Additional comments from the Australian Greens

Introduction

1.1The Australian Greens welcome the introduction of the Treasury Laws Amendment (Refining and Improving Our Tax System) Bill 2023 (Bill), and the work being undertaken to streamline deductible gift recipient registration. These reforms are important and long overdue, and we value the Government’s commitment to progressing them.

1.2A number of submissions noted their broad support for the measures in this bill, including the Stronger Charities Alliance,[1] the Law Council of Australia,[2] and the Australian Council for International Development.[3]The Australian Greens support the main Committee recommendation that the bill be passed.

Who is the best regulator for overseas aid organisations?

1.3The Australian Greens recognise concerns advanced by a number of international development organisations that the Australian Taxation Office may not be the best regulator.

1.4In its submission on the exposure draft, the Australian Council for International Development outlined its concerns, and preferences that the Australian Charities and Not-for-profits Commission remain the regulator:

Alongside much of the charitable sector, ACFID supports the ambitions laid out in the proposed amendments, particularly efforts to reduce red tape. ACFID understand from the exposure draft materials that under this proposal the Australian Tax Office (ATO) would gain responsibility for assessing eligibility for the four unique deductible gift recipient DGR categories. This change is intended to ensure administrative consistency and simplify the application process for those seeking DGR status.

The Australian Charities and Not-for-profits Commission (ACNC) already has responsibility for assessing organisations and funds under other categories of DGR, including Public Benevolent Institutions (PBI) and Health Promotion Charities. Applications for DGR endorsements for these organisations are made at the same time as the application to the ACNC, significantly reducing time spent administering applications for both these organisations, and the Government.

ACFID proposes that a more effective route of achieving genuine red tape reduction is for this approach to be simply extended to the four DGR registers. This would include the definitional element of DGR also being dealt with initially by the ACNC and then provided onwards to the ATO for endorsement.

One regulator being tasked with definitional issues avoids conflicting interpretations and streamlines administration. This is particularly important for PBIs that deliver development and humanitarian aid outside of Australia or operate Overseas Aid Gift Deduction Funds which do similar activities and often as the controlled entity of a PBI.

The ACNC already has experience in engaging with the organisations working within overseas aid via the development and administration of the Governance Standards and the External Conduct Standards, including their accompanying guidance material. ACFID proposes this capability could be extended to the definitional assessment of these charitable organisations.[4]

1.5The Australian Greens support this approach.

1.6That the Australian Government closely consider recommendations from the sector for a greater role for the Australian Charities and Not-for-profits Commission in regulating Overseas Aid Organisations.

Transitional provisions in Schedule 3

1.7In its submission to the Committee on the Bill, ACFID also notes a concern in relation to the wording of the legislation. As set out in its submission:

ACFID welcomes the simplification of requirements for the provisions relating to overseas aid acknowledging that several of the criteria for this endorsement are already requirements for registration under the ACNC Act, and the accompanying External Conduct Standards.

ACFID further welcomes the expansion of item 9.1.1 to include a public fund as solving part of the issue flagged in our original submission to this reform Bill proposal. ACFID however, remains concerned that this change has not flowed through to the proposed transitional provisions, and due to this, a number of the issues we flagged in our original submission to this reform bill will not be resolved.

Item 9.1.1. has been expanded to state OAGDS should apply to “a public fund, institution or Australian Government Agency whose principal purpose is delivering development or humanitarian assistance activities….”. This adjustment allows for the fact that there are many organisations, including up to 95 ACFID members, which have a wider purpose and remit to the Australian public than the OAGDS fund that they operate. In the case of these organisations, development and humanitarian relief activities is the primary purpose of the fund but not the sole purpose of the charity.

However, this change is effectively mitigated for these charities by the requirements of the transitional provisions, specifically section 20(3)(d) which requires that “the organisation is an institution or Australian government agency that would be covered by item 9.1.1 of the table…”. ACFID believes this provision may narrow the eligibility of an organisation such that they will only be able to operate a fund with OAGDS if the organisation has a qualifying 9.1.1. principal purpose, that is, organisations that would have already qualified to apply OAGDS at the organisational level under the principal purpose test. This requirement may disqualify organisations that would have otherwise been able to transition an eligible fund.

A typical structure for entities involved in humanitarian or development activities overseas is to operate as a Public Benevolent Institution (PBI) registered with the Australian Charities and Not-for-profits Commission (ACNC) and complying with the ACNC external conduct standards. These organisations pursue a charitable purpose in line with their PBI registration and maintain an OAGDS fund for the purpose of delivering development and humanitarian activities. This is the case for some 55 ACFID members. Unsurprisingly, most of these organisations presently do not have their purposes described in such an expansive way as to also capture all the elements of an item 9.1.1 purpose. This is likely to also be the case for many religious organisations and Harm Prevention Charities.

It is ACFID’s view that is unlikely there will be many charities that are able to meet the proposed eligibility test, and that those who are ineligible will be denied the significant benefits set out in the transitional provisions, or obliged to incur significant legal costs and administrative burden in order to comply. ACFID is further concerned that it may be the case that the transitional provision gives the benefit of whole of organisation DGR and having to operate a gift fund instead of a public fund to those very few organisations that can meet the criteria in section 20(3) and also those who have different kinds of applications already underway (sections 20(5), 20(7) and 20(9)) before the Bill is passed but not to others that may apply to set up an overseas aid fund in future (as they would need to apply for a public fund). This outcome is bizarre and unnecessarily confusing.[5]

1.8The Australian Greens recommend that the transitional provisions in Schedule3 relating to Overseas Aid Organisations be amended to avoided unintended consequences, and ensure organisations can transition appropriately.

1.9That the Australian Government amend the transitional provisions in Schedule 3 relating to Overseas Aid Organisations to align them with the primary provisions in the Bill, to ensure consistency for organisations transitioning to the new legislation.

Senator Janet Rice

Senator for Victoria

Footnotes

[1]Stronger Charities Alliance, Submission 1, p. 1.

[2]Law Council of Australia, Submission 3, p. [1].

[3]Australian Council for International Development, Submission 4, p. 2.

[4]Department of the Treasury, ACFID Submission: Treasury Laws Amendment Bill 2023: Deductible Gift Recipient Registers Reform, 2023, p. 2.

[5]Australian Council for International Development, Submission 4, p. 2.