House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

General outline and financial impact

Australian Charities and Not-for-profits Commission

The Australian Charities and Not-for-profits Commission Bill 2012 establishes a new independent statutory office, the Australian Charities and Not-for-profits Commission (ACNC) which will be the Commonwealth level regulator for the not-for-profit (NFP) sector. The exposure draft also establishes a new regulatory framework for the NFP sector.

Date of effect: The ACNC will commence operations on 1 October 2012.

Proposal announced: This reform was announced by the then Assistant Treasurer and Minister for Financial Services and Superannuation and the then Minister for Human Services and Social Inclusion's joint Media Release No. 77 of 10 May 2011.

Financial impact: Establishing the ACNC and the resulting structural changes to the Australian Taxation Office (ATO) has resulted in the following fiscal impact:

Human rights implications: This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 17, paragraphs 17.1 to 17.41.

Compliance cost impact: The establishment of the ACNC and related regulatory framework could result in minor transitional compliance costs for the registered charities that will come within the scope of the ACNC. However, the introduction of a streamlined regulatory framework for the NFP sector, which includes a 'report-once, use-often' reporting framework, is expected to reduce compliance costs over the medium to long term.

Summary of regulation impact statement

Regulation impact on business

Impact: Registered charities that will come within the scope of the ACNC could experience transitional compliance costs.

Once the sector's new regulatory system is in place, the Regulatory Impact Statement finds that it will lead to a reduction in compliance costs and red tape faced by the sector. Small entities that currently have no reporting obligations are a minor exception. These entities would be required to report to the ACNC and may therefore experience a minor increase in compliance burden. However, they may benefit through other aspects, such as more easily accessing Commonwealth exemptions, concessions and benefits, and by having additional public exposure through a page on the ACNC website at no cost.

Main points:

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The ACNC Bill establishes a new regulatory framework for the sector and creates the ACNC as the Commonwealth level regulator responsible for administering the ACNC Bill.

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The sector's new regulatory system will establish:

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a robust and streamlined regulatory framework for the NFP sector, including a 'report-once, use-often' reporting framework;

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strengthen the sector's transparency, governance and accountability; and

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provide the public with information on the sector commensurate to the level of support provided to the sector by the public.

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The ACNC will create a 'one-stop shop' for ACNC registration, tax concessions, and accessing Australian Government services and concessions. Registered entities that are involved in a range of activities would only have to apply and report to the ACNC.

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The move to the 'report-once, use-often' approach would reduce the compliance burden associated with duplicative, ad hoc and inconsistent reporting.

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Smaller entities with no reporting obligations may have to provide some basic reports, with the level of reporting based on the entity's annual revenue turnover. This reporting requirement may introduce a minor compliance burden for these small entities.

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The compliance savings from introducing the ACNC and a new regulatory framework are hard to quantify, particularly for this sector, due to limited data availability.

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During consultation with the sector stakeholders indicated that a move toward a 'report-once, use-often' approach would lead to 'huge' savings in administrative and compliance costs.

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The Regulatory Impact Statement also finds that a truly national NFP regulator would provide the greatest benefits in terms of reducing regulatory overlap, red tape and compliance costs for the sector.