Background

Treasury recently 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.

In late 2019 it was reported that the Federal Council of the Liberal Party passed a unanimous motion to remove tax exemption for charities such as “Aussie Farms” that carried out protest action at farms.[1] In late 2020 the then Assistant Minister for Charities, Zed Seselja, issued a media release that stated that:

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.[2]

In February 2021, Treasury released an Exposure Draft of the proposed amendments to ACNC Governance regulation 3 for consultation.[3]

The proposed amendments 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.

The Explanatory Statement gives examples of offences that will be covered by the amendments to Governance Standard 3 of:

  • 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.

The definition of a summary offence will differ according to the jurisdiction, but is usually a criminal offence which is normally tried in a magistrates’ court and which is generally considered to be less serious than other types of offences.

There appears to be concern by many sector peak bodies and law societies that the amendments are an over reach and disproportional given the identified mischief.

Specific concerns

The expert review of the ACNC legislation in 2018 recommended that Governance Standard 3 be completely removed noting that:[4]

Governance standard 3 is not appropriate as a governance standard. Registered entities must comply with all applicable laws. It is not the function of the ACNC to force registered entities to enquire whether they may or may not have committed an offence (unrelated to the ACNC’s regulatory obligations), advise the Commissioner of that offence and for the ACNC to advise the relevant authority regarding the offence.

The proposed amendments give the ACNC Commissioner very wide discretion that is subject only to partial review by the Courts and inconsistent with the rule of law. The range of summary offences throughout Australia is so broad that there will inevitably be unintended consequences. Further, the ACNC Act already gives the Commissioner power to revoke the registration of the charity if “it is more likely than not that the registered entity will not comply” with a governance standard. The Charity or an associate need not be charged or convicted of a summary offence for the Commissioner to act under the standard.

The proposed amendments apply a standard of conduct and severity of consequence to registered charities that is not applied to other entities and may be disproportionate to the alleged conduct.

The proposed amendments may inhibit legitimate public dialogue by charities or persons associated with charities to the detriment of Australian representative democracy. This may offend against the implied freedom of political communication and the amendment be stuck down by the Courts.

The proposed amendments, if confirmed, are likely to increase the administrative burden on charities as they attempt to generate risk management policies and staff training to discharge their obligations under this governance standard combined with governance standard 5.

[1] Sarah Ison, The West Australian, 19 October, 2019.

[2]. Media Release, Charities Supporting Unlawful Behaviour Will Not be Tolerated, Senator The Hon. Zed Seselja, Assistant Minister for Finance, Charities and Electoral Matters, 13 December, 2020 available at https://www.financeminister.gov.au/assistant/media-release/2020/12/13/charities-supporting-unlawful-behaviour-will-not-be-tolerated.

[3] Available at https://treasury.gov.au/consultation/c2021-149084

[4] Strengthening for Purpose: Australian Charities and Not-for-profits Commission Legislation Review 2018 at page 37.