How the Coalition ignored experts to protect religious charities

There have been multiple calls over the years to abolish financial exemptions for certain religious charities, and yet they remain.

This is part of a series on charities in Australia. Read more of the series here.

Having come into being as a political fix in the dying months of the Rudd/Gillard/Rudd government, the special deal for religious interests — the basic religious charity exemption (BRC) — has survived for a decade under the grace and favour of successive Coalition governments that declined to act on recommendations from academics, lawyers and not-for-profit tax specialists.

Calls to end the BRC exemption reached a peak in 2018, coinciding with the end of the Royal Commission into Institutional Responses to Child Sexual Abuse. One of its six commissioners, Robert Fitzgerald, said the royal commission had demonstrated a need for “greater transparency and accountability in relation to all non-profits, but particularly charitable organisations”.

Fitzgerald is uniquely qualified to offer a view. A former productivity commissioner, he was chair of the Australian Charities and Not-for-profits Commission’s (ACNC) advisory board when it was established in 2012. Fitzgerald has also served on the boards of Catholic Church charitable organisations, such as Caritas Australia.

Fitzgerald articulated his reasoning in an address he gave in February 2018 to national access to justice charity Justice Connect. His address is worth quoting at length because it demonstrates exactly the reasoned evidence — and a path to reforming religious-run organisations — the government chose to ignore, even as it offered apologies and compensation for the behaviour of religious organisations. (Crikey has edited the address for length and clarity.)

“How is it possible that so many not-for-profit organisations who talk about justice, integrity and truth abandoned all of those values so quickly when adults came forward to disclose the abuse that had happened to them, as children, in the royal commission?

“For me, for the whole five years of the royal commission that was that question.

“The answer became clearer and clearer as we went on. And that was that the three elements that are essential to the good functioning of an organisation — governance, leadership and culture — were failing.

“How do we change institutions that have been so trusted by the Australian community into safer, healthier places, not only for children, but for all those that come to those institutions with vulnerabilities? That is the challenge that we now face. It’s not just about child sexual abuse. It’s really about how we govern for the vulnerable.

“And that affects the Catholic Church and the Anglican Church and the Uniting Church. And it affects the Boys Scouts and the Girl Guides, and it affects Swimming Australia and the Olympic committee. And it affects the Defence Force of Australia. How will we shape those elements to actually create that environment?”

“I think the challenge here really is very significant: that organisations that were found wanting in the royal commission cannot stand in the marketplace of values without also embracing fully and wholeheartedly the value of transparency and accountability. It is inconsistent.

“Now, let me be absolutely clear. This is not an attack on religion, far be it from it. Those that know me, know me, how committed I am to faith and to religion. And I remain no less committed to those today than I was five years ago, despite all of what I’ve heard in the royal commission. Nevertheless, you cannot sit there for five years and listen to the organisations with which you are associated being so excruciatingly exposed and not come to the view that transparency and accountability together with good governance is in fact the only way forward. And I hope they and governments will listen to that.”

The McClure report

In 2018 more calls to abolish the BRC exemption emerged during a government-commissioned review into the ACNC’s operations. The review was chaired by Patrick McClure, former head of Mission Australia and the Society of St Vincent de Paul.

The Prime Minister’s Community Business Partnership — a 10-member group of business and community leaders working in philanthropy — argued there should be “a level playing field” in respect of all charities “without regard to the religion or beliefs of the [not-for-profit] and its purpose”.

“Greater transparency across religious charities is to be encouraged to ensure greater public trust and confidence. We therefore suggest that the review panel should review the current blanket exemption that applies to basic religious charities to ensure a fair and equitable regulatory treatment of charities across the sector,” it said in a submission to the McClure review.

The review was tabled in August 2018, the same month that Malcolm Turnbull was removed as prime minister and replaced by Scott Morrison.

The government then took 18 months — until March 2020 — to respond to the review’s recommendations. It dealt with the BRC question in a single line:

“The government has no plans to review the exemptions for basic religious charities.”

Time’s up

Chris Povey, CEO of Justice Connect, told Crikey that now was the right time to put an end to the BRC exemption.

“The objects of the ACNC Act include supporting public trust and confidence in charities. Registered charities get the benefit of tax concessions and the flip side of that is the responsibility to report and provide accountability about how funds are used” he said.

“One of the major problems is that the BRC exemption is not calibrated for the size of the organisation. You can be very large and get the exemption, which means you don’t have to comply with the governance standards that apply to every other registered charity.”

“The arguments are straightforward,” he said. “It was probably never a sound policy and nearly a decade on we know that even very small volunteer-run groups don’t find compliance with the tiered reporting obligations and the governance standards to be an issue. It’s free to lodge annual reports, and support is provided, including by us. The use of the ACNC’s charity register has grown exponentially and people who are donating money should be able to have basic information about all charities, no matter what their particular charitable purpose.”

The ACNC position

The government is seeking a new commissioner to run the ACNC following the resignation of Dr Gary Johns in June, shortly after the election of the Albanese government.

The appointment of Johns, a former Labor politician, by the Coalition in 2017 was highly controversial. It was described as “bizarre” by the chief executive of the Communities Council of Australia, a peak body for not-for-profit organisations. Johns had previously been head of the Institute of Public Affairs’ NGOWatch, which investigated charities the IPA thought were targeting businesses.

At the time of Johns’ resignation, Assistant Minister for Competition, Charities and Treasury Andrew Leigh declared that the Coalition’s “nine-year war on charities” was over.

Crikey yesterday asked Andrew Leigh’s office if the minister had any plans to address the appropriateness of the BRC exemptions, given the criticism of the exemptions, especially in light of the work of the Royal Commission into Institutional Responses to Child Sex Abuse. However, the minister’s office said it would not be able to provide an answer for today’s edition given the “short notice”. Crikey’s request remains open.