Most experts agree that the next Federal election must take place before 21 May 2022. Elections can be confusing territory for charities and the philanthropic foundations and individuals who support them. And the need for open communication, finesse and a clear-eyed view of the rules has just been sharpened. Let’s canvass the situation and look at what charities and philanthropists need to think about as the election looms.
The case for advocacy
The Australia Charities and Not-for-profits Commission (ACNC) recently confirmed1 that advocacy and campaigning are legitimate activities for charities, with Commissioner Dr Gary Johns writing they are, “important to the work of many of Australia’s registered charities…”
For many charities, campaigning for social and policy change is the essence of what they do. They are seeking systemic social change by addressing the structures, laws and rules that create social problems – or prevent them being fixed. They are building a fence at the top of the cliff rather than stationing an ambulance at the bottom.
Charities can campaign if the advocacy work they undertake is done to further their charitable purpose and is not prevented under their governing documents. What they cannot do is undertake activities which have a purpose of promoting or opposing any particular political party or candidate, engage in or promote activities that are unlawful or engage in or promote activities that are contrary to public policy. That’s crossing a line – into ‘a disqualifying political purpose’ – and doing so could mean losing registration with ACNC.
Changes to the Commonwealth Electoral Act
The recent changes (December 2021) to the Commonwealth Electoral Act mean more charities may be required to register with the Australian Electoral Commission (AEC) and make disclosures about their finances and donors. It’s a complex area and one where charities need to get their own legal advice but the broad thrust is as follows:
A third party
- Charities that spend money campaigning or advocating on ‘electoral matters’ – that is communications where the dominant purpose is to influence how people might vote – may have engaged in ‘electoral expenditure.’
- If an organisation spends more than $14,500 on electoral expenditure for the 2021/22 financial year, they’re qualified as a ‘third party’ and must submit a return to the AEC by 17 November 2022. It must submit details of any gifts worth over $14,500 that were used for electoral expenditure.
A significant third party
Charities are classified as a ‘significant third party’ if the amount of electoral expenditure incurred by the charity:
- is $250,000 or more in a financial year (or in any year in the previous three financial years), or
- is $100,000 or more during a financial year and during the previous financial year was at least one-third of the revenue of the entity for that year.
As a significant third party they need to formally register with the AEC. In their annual return to the AEC, the charity must disclose the details of any donations greater than $14,500 (in cash or kind) if the money was used (all or part) to create or communicate electoral matter.
Transparency and trust – What Philanthropists need to know
Charitable Trusts, Private Ancillary Funds and Public Ancillary Funds are all charities and their distributions to programs, organisations and projects fall within the new registration requirements of the Electoral Act.
Jane Magor, National Manager, Philanthropy & Non Profit Services at Perpetual says the disclosure question is an important one for donors and charities. “If donors are going to make grants to a charity over FY 21/22 that will add up to $14,500 or more then they need to consider whether they are comfortable for their details to be disclosed to the AEC and may be publicly available on the AEC’s Transparency Register.”
“Some philanthropists may consider this a concern, however others who are passionate about advocacy and have an interest in this upcoming election will accept that there is a chance that the details of their charitable foundation may be made public on the AEC’s Transparency Register.
It’s therefore important for donors to be clear about the intent of their grants. For charities, it’s equally important to have open and honest conversations with donors about the use of their donated funds and their comfortability, or lack thereof, with these donations becoming public.”
For philanthropists, it’s critical they tap into their trusted advisers for advice and guidance on how to communicate with and guide their beneficiary organisations around their wishes related to funding expenditure.
WANT TO LEARN MORE?
Get in touch with our nor-for-profit and philanthropy specialists via 1800 631 381, firstname.lastname@example.org or by submitting the form below.