FEDERAL BUDGET 2011: Government cracks down on charities

A new independent statutory agency called the Australian Charities and Not-for-profits Commission will be introduced by July 2012 as part of a $53 million crackdown on charities in this year’s Federal budget.

The Government will also start working with the states and territories in order to introduce national regulation and a regulator for the charities and not-for-profits sector in order to increase compliance activity.

In fact, it expects to raise about $41 million as a result of the changes through increased compliance.

The changes are designed to deliver what the Government calls a “one-stop-shop” for the support and regulation of the NFP sector.

Firstly, the Government will establish the Australian Charities and Not-for-profits Commission. This will be responsible for determining the legal status of all groups wanting to be classed as charitable institutions, and thus receive benefits.

An implementation task force will be started to assist with the preparation for the commission, to begin work from July 1, 2011. This will consult with state governments, the public and the not-for-profit sector.

Part of this initiative will see the commission introduce a “report-once use-often” framework, provide education and support, and build a public info portal by 2013. A new commissioner will be named to run all this, reporting directly through the assistant treasurer – this will most likely be the same person who ran the task force.

But while current assistant treasurer Bill Shorten says the changes have been implemented due to NFPs suffering under “overly complex, duplicating regulatory requirements”, it is also true some of these changes are designed to increase compliance.

One change will see better targeting of NFP tax concessions, with Shorten saying, “it is important that charities use their tax concessions only to assist disadvantaged people and not for unrelated commercial activities”.

NFP entities will now pay income tax on profits from their unrelated commercial activities that are not directed back towards those “altruistic purposes”. Additionally, NFPs will not be able to use FBT and GST concessions for those commercial activities.

This won’t affect small-scale activities, such as school fetes and renting out halls.

Finally, the Government will introduce a statutory definition of a charity in consultation with the states and territories.

“The adoption of a consistent definition of charity and single determination of charitable status will greatly assist the sector,” Shorten said.

“The current definition of charity is based on over 400 years of common law and is complex.”