ATO to Take Over Charity Compliance – Is This a Good Thing?

ATO to Take Over Charity Compliance – Is This a Good Thing?We have all seen over the years when a new government takes control, State or Federal, there is a shift in how things are run.  This usually includes the creation or the rationalisation of agencies and departments for what the new government calls rationality.  Mr Abbott’s government is no different.

Recently at a Senate Estimates hearing the Commissioner of Taxation advised that they were planning to take over the Australian Charities and Not-for-profits Commission (“ACNC”).  What has been a little concerning, if the information throughout the sector is true, is that those in the sector and the ACNC have not been consulted in relation to this.

On a compliance and government revenue protection stand point the move to the Australian Taxation Office makes economically rational sense but will that be all the ATO focuses on?   Will the charities and non-for-profit organisations get bogged down in compliance duties instead of creating benefits to society? These and a number of other questions are yet to be answered.

There is more to ACNC’s role than compliance and revenue protection.  It also focuses on promoting confidence, supporting and promoting the integrity of the sector as well as simplifying the regulatory red tape.  Basically they want to enhance the sector and the confidence the public have in ensuring their donations go where they have been told it will.  Will the ATO also take on an active role in these areas or will it solely be about compliance?  At the end of the day, many of these organisations need this help to help others in need.  Does the ATO have the resources and experience to provide to the sector with what it needs?  Is it flexible enough to deal with disaster charities and the ever changing social impacts which the sector has to work in?

It is this flexibility which may be the key criteria which may be lost by the ATO takeover.  This might mean there would still need to be an independent regulator for this sector.  An example of where this works is the case of Indigenous Corporations which are governed by the Office of the Registrar of Indigenous Corporations (“ORIC”).  It runs similar to the ACNC and governs Aboriginal and Torres Strait Islander Corporations where such organisations need more flexibility than ASIC can provide and a lot of them are community based not-for-profit style organisations.  Having worked with a number of these Corporations and with ORIC itself I have seen firsthand the benefits that a flexible regulatory body can bring.  Could it make more sense to merge ORIC and ACNC together than ACNC with the ATO?

At this stage it is too early to tell if the ATO’s planned takeover will have a positive or negative effect on the sector.  However, at the end of the day some regulator needs to provide the sector with the guidance, promotion and protection that it needs.

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