On 9 December 2011, the Government released the exposure draft legislation for the establishment of the Australian Charities and Not-for-profits Commission (ACNC), which will be the new national regulator for the not-for-profit (NFP) sector.

The exposure draft, explanatory materials and fact sheets on how the ACNC is expected to operate can be accessed through the Treasury website. It is anticipated the ACNC legislation will be introduced into Parliament in the first quarter of 2012.

The ACNC is expected to begin operating on 1 July 2012. An initial task for the ACNC will be to register charities, including public benevolent institutions, for all Commonwealth purposes. Existing charities that are already endorsed as income tax exempt by the Australian Taxation Office will be transitioned into the new ACNC regime and will not have to re-register as a charity. The goal is to create a "one stop shop".

Of key note to existing NFPs is the proposed reporting framework. The Government has announced that this will apply for registered charities from 1 July 2013, for information from the previous year. The ACNC's scope will expand to cover other NFP entities over time. Those timeframes are still to be determined and won't start before 1 July 2015.

Reporting requirements will be proportional to the size of registered entity, based primarily on the annual revenue of the entity. There are three tiered categories set out in the exposure draft:

  • small (revenue of less than A$250,000 and not a deductible gift recipient)
  • medium (revenue of between A$250,000 and A$1 million)
  • large registered entities (revenue A$1 million or more).

All registered NFP entities will be required to provide the ACNC with an annual information statement. Medium and large entities will also need to provide a financial report. Large registered entities must have their financial report audited annually. Medium registered entities must have their financial report either reviewed or audited annually.

The new statutory definition of charity is intended to come into effect on 1 July 2013 (see our recent eAlert! on this) and from that date the ACNC will register charities based on that definition.

It is intended that the ACNC's role will eventually expand to regulate all NFP entities that receive government concessions and benefits, but not before 1 July 2014.

The closing date for submissions is 20 January 2012. Given the holiday season, this will be a tight timeframe for many stakeholders. Queries and submissions should be sent to NFPReform@treasury.gov.au. If you are considering making a submission on the draft legislation, we can assist.

In addition, we intend to host a NFP roundtable in the new year to discuss, in more detail, the draft legislation and its implications for the NFP sector.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.