Transcript 4th Annual Corporate Governance Symposium

How to manage governance and
compliance with the new NFP regime
Anne Robinson
Solicitor Director
Prolegis Lawyers, Sydney
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Outline
1.
2.
3.
4.
5.
6.
7.
8.
Introduction
Reform Timeline
ACNC role and impact
Governance Standards
Definition of Charity
Tax Concession Charity (TCC)
Deductible Gift Recipient (DGR)
Compliance …
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1. Introduction
The whole landscape for charities/NFPs is
changing. What are the implications for you:
• governance
• compliance
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Scope of reforms
Objects of reform
Effects
ACNC
• Accountability
• Transparency
• Integrity
• Reducing Red-tape
• Protecting the sector
• Codifying the
definition of charity
• Income tax
exemption
• GST & FBT
concession
• Land tax & payroll tax
• Council rates
• Stamp duty
• Fundraising authority
• Cornerstone of
reform process
• ACNC Bill passed on 1
November 2012
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2. Reform Timeline
A. Changes already made
Subject
Effective Date
End of Transitional Period
(1) Private Ancillary Funds (PAFs)
1 October 2009
31 October 2012
(2) Public Ancillary Funds (PuAFs) 1 January 2012
1 July 2015
B. Imminent changes
Subject
Start Date
(3) Establishment of Australian
Charities & Not-for-profits
Commission (ACNC)
Legislation passed.
Start date for ACNC:
4 December 2012.
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What are the relevant changes?
C. Further proposed, likely or possible changes
Subject
Proposed Start Date
Current progress
(4)
“not-for-profit entity”
December 2012 (likely), but...
Before Parliament
(5)
“in Australia” special
conditions
1 July 2013 (likely).
Before Parliament
(6)
Unrelated Business
Income Tax (UBIT)
10 May 2011 then 1 July 2012.
No Exposure Draft, let alone
Bill, yet. But ...
(7)
statutory definition of
charity
1 July 2013.
No Exposure Draft, let alone
Bill, yet. But...
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What are the relevant changes?
C. Further proposed, likely or possible changes
Subject
Proposed Start Date
Current progress
(8)
Changes to FBT and other tax
concessions
Unknown, but...
Discussion Paper of Not-for-profit Sector
Tax Concession Working Group just
released
(9)
Charity Passport
Progressive adoption...
See ACNC website for details and
guidance
(10)
Possible transitioning of all other
NFPs to the ACNC?
Not immediate, but
probably from 2014
Legislation amendments will be drafted
(11)
Winding back of new ACNC?
?
Proposed by any new Liberal/National
party Coalition government
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What are the relevant changes?
C. Further proposed, likely or possible changes
Subject
Proposed Start Date
(12) New Public Ruling on February 2013
School Building
Funds
Current progress
Draft Taxation Ruling
TR 2011/D5, released on
5 December 2011. Ruling
is due to be finalised in
near future.
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3. New ACNC and related changes:
structure of ACNC
Model:
UK/NZ
Shared
Service
s
ATO
structu
re
ACNC
Advisor
y
Board
Melbour
ne
95
People
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New ACNC: roles of ACNC?
Registration
•Establish new Register.
•Determining legal (including tax) status of charities, including their particular subtype (eg
PBI), including under proposed new statutory definition to apply from 1 July 2013.
•Note: ACNC determination will apply for all Australian Government purposes. Thus, will
bind ATO.
Education/
Compliance
•Provide guidance and education to the NFP sector.
•Administer regulatory framework and powers
•Work with the States and Territories to co-ordinate and harmonise the administration of
the national regulatory arrangements
Reporting
•“report once, use often” tiered general reporting framework , the So – called “Charity
Passport”.
•Public Information Portal (similar to the UK and NZ) from 1 July 2013.
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New ACNC: who will be affected?
• All charities:
#
*
##
Educational
* Direct relief of poverty, sickness, destitution or helplessness.
# Provision of child care services.
## “Another purpose which is beneficial to the community”.
• Eventually, all NFPs
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New ACNC: Day 1 impact on you and
your board?
Day 1: Transition to ACNC Register
Minimal Impact
Opt-Out: Voluntary but compulsory
Future impact
New registration
process for new
charities
ATO retains
determination of other
tax requirements
Right of objection
Notification to ACNC of
changes
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New ACNC: Reporting and other ongoing
requirements?
Tiered financial reporting starting for
YE 30/6/14, based primarily on the annual revenue of the entity
= Company limited by guarantee thresholds):
Small
Medium
Large
(covers 78% of
charities)
(covers 11% of
charities)
(covers 11% of
charities):
< $250K pa
$250K-$1m
$1m+
None
+ Review
+ Audit
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New ACNC: Reporting and other ongoing
requirements?
Reporting
Exemption:
‘Basic Religious
Charities’
• SAPs
• Joint reporting
• Collective reporting
Moving up and
down tiers
• Regulatory guidance
Governance
Standards
Reporting
External Conduct
Standards
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New ACNC: Extensive new compliance,
enforcement and related powers
Compliance pyramid
Active
Enforcement
Monitoring
Information and
document gathering
Information statements and
financial reports
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New ACNC: Extensive new compliance,
enforcement and related powers
Compliance pyramid
‘Federally Regulated
Entity’
‘Loopholes’
Factors relevant to
enforcement
powers
Effect and practical
impact
Capacity
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4. Governance standards
• ACNC Act framework for principle-based
minimum standards to apply to all
registered entities
• Effect of the standards is to enable trigger
for sanction regime
• Consultation still on ‘turning off’ of
Corporations Act provisions ss.180-183 etc
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Personal liability re management of
registered entities
• ‘registered entity’= charity registered with ACNC
(initially)
• ‘responsible entity’ = individual
directors/trustees/trustee corporation responsible
for decision-making/management/compliance
• Different regimes and standards for:
– bodies corporate,
– trusts, and
– unincorporated associations.
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Personal liability re management of
registered entities
Bodies
Corporate
Trusts
If trustee is not a
corporate trustee:
personal liability of each
trustee.
Personal liability of
Individual directors in
certain limited cases.
If a corporate trustee:
personal liability of each
director (in limited
circumstances), as well as
the corporate trustee
itself.
Unincorporated
associations
Members of Management
Committee (MC) are
personally liable but only in
limited circumstances.
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5. Definition of Charity
• Four heads of charity:
– The relief of poverty
– The advancement of education
– The advancement of religion
– Other purposes beneficial to the community
• Statutory definition
– Bill & Explanatory Memorandum to be
released in February 2013
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What hasn’t changed…
• Requirement to self-assess entitlement to
endorsements for TCC, ITEF and DGR
What has changed?
• Further transparency with ACNC public
portal
• Annual Information Statement (AIS)
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6. Tax Concession Charity (TCC)
• Requirements for TCC endorsement:
– Established and maintained for charitable
purposes
– Not-for-profit
– Satisfy ‘in-Australia’ test
• What changes are coming?
– Statutory definition of charity
– Change of the ‘in-Australia’ test
– Applications to be lodged with ACNC
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Tax Concession Charity (TCC): charitable
fund and ITEF
• The fund must be applied for the purposes for which
it is established.
• Additional 3 tests for a charitable fund:
– Australian purpose test; or
– DGR test; or
– Distribution test
• Other requirements for ITEF
– Not provide for, or establish ancillary funds; and
– Established solely for establishing DGRs or for the
purpose of providing money, property or benefits to
income tax exempt DGRs.
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7. Deductible Gift Recipient (DGR):
basics
• Donations to a DGR is tax deductible.
• More than 40 different categories of DGR
set out in the Income Tax Assessment Act
(Cth) 1997.
• Requirements for endorsement as a DGR
differ depending on which DGR category
you are applying (e.g. taxation rulings,
guidelines, ministerial approval).
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8. Compliance how to…
• Develop and maintain a compliance manual
for recording self-reviews
• Report to the board annually on
compliance outcomes
• Maintain checklist of governance standards
compliance for on-going reference
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How to manage governance and
compliance with the new NFP regime
Anne Robinson
Prolegis Lawyers, Sydney
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