Monday, October 29, 2012

Destroy!  Gillard Government goes all Dalek on charities

As Christmas approaches, many Australians will be planning to donate to charity.

Few would realise, however, the incredible damage the Gillard government is about to unleash on the sector with the advent of the Australian Charities and Not-for-Profits Commission (ACNC), expected at some point before the end of the year.

The ACNC will force charities to adhere to a raft of new tax and compliance requirements, dissuade people from becoming involved with charities and turn people off from donating.

There are 600,000 not-for-profit entities (NFPs) in Australia of which approximately 56,000 are charities.  In relative growth terms, the NFP sector is second only to mining.  Clearly, charities in Australia are big business.

In May 2011, the government announced $53.6m in funding for a ''one-stop-shop'' for the ''support and regulation'' of the NFP sector to replace the various arrangements in place in each state and territory and federally with the Australian Taxation Office.

It's admirable for the government to cut the red tape and make things easier for charities — but that's not what they're doing.

The ACNC will force many charities to submit ''Annual Information Statements'' for the first time.  They will have to give the government detailed information about their activities, operations and volunteers.  And more charities will be compelled to notify the ACNC if they make changes to their board of directors or amend their constitution.

The cost to charities of this will be huge.  The Baptist Ministries initially estimated that the ACNC would cost Baptist churches across Australia an extra $1 million on compliance.

So far only South Australia has announced that they will be amending their current arrangements to fit in with the ACNC.  Far from creating a one stop shop, all the ACNC has done is whack another layer of regulation on charities.

The ACNC will also ramp up the penalties for when things go wrong.  Australians currently donate $14.6 billion in volunteer time every year to charities.  The ACNC legislation proposes that volunteer board members could be held personally liable in cases of management malpractice and will introduce exorbitant fines as penalties.

Indeed, the potential penalties faced by volunteer board members of charities is greater than a director of a normal business in many cases.

These measures won't stop people from doing the wrong thing.  They will simply discourage people from becoming involved in charities in the first place.

And the ACNC will force charities to submit increased levels of information about their donors which can be made publicly available at the discretion of the Commissioner.

Whilst the level of detail of information required is yet to be made public, the fact that individuals may well be forcibly identified to the government and publicly ''outed'' against their will only serve to prevent many from giving at all.

Of course, it's also a gross violation of a person's right to privacy for details about their private donations to be handed over to the government.

Apart from the damage the ACNC will do to charities, and the bungling over the issue of getting the states and territories on board, the government's communication with the sector over the proposals has been appalling.

To take one example, the government will be increasing taxation to the earnings of NFPs that are deemed to be ''non-altruistic''.  It is yet to be communicated to charities what is considered non-altruistic and what is not.  To make matters worse, this increased taxation will be applied retrospectively.  As in, right now.

Indeed, the sector is currently in the farcical situation of operating under a taxation framework that is yet to be finalised and certainly yet to be communicated.

The ACNC is one of the worst examples of government involving itself where it is not needed or wanted.  Far from making things easier for charities, the ACNC will make things harder and more expensive.  Charities should be left to get on with serving those in need, not the government.

No comments: