Source | Report

A Senate Committee report has called on the incoming government to increase transparency and accountability in the Not for Profit sector by establishing a national commission, which incorporates a public benefit test in order for charities to maintain their tax free status.

It has also called on the Attorney-General to investigate new cult laws.

The Senate's Economics Legislation Committee has been investigating the Tax Laws Amendment (Public Benefit Test) Bill 2010 which was introduced by independent Senator Nick Xenaphon in May 2010.

Senator Xenaphon said at the time the Bill was prompted by the heartbreaking stories he has heard from victims of the Church of Scientology and that the organisation’s tax-exempt status needed to be examined.

Sen. Xenophon says the Report's recommendations puts cult-like religious organisations such as the Church of Scientology on notice.

The Report says a charities commission would ensure charitable and religious organisations were open and transparent and they would also need to be able to prove they deserved a charitable status.

It says the commission should not be regarded as an additional bureaucratic impost; it would rather replace a complex array of state and territory regulatory bodies, streamlining processes for charities and reducing their compliance costs.

It says it would increase public confidence in charities by improving their transparency as well as being a source of advice and assistance to charities.

The Senate Committee says it notes the previous inquiries conducted by parliamentary committees, the Productivity Commission and the recent Henry Review and notwithstanding their work, there remains a serious lack of information in relation to the Not for Profit sector; for example, estimates of the value of tax concessions range from $1 billion to $8 billion.

Sen. Xenophon, who was part of the inquiry committee, says the recommendations go further than the scope of the Tax Laws Amendment (Public Benefit Test) Bill 2010, by recommending a Charities Commission using a Public Benefit Test to provide appropriate and fair scrutiny of Not for Profit organisations and much greater protection for individuals.

In special notes attached to the report, Sen. Xenophon says given some of the horrific stories heard within the Inquiry, it is important that any legislation to establish a Charities Commission be established as soon as possible and by no later than 30 June 2011.

The Senate Report recommends that the government should establish a working group to consult extensively with the sector in a timely manner to address issues arising from the establishment of a commission which applies a public benefit test.

It recommends that the working group consider the functions and role of an Australian commission which should include, but not be limited to, the following:

• promote public trust and confidence in the charitable sector;
• encourage and promote the effective use of charitable resources;
• develop and maintain a register of all Not for Profit organisations in Australia using a unique identifying number (for example an ABN) as the identifier;
• develop and maintain an accessible, searchable public interface;
• undertake either an annual descriptive analysis of the organisations that it regulates or provide the required information annually to the ABS for collation and analysis;
• educate and assist charities in relation to matters of good governance and management;
• facilitate, consider and process applications for registration as charitable entities;
• process annual returns submitted by charitable entities;
• supply information and documents in appropriate circumstances for the purposes of the Tax Acts;
• monitor charitable entities and their activities to ensure that registered entities continue to be qualified;
• inquire into charitable entities and persons engaging in serious wrongdoing in connection with a charitable entity;
• monitor and promote compliance with legislation;
• consider, report and make recommendations in relation to any matter relating to charities;
• and stimulate and promote research into any matter relating to charities.

The Committee says it would expect a commission to adopt a tiered reporting system to ensure that small Not for Profit organisations are not overburdened by the costs of compliance.

The Committee also recommends that the Federal Government should work with the Council of Australian Governments (COAG) to amend legislation governing Not for Profit entities to include a definition and test of 'public benefit'.

The Committee says it agrees that it would be better for a public benefit test to be in legislation, where it would be subject to more parliamentary scrutiny, than be set by a minister through regulations, as proposed by the original bill.

The Report makes specific recommendations regarding cult-like organisations. It says the Committee believes that sufficient evidence was put before it to suggest that the behaviour of cults should be reviewed with a view to developing and implementing a policy on this issue that goes beyond taxation law.

The full Senate report can be downloaded at  www.aph.gov.au