A recent Fair Work Commission (FWC) highlights the complexity and constraints for employers when faced with a flexible work arrangement request from an employee.

In the decision of The Police Federation of Australia (Victoria Police Branch) v Chief Commissioner of Police T/A Victoria Police [2022] FWC, the FWC considered an employer’s refusal of a flexible work arrangement request based on ‘reasonable business grounds’ under section 65 of the Fair Work Act 2009 (Cth) (FW Act). Ultimately finding in favour of the employer’s decision, the decision is a timely reminder of the onus on employers to give due consideration to such requests and the importance of analysing and documenting the ‘reasonable business grounds’ relevant to the request.

Legislation change in this area is also imminent with the recent FW Act changes passed in late 2022 and effective in June 2023. You can read more about the changes here.

The Request

The employee was employed in the position of ‘First Constable’ within the Transit Safety Division of Victoria Police. The employment was on a full time basis and worked over five days with shifts of eight hours in length. Many of these shifts required the operation of large vehicles, including vans. In October 2022, the employee requested that his shift pattern be changed to four, ten hour shifts on the basis that he had family caring responsibilities (Request).

Once the Request was received, the employer engaged in discussions with the employee but could not come to an agreement. The employer then sent the employee an email stating that the employee’s Request had been refused. A further discussion occurred, leading to the employee requesting a formal response to the Request.

Victoria Police responded with its reasons which included:

• Chronic staff shortages: the employer was currently unable to meet its minimum workforce requirements due to having approximately 17% of its workforce on some form of leave, (or absence due to recreation or workers compensation);
• Division model: the working model of the Division in which the employee worked required 156 van shifts every fortnight. However, the Division was operating 120 shifts every fortnight; and
• Loss of productive work: the employee’s Request to change his working hours from five, eight hour shifts to four, ten hour shifts would result in a loss of two shifts per fortnight where productive work could be performed (because of the way the Transit officer shift structure operates with a mix of front line and other work each shift).

After the Request was refused, the employee made an application to the FWC to challenge the decision under section 65 of the FW Act.

The Legislative Framework

Under section 65 of the FW Act, employees are entitled to make requests for a ‘flexible work arrangement’ if the employee:

• is the parent, or has responsibility for the care, of a child who is of school age or younger;
• is a carer (within the meaning of the Carer Recognition Act 2010);
• has a disability;
• is 55 or older;
• is experiencing violence from a member of the employee’s family; or
• provides care or support to a member of the employee’s immediate family, or a member of the employee’s household, who requires care or support because the member is experiencing violence from the member’s family.

The employer has an obligation to consider the request and must do so within 21 days of receipt of the request. A refusal of a request can only be based on “reasonable business grounds”.

In this case, the employee was eligible to request a flexible work arrangement due to his caring responsibilities (which included care for his wife and primary school aged children).

While section 65 of the FW Act provides guidance on what circumstances might be considered as ‘reasonable business grounds’ to reject a request for a flexible working arrangement, the list is not exhaustive. Those factors include:

• that the new working arrangements requested by the employee would be too costly for the employer;
• that there is no capacity to change the working arrangements of other employees to accommodate the new working arrangements requested by the employee;
• that it would be impractical to change the working arrangements of other employees, or recruit new employees, to accommodate the new working arrangements requested by the employee;
• that the new working arrangements requested by the employee would be likely to result in a significant loss in efficiency or productivity;
• that the new working arrangements requested by the employee would be likely to have a significant negative impact on customer service.

In the Decision, the employee submitted that there were no reasonable business grounds for the refusal, stating that the employer had sufficient resourcing to perform the shifts that were required and that a loss of only two shifts every fortnight would have a “small adverse impact” on the employer’s operations. The employee also stated that he was willing to reasonably perform administration duties to make up for the two extra hours that he would have otherwise performed during each shift.

The Decision

In his decision, Deputy President Andrew Bell considered the operational impact of the Request and the fact that 17% of the relevant section of the workforce was on some form of leave, or absence due to recreation or workers’ compensation. The implication of that level of absence was that further accommodations were challenging when there was a shortfall of employees already. The shortfall was not the usual or ‘typical’ level.

In considering evidence on the impact of the Request, the Deputy President stated that:

“I do not accept [the employee’s] case that there existed sufficient resources to perform the requisite number of “van shifts”. The assumptions underlying the arithmetic concerning that issue are not reflected by the evidence of each witness called by Victoria Police. That evidence, which I accept, showed that there were clear shortfalls in available staffing levels, which were not merely transitory and were also well in excess of typical absences.”

The counterpoint was that if the ‘reason’ the employer points to deny such a request is something that is part of the ‘business as usual’ workforce features or factors, it will be harder to argue that it will meet the threshold to deny the request.

Turning to the impact that the Request would have in regards to the reduction of up to two shifts per week, the Deputy President stated the following:

“Even if it might be concluded that this would have little impact on Transit South’s overall operations, the reduction in productive work that could be performed by the individual officer (even if not equivalent to a full two shifts per fortnight) is non-trivial.”

The Deputy President also found that the employee would not be able to “routinely” perform sufficient productive work to make up the additional two hours a day he proposed.

The employer successfully defended the case.

Key takeaways

The case serves as a timely reminder for employers as they deal with an increasing number of flexible work arrangements, particularly following the changes in many workplaces after the pandemic and the transition to hybrid work environments.

Justifying a refusal of a flexible work request requires consideration and analysis. It is also important to document the decision making considerations and final decision as it may be necessary to rely upon in any legal challenge.

New FW Act changes will require employers to discuss such requests with employees and provide explanations for any refusal.

Other upcoming legislative changes on 6 June 2023 include:

• expanding the groups of eligible employees to those who experienced family and domestic violence or are pregnant;
• the requirement for an employer to communicate what changes or adjustments it was willing to make if the requested change is refused; and
• provide a new mechanism for dispute a rejection of such a request.

How we can help

For assistance with responding to requests for flexible working arrangements, or advice on your organisation’s obligations, contact our workplace relations team. Our team is well-placed to assist with practical and legal guidance for organisations seeking to balance their obligations to employees, and their operational and workforce needs.

Contact us

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In the coming months, a new term dealing with annual leave during a planned ‘shutdown’ period will start to take effect in many modern awards which currently contain a term, or terms, dealing with leave arrangements and related matters during shutdown periods. Impacted awards include the:

• Clerks — Private Sector Award 2020 (clause 32.5);
• Educational Services (Post-Secondary Education) Award 2020 (clause 22.5);
• Higher Education Industry—General Staff—Award 2020 (clause 24.4); and
• Professional Employees Award 2020 (clause 18.4).

Some awards are impacted from 1 May 2023.

The change is part of the Fair Work Commission’s four yearly modern award review and a desire to standardise the requirements and obligations for annual leave during shutdown periods.

Many employers have planned shutdown periods including for an annual close down during the Christmas holiday season. This type of shutdown is different to a stand-down of employees required because of a third-party cause (such as a breakdown of machinery, natural disaster or industrial action in certain circumstances). While sometimes the terminology is used interchangeably, they are different concepts under the legislation. The award change which is the subject of this article relates to planned shutdowns of a whole or part of an employer’s operation.

Currently, many awards deal with how an employer can require an employee to take leave, whether paid or unpaid, during the ‘shutdown’ period. Some awards are more prescriptive than others.

The upcoming change will see the inclusion of a new ‘model term’ in each of the 78 impacted awards. The key feature of the change is that an employer will not be able to require or direct an employee to take unpaid leave during the shut down period. That does not mean that the employer has to pay the employee where the employee has exhausted their paid annual leave entitlements but the employer may need to work with the employee on a specific mix of leave to cover the period, such as use of any remaining paid annual leave entitlement, agreed leave in advance or leave without pay with agreement of the employee.

Other features of the change include:

1. That an employer must give employees at least 28 days written notice (or longer if stipulated) of a temporary shutdown period (there is a limited exception to this notice requirement);
2. Any direction to take paid annual leave must be ‘reasonable’.

Planning for impact

If your organisation’s workforce, or part of your workforce, is covered by an award, it is recommended that your organisation:

• check if the current award contains any terms regarding annual leave during shutdown periods;
• seek advice about whether the change described above will impact on the applicable award; and
• review your policies and processes for upcoming shutdown periods including how other annual leave requests during the year may impact on the employee’s annual leave balance when it comes to the planned shutdown period.

How we can help

Moores can help you to identify the necessary steps to ensure that your organisation is compliant with the new changes, including updating of leave policies, to ensure compliance. Get in touch with the Workplace Relations team at Moores if you or your organisation need any assistance with these matters.

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In 2022, the Privacy Act 1988 (Cth) (Privacy Act) was amended to increase penalties for serious or repeated interferences with privacy – a.k.a. breaches of the Australian Privacy Principles (APPs). You can read more about this in our article: We have a Privacy Bill, but some promised reforms will have to wait.

Now, in 2023, we have more action on the Privacy Act Review. The Attorney-General’s Department has published a report containing over 100 concrete proposals of reform, seeking consultation and feedback from the public.

Below we summarise the proposed amendments which will have the greatest impact on schools and other educational organisations such as Out of School Hours Care, TAFEs, Registered Training Organisations and key providers of services to schools.

More information captured by the APPs

It is likely the definition of “personal information” will be broadened to capture more information. This means the APPs, and the Notifiable Data Breach Scheme (NDB Scheme) will apply to more information. The proposed change to this definition is partly due to considerable confusion identified in previous consultation about what is exactly covered by the Privacy Act.

A technical change, it is proposed that the word “about” in the definition of personal information is changed to “relates to”. This significantly expands the reach of the Privacy Act to cover instances when a person may be mentioned or referred to, even if the information is primarily about another person.

No more employee records exemptions

Currently, the anomalous “employee records exemption” means Australian private sector employers do not need to comply with the APPs for large swathes of personal information they hold about their employees.

The proposed amendment suggests the security requirement of APP 11.1 and the NDB Scheme should both apply to employee records. It does not suggest that all the APPs should apply to employee records, as a consideration is the need for employers to have “adequate flexibility” to handle the information about employees they need.

The General Data Protection Regulation (GDPR), Europe’s privacy law and the global “gold standard”, does not include an equivalent exemption.

Privacy rights and protections for children

There are a few proposed amendments which relate to children. We intend to publish more detailed information about these which goes beyond the below summary.

Who is considered a “child”?

• Define a child as under 18 years of age. Currently, schools and organisations need to apply the “Gillick competence” test, which is to consider the child or young person’s capacity to understand and consent; or
• Embed the 15-year-old assumption of capacity in the Privacy Act.

Other proposed changes

• Implement a Children’s Online Privacy Code to ensure collection notices and privacy policies for only services targeted to children are clear and understandable by that age group.
• Require organisations to have regard to the best interests of children when handling their information, and designing online services.

Shorter data breach reporting periods

The proposed new data breach reporting obligation would require schools and other organisations covered by the NDB Scheme to notify the Office of the Australian Information Commissioner (OAIC) within 72 hours of becoming aware of a data breach, so that, when a data breach occurs, quick action can be taken to minimise harm to affected individuals.

The current requirement is 30 days. This is a significant change, and will require schools to upskill in their data breach responses.

How we can help

These proposed amendments, and many others, are already considered best practice in the industry. We can help you prepare for the coming reforms, and upskill your school, to aim for best practice privacy protection measures. We can do this by offering training to your staff, reviewing policies and procedures, and conducting a privacy compliance audit.

Contact us

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In response to increased social and regulator expectations, many schools have done the hard work of improving their governance frameworks and processes in recent years. Unfortunately, some schools’ related organisations (including the parent, alumni and sporting associations) have been left behind in these governance reforms.

School parent, alumni and sporting associations are generally managed by caring, enthusiastic and well-intentioned parents and members of the school community. With guidance and support from their school, these associations can play a key role in building thriving school communities, fundraising and providing ancillary school services and activities.

The following considerations can help school parent, alumni and sporting associations to effectively pursue their mission, reduce the potential for disputes and ensure good governance.

Support is key

Associations are generally run by volunteers with limited time and resources and potentially less governance experience. Schools can offer administrative support, practical resources and assistance with navigating the governance landscape.

Reputations are interlinked

While a school and its associations may be legally separate, their reputations are inextricably linked. Schools need to consider the risk that issues arising in an association could impact the school community as a whole and the school reputation.

Privacy is critical

Associations may obtain member details from the school (including details of alumni and parents). This must be carefully managed to ensure that both the school and the association comply with their privacy obligations in relation to dealing with private information and the provision of private details held by one entity to the other. Some associations still deem individuals to be members (such as an alumni association that automatically adds all school leavers to its member database). These associations may breach their privacy obligations if they add the contact details of these “deemed” members to their register of member details (as the register must be provided to a member that makes a valid request for access to the register).

The devil is in the detail

Each association will have a governing document – being a constitution, trust deed, or a memorandum/articles of association. Many members (and even some committee members) of the association will never read this governing document, even though it is a legal contract. These governing documents are often out-of-date and do not support best practice governance. Governing documents should be reviewed regularly to ensure that they are up to date, are fair and reasonable, are consistent, and reflect the values of the school and the association. A governing document can also establish ties back to the school that can be invaluable if the school needs to intervene to support a failing association. The governing document should also be supported by appropriate policies (such as a conflict of interest policy) that promote good governance.

The committee must understand their obligations

Not-for-profit associations are subject to increasing regulatory scrutiny and operate in a complex legal environment. There can be serious consequences for non-compliance – both reputational and legal. Committee members of school associations would benefit from an induction process and ongoing training to help them to understand and comply with their obligations. This should be supported by appropriate insurance coverage to reduce the risk of exposure to personal liability.

If a school parent, alumni or sporting association has:

• appropriate administrative, practical and governance support from its school;
• clear, well-thought out and compliant policies and procedures;
• a governing document that is up to date, easy to read and reflects core values; and
• a committee that understands their governance obligations and responsibilities; then

the association will be well placed to make a positive contribution to the school community.

How we can help

Moores can help if you have any questions about your schools’ parent, alumni or sporting associations.

Contact us

Please contact us for more detailed and tailored help.

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This article is part two of our charity article series. Click here to read the first article titled So you want to start a charity? Part one – Before you start

Part 2: Charity Tax Concessions

Tax concessions for charitable purposes have been granted in one form or another for over 400 years. Today, tax concessions are critical to the financial viability of registered charities. Obtaining charity tax concessions is the principal driver behind many charity registrations. This article will outline which tax concessions are available, how an organisation is endorsed and what ongoing obligations exist.

Importance of tax concessions

Charity tax concessions are highly sought (and protected) for a simple reason – charity income that would otherwise go to state and federal governments can instead be spent furthering the charity’s purpose. Less money on tax means more money for supporting the vulnerable, protecting the environment, promoting the arts or otherwise contributing to the community.

What tax concessions are available to charities?

A range of tax concessions may be available to charities. Federal charity tax concessions include:

• exemption from paying income tax (income tax exemption);
• concessions on tax paid for goods and services (GST concessions);
• rebate on Fringe Benefits Tax (FBT Rebate) OR Fringe Benefits Tax exemption (FBT Exemption).

The federal government also regulates which entities can be endorsed as tax deductible gift recipients (Deductible Gift Recipient (DGR) endorsement).

In addition to federal charity tax concessions, charities may also be eligible for state tax concessions, including exemptions from paying:

• Stamp duty;
• Payroll tax; and
• Land tax.

Is my charity eligible for tax concessions?

Federal concessions

Federal charity tax concessions are available to charities registered with the Australian Charities and Not-for-profits Commission (ACNC). To register with the ACNC, organisations must meet the requirements of the Charities Act 2013 (Cth) (Charities Act), which requires a charity to:

• be a not-for-profit;
• have only charitable purposes that are for the public benefit;
• not have a disqualifying purpose; and
• not be an individual, political party or government entity.

Charitable purposes must be set out in an organisation’s governing document (such as its constitution, rules or trust deed) and must be reflected in its activities. The Charities Act recognises 12 charitable purposes:

• advancing health;
• advancing education;
• advancing social or public welfare;
• advancing religion;
• advancing culture;
• promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia;
• promoting or protecting human rights;
• advancing the security or safety of Australia or the Australian public;
• preventing or relieving the suffering of animals;
• advancing the natural environment;
• promoting or opposing a change to any matter established by law, policy or practice in the Commonwealth, a state, a territory or another country (where that change furthers or opposes one or more of the purposes above); and
• other similar purposes ‘beneficial to the general public’.

All charities registered with the ACNC are eligible to receive basic charity tax concessions – income tax exemption, GST concessions and FBT rebate.

Only some charities registered with the ACNC will be eligible for FBT exemption and/or DGR endorsement. For example:

• a charity that is a public benevolent institution can be endorsed as a DGR and provide FBT exempt benefits of up to $30,000 to each employee;
• a charity on the Register of Cultural Organisations can be endorsed as a DGR but receive no FBT exemption (they do receive the FBT rebate);
• a charity with a purpose of advancing religion can provide FBT exempt benefits to religious practitioners.

These charities must meet additional criteria – for example, they must take steps to ensure that their assets will go to another charitable DGR in the event that the charity loses its endorsement or is wound up.  

State concessions

Eligibility for state tax concessions varies in each state and territory. Most state tax concessions are administered by state revenue offices. The charity’s application for exemption must demonstrate that it has a purpose which meets that state or territory’s definition of “charitable”. What the states considers to be charitable largely overlaps with, but is not identical to, the Charities Act charitable purposes listed above. Being ACNC registered is not conclusive evidence of eligibility for state tax concessions. Additionally, eligibility for particular concessions is based on a charity’s activities, rather than its purposes. This means that although an ACNC registered charity will usually be eligible for state tax concessions, eligibility is not guaranteed.

Concessions for non-charities

Although this article focuses on charity tax concessions, it is worth noting that some “mere” not-for-profits (that is, not-for-profits that are not charities) can still access certain tax concessions. Sports groups, for example, generally cannot be ACNC registered charities (unless they also have a charitable purpose, such as a group that carries out sporting programs to advance education or social welfare), but may be exempt from paying income tax as self-assessing income tax exempt organisations.

Maintaining eligibility for tax concessions

Eligibility for tax concessions must be maintained throughout the life of a charity. There are obligations on charities to self-assess their ongoing entitlement to tax concessions, and notify the ACNC, Australian Tax Office or State Revenue Office if they are no longer eligible.

If a charity ceases to meet the eligibility requirements for tax concessions, it may lose those concessions. In a worst case scenario, the loss of concessions can be retrospective, which can result in a significant tax liability.  

It is important that the governing body (Board, Committee or Trustees) of a charity understands the tax concessions it holds and the importance of its not-for-profit character and charitable purpose. The governing body should have a process in place to review ongoing eligibility – both periodically and when contemplating any change in activities, purpose or structure.

It is also critical that charities meet ongoing obligations of charity registration, including providing annual statements or reports to the ACNC. The charity must also take steps to comply with the Governance Standards (unless the charity is a Basic Religious Charity) and, if operating overseas, the External Conduct Standards.

The ACNC is increasingly active as a regulator and will investigate non-compliance connected to eligibility for charity tax concessions and DGR endorsement. Additionally, the Government has provided additional funding to support proactive reviews of charity and DGR eligibility, which will commence with a review of 500 public benevolent institutions.

How we can help

Tax concessions can help a new charity stretch their donated dollars further, so more resources can be put towards their charitable purpose. Our For Purpose team can provide advice and assistance establishing new entities and applying for tax concessions.

Contact us

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This is part 2 of our ‘So you want to start a charity’ series. 

See Part 1 – Before you start here

See Part 3 – Choosing the right structure here

We often consider that superannuation is ‘ours’. It’s our money that we contribute to our long-term retirement savings.

But there are rules and regulations that are imposed in the superannuation environment which have to be carefully considered.

For example, unless certain circumstances arise, you are not able to simply withdraw your superannuation entitlements.

Death is one circumstance where superannuation must be paid out of the fund in which it was held – but it cannot be paid to just anyone.

Who is eligible to receive your super?

When a member of a superannuation fund dies, they receive a ‘death benefit’. Broadly speaking, a death benefit is the sum of the person’s member balance (made up of all of their contributions and earnings on those contributions) and any life insurance that they hold in the fund. That death benefit can only be paid to a limited class of recipients (referred to in the superannuation legislation as a ‘dependant’):

1. The member’s spouse or de facto partner;
2. The member’s child; and
3. Someone financially dependent on the member, or in an inter-dependency relationship with the member.

In addition to the above ‘dependants’, the member’s legal personal representative is also eligible to receive a death benefit (which means it forms part of their estate). The existence of this last category is important – a person’s Will does not automatically govern where their death benefit will be paid. It is only if the death benefit is paid to the member’s legal personal representative that their Will (if any) will dictate how the death benefit is then paid. If there is no Will, then death benefits paid to the estate will be governed by the laws of intestacy.

The tax treatment of the payment of death benefits to each of these categories of recipients is a topic for another article.

So, how do we know where the superannuation will be paid?

The default position for most superannuation funds is that the trustee will have discretion to choose who will receive the death benefit amongst the above class of eligible recipients.

It is possible (subject to the rules of the relevant superannuation fund) for a member to advise the trustee of their preference of recipient, or even elevate that to a binding nomination of the recipient.

A recent case…

For example, in the case of Wan v BT Funds Management Limited [2022] FCA 302 the full Federal Court heard the following details:

• The deceased left a Will distributing his estate in equal shares between Ms Wan (who the deceased referred to as his ‘friend’ in his Will), the deceased’s former spouse, and the son of the former spouse.
• The deceased made a non-binding nomination with his superannuation fund, sending his death benefit to his legal personal representative (i.e. to his estate).
• The deceased did not make any binding death benefit nomination, therefore the trustee has discretion as to whom to pay the deceased’s death benefit, and determined it was appropriate to follow the deceased’s non-binding nomination and resolved to pay the death benefit to the deceased’s estate.
• Ms Wan issued a complaint to AFCA claiming that the deceased’s death benefit should have been paid to her.
• AFCA decided that there was no evidence provided to indicate that Ms Wan was a de facto spouse of the deceased, nor was she in an interdependency relationship with him – despite staying at his home more frequently as his health deteriorated and leaving personal items at his residence. AFCA considered the deceased’s description of Ms Wan as his ‘friend’ in the terms of his Will in coming to its decision.
• Ms Wan then appealed AFCA’s decision on the basis that AFCA had misinterpreted the meaning of ‘dependant’ under the superannuation legislation, and applied a limited definition without considering any personal and emotional dependency. The appeal was dismissed after the Court determined there was no evidence in relation to financial support to or from the deceased, or that Ms Wan and the deceased had a common residence.
• Ms Wan further appealed, submitting that AFCA made an error in its conclusion that Ms Wan was neither a de facto spouse or in an interdependency relationship with the deceased. She contended she was a ‘dependant’ under a wider interpretation of the term, with a focus on her close personal relationship and provision of emotional support to the deceased. The appeal was again dismissed with the Court concluding that AFCA “conducted its assessment on the basis of the claim made and within the parameters which delineated that claim”.
• The Court indicated that while emotional and personal support may be a relevant factor of interdependency, it is not in itself a category of ‘dependant’ for superannuation purposes.

What do we learn from this case?

There are a few key takeaways from this case to keep in mind:

1. If the deceased had made a valid binding death benefit nomination – as opposed to a non-binding nomination – then (again, subject to the terms of the fund’s rules) the trustee would have been bound to follow the deceased’s direction.
2. ‘Dependency’ for the purposes of superannuation law is, at least for now, primarily a test of financial dependency and not a broader emotional or personal dependency. While a ‘close personal relationship’ and ‘personal care’ are some aspects of the legislated definition for ‘interdependency’, the definition also requires one or each of the persons ‘providing financial support’.
3. Consideration needs to be given in an estate planning context in respect of who is intended to benefit from the death benefit – i.e. do they fall within one of the above categories, or is it necessary to send the superannuation to the estate and what are the implications (tax and otherwise) of doing so?

How we can help

For expert advice or guidance regarding Estate Planning and superannuation funds, please do not hesitate to contact us.

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The Federal government has announced a plan to increase the tax rate applicable to member balances over $3M from 1 July 2025 to 30% (up from 15%). The detail is not yet published, however, for members with balances that exceed this amount, an initial reaction might be to look to how to withdraw their funds. The question however needs careful consideration (as well advice from a licenced financial advisor).

This article flags some issues for consideration when looking at that question:

1. Can I take out my super? A member must meet a condition of release (such as reaching age 65 years, or reaching 60 years and retiring) before they can withdraw their super. It goes without saying that in order to validly take funds out of super, you also need to follow the terms of the relevant deed.
2. What is the immediate cost of getting funds or assets out? Here you would need to consider capital gains tax in the fund, stamp duty on dutiable assets, as well as transaction costs. If you are going to incur capital gains tax, it may be worth considering if there is any merit in planning the timing of sale or transfer over the 2023 year and the 2024 year.
3. What are the ongoing costs of holding assets outside super? Apart from comparing the income tax rate, it will be important to consider the impact on land tax and aggregation (for real estate) and the capital gains tax rates in the future.
   One benefit of withdrawing superannuation during the lifetime of a member over the age of 60 years, is that it will not be subject to tax on their death in the same way as if it remained in the fund (when paid to non-tax dependants).
4. What about using a family trust?
   • This may have merit but consider broader implications such as costs of administration, costs of transferring assets to the trust and additional costs within a trust (such as extra land tax surcharge).
   • Decisions such as Re Owies make it clear that you cannot consider assets owned via a trust in the same way as those you own personally, and that the fiduciary obligations imposed on a trustee will be taken seriously by the Court.
5. What are other implications?
   • Super is a very well protected vehicle against bankruptcy. Taking super out will potentially expose those assets to any creditor risk the member may face.
   • Converting super to another structure or to hold in the member’s sole name will have estate planning implications. For those members who have estate challenge risk, moving assets to their own name may increase that risk.

The devil will be in the detail, but advisors and members of SMSFs need to start thinking about these questions sooner rather than later.

How we can help

For expert advice or guidance regarding Estate Planning and superannuation funds, please do not hesitate to contact us.

Contact us

Please contact us for more detailed and tailored help.

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The Australian Law Reform Commission (ALRC) has released a Consultation Paper on Religious Educational Institutions and Anti-Discrimination Laws. Submissions close on 24 February 2023.

The ALRC carried out the consultation in response to a request from the Commonwealth Attorney General the Hon Mark Dreyfus MP KC. That request asked the ALRC to recommend reforms to the law to implement the Government’s policy commitments in this area in a way that is consistent with Australia’s international legal obligations. These policy commitment include reforms to ensure that a religious educational institution:

• must not discriminate against a student on the basis of sexual orientation, gender identity, marital or relationship status or pregnancy;
• must not discriminate against a member of staff on the basis of sex, sexual orientation, gender identity, marital or relationship status or pregnancy; and
• can continue to build a community of faith by giving preference, in good faith, to persons of the same religion as the educational institution in the selection of staff.

The paper sets out four general propositions which would be implemented by amending the Sex Discrimination Act 1984 (Cth) and the Fair Work Act 2009 (Cth).

We have briefly outlined and commented on the proposed reforms below. Interested parties are encouraged to read the Consultation Paper in full, which is comprehensive and clear.

In summary, the proposed reforms, if adopted, would:

1. Make discrimination against students on the grounds of sexual orientation, gender identity, marital or relationship status, or pregnancy in schools and other religious educational institutions unlawful, by removing exceptions currently available under federal law
   
   This is generally consistent with the current law in all States and Territories except for Western Australia. Similar reforms are proposed in Western Australia but have not yet been enacted.

2. Protect teachers and other school staff from discrimination on the grounds of sex, sexual orientation, gender identity, marital or relationship status, or pregnancy, by removing similar exceptions
   
   This is generally consistent with the current law in the ACT, Tasmania and Victoria. Similar provisions are enacted but not yet in force in the Northern Territory and are being considered in Queensland and Western Australia. Proposals for similar reforms have been made in South Australia.

3. Allow religious schools to maintain their religious character by permitting them to:

• give preference to prospective staff on religious grounds where the teaching, observance, or practice of religion is a part of their role (and it is not discriminatory on other grounds).
  
  This is generally consistent with the law in Victoria and provisions that have been enacted but are not yet in force in the Northern Territory. Proposals for similar reforms have been made in Queensland, South Australia and Western Australia.
  
  The proposed provisions would require the institution to show that preferencing individual staff on religious grounds was justified because:

• it is a “genuine requirement of the role” that the individual participates in the teaching, observance, or practice of the religion. This must be assessed with regard to factors including the nature and religious ethos of the educational institution;
• the differential treatment is proportionate to the objective of upholding the religious ethos of the institution; and
• the criteria for preferencing in relation to religion or belief would not amount to discrimination on another prohibited ground (such as sex, sexual orientation, gender identity, marital or relationship status, or pregnancy), if applied to a person with the relevant attribute.
  
  The ALRC provides examples indicating that this might permit a school to discriminate (if proportionate in all the circumstances) on the grounds of dietary restrictions or dress. However, it appears that a school may not be able to discriminate on the grounds of beliefs about a protected attribute such as homosexuality.

4. Require all staff to respect the educational institution’s religious ethos
   
   This is provision has no existing State or Territory equivalent. It is intended to complement the limitation on the ability of religious educational institutions to discriminate in employment.
   
   The ALRC proposes that this could include the ability to impose “reasonable and proportionate codes of staff conduct and behaviour” subject to prohibitions of discrimination on other grounds. An educational institution would be able to require its staff not to publicly denigrate or ridicule the religion of the institution, but could not terminate employment on the basis of conduct that it considered was inconsistent with those beliefs, if that conduct related to a protected attribute under anti-discrimination law. The ALRC provides the example of an educational institution being unable to terminate the employment of a lesbian teacher on the grounds that she was actively undermining the religious ethos of the institution merely by entering into a marriage with a woman.

Responding to the Consultation Paper

Members of the public are invited to respond to the Consultation Paper, by making a formal submission (which can be public or confidential) and/or responding to a confidential survey. Submissions close on 24 February 2023.

How can we help?

Moores can help if you have any questions about the Consultation Paper or what the proposed reforms mean for your organisation.

Contact us

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2022 was a significant year of change and progress for the charity and not-for-profit (NFP) sector in Australia – numerous governance and regulatory changes were announced and will come into effect from 2023. If you are heading up a charity or NFP or sit on its board, consider the key matters in the links below as we start 2023.

Your 2022 checklist

Director Identification Number

Directors of NFPs and charities that are companies registered with the Australian Securities and Investments Commission (ASIC) (including incorporated associations with an Australian Registered Business Number and Aboriginal and Torres Strait Islander corporations) were required to obtain a Director Identification Number (Director ID) before 30 November 2022. Directors were given an additional two-week grace period (which ended on 14 December 2022) as it was believed that up to 700,000 directors had not yet obtained a Director ID at that time. Directors who have not obtained a Director ID are encouraged to do so now as a matter of urgency to avoid any penalties. Apply online at abrs.gov.au/directorID.

Annual reporting to the ACNC

Charities with a reporting period of 1 July 2021 to 30 June 2022 should have lodged their 2022 Annual Information Statement (AIS) on the 2022 AIS Hub by 31 January 2023. The AIS should have complied with the new reporting requirements for charities which came into effect on 1 July 2022. These include:

• changes to charity size thresholds; and
• increased reporting obligations relating to related party transactions and remuneration paid to key charity personnel.

To support ongoing compliance, charities should familiarise themselves with the changes and ensure they have systems, processes and controls in place to enable reporting.

Requirements for Deductible Gift Recipients to be a registered charity

Most categories of Deductible Gift Recipients (DGRs) are now required to be registered charities with the Australian Charities and Not-for-profits Commission (ACNC) or be operated by registered charities. As set out in our previous article, ‘affected DGRs’ had a transitional period of up until 14 December 2022 to become registered charities or to apply to the Australian Taxation Office (ATO) to request for an extension of up to three years (up to 14 December 2025). Moores can assist if these changes have affected your organisation and you are yet to become a registered charity or apply for an extension, please get in touch with us.

Other noteworthy changes in 2022

ACNC Changes

The ACNC experienced significant change in 2022, its tenth year of operation.

New Commissioner(s)

Shortly after the federal election, Dr Gary Johns resigned from his position as Commissioner of the ACNC. Deborah Jenkins took up the role of Acting Commissioner from 1 August 2022 and served until 12 December 2022, when Sue Woodward AM commenced as the Commissioner. Ms Woodward’s appointment was warmly welcomed by the charity sector. She is widely respected for her expertise and experience as well as her significant contribution towards reforming fundraising laws.

Enhanced charity register

The ACNC launched its enhanced Charity Register in 2022, aimed at assisting users to more easily find details about the types of programs being run by charities. If your charity has not reviewed its ACNC charity records recently, it may be a good opportunity to undertake a review of your records to ensure that information about your charity and programs are accurate and up to date. This will also assist potential supporters and funders to readily locate your charity through the search functions. Since launching the enhanced Charity Register, the ACNC noted a 31% increase in searches throughout the last financial year.

A new Assistant Minister for Charities

Following the 2022 federal election and change of government, Dr Andrew Leigh was appointed as the Assistant Minister for Competition, Charities and Treasury. Dr Leigh promised to “end the war with charities” and pledged to:

• fix fundraising laws;
• double philanthropy by 2030; and
• support charitable advocacy.

The sector waits to see how Dr Leigh will implement these changes in practice. However, early signs have been positive, including the government’s recent announcement that it had removed restrictions in funding arrangements with legal aid organisations (i.e. community legal centres) which previously prevented them from engaging in political advocacy.

Amendments to the Corporations Act 2001 (Cth)

In 2022, the government amended the Corporations Act 2001 (Cth) (Corporations Act) to allow companies (including NFP and charitable companies limited by guarantee) to use technology or electronic means to:

• sign documents (i.e. minutes of meetings and resolutions and deeds);
• hold directors’ and members’ meetings (including hybrid meetings) provided certain conditions are met;
• provide (and receive from members or directors) notices and certain meeting related documents; and
• record and retain minute books.

These new, more flexible practices should be taken into account by companies, particularly when making meeting arrangements and reviewing affected provisions in your governing document.

DGR for pastoral care

Public consultation commenced early in 2022 regarding a new DGR category for pastoral care services. This proposal was short-lived, with confirmation in the 2022 Federal Budget that the initiative would not proceed.

Gaming and sporting associations

A new Taxation Ruling, TR 2022/2 Income tax: the games and sports exemption, replaced the ATO’s longstanding previous taxation ruling TR 97/22. The new ruling aims to provide a clearer and more nuanced definition of when a society, association or club will be exempt from income tax under the games and sports exemption in section 50-45 of the Income Tax Assessment Act 1997.

What you can expect in 2023

ATO and Income Tax Exemptions

NFPs that are not registered charities should prepare for impending changes regarding self-assessments for income tax exemption (ITE).

From 1 July 2023, the ATO will require NFP companies to lodge an annual self-review form along with supporting documentation in order to maintain eligibility for ITE. To assist organisations with complying with this new requirement, the ATO has produced a number of self-assessment tools including a self-governance checklist and an ITE self-assessing worksheet for sporting organisations and all other ITE categories. Since announcing the changes, the ATO has also continued its targeted consultation, which is likely to result in additional support and guidance materials to assist with the transition.

NFPs should give careful consideration to whether they are entitled to self-assess as income tax exempt. They should also consider whether their entity is able to be a registered charity, as the effect of the Income Tax Assessment Act 1997 (Cth) is that an entity that can be a registered charity must be a registered charity – it should not seek income tax exemption under another ITE category.

Proposed new Commissioner’s Interpretation Statements

In mid-2022, the ACNC commenced public consultation on the proposed updated Commissioner’s Interpretation Statements (CISs) for Public Benevolent Institutions and Health Promotion Charities. Public consultation on the proposed updated CISs has now closed. The sector awaits the ACNC’s response to submissions made in the consultation process. In the meantime, the current CISs continue to apply.

Treasury Consultations

DGR register reform

The Australian Treasury (Treasury) has released a draft bill and explanatory memorandum which proposes to abolish the registers of Cultural Organisations, Environmental Organisations and Harm Prevention Charities and the current Overseas Aid Gift Deductibility Scheme. These reforms intend to reduce red tape and increase the processing time of DGR application, which would instead be processed by the ATO. For more information about these reforms see our article.

Treasury is engaging in a process of consultation with regards to the proposed reforms and has invited the public to comment on the matters set out in the exposure drafts. Submissions are open until 19 February 2023.

Beneficial ownership register

In late 2022, Treasury sought submissions, (which closed on 16 December 2022) in relation to the design features for a publicly available beneficial ownership register. This public register would require entities regulated by the Corporations Act (which includes many charities and NFP companies limited by guarantee) to maintain a register (parts of which would be publicly available) including details about beneficial ownership of assets.

The driver for these reforms is enhancing the tax integrity of multinational entities and to increase transparency about ownership of companies. There are concerns about how the proposed requirements would impact charitable and NFP entities, including introducing further record-keeping and compliance requirements as well as making public information that may have otherwise been undisclosed to date.

Strengthening the Australian Business Number system Bill

Treasury has also recently finalised its community consultation in relation to a new bill focused on strengthening the Australian Business Number (ABN) system in Australia. The bill proposes to enable the Australian Business Register (ABR) to cancel an ABN if a person or entity either:

• fails to lodge an annual income tax return for two or more years in a row (if required to do so); or
• fails to annually confirm with the ABR that their details are still accurate.

The bill in its current form would apply to all ABN holders, including NFPs and charities registered with the ACNC. Whilst Moores welcomes reforms focused on improving the accuracy of information on the ABR, there is concern about the impact that the implementation of the bill could have on the NFP and charity sector, including increased reporting requirements and the potential consequences of non-compliance. The sector awaits the published outcomes of the community consultation.

…and another thing

The ACNC has released new guidance for the sector on crypto-assets. Charities are encouraged to consider the risks and benefits before accepting donations or crypto-assets or investing in crypto-assets given that managing a charity’s financial affairs responsibly is a key requirement under Governance Standard 5 and the risks associated with crypto-assets are greater and harder to manage.

The ACNC has invited stakeholders to complete a survey and comment on its guidance note in relation to related party transaction reporting in the 2023 AIS. Comments are welcome before 10 March 2023 and the survey must be completed by 16 March 2023.

The Australian Institute of Company Directors (AICD) has launched its NFP Governance and Performance Study 2022-23, providing valuable insights into the sector.

The AICD has also made one hundred scholarships available for its 2023 Disability Leadership Program. This is a full-fee scholarship to undertake the AICD Company Directors Course, Foundations of Directorship Program or Governance Foundations for Not-for-profit Directors. Individuals with disability can submit an application by 19 February 2023.

How can we help?

Moores can help if you have any questions about setting up your NFP or charity for a successful 2023 or complying with any of the recent reforms.

Contact us

Please contact us for more detailed and tailored help.

Subscribe to our email updates and receive our articles directly in your inbox.

On 19 January 2023, the Treasury released an exposure draft bill and explanatory memorandum relating to reforms of the Deductible Gift Recipient (DGR) registers currently administered by Australian Government departments. The draft bill is a key step in a reform process initially announced over five years ago and should lead towards simpler and more efficient administration for some categories of DGR.

Background

There are currently 52 DGR categories set out in Division 30 of the Income Tax Assessment Act 1997 (Cth) (ITAA). Each category has its own eligibility criteria. Applications for endorsement for 48 of these DGR categories are made to the Australian Taxation Office (ATO), sometimes via another government agency such as the Australian Charities and Not-for-profits Commission (ACNC).

However, four DGR categories are currently administered in a different manner by Australian Government departments, these are:

• Register of Cultural Organisations – Department of Infrastructure, Transport, Regional Development, Communications and the Arts.
• Register of Environmental Organisations – Department of Climate Change, Energy, the Environment and Water.
• Register of Harm Prevention Charities – Department of Social Services.
• Overseas Aid Gift Deductibility Scheme – Department of Foreign Affairs and Trade.

Currently, entities must apply directly to these departments in order to obtain DGR endorsement. Each department has a distinct set of eligibility requirements, and applications for DGR endorsement are managed independently using different platforms and following different processes.

Ultimately, the relevant Treasury Minister and the Ministers responsible for each respective department must approve each application. These applications can take up to two years to be processed, whereas applications to the ATO can often be completed within one month.

What are the proposed reforms?

The proposed reforms seek to transfer the practical administration of these DGR categories from the government departments to the ATO.

The proposed reforms would abolish the powers of the Ministers and the departments to facilitate and approve registrations, and would abolish the registers themselves. Eligibility criteria for entities seeking DGR endorsement would largely remain unchanged. However, applicants would no longer need to include some previously required provisions in their governing documents such as a requirement to provide statistical information about gifts to the secretary of the endorsing department.

Additionally, for Cultural Organisations, Environmental Organisations and Harm Prevention Charities, the proposed reforms also seek to replace the current requirement to maintain a public fund, with the slightly less onerous obligation to maintain a gift fund.

Section 30.130 of the ITAA provides that a separate bank account is not required for a gift fund and does not require a gift fund to be managed by a management committee with a majority of individuals who meet the ATO’s ‘responsible persons’ test.

This is good news for current DGRs as administrative burdens relating to opening a separate bank account will be alleviated and the board or executive would be able to manage the gift fund directly without the need for a separate management committee, comprising ‘responsible persons’.

The proposed reforms for overseas aid organisations are slightly more significant. Currently, the eligibility criteria for DGR endorsement is predominantly contained in guidance material that is published by the Department of Foreign Affairs and Trade with a focus on the organisation’s activities. Much of the eligibility criteria is preserved in the proposed reforms, however the language is expressed in a manner that focuses on the principal purposes of the organisation: they must have a “principal purpose of delivering development or humanitarian assistance activities (or both) in developing countries, and must deliver those activities in partnership with organisations in the country, based on principles of cooperation, mutual respect and shared accountability.”

If the reforms are enacted, existing DGRs will (irrespective of the clause in their governing document) be able to transfer assets in a winding up to another DGR with similar purposes, rather than another DGR on the relevant register. They will also be able to replace the public fund requirement in their governing document with a more flexible gift fund requirement.

Deadline for consultation submissions

Treasury is engaging in a process of consultation with regards to the proposed reforms and has invited the public to comment on the matters set out in the exposure drafts. Submissions are open until 19 February 2023.

How can we help?

Please get in contact with our team of charity and not-for-profit law experts if you’d like to discuss the proposed reforms with us in greater depth.

Contact us

Please contact us for more detailed and tailored help.

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