House of Representatives

Explanatory Memorandum

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

Chapter 2 Constitutional basis for the Bill

Outline of chapter

2.1 This Chapter explains the constitutional basis for the Australian Charities and Not-for-Profits Commission Bill 2012 (Bill).

Detailed explanation of new law

2.2 Under The Constitution , the Commonwealth does not have any legislative power specifically to regulate the not-for-profit (NFP) sector. As a result, different Commonwealth powers support different aspects of the Bill.

Taxation power

2.3 Paragraph 51(ii) of the The Constitution (the taxation power) allows the Commonwealth to make laws with respect to taxation. The taxation power supports the provisions of the Bill that:

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establish a registration scheme as a prerequisite for NFPs to access certain Commonwealth tax concessions (Part 2-1);

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empower the Governor-General to make regulations prescribing particular standards that entities need to meet as a prerequisite for being registered and remaining entitled to be registered (Part 3-1);

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set out the record keeping and reporting obligations applicable to registered entities - to the extent that these are imposed in order to enable an assessment of an entity's entitlement to registration, compliance with the parts of the Bill or the regulations supported by the taxation power, or compliance with any taxation law as defined in the Income Tax Assessment Act 1997 (Part 3-2);

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require registered entities to notify the Australian Charities and Not-for-profits Commission Commissioner (ACNC) Commissioner (ACNC Commissioner) of certain matters in circumstances where those matters may affect their entitlement to registration (Division 65);

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empower the ACNC Commissioner to obtain information for the purpose of determining whether a registered entity has complied with certain provisions of the Bill (or legislative instruments made under the Bill) supported by the taxation power (Division 70);

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empower the ACNC Commissioner to obtain information for the purpose of determining whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the taxation power is correct (Division 70);

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empower ACNC officers to monitor whether certain provisions of the Bill (or legislative instruments made under the Bill) supported by the taxation power have been complied with (Division 75); and

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empower ACNC officers to monitor whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the taxation power is correct (Division 75).

2.4 The provisions of the Bill supported by the taxation power will apply in relation to all registered entities.

Communications power

2.5 Paragraph 51(v) of the The Constitution (the communications power) allows the Commonwealth to make laws with respect to 'postal, telegraphic, telephonic, and other like services' - including electronic communications. The communications power supports the provisions of the Bill that require the ACNC Commissioner to maintain the Australian Charities and Not-for-profits Register, an electronic database that must be made available for public inspection on the internet (Part 2-2).

2.6 The communications power also supports the provisions of the Bill that:

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empower the ACNC Commissioner to obtain information for the purpose of determining whether information provided to the ACNC Commissioner by an entity, and included on the Register in accordance with Division 40, is correct (Division 70); and

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empower ACNC officers to monitor whether such information is correct (Division 75).

Corporations power and Territories power

2.7 Certain parts of the Bill only apply in relation to 'federally regulated entities' (FREs), which are essentially entities that the Commonwealth has power to regulate under paragraph 51(xx) of The Constitution (the corporations power) or section 122 of The Constitution (the Territories power). The corporations power allows the Commonwealth to make laws with respect to certain types of corporations (paragraph 51(xx) corporations). The Territories power allows the Commonwealth to make laws for the government of any Territory.

2.8 Where a registered entity is an FRE because it is a paragraph 51(xx) corporation or a trust whose trustees are all paragraph 51(xx) corporations, the corporations power supports the provisions of the Bill that empower the ACNC Commissioner to:

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give warnings and directions to that FRE (Divisions 80 and 85);

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accept and seek Court enforcement of certain undertakings made by that FRE (Division 90);

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seek, and a Court to grant, injunctions relating to that FRE (Division 95); and

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suspend or remove a responsible entity of that FRE, and appoint acting responsible entities (Division 100).

2.9 The Territories power supports these provisions of the Bill in their application to each registered entity that is an FRE because it is a body corporate incorporated in a Territory, a trust whose trustees are all bodies corporate incorporated in a Territory, a body corporate taken to be registered in a Territory under section 119A of the Corporations Act 2001 , or an entity connected to a Territory in the manner described in paragraphs (d) or (e) of the definition of FRE in section 205-15 of the Bill.

2.10 Additionally, the corporations power and the Territories power respectively support the provisions of the Bill that:

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set out the record keeping and reporting obligations applicable to registered entities - to the extent that these are imposed in order to enable an assessment of an entity's compliance with the parts of the Bill or the regulations supported by the corporations power / Territories power (Part 3-2);

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empower the ACNC Commissioner to obtain information for the purpose of determining whether a registered entity has complied with certain provisions of the Bill (or legislative instruments made under the Bill) supported by the corporations power / Territories power (Division 70);

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empower the ACNC Commissioner to obtain information for the purpose of determining whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the corporations power / Territories power is correct (Division 70);

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empower ACNC officers to monitor whether certain provisions of the Bill (or legislative instruments made under the Bill) supported by the corporations power / Territories power have been complied with (Division 75); and

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empower ACNC officers to monitor whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the corporations power / Territories power is correct (Division 75).

External affairs power

2.11 Paragraph 51(xxix) of The Constitution (the external affairs power) allows the Commonwealth to make laws with respect to external affairs. 'External affairs' in this context includes persons, places, matters or things outside the geographical limits of Australia.

2.12 The external affairs power supports section 50-10 of the Bill in Part 3-1, which empowers the Governor-General to make regulations, specifying the 'external conduct standards', for the purpose of regulating funds sent by NFPs outside Australia and activities engaged in by such entities outside Australia.

2.13 Additionally, the external affairs power supports the provisions of the Bill that empower the ACNC Commissioner to take enforcement action in relation to any registered entity in certain circumstances involving the external conduct standards. In these circumstances, the ACNC Commissioner has power to exercise the same enforcement powers as are available in relation to registered entities that are FREs. In other words, the ACNC Commissioner may:

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give warnings and directions to a registered entity (Divisions 80 and 85);

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accept and seek Court enforcement of certain undertakings made by a registered entity (Division 90);

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seek injunctions from a Court (Division 95); and

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suspend or remove a responsible entity of a registered entity, and appoint acting responsible entities (Division 100).

2.14 The external affairs power also supports the provisions of the Bill that:

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set out the record keeping and reporting obligations applicable to registered entities - to the extent that these are imposed in order to enable an assessment of an entity's compliance with the parts of the Bill or the regulations supported by the external affairs power (Part 3-2);

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empower the ACNC Commissioner to:

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obtain information for the purpose of determining whether a registered entity has complied with certain provisions of the Bill (or legislative instruments made under the Bill) supported by the external affairs power (Division 70); and

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obtain information for the purpose of determining whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the external affairs power is correct (Division 70);

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empower ACNC officers to:

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monitor whether certain provisions of the Bill (or legislative instruments made under the Bill) supported by the external affairs power have been complied with (Division 75); and monitor whether information given in compliance or purported compliance with provisions of the Bill (or legislative instruments made under the Bill) supported by the external affairs power is correct (Division 75).

Mixture of powers

2.15 Other parts of the Bill that comprise overarching or machinery provisions of the ACNC scheme also rely on all of the Commonwealth powers listed above. These parts of the Bill are supported by different powers depending on the particular function or power being exercised under the Bill, the circumstances of its exercise, or the substantive provision of the Bill to which the particular machinery provision relates.

2.16 The parts of the Bill relying on a mix of powers are the provisions that:

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establish the ACNC (Chapter 5) and the Advisory Board (Chapter 6);

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impose secrecy obligations in relation to information obtained under or for the purposes of the Bill, and authorise disclosure of this information in particular circumstances (Part 7-1);

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provide for reviews and appeals of decisions made under the Bill (Part 7-2);

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set out the administrative penalties applicable for making false or misleading statements or failing to lodge documents on time under the Bill (Part 7-3);

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extend the application of the obligations, liabilities and offences of entities under the Bill to the responsible entities of those entities (Part 7-4);

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govern administrative matters relating to the process for providing material to the ACNC Commissioner (Divisions 190 to 195); and

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empower the Governor-General to make regulations prescribing certain matters (Division 200).

2.17 Finally, some Commonwealth powers not mentioned above provide support for discrete aspects of the Bill. For example, to the extent that the information-gathering and monitoring powers in Divisions 70 and 75 relate to provisions of the Crimes Act 1914 or Criminal Code , these powers rely on the Commonwealth powers supporting those criminal laws.