The Australian Charities and Not-for-profits Commission (ACNC) Governance Standards contain core minimum standards registered charities (other than ‘basic religious charities’) need to comply with to ensure they operate in a lawful, accountable and responsible way. Failure to comply with the Governance Standards may lead to severe consequences, including having charity registration with the ACNC revoked and losing Commonwealth charity tax concessions. It is therefore crucial for charities to stay up to date with the requirements imposed by the Governance Standards and to act accordingly.

In this article we explain the proposed amendments to Governance Standard 3 which requires compliance with Australian laws and the proposed addition of Governance Standard 6 which aims to maintain and enhance trust and confidence in the Australian charity sector by ensuring charities are accountable for past conduct relating to child sexual abuse.

Each of these proposed changes are detailed below.

Proposed changes to Governance Standard 3

On 16 February 2021, Treasury released an Exposure Draft and Explanatory Statement detailing proposed changes to expand the scope of Governance Standard 3.

Currently, Governance Standard 3 prohibits registered charities from acting in a way that may be dealt with:

• as an indictable offence under Australian law; or
• by way of a civil penalty of 60 penalty units or more.

The proposed changes aim to expand the scope of Governance Standard 3 by adding that registered charities are also not entitled to remain registered with the ACNC if they:

• do an act (or omit to do an act) that may be dealt with as a summary offence under an Australian law relating to real property, personal property or causing personal injury or harm to an individual; or
• fail to take reasonable steps to ensure its resources are not used to promote acts (or omissions) by any entity that may be dealt with as an indictable offence, a relevant summary offence, or a civil penalty of 60 penalty units or more.

According to the Explanatory Statement, offences that will be covered by the proposed additions to Governance Standard 3 include:

• unlawful gathering or remaining on land or in a building;
• malicious damage, vandalism or theft of personal property; and
• common assault or threatening violence against an individual.

In a 13 December 2020 media release  Assistant Minister for Charities Zed Seselja commented on the proposed expansion stating:

“Late night break-ins. Illegal blockades. Damage to property and theft of stock. These are the types of unlawful behaviours promoted and engaged in by activist organisations masquerading as charities that will no longer be tolerated under strengthened rules to be implemented by the Morrison Government.”

Whilst proponents of the proposed expansion of Governance Standard 3 suggest the amendments will help clarify the law, the proposed amendments have not come without controversy. Many believe the proposed expansion of Governance Standard 3 will be used to silence charities and reduce activism and advocacy within the charity sector. This is particularly concerning for charities that view their advocacy and activism work as a necessary activity required to achieve their charitable purpose.

By way of example, environmental charities often regard their advocacy work as a vital element to achieving their charitable purpose. Whilst they could plant a million trees and clean the beaches, these activities are seen as remedial, ‘band-aid solutions’ that do not actually target the core of the problem. Therefore, activism and advocacy are often used as a way to change laws and policies that are viewed as the root of the issue thereby negating the need for remedial action in the first place. Historically, some such organisations appear to have viewed committing an offence such as trespass as at times an unavoidable consequence of drawing the specific issue to the attention of lawmakers and the public in order for laws and policies to change.

If the proposed amendments to Governance Standard 3 are implemented, charities that undertake activism and advocacy related activities will be at an increased risk of having their charity status with the ACNC revoked and to thereby lose the associated Commonwealth charity tax concessions. This is a big risk as charity tax concessions are often needed to ensure the survival and sustainability of these charities. As a consequence, many charities may opt out of participating in advocacy and activism activities deeming the risk of losing their charity status too high.

Whilst we have no way of knowing for sure how the ACNC will apply the amended version of Governance Standard 3, the Explanatory Statement does provide some guidance on what would be considered a contravention. For example, the Explanatory Statement explains that a contravention of Governance Standard 3 would occur where a charity uses its resources (such as a mailing list) to promote or support its volunteers to engage in a relevant unlawful activity. In contrast, a contravention would not occur where a volunteer (who is not a director of the charity) engages in relevant unlawful activity without the authorisation of the charity.

The real possibility for the expansion of Governance Standard 3 to erode advocacy and activism in the charity sector is not to be taken lightly as a decline in advocacy and activism by charities threatens the effectiveness and impact of the charity sector as a whole.

If you or your charity would like to have a say about the proposed expansion of Governance Standard 3, Treasury is accepting responses to the Exposure Draft until 14 March 2021. Responses may be made electronically to: charitiesconsultation@treasury.gov.au or by post to:

Senior Advisor
Not-For-Profit Unit, Not-for-profits and Tax Administration Branch
Treasury Melbourne
Level 16, 530 Collins Street
Melbourne VIC 3000

If you want to know more about the proposed expansion of Governance Standard 3, please get in touch with our specialist  Charities + Social Sector lawyers.

Proposed introduction of Governance Standard 6

On 7 December 2020, Treasury released an Exposure Draft and Explanatory Statement relating to the introduction of a new Governance Standard (Governance Standard 6).

If implemented, the proposed Governance Standard 6 will require registered charities to take reasonable steps to join the National Redress Scheme for Institutional Child Sexual Abuse (Redress Scheme) if the charity is, or is likely to be, identified as being involved in the abuse of an applicant for redress under the Redress Scheme.

The Redress Scheme was established in response to the Royal Commission into Institutional Responses to Child Sexual Abuse. The Redress Scheme provides support to survivors of institutional child sexual abuse, including by providing them with:

• a redress payment of up to $150,000;
• counselling and psychological care; and
• an optional direct personal response from the responsible participating institution.

Survivors of institutional child sexual abuse cannot obtain redress under the Redress Scheme if none of the institutions responsible for their abuse have joined the Redress Scheme.

Joining the Redress Scheme, which started on 1 July 2018, has so far been voluntary. However, the proposed Governance Standard 6 is meant to incentivise charities involved in abuse to participate in the Redress Scheme as failure to do so may lead to their charity registration being revoked and loss of their associated Commonwealth charity tax concessions.

Whilst the consultation process on the proposed Governance Standard 6 is now complete, concerns have been raised about the appropriateness of using the Governance Standards as a mechanism to require charities to register in the Redress Scheme. At this stage we do not know whether these concerns will be addressed in the final version of Governance Standard 6 (if it is in fact adopted).

It should also be noted that, as a result of the enactment of the Treasury Laws Amendment (2020 Measures No. 6) Act 2020 (Cth) on 17 December 2020, the definition of ‘basic religious charity’ under s 205-35 of the Australian Charities and Not for-profits Commission Act 2012 (Cth) will be changed commencing 17 March 2021. Under the new definition, a religious institution is not entitled to be a ‘basic religious charity’ if:

• the religious institution has been identified as being involved in the abuse of a person (either in an application for redress or in response to a request for information by the Operator);
• the redress application has not been withdrawn; and
• the religious institution fails to join the Redress Scheme.

Where a charity loses its status as a ‘basic religious charity’ it will no longer be exempt from:

• answering financial information questions on its Annual Information Statement to the ACNC;
• submitting annual financial reports to the ACNC; and
• complying with all of the ACNC governance standards.

This means charities that have previously enjoyed the benefits of being a basic religious charity face the risk of higher reporting and compliance standards if the above criteria are satisfied.

If you want to know more about the Proposed Governance Standard 6 or the new definition of ‘basic religious charity’, please get in touch with our specialist  Charities + Social Sector lawyers.