have been made including further clarification of the independence of the ACNC.
Once the committee provides its report, the Government will consider any recommendations the Committee makes, before introducing the legislation later in the year, ahead of the ACNC's planned 1 October 2012 start date.
The Coalition's Position on the Australian Charities and Not-for-profits Commission
Many stakeholders have made it quite clear that they do not support the ATO retaining its role as the de-facto Commonwealth regulator of charities.
And while we welcome the broad support of the Coalition for the establishment of a Charities Commission in some form, they have made it clear that they will ignore one of the major concerns of charities and the NFP sector by retaining the regulatory powers that already exist in the ATO and not transfer them to a new and independent regulator.
As Assistant Treasurer, I have a very high regard and respect for the ATO and the important work it does.
Taxation, and the important services and other Government outlays it funds, is vital to making Australia a strong, inclusive and cohesive society and a great place to live.
As I mentioned earlier, the ATO currently has potentially conflicting roles. The ATO is the Australian Government's taxation collection agency, it should not be a de-facto regulator of charities and NFPs.
Rather than maintaining this arrangement, the Government has decided that it is more appropriate to have an independent national regulator tasked with the role of determining an organisation's charitable status.
Such an independent national regulator would have a stronger and more dedicated focus on the particular needs of charities and the broader NFP sector.
The Coalition's proposed Charities Commission would not be a regulator but rather more of an information and advice body. A critical flaw in their policy is that it would not address the deficiencies which currently exist when it comes to charities and NFP regulation - namely the fragmented, inconsistent and uncoordinated approach to regulation of the sector.
These deficiencies have been outlined in numerous reviews and reports - which is why these reviews and reports have recommended establishing a national regulator, rather than just an information and advice body.
Let's be clear about one thing. We are not asserting that the mere establishment of a national regulator is going to solve all of these problems overnight. What we are saying is that this is an important first step in the process of achieving better and more coordinated regulation.
The Government wants a regulator that understands the sector and whose core business involves engagement with the sector. A regulator that can assist in driving reform to address this fragmented, inconsistent and uncoordinated approach to regulation, a regulator that can provide a strong platform for delivering a national approach to NFP regulation.
Delivering this regulator is a task that this Government is determined to achieve.
I would like to again thank the Melbourne Law School for the opportunity to open your conference today.
As you will all undoubtedly know, within Melbourne Law School, Professor Ann O'Connell has been leading a team of impressive researchers undertaking the first comprehensive comparative investigation of the definition, regulation, and taxation of the NFP sector in Australia - and this conference is a key part of this project.
Given the Gillard Government's wide-ranging NFP reform agenda, I think Ann and her team's work has been of major significance and complemented the policy development taking place over the last couple of years - I know that members of the Melbourne Law School project team such as Dr Joyce Chia have made an important and valuable contribution to the consultations undertaken so far.
I would like to thank you for your work and acknowledge your contributions.
As you will know, NFP reform is never easy, but I do believe that whilst we are not yet there, we are very close to having an effective and responsive national regulator in terms of ACNC.
I look forward to continuing to work with all stakeholders as we progress the Government's NFP reform agenda.