The Charities Amendment Act 2023 (Act) – that amends the Charities Act 2005 – was passed in late June and came into force on 5 July 2023.
Charities should begin turning their minds to the changes introduced by the Act, with most coming into force from early October.
The Act aims to modernise the legislation to increase transparency for the public, improve access to justice services, and reduce the burden on smaller charities.
Changes from 5 October 2023
The following changes come into effect on 5 October 2023:
Role and definition of officer clarified and widened
The Act clarifies that the role of an ‘Officer’ of a charity is to support the charity to deliver its charitable purpose and comply with obligations under the Charities Act 2005.
The Act also widens and clarifies the definition of an Officer to include those with significant influence over the management or administration of the entity. This is intended to ensure that people with influence over the decision-making and direction of a charity are deemed to be Officers.
In practice this is likely to include Chief Executive Officers and depending on their influence those in roles similar to Chief Financial Officers and Chief Operating Officers.
Review of governance procedures
Charities will be required to review their rules and/or governance procedures at least every three years. This is intended to promote good governance and ensure Officers are routinely ensuring prioritisation and fulfilment of their charity’s charitable purpose.
Accordingly, it’s a good time for charities to ensure their rules and governance procedures are fit for purpose and compliance. This is especially important for Incorporated Societies as they also need to review their rules to ensure they are eligible to re-register under the new Incorporated Societies Act.
Declining applications for registration
Under the Act, entities will receive two months’ notice from the Department of Internal Affairs (DIA) if their application for registration as a charity is intended to be declined, as opposed to 20 working days under the previous regime.
Applicants will also have longer to respond to such notice and will have two months (again, as opposed to 20 working days under the previous regime) to make submissions accordingly.
This amendment will increase the ability of applicant entities to meet the response timeframe and reduce the previous time-based barriers to appealing decisions.
A decision to decline an application for registration must be published publicly.
Disqualification of individual Officers
The Charities Registration Board will be able to disqualify individual Officers after completing an investigation for serious wrongdoing as opposed to deregistering the whole charity.
The Department of Internal Affairs (DIA) will be required to consult with charities before publishing significant guidance or recommendations.
Changes from 5 July 2024
The following changes come into effect on 5 July 2024:
Charities will be able to appeal a wider range of decisions made by DIA or the Charities Registration Board. These appeals will be made to a Taxation Review Authority (TRA) instead of the High Court in the first instance. For example, a deregistered charity may appeal their deregistration to the TRA. Further appeals to the High Court and Court of Appeal will still be permitted on points of law.
The intention of this amendment is to increase access to justice for charities, with the appeals process to the TRA being easier, more informal and more affordable. The timeframe for making an appeal is also increased from 20 working days to two months.
In-person appearance before the Charities Registration Board
Additionally, charities will now be able to appear in person before the Charities Registration Board, again emphasising the Act’s focus on increasing access to justice and supporting charities’ ability to appeal decisions against them.
As of 5 July, DIA have started working on non-legislative changes to accompany the Act. Namely, larger charities in tiers 1-3 (i.e., with annual operating payments over $140,000) will be required to report the reasons for their accumulated funds when filing their annual return. This amendment intends to contribute to increased transparency, supporting public confidence in large charitable organisations and the charitable sector more generally.
Very small charities
On the other hand, reporting requirements for very small charities will be reduced to lessen their administrative burden and enable focus on their charitable purposes. The regulations clarifying the financial threshold for very small charities are still being finalised.
Special thanks to Louisa Joblin for preparing this article.
We will continue to provide updates and guidance for charities as these changes come into effect. For more information about how the changes may affect you or your charitable entity, please reach out to one of our specialist not-for-profit lawyers.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.