Your 2022 NFP or Charity Board agenda

2021 ushered in a range of new and proposed changes affecting not-for-profit and charity governance and regulation. Many of these changes will come into effect in 2022. Here are some things to keep in mind as you develop your 2022 Board agenda.

Top of the to-do list

All registered charities should ensure they have considered and are prepared to implement the new Australian Charities and Not-for-profits Commission (ACNC) reporting requirements (which will commence from the 2022 Annual Information Statement reporting period). These requirements cover both Financial Reporting and Related Party Transactions and Board Remuneration. Charities should ensure they have systems, processes and controls in place to support compliance.

All company directors and committee members of incorporated associations with an Australian Registered Body Number, which allows your incorporated association to operate outside of your “home” state or territory must obtain a Director Identification Number in 2022. Different deadlines apply depending on when the director is appointed.

Deductible Gift Recipients (DGRs) will need to register as a charity with the ACNC (if they are not already registered charities) or be operated by a registered charity. The new requirements do not apply to public and private ancillary funds. Affected existing DGRs will have until 14 December 2022 to register and should commence this process now.

Charities and not-for-profits who expend more than $250,000 for the dominant purpose of influencing the way electors vote in a federal election (“electoral expenditure”) will be required to register as a “significant third party” (previously a “political campaigner”) and meet certain disclosure requirements by 14 March 2022. The electoral expenditure threshold was reduced from $500,000 to $250,000 by legislation passed on 1 December 2021.

Large charitable companies (with annual revenue of $1m or more) and not-for-profit public companies have been required since 1 January 2020 to have a compliant whistleblower policy. ASIC’s 2021 review of a sample of whistleblower policies indicated the majority were non-compliant. This remains an area of focus for ASIC and further reviews will be conducted. Affected organisations should review their policy alongside ASIC’s Letter to CEOs and Regulatory Guide.

2021 changes to note

Companies continue to benefit from temporary amendments to the Corporations Act 2001 (Cth), which allows companies to use technology to hold member and director meetings. These amendments will lapse on 1 April 2022. Companies whose constitution does not expressly permit them to hold virtual meetings should consider amending their constitution. All charities and not-for-profits should ensure that any virtual meetings are held in accordance with their governing document and legislative requirements and properly facilitate member participation.

Public Benevolent Institutions (PBIs) considering broadening their activities and entities that have previously been refused registration with this charity subtype should be aware of the landmark Global Citizen decision. The Administrative Appeals Tribunal found that Global Citizen, a charity that pursues its purpose of relieving poverty through advocacy and education (seeking to influence and enlist public opinion to obtain financial commitments from governments and philanthropists to fund overseas aid projects) was entitled to be registered as a PBI. The boundaries around what constitutes a PBI are not static and past ACNC decisions may be able to be reviewed on the basis of the Global Citizen decision. See the ACNC response here.

Registered charities that have not joined the National Redress Scheme (NRS) and have been, or are likely to be, identified in connection with abuse that is covered by the NRS should be aware of ACNC Governance Standard 6. Following the introduction of this new standard in February 2021, these entities may be subject to ACNC compliance action including revocation of charity status. Read our article here for an overview and what this may mean for your charity.

Charities providing housing should note the updated ACNC Commissioner’s Interpretation Statement on the provision of housing by charities. Published on 5 November 2021, this clarifies the meaning of ‘relieving poverty’ in the context of the provision of housing assistance, significantly expands guidance on permitted commercial activities and outlines ways in which the private benefits of home ownership schemes might be successfully mitigated.

Entities seeking to establish tax deductible school building funds (particularly non-traditional schools and faith based organisations co-locating with schools) may benefit from the Buddhist Society of Western Australia decision. Although still subject to appeal, this decision may allow for a more holistic assessment of what constitutes a “school”.

On the horizon

Not-for-profit organisations that are not registered charities are currently encouraged by the Australian Tax Office to carry out an annual self-review to confirm they are meeting their tax and super obligations. From 1 July 2023, not-for-profit entities with an Australian Business Number will be required to lodge this annual self-review in order to confirm their eligibility for income tax exemption.

A national fundraising framework (currently fundraising is separately regulated in each state and territory) will be developed following a federal government announcement on 15 December 2021. The announcement does not include a proposed timeline.

Faith based organisations will be watching as the third draft of the Religious Discrimination Bill 2021 (Cth) is considered by Federal Parliament in February 2022. Read our article here regarding what this may mean for the expression and application of religious views.

How we can help

Moores can advise charities and not-for-profits on what these proposed changes mean for your organisation and how to review your policies and processes to ensure that they are compliant.

Please contact us if we can assist.