House of Representatives

Explanatory Memorandum

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

Chapter 13 Miscellaneous

Outline of chapter

13.1 This Chapter explains common rules which govern the operation of administrative matters, including:

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the requirements for approved forms for material given to the Australian Charities and Not-for-profits Commission Commissioner (ACNC Commissioner);

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the requirements for address for service rules;

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how some core concepts have been defined;

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administration penalties for late lodgement and false and misleading statements; and

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how the new law imposes certain obligations, liabilities or offences on specific responsible entities.

Summary of new law

13.2 The Bill sets out the common rules which govern the operation of administrative matters of the ACNC. In particular, there are requirements for the approved forms for material given to the ACNC Commissioner, address for service rules, as well as administrative penalties for registered entities for late lodgement and false and misleading statements.

13.3 This Chapter also explains the imposition of certain obligations, liabilities or offences on specific responsible entities, as well as outlining some other core concepts.

Detailed explanation of new law

Approved forms

13.4 The approved form rules set out matters such as the standard manner in which certain information must be provided to the ACNC Commissioner including how that information is to be set out, what is to be included or appended, who can sign-off on the materials and the mechanism in which it is to be provided.

13.5 The rules help provide for administrative efficiency and simplicity in the operation of the ACNC.

13.6 The approved form is determined as an administrative function of the ACNC Commissioner and does not constitute a legislative instrument.

13.7 The Bill provides for the ACNC Commissioner to approve the form of certain information that the ACNC routinely collects such as returns, applications, notifications and statements.

13.8 The rules also allow the ACNC Commissioner to determine how information is to be provided to the ACNC Commissioner, such as whether it may be provided in a paper form or a virtual form, and where the document is given, for example, electronically or by telephone.

13.9 These rules have been based on similar requirements contained in other Commonwealth laws, including the Taxation Administration Act 1953 .

13.10 Information is in the approved form if it meets all the following requirements:

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it is in the form approved by the ACNC Commissioner for that kind of document;

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it contains a declaration that the information provided is true and correct, signed by an entity or entities as the form requires;

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it contains the information that the form requires, and any further information, statement or document as the ACNC Commissioner requires, whether in the document or otherwise; and

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if it is to be given to the ACNC Commissioner, it is given in the manner that the ACNC Commissioner requires.

[Subsection 190-10(1)]

13.11 If an entity provides a document to the ACNC Commissioner that satisfies all the above requirements, except for the requirement that it contains any further information, statement or document as required by the ACNC Commissioner, the document is also in the approved form, if it contains the other information required by the ACNC Commissioner. [Subsection 190-10(2)]

13.12 The ACNC Commissioner must specify the further information, statement or document that is required in writing. [Subsection 190-10(2)]

13.13 The ACNC Commissioner may combine more than one document (for example two notices, or a statement and an application) into the same approved form. [Subsection 190-10(3)]

13.14 The ACNC Commissioner may approve a different approved form for different entities. For example, the ACNC Commissioner may require medium and large registered entities to lodge a different annual information statement to that lodged by small registered entities. [Subsections 190-10(4) and note in subsection 190-10(4)]

13.15 The ACNC Commissioner may also defer the time by which information is to be provided to the ACNC Commissioner, or to another entity, in the approved form. [Section 190-15]

Declaration by an entity

13.16 If an entity gives a document to the ACNC Commissioner in the approved form, the entity must make a declaration in the approved form that any information in the document is true and correct. [Section 190-20]

13.17 This gives assurance to the ACNC Commissioner that the entity has provided accurate information.

Declaration by an entity where an agent gives a document

13.18 If a document is to be given to the ACNC Commissioner in the approved form by an agent on the entity's behalf, the entity must make a declaration in writing:

•

stating that the entity has authorised the agent to give the document to the ACNC Commissioner; and

•

declaring that any information the entity provided to the agent for preparation of the document is true and correct.

[Subsection 190-25(1)]

13.19 The entity must give the declaration to the agent. [Subsection 190-25(2)]

13.20 The entity must retain the declaration or a copy of the declaration for:

•

seven years after it is made; or

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a shorter period determined by the ACNC Commissioner in writing for the entity; or

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a shorter period determined by the ACNC Commissioner by legislative instrument for a class of entities that include the entity.

[Subsection 190-25(3)]

13.21 A determination made by the ACNC Commissioner may specify different periods for different classes of entities. [Subsection 190-25(4)]

13.22 An entity must produce the declaration or copy if requested to do so within that period by the ACNC Commissioner. [Subsection 190-25(5)]

13.23 The agent must not give the document to the ACNC Commissioner before the entity makes the declaration. [Subsection 190-25(6)]

13.24 The entity must sign the declaration. [Subsection 190-25(7)]

Declaration by an agent

13.25 If an agent gives a document to the ACNC Commissioner in the approved form on behalf of another entity, the agent must, if the document so requires, make a declaration in the approved form stating that:

•

the document has been prepared in accordance with the information supplied by the other entity; and

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the agent has received a declaration from the other entity stating that the information provided to the agent is true and correct; and

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the agent is authorised by the other entity to give the document to the ACNC Commissioner.

[Section 190-30]

Signing declarations

13.26 An entity must sign a declaration in a document the entity gives to the ACNC Commissioner in paper form. [Subsection 190-35(1)]

13.27 If an entity's agent gives a document to the ACNC Commissioner on the entity's behalf in paper form the document must contain:

•

if the document so requires - a declaration made by the entity with the entity's signature; and

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if the document so requires - a declaration made by the agent with the agent's signature.

[Subsection 190-35(2)]

13.28 Any document of an entity's that is lodged electronically:

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if the entity gives it to the ACNC Commissioner - must contain the entity's declaration with the entity's electronic signature; or

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if the entity's agent gives it to the ACNC Commissioner - must contain the agent's declaration with the agent's electronic signature.

[Subsection 190-35(3)]

Address for service

13.29 The new law sets out rules for how the ACNC can serve documents on registered entities (or on responsible entities of registered entities). This includes documents such as directions, warnings and penalty notices.

13.30 These rules require registered entities to keep their details up-to-date with the ACNC to ensure they receive all material sent to them.

13.31 By using the address for service, the ACNC Commissioner can presume that documents have been served to the registered entity.

13.32 Failure to update an address with the ACNC may lead to a registered entity failing to fulfil an important obligation.

13.33 Registered entities are required to notify the ACNC Commissioner if they change their address for service. This is explained in detail in Chapter 7 - Duty to notify.

13.34 Maintaining an up-to-date address for service makes sure that registered entities are able to receive all directions and other information from the ACNC Commissioner, ensuring they meet (and not avoid) their regulatory obligations.

13.35 It is important for registered entities to regularly check their electronic and physical mail to ensure they are able to meet their regulatory obligations.

13.36 An entity's address for service can be a physical address in Australia, a postal address in Australia or an electronic address that the entity has given the ACNC Commissioner for the purposes of receiving documents from the ACNC. [Subsection 195-5(1)]

13.37 If an entity has given the ACNC Commissioner more than one address for service, the Bill allows the ACNC Commissioner to choose the address that the ACNC Commissioner reasonably believes to be the address for service in the circumstances. [Subsection 195-5(2)]

13.38 If an entity has not given the ACNC Commissioner an address for service the ACNC Commissioner may use an address that he or she reasonably believes to be the entity's address for service. [Subsection 195-5(3)]

Example 13.56

Noad Inc is a registered entity. Noad Inc has not given an address for service to the ACNC Commissioner. The ACNC Commissioner needs to serve a document on Noad Inc. The Australian Securities and Investments Commission (ASIC) has an address for Noad Inc. The ACNC Commissioner may use that address to serve the document on Noad Inc.

How documents may be given

13.39 A document (however described) may be given to an entity:

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in the manner specified in section 28A of the Acts Interpretation Act 1901 ;

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if the entity's address for service is an electronic address - by sending it to that address;

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if the entity is a company and a liquidator of the company has been appointed - by leaving it at, or posting it to, the address of the liquidator's office in the most recent notice of that address lodged with ASIC; or

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if the entity is a company and an administrator of the company has been appointed - by leaving it at, or posting it to, the address of the administrator in the most recent notice of that address lodged with ASIC.

[Subsection 195-10(1)]

13.40 Despite section 29 of the Acts Interpretation Act 1901 , a document given under the Bill is taken to be given at the time the ACNC Commissioner leaves or posts it. [Subsection 195-10(2)]

Example 13.57

The Paper Charity has an address for service registered with the ACNC. The ACNC Commissioner needs to serve a notice on The Paper Charity. The ACNC Commissioner sends the notice by post to the address for service held for The Paper Charity on 2 February 2013. The notice is taken to be given to The Paper Charity on 2 February 2013.

13.41 This Division of the Bill has effect despite paragraphs 9(1)(d) and (2)(d) of the Electronic Transactions Act 1999 . [Subsection 195-10(3)]

Core concepts

Entity

13.42 The new law uses the concept of 'entity' as a broad term to refer to any individual or body.

13.43 The NFP sector is comprised of many diverse entities. The term entity is used as a general term throughout the Bill to reflect the diversity of the NFP sector.

13.44 The term entity is used to refer to any of the following:

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an individual;

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a body corporate;

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a body politic;

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any other unincorporated association or body or persons;

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a trust.

[Subsection 205-5(1)]

13.45 The term entity is used through the Bill in a number of different, but related senses. It covers all kinds of legal person. It also covers groups of legal persons, and other things, that in practice are treated as having a separate identity in the same way as a legal person does. [Note in subsection 205-5(1)]

13.46 Any other unincorporated association or body or persons does not include a non-entity joint venture (within the meaning of the Income Tax Assessment Act 1997 ). [Subsection 205-5(2)]

13.47 The concept of an entity also distinguishes between the different capacities in which a legal person may act. For example, an individual acting in the capacity of a trustee will be treated as a separate entity from that individual acting in a personal capacity. This will remove the necessity to continually state that a particular provision only applies to an individual otherwise than in the capacity of trustee.

13.48 The trustee of a trust is taken to be an entity consisting of the person who is the trustee, or the persons who are the trustees, at any given time. [Subsection 205-5(3)]

13.49 This is because a right or obligation cannot be conferred or imposed on an entity that is not a legal person. [Note 1 in subsection 205-5(3)]

13.50 The entity that is the trustee of a trust does not change merely because of a change in the person who is the trustee of the trust, or persons who are the trustees of the trust. [Note 2 in subsection 205-5(3)]

13.51 A legal person can have a number of different capacities in which the person does things. In each of those capacities, the person is taken to be a different entity. [Subsection 205-5(4)]

13.52 For example, in addition to his or her personal capacity, an individual may be a sole trustee of one or more trusts; and one of a number of trustees of a further trust. In his or her personal capacity, he or she is one entity. As trustee of each trust, he or she is a different entity. The trustees of the further trust are a different entity again, of which the individual is a member. [Example in subsection 205-5(4)]

13.53 If a provision refers to an entity of a particular kind, it refers to the entity in its capacity as that kind of entity, not to that entity in any other capacity. [Subsection 205-5(5)]

13.54 For example, a provision that refers to a company does not cover a company in a capacity as trustee, unless it also refers to a trustee. [Example in subsection 205-5(5)]

13.55 Because obligations are placed on registered entities generally, other rules are required to explain how the law is to be applied where the entity is not a legal entity. See heading below - Obligations, liabilities and offences.

Small, medium and large registered entities

13.56 The concepts small, medium and large registered entities are used throughout this Bill to differentiate NFP entities based on their revenue.

13.57 Tiered registration of NFP entities ensures proportionality of reporting and other requirements for registered entities of different sizes.

13.58 A registered entity is a small registered entity in a particular financial year if the revenue of the registered entity for the financial year is less than $250,000, or any other amount prescribed by the regulations for the purposes of determining tier thresholds. [Subsection 205-25(1)]

13.59 A registered entity is a medium registered entity in a particular financial year if:

•

it is not a small registered entity in the financial year; and

•

the revenue of the registered entity for the financial year is less than $1,000,000, or any other amount prescribed by the regulations for the purposes of determining tier thresholds.

[Subsection 210-10(2)]

13.60 A registered entity is a large registered entity in a particular financial year if it is not a small registered entity or a medium registered entity in the financial year. [Subsection 205-25(3)]

13.61 Revenue is to be calculated for the purposes of this section in accordance with accounting standards in force at the relevant time (even if the standard does not otherwise apply to the financial year of the registered entity concerned). [Subsection 205-25(4)]

13.62 The ACNC Commissioner may continue to treat a registered entity as either a small, medium or large registered entity for a financial year if the ACNC Commissioner is of the opinion that the entity was a registered entity of that size for the previous financial year, and the entity, while not being of that size for the current financial year, is likely to return to that size during the next financial year. [Subsection 205-25(5)]

13.63 This provision allows for the ACNC Commissioner to use discretion to allow for certain circumstances that may make it inappropriate for an entity to move between the small, medium and large thresholds.

13.64 For example, a previously small registered entity disposes of a capital asset in a particular financial year and this produces a large amount of revenue, causing the entity to move beyond the threshold of a small registered entity, and into the threshold of a medium registered entity. As this is an uncommon event and the entity is likely to be a small registered entity in the next financial year, the ACNC Commissioner may continue to treat the entity as a small registered entity, even though it is a medium registered entity in that particular financial year.

13.65 The tiered framework minimises the compliance burden placed on registered entities, while striking a balance with accountability and transparency.

13.66 The tiered framework ensures that all registered entities provide standardised information which is useful to the public, for example to allow members of the public to make meaningful assessments of registered entities in considering whether to volunteer for, or donate to, these organisations.

13.67 For further information see Chapter 6 - Reporting and record keeping.

Responsible entities

13.68 The concept of responsible entity identifies individuals and other entities that are responsible for the decision-making, day-to-day management and compliance of a registered entity.

13.69 The term responsible entity is used throughout the new law to identify entities to whom responsibilities and liabilities in relation to registered entities fall.

13.70 Each of the following is a responsible entity of a registered entity.

13.71 In the case of a registered entity that is a company, the responsible entities are the directors. [Paragraph 205-30(a)]

13.72 In the case of a registered entity that is a trust the responsible entities are each of the following:

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a trustee of the registered entity;

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if a trustee of the registered entity is a body corporate - a director of the trustee.

[Paragraph 205-30(b)]

13.73 A person who is any of the following:

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a trustee in bankruptcy of the registered entity;

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a receiver, or receiver and manager, of the property of the registered entity;

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an administrator of the registered entity;

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an administrator of a deed of a company arrangement executed by the registered entity;

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a liquidator of the registered entity; or

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a trustee or other entity administering a compromise or arrangement made between the registered entity and someone else.

[Paragraph 205-30(c)]

13.74 For an incorporated association the responsible entities are members of the management committee.

13.75 The law also looks to corporate responsible entities (such as corporate trustees) to identify other responsible entities who control the mind and will of the registered entity (such as directors of a corporate trustee of a registered entity that is a trust).

Company

13.76 In this Bill the term company means:

•

a body corporate; or

•

any unincorporated association or body of persons; but does not include a partnership.

[Section 205-10]

Basic religious charity

13.77 The term basic religious charity is used throughout this Bill to identify certain registered entities that have different obligations and requirements under the Bill.

13.78 A basic religious charity is an entity that meets all of the following requirements:

•

it is a registered entity;

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it is registered as the type - charity and as the subtype - entity with a purpose that is the advancement of religion; and

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it is not entitled to be registered as any other subtype.

[Subsection 205-35(1)]

13.79 An entity would not be entitled to be registered with another subtype to the extent that it activities in that subtype are merely ancillary and incidental to its subtype registration. For example, a church that is registered with the subtype - entity with a purpose that is the advancement of religion occasionally provides clothes and food vouchers to families that attend their church services and that are experiencing poverty. This service is not provided frequently, and is merely incidental to the registered entity's activities to advance religion.

13.80 An entity is not a basic religious charity if:

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it is a body corporate that is registered under the Corporations Act 2001 ;

•

it is a corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 ;

•

the entity is incorporated under a State or Territory Incorporated Associations Act;

•

it is registered under the Associations Incorporation Act 2005 of Norfolk Island; or

•

it is registered under the Companies Act 1985 of Norfolk Island.

[Subsection 205-35(2)]

13.81 An entity is also not a basic religious charity if it is a deductible gift recipient (DGR). [Subsection 205-35(3)]

13.82 An entity may still be considered a basic religious charity if it operates a fund, authority or institution as a separate entity that is a DGR, where the running of the DGR and all DGR funds are kept separate from the parent entity. For example, a church may operate a trust that is listed on the Register of Cultural Organisations as a DGR. The trust is a separate entity and has a separate bank account. All DGR funds are kept separate from the church. In this case, the church could still be considered a basic religious charity.

13.83 In the case where a church operates a fund, authority or institution that is a DGR, but where all the church and DGR funds are kept in one bank account the church would not be considered a basic religious charity.

13.84 In this case, the church would have to separate the DGR fund, authority or institution so that the DGR can report separately. In this case, the church could then be considered a basic religious charity.

13.85 An entity is also not a basic religious charity at a time in a financial year if the ACNC Commissioner has allowed it (together with one or more other entities) to form part of a reporting group for the year under section 60-95. [Subsection 205-35(4)]

13.86 An entity is also not a basic religious charity at a time if the total of the grants (however described)(if any) it receives from Australian government agencies in a financial year exceeds $100,000; in any of these financial years:

•

the financial year in which the time occurs; or

•

either of the previous two financial years.

[Subsection 205-40(5)]

13.87 This requirement will only apply from the 2013-14 financial year. That is to say, if a registered entity receives a grant in the 2012-13 financial year or an earlier financial year, the registered entity will not be excluded from being considered a basic religious charity.

13.88 The definition of Australian government agency used in the Bill does not include local government bodies. Accordingly, an entity may receive grants to any value from a local government body and, providing it meets all other requirements, could still be considered a basic religious charity.

Governing rules

13.89 Governing rules are those documents of an NFP entity that set out its purposes and how it is to be run. Governing rules may include a constitution, association rules, cooperative rules, memorandum and articles of association, legislation, a trust deed or church law. [Section 300-5]

13.90 Governing rules cover a broad range of topics, including rules about an entity's mission, procedures for when an entity winds up, removal of members, how the governing rules can be altered and what happens when an officer of the entity resigns from his or her position.

13.91 An entity's governing rules may be drawn from more than one source.

13.92 For example, a church parish may be subject to governing rules set at an Australia-wide, or world-wide, level, as well as to governing rules established at the parish level.

13.93 The content of the governing rules must be binding on the registered entity. Rules that allow an entity to do certain things, but do not bind them to do certain things, are not sufficient.

13.94 A registered entity must notify the ACNC Commissioner of any changes made to their governing rules - see Chapter 7 - Duty to Notify.

13.95 In addition, the Governor-General may make regulations relating to the governance standards which cover the content of a registered entity's governing rules.

Administrative Penalties

13.96 The Bill establishes a regime for administrative penalties.

13.97 Penalties can be administrative, civil or criminal. Civil and criminal penalties are imposed by the courts, whereas administrative penalties are imposed without the need for court action.

13.98 The ACNC will rely on entities providing correct information to establish their eligibility for registration as a charity, and in the future, for other NFP statuses.

13.99 Where an entity fails to correctly report to the ACNC, this may lead to the incorrect registration of an entity and the subsequent provision of tax concessions and other benefits and exemptions where they should not have been provided. Incorrect reporting, or a failure to report, impacts on the public at large, through a reliance on incorrect information.

13.100 It is expected that administrative penalties in relation to an entity's dealings with the ACNC will not be imposed frequently. However, it is important that appropriate sanctions are put in place for those who seek to purposely mislead the ACNC Commissioner, whilst protecting those who unintentionally provide the ACNC Commissioner with incorrect information, having taken reasonable care not to.

13.101 The administrative penalties regime is proportional and dynamic. As such, there are more severe penalties for prolonged lateness, attempts to mislead the ACNC Commissioner and for providing deliberately false information. Conversely, penalties are more lenient where an entity voluntarily provides information.

False or misleading statements

13.102 For the purposes of the administrative penalties regime, a statement may be made orally, in a document, or any other way (including electronically) for a purpose connected with the Bill. Administrative penalties also apply to statements made by an entity's agent as if they had been made by the entity. [Section 175-5]

Liability to penalty

13.103 An entity is liable to an administrative penalty if the entity makes a false or misleading statement to the ACNC Commissioner or to an entity that is exercising powers or performing functions under the Bill. [Paragraph 175-10(1)(a)]

13.104 In this Bill, a statement may be false or misleading in a material particular whether because of things in it or omitted from it. [Paragraph 175-10(1)(b)]

13.105 An entity is also liable to an administrative penalty in these circumstances where a statement is made by an entity's agent as though it had been made by the entity. [Note in paragraph 175-10(1)(b)]

13.106 An entity is liable to an administrative penalty if the entity makes a false or misleading statement which is, or purports to be, one required or permitted by this Bill. An entity is liable where a statement is made to an entity other than the ACNC Commissioner or an entity exercising powers or performing functions under this Bill. [Subsection 175-10(2)]

13.107 However, there is an exception for reasonable care. That is, an entity is not liable to an administrative penalty if the entity (or their agent where relevant) took reasonable care in connection with the making of the statement. [Subsection 175-10(3)]

Example 13.58

Giving Incorporated makes a false or misleading statement to the ACNC Commissioner, but did so unintentionally. The entity is liable to an administrative penalty. If the entity is able to show that they took reasonable care to prevent making the misleading statement, no penalty will be imposed.

13.108 When an entity makes an error or omission in documentation, the ACNC Commissioner will take into account the relevant circumstances, such as, previous compliance history, when deciding what action to take, particularly in relation to pursuing administrative penalties.

Amount of penalty

13.109 The Bill provides for a base penalty amount that may be increased or decreased according to certain factors, based on the culpability and actions of the registered entity. [Section 175-15]

13.110 The base penalty amount is worked out according to the table in the Bill which sets out the penalty units applicable to various types of false or misleading statements. [Subsection 175-20(1)]

13.111 There is a higher penalty for a statement that was false or misleading because of intentional disregard of the Bill by the entity or its agent than there is for a statement which was false or misleading because of recklessness by the entity or its agent.

13.112 A statement that was false or misleading because of a failure by the entity or its agent to take reasonable care to comply with the Bill is subject to a lesser penalty again. Whereas where an entity fails to give a document in accordance with the Bill where that document is necessary for the ACNC Commissioner to make a decision, the entity is subject to a higher penalty. [Subsection 175-20(1)]

13.113 The item that produces the greater base penalty amount will be used where more than one item in the table applies. [Subsection 175-20(2)]

13.114 An entity may have their base penalty amount reduced if the entity received information or advice from the ACNC Commissioner in some form which lead the entity to believe that the Bill operated in a certain way. [Subsection 175-20(3)]

13.115 Information published on the ACNC website is to be taken as having been approved by the ACNC Commissioner in writing for these purposes.

Increase in penalty

13.116 The Bill provides for circumstances where the base penalty is able to be increased by 20 per cent. An increase in the penalty will occur if the entity took steps to prevent or obstruct the ACNC Commissioner from finding out about the false or misleading nature of the statement. [Paragraph 175-25(a)]

13.117 The base penalty is increased by 20 per cent where the entity became aware of the false or misleading nature of the statement made to the ACNC Commissioner or another entity after the statement had been made and did not tell the ACNC Commissioner or the other entity about it within a reasonable time. [Paragraph 175-25(b)]

13.118 The penalty is also increased if the entity has been liable to a similar penalty previously. [Paragraph 175-25(c)]

13.119 This allows for the ACNC Commissioner to recognise differences between registered entities that have made every effort to comply with their obligations under the Bill, and those entities which have deliberately sought to mislead the ACNC Commissioner, or withhold information from the ACNC Commissioner. This ensures that the administrative regime is proportional and responsive to different circumstances.

Reduction in penalty

13.120 The Bill provides for circumstances where the base penalty is able to be reduced by 20 per cent where the entity voluntarily informs the ACNC Commissioner of the false or misleading statement.

13.121 The base penalty amount is reduced if the ACNC Commissioner tells the entity that an examination is to be made of the entity's affairs relating to this Bill and after this time the entity voluntarily tells the ACNC Commissioner, in the approved form, about the false or misleading nature of the statement and telling the ACNC Commissioner will likely save the ACNC Commissioner a significant amount of time or resources. [Subsection 175-30(1)]

13.122 In recognition of the savings made to the time and resources of the ACNC Commissioner, the penalty amount is reduced to nil if the entity voluntarily tells the ACNC Commissioner, in the approved form, about the false or misleading nature of the statement before the day the ACNC Commissioner tells the entity that an examination is to be made in relation to the entity's affairs under the Bill. [Paragraph 175-30(2)(a)]

13.123 In the case where the ACNC Commissioner makes a public statement requesting entities to make a voluntary disclosure by a particular earlier day about a matter that applies to its affairs, the entity must voluntarily tell the ACNC Commissioner before that day to have the penalty amount reduced. [Paragraph 175-30(2)(b)]

13.124 The ACNC Commissioner has discretion to treat a voluntary statement as having occurred before being told about the examination, even if the voluntary statement is made after having been told about the examination, if the ACNC Commissioner considers it appropriate to do so in the circumstances. [Subsection 175-30(3)]

Failure to lodge documents on time

13.125 The Bill sets out the penalties for failing to lodge documents on time.

13.126 Penalties for lodging documents late encourage registered entities to lodge documents on time.

13.127 If the ACNC Commissioner has documents on time, he or she can ensure that information on the Australian Charities and Not-for-profits Register is up to date, and that the ACNC Commissioner has the most accurate information for each registered entity on which to base administrative decisions.

Liability to penalty

13.128 The ACNC Commissioner needs certain documents in order to make informed decisions in relation to entities registered with the ACNC. As such, it is important that the ACNC Commissioner has access to timely and accurate information.

13.129 Where an entity is required under this Bill to give a report, return, notice, statement or other document to the ACNC Commissioner and the entity fails to do so in the required time the entity will be liable to an administrative penalty. [Section 175-35]

13.130 Proportional and appropriate penalties are required to ensure that registered entities have an incentive to comply with their obligations under the Bill.

Amount of penalty

13.131 The amount of the penalty for failure to lodge documents on time varies as to the size of the entity. Medium and large entities are subject to proportionately higher penalties. Small entities will be required to pay the base penalty amount only. [Section 175-40)]

13.132 Medium registered entities are required to pay double the base penalty amount. [Paragraph 175-40(1)(a)]

13.133 Large registered entities are required to pay five times the base penalty amount. [Paragraph 175-40(1)(b)]

13.134 The base penalty amount is one penalty unit for each period of 28 days or part of a period of 28 days starting on the day when the report, return, notice, statement or other document is due and ending when the entity gives the document. There is a maximum of five penalty units. [Subsection 175-40(2)]

13.135 Section 4AA of the Crimes Act 1914 sets out the current value of a penalty unit. If this value changes, the base penalty amount is calculated using the amount applying at the start of the relevant 28 day period. [Note in paragraph 175-40(2)(b) and subsections175-40(3)]

13.136 The ACNC Commissioner can notify the entity of the penalty before the entity actually provides the relevant report, return, notice or other document. If necessary, the amount of the penalty can be increased later, when the total amount is known. [Subsection 175-40(4)]

Machinery provisions for administrative penalties

13.137 The Bill sets out the machinery provisions in relation to administrative penalties, such as the requirement of the ACNC Commissioner to give written notification of the penalty, the due date for the penalty, the power of the ACNC Commissioner to remit the penalty, interest charges on unpaid penalties, and the collection of the penalty by the Commissioner of Taxation.

13.138 The machinery provisions ensure that the administrative penalties operate as a flexible and effective enforcement mechanism.

13.139 The Bills give the ACNC Commissioner the power to remit all or part of an administrative penalty. This means that the ACNC Commissioner may decide that, although the penalty is imposed, that he or she will remove liability for the penalty because it is appropriate in the circumstances to do so. This can happen either by the ACNC Commissioner deciding not to issue a notice or by issuing a notice and later reducing any liabilities in part or in full.

13.140 This broad discretion allows the Commissioner to ensure that administrative penalties are only used in circumstances where it is appropriate to do so, ensuring that the Commissioner can be responsive to the unique aspects of the NFP sector, and recognise that administrative penalties should not be imposed if they would merely unfairly penalise those individuals who depend on the services provided by the entity in question.

13.141 Where an administrative penalty is imposed on an entity, the ACNC Commissioner must provide written notice to the entity, setting out the entity's liability to pay the penalty and the reasons behind the penalty. [Sections 175-45 and 175-50]

13.142 If the ACNC Commissioner is required to give a notice to the entity for another unrelated reason, the ACNC Commissioner can provide the penalty notice in the same document. [Section 175-50]

13.143 Where the ACNC Commissioner has issued a penalty notice, the penalty will be due for payment 14 days after the day specified in the notice. [Section 175-55]

13.144 This Bill provides the ACNC Commissioner with the power to remit all or part of an administrative penalty [Section 175-60] . This means that the ACNC Commissioner may decide that, although there is a liability for a penalty, that he or she will remove liability for the penalty because it is appropriate in the circumstances to do so.

Example 13.59

The ACNC Commissioner notifies Lizzie Inc., a registered entity, that a penalty will be imposed on Lizzie Inc. for making a false or misleading statement in its registration documentation. The date of the notice is 29 March 2013, meaning that the notice will be due for payment 14 days later, on 13 April 2013. The payment is due 14 days after the date specified on the notice, even though some of the days during that period were public holidays for the Easter period.

Example 13.60

Following on from the example above, the ACNC Commissioner decides that it is not appropriate to collect the administrative penalty from Lizzie Inc. On 28 March 2013 there was a fire at the premises of Lizzie Inc. Therefore, Lizzie Inc. was unable to lodge on time. The ACNC Commissioner decides to remit the penalty in full, and notifies Lizzie Inc. accordingly. Lizzie Inc. is not required to pay the penalty.

13.145 Where the ACNC Commissioner decides not to remit the penalty, or to remit only part of the penalty, the ACNC Commissioner must give written notice of the decision and the reasons for the decision to the entity. [Subsection 175-60(2)]

13.146 Section 25D of the Acts Interpretation Act 1901 sets out rules about the content of a statement of reasons [Subsection 175-60(2) note] .

13.147 This does not mean the ACNC Commissioner needs to consider remission in all cases and give reasons each time. The ACNC Commissioner need only give reasons in cases where the ACNC Commissioner actively considers whether to exercise the discretion and decides not to.

13.148 In the routine course, the ACNC Commissioner would not be expected to consider remission unless requested to do so by the entity subject to the penalty.

13.149 Where the ACNC Commissioner decides to any extent not to remit an amount of penalty, and the amount of penalty payable after the refusal is more than two penalty units and the entity is dissatisfied with the decision, the entity may object against the decision according to the review and appeal provisions of the Bill. [Subsection 175-60(3)]

13.150 The general interest charge (GIC) will apply on unpaid penalty amounts arising under this Division. The GIC has the same meaning as under the Taxation Administration Act 1953 .

13.151 If an entity fails to pay all or part of their penalty by the due date, the entity is liable to pay the GIC on the unpaid amount for each day the debt remains outstanding. The debt is calculated for each day starting at the beginning of the day on which the amount was due to be paid and finishing at the end of the last day where either the amount or the GIC on any of the amount, remains unpaid. [Section 175-65]

13.152 This Bill provides for the collection of the penalty by the Commissioner of Taxation. [Section 175-70]

13.153 When a notice is given, the penalty and any GIC in respect of the penalty becomes a tax-related liability under section 255-1 in Schedule 1 to the Taxation Administration Act 1953 . The collection and recovery rules applying to these debts are located in Part 4-15 in Schedule 1 to the Taxation Administration Act 1953 . [Subsection 175-70(2)]

13.154 For the purposes of Part IIB of the Taxation Administration Act 1953 , the penalty and any GIC in respect of the penalty is a primary tax debt. This provision allows the Commissioner of Taxation to add the penalty to an entity's running balance account. [Subsection 175-70(1)]

13.155 To allow the Commissioner of Taxation to collect the debt, the ACNC Commissioner must notify the Commissioner of Taxation when he or she gives an entity a written notice. [Subsection 175-70(3)]

13.156 Following on from the paragraph above, the ACNC Commissioner must also notify the Commissioner of Taxation if he or she remits all or part of the penalty. [Subsection 175-70(4)]

13.157 If the ACNC Commissioner uses his or her discretion and does not issue a penalty notice to the registered entity because the ACNC Commissioner has remitted the penalty in full, the ACNC Commissioner is not required to notify the Commissioner of Taxation of the penalty.

13.158 This communication between the ACNC Commissioner and the Commissioner of Taxation will allow the Commissioner of Taxation to be fully aware of any debts that he or she is to pursue in relation to this Division. Further information about communication between the ACNC Commissioner and the Commissioner of Taxation is to be set out in the Memorandum of Understanding between the two Commissioners.

13.159 The Commissioner of Taxation is responsible for the debt for the purposes of the Financial Management and Accountability Act 1997 . [Subsection 175-70(2) note 1 and 2]

13.160 The Commissioner of Taxation will treat the debt as a primary tax debt, in the same way that any debt arising from a taxation law would be treated.

13.161 Upon request in writing by the ACNC Commissioner, the Commissioner of Taxation must notify the ACNC Commissioner of any action taken by the Commissioner of Taxation to recover a debt attributable to the penalty. [Subsection 175-70(5)]

13.162 Allowing the Commissioner of Taxation to collect ACNC debts ensures cost effectiveness and efficiency for the Government and for the entity, ensuring all its debts are centralised and managed by one government agency.

Obligations, liabilities and offences

Overview

13.163 If an entity is subject to an obligation or liability, or commits an offence, certain entities that are responsible for managing the entity may also be subject to the obligation or liability, or commit the offence, in specific situations. [Division 180]

13.164 This ensures that certain responsible entities are accountable for fulfilling the obligations contained in the Bill. This is particularly important in the case of entities that do not have legal personality, such as unincorporated associations and trusts, as they cannot be sued or penalised.

13.165 In contrast, a body corporate does have separate legal personality, and can be sued or penalised. For this reason, the Bill sets out a more streamlined and targeted framework for attaching personal liability to directors of a body corporate. The directors of the body corporate will not be made personally liable for any offences contained in the Bill. Furthermore, the directors will only be personally liable for the liabilities of the body corporate in certain limited cases, for example, if there is a deliberate act involving dishonesty on their part.

13.166 This regime ensures that certain responsible entities are accountable for making sure that the entity complies with the law, whilst protecting those responsible entities by providing that they will only be subject to certain liabilities or offences in specified cases, for example, if they act dishonestly.

Obligations, liabilities and offences

13.167 The Bill expressly identifies those requirements that result in an offence. For example, a failure to comply with a direction from the ACNC Commissioner would result in an offence [Section 85-30] .

13.168 In addition to offences other liabilities can arise, for example, as a result of administrative penalties. A liability is an amount payable under the Act, which can only arise where there has been a contravention of the Act. For example, a failure to lodge an annual report on time, which may result in the imposition of an administrative penalty [Section 175-35] . The administrative penalty regime was explained earlier in this Chapter.

13.169 An obligation includes any requirement contained in the Bill, for example, the obligation to keep financial records. Irrespective of whether a liability or offence arises, the Bill makes it clear that certain responsible entities are responsible for fulfilling the obligations contained in the Bill. However, in some cases, the Bill provides greater protection for responsible entities in respect of liabilities and offences that apply to them by requiring that specific fault elements be present, as noted above.

13.170 An obligation can continue to apply to certain responsible entities, even if the entity is not subject to an offence provision or another type of liability. For example, if an unincorporated association fails to keep financial records, the association will commit an offence under the Bill. In this case, the members of the committee of management will not be taken to have personally committed the offence if they did not aid, abet, counsel or procure the act or omission, or if they were not knowingly concerned in, or a party to, the act or omission. However, they will be subject to the obligation to keep financial records.

13.171 Imposing these obligations, offences and liabilities on certain responsible entities does not reduce or negate the obligations, offences and liabilities applying to the entity itself.

13.172 The obligations, offences and liabilities of entities are not imposed on receivers, administrators or liquidators of entities under the Bill.

Unincorporated associations and bodies of persons

Obligations

13.173 An obligation that is imposed on an unincorporated association or body of persons is also imposed on each member of the committee of management at the time the obligation arose. [Subsection 180-5(1)]

13.174 As the unincorporated association or body of persons has no separate legal personality, these obligations need to be placed on the members of the committee of management to ensure that the association or body complies with the law.

Liabilities

13.175 A liability that is payable under the Bill (that is, a liability that results from a contravention of the Bill) by an unincorporated association or body of persons is payable by each member of the committee of management at the time the amount became payable [Subsection 180-5(2)] . This is consistent with the existing position in respect of unincorporated associations and bodies of persons, as they have no separate legal personality, and therefore, the debts of the association or body are payable by the members.

13.176 The members of the committee are jointly and severally liable to pay the amount. [subsection 180-5(3)] This ensures that the ACNC Commissioner could sue any of them, or could sue them as a group.

13.177 If one or more members pay the amount, they have a right of indemnity, subrogation and contribution against other members of the committee. [Section 180-35]

Offences

13.178 Any offence that is committed by an unincorporated association or body of persons under the Bill is taken to have been committed by each member that was a member of the committee of management at the time the association or body committed the offence, only if the member:

•

aided, abetted, counselled or procured the relevant act or omission; or

•

was in any way knowingly concerned in, or a party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the director).

[Subsections 180-10(1) and (2)]

13.179 There are two defences available to a member of the committee of management in respect of the offence provisions.

13.180 An offence will not apply to the member of the committee of management if, because of illness or for some other good reason, it would have been unreasonable to expect the member to take part, and the member did not take part, in the management of the association or body at any time when the offence was committed. [Subsections 180-10(3) and 180-15(1)]

13.181 An offence will also not apply to the member of the committee of management if the member took all reasonable steps to ensure that the association or body did not commit the offence, or there were no such steps the member could have taken [subsection 180-15(2)] . For example, if a member of the committee was out-voted at a board meeting on a particular resolution to do an act that would lead to a breach of the Bill, it is likely that they could rely on this defence.

13.182 In determining what are reasonable steps, it is necessary to have regard to when, and for how long, the member was a member of the management of committee, and all other relevant circumstances. [Subsection 180-15(3)]

13.183 A defendant bears the evidential burden to prove the matters in respect of these defences.

13.184 Under subsection 13.3(3) of the Criminal Code , 'evidential burden' means the burden of adducing or pointing to evidence that suggests a reasonable possibility that the matter exists or does not exist.

13.185 In the context of these defences, this would mean that a member seeking to rely on one of the defences will need to point to relevant evidence, including evidence of their illness or any reasonable steps taken by them.

13.186 This is consistent with the Attorney-General Department's publication entitled A guide to framing Commonwealth offences, infringement notices and enforcement power where it states that an evidential burden of proof should generally apply to a defence where there is an offence-specific defence. In these situations, the defendant is in the best position to provide evidence justifying why they triggered the offence-specific defence.

13.187 In this case, placing the evidential burden on the defendant is justified as they will be able to point to any relevant evidence relating to their illness and the extent of any participation in the management of the association or body, or any reasonable steps taken by them.

13.188 Despite the evidential burden resting on the defendant, the prosecution retains the 'legal burden' of proof and is required to prove each element of an offence beyond reasonable doubt, consistent with the requirements of Article 14 of the International Covenant on Civil and Political Rights .

Trusts

Obligations

13.189 An obligation that is imposed on a trust is also imposed on each trustee at the time the obligation arose, provided the trustee is not a corporate trustee.

13.190 If the trustee is a corporate trustee, the obligation is imposed on each director of the corporate trustee, as well as the trustee, at the time the obligation arose. [Subsection 180-20(1)]

Liabilities

Trustee is not a corporate trustee

13.191 A liability that is payable under the Bill (that is, a liability that results from a contravention of the Bill) by a trust is payable by each trustee at the time the amount became payable, provided the trustee is not a corporate trustee. [Subsection 180-20(2)]

13.192 The trustees are jointly and severally liable to pay the amount [Subsection 180-20(4)] . This ensures that the ACNC Commissioner could sue any of them, or could sue them as a group. If one or more trustees pay the amount, they have a right of indemnity, subrogation and contribution against any other trustees [Section 180-35] .

Trustee is a corporate trustee

13.193 If the trustee, or one or more of the trustees, is a corporate trustee, the liability is payable by the trustee and each director of the corporate trustee at the time the obligation arose only if there is a deliberate act or omission of the director involving dishonesty, gross negligence or recklessness. [Subsection 180-20(3)]

Joint and several liability

13.194 The trustees, and any directors of a corporate trustee, are jointly and severally liable to pay the amount [subsection 180-20(4)] . This ensures that the ACNC Commissioner could sue any of them, or could sue them as a group. If one or more trustees or directors pay the amount, they have a right of indemnity, subrogation and contribution against any other trustees or directors. [Section 180-35]

Commissioner of Taxation has direct access to trust assets

13.195 In suing for amounts owed by a trust, the Commissioner of Taxation is not limited to recovering against the personal assets of the trustees or directors of the corporate trustee. He or she can also take action directly against the trust assets. [Section 180-20(5)]

Offences

13.196 Any offence that is committed under the Bill by a trust, is taken to have been committed by each trustee at the time the trust committed the offence. [Section 180-25]

Trustee is a corporate trustee

13.197 Directors of a corporate trustee are not subject to an offence provision contained in the Bill that applies to a trust.

Bodies corporate

Liabilities

13.198 A liability that is payable under the Bill (that is, a liability that results from a contravention of the Bill) by a registered body corporate is also payable by each director of the body corporate at the time the amount became payable, only if the liability arose because of a deliberate act or omission of the director involving dishonesty, gross negligence or recklessness. [Section 180-30]

13.199 The directors and the body corporate are jointly and severally liable to pay the amount. [subsection 180-30(3)] This ensures that the ACNC Commissioner could sue any of them, or could sue them as a group. If one or more directors pay the amount, they have a right of indemnity, subrogation and contribution against any other directors [Section 180-35] .

Offences

13.200 Directors of a body corporate are not subject to an offence provision contained in the Bill that applies to the body corporate.