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Productivity Commission recommends significant reforms to not-for-profit sector

5 min read

Putting the Commission’s case for reform, Presiding Commissioner, Robert Fitzgerald, said “the proposed reforms would bring together the multiplicity of governance, taxation, and fundraising regulatory requirements to create a much stronger foundation for this expanding sector. Further, proposed changes to government funding arrangements will reduce compliance costs and burdens, leading to significant gains in service delivery efficiency and effectiveness” .

Proposed new bodies

The report stated that the proposed changes would bring together a number of the roles that are currently undertaken by various agencies into a coherent structure, with only a minimum of new bodies to improve clarity and regulatory consistency for NFPs. For some this will lower their compliance burden, for others currently avoiding oversight, it will strengthen their accountability, albeit at some cost.

To consolidate regulatory oversight, and enhance public transparency, the Commission proposes a ‘one-stop shop’ for Commonwealth-based regulation in the form of a Registrar for Community and Charitable Purpose Organisations.

Registrar for Community and Charitable Purpose Organisations responsibilities:
– Incorporation and Regulation of Companies Limited by Guarantee, Commonwealth Incorporated Associations, Aboriginal Corporations, and any new NFP entities.

– Registration of Tax Concession entities charitable institutions and funds, PBIs, DGRs and other tax benefited bodies, Registration for national fundraising.

– Single Reporting Portal to drive common accounting and reporting reforms.

– Register cross jurisdictional fundraising organisations.

– Fast track harmonisation of state/territory fundraising legislation.

The Commission suggests that the proposed Office for Not-For-Profit Sector Engagement be located within the Prime Minister’s portfolio to give “a much needed focus to improving the sector’s engagement with the Government, and a business, and stimulate sector-wide policy development.”

Office for Not-For-Profit Sector Engagement responsibilities:
– Take the lead in reform planning and implementation

– Monitor and action the implementation of the National Compact

– Reform Government contracting

– Encourage social innovation funding

– Provide high level government leadership for a community and business engagement.

Other key recommendations
– Government funded services delivered through NFPs should be fully funded, based on independent costing assessments that is comprehensive in accounting for all costs including wages at market rates.

– Fast track the introduction of the Standard Chart of Accounts for reporting by NFPs and governments in all jurisdictions and extend the Standard Business Reporting Program to NFPs. Registrar to establish a single portal for public record corporate and financial information.

– Australian Government to establish a Commonwealth Associations Incorporation regime and all governments to allow easier migration from one legal form to another, and between jurisdictions.

– States/territories to reform Association legislation to reduce the reporting burden on small incorporated NFPs.

– Develop an Information Development Plan to assess the desirable frequency of satellite accounts for the sector and build databases for assessing the contribution the sector over time.

Government response

The Federal Government welcomed the release of the Productivity Commission’s draft report: Contributions of the Not for Profit Sector.

Minister for Community Services Jenny Macklin and Parliamentary Secretary for Social Inclusion and the Voluntary Sector Senator Ursula Stephens acknowledged the significant role the not for profit sector plays in Australia.

“The outcome of this important inquiry will help us identify ways to improve our partnership with the not for profit sector to ensure we maximise its contribution to Australia,” Ms Macklin said.

“The draft report identifies barriers which prevent the not for profit sector from getting on with the job. It is critical that we overcome these barriers, particularly for those organisations that deliver services in the community on behalf of the government.

“I encourage individuals and community organisations to make submissions or comment on the draft report to enable the Commission to capture a full range of views before finalising its report.”

Senator Stephens said the draft report provided a detailed insight into the current relationships between government, business and community organisations.

“Community organisations play a crucial role in combating social exclusion and enhancing the economic, social, cultural and environmental wellbeing of our society,” Senator Stephens said.

“We are also committed to improving the relationship between government and the sector through the development of a National Compact with the not for profit sector.”

Sector response


ACOSS has welcomed the draft reform’s release. CEO Clare Martin says the new system will lead to more efficient delivery of services through a reduction in red tape and a lessened compliance burden on social and community services.
“Smart governance practices, reporting and regulation should aid and enhance the operations of non profits not impose onerous burdens.

“The draft recommendations lift barriers faced by non profits so they can achieve more responsive and innovative service outcomes.

“Smart governance practices, reporting and regulation should aid and enhance the operations of non profits not impose onerous burdens.

“ACOSS will be consulting with our sector and we encourage organisations to send their responses to the Commission before 24 November.”


Infoxchange is in the process of finalising its response to the Productivity Commission draft report.

It has issued a preliminary response, in which it states it believes the role of information and communications technology (ICT) has been overlooked in improving the delivery of government-funded services.

“We must move beyond seeing communication technology as a tool, and recognise it as a strategic asset, an asset that underpins our effectiveness and defines how we function. ICT is a path to efficiency; it helps to shape our client services and ensures participation in our professional networks”.

“A digitally proficient organisation, with access and knowledge of necessary and useful ICT systems, is in a much better place to meet the needs required of not-for-profit organisations, as set out in the draft report. Digital proficiency will reduce the regulatory burden; streamline interaction with government, clients and professional networks; increase the capacity of community organisations; encourage innovation and growth; enhance not-for-profits’ role in the community and facilitate coordination across government and the community sector.

Infoxchange will submit that the importance of digitally proficient organisations must be central to any attempt to improve the efficiency of the Australian not-for-profit organisation, and thus should be reflected in the final report.

For more information on their submission, email

Social Traders

Social Traders, representing a coalition of organisations committed to supporting the growth of social enterprises in the Australian economy, has issued an extensive response to the Productivity Commission draft report.

Although the report does not address the Social Enterprise Sector in great detail, Social Traders felt it appropriate to respond to a number of the Commission’s recommendations as the NFP and Social Enterprise Sectors are strongly interconnected, and significant developments in the NFP Sector will no doubt impact on the work of social enterprises throughout the country.

“We believe that social enterprise can play a vital role in the future success of the NFP Sector through the development of new and innovative approaches to trading and service delivery, mixed economy approaches to NFP income sources, and the application of new business models within the NFP Sector,” said Social Traders.

Their Statement encompassed comments in the following areas:

  • Developing a framework for the not for profit sector
  • A social enterprise action plan
  • Working with governments
  • Accessing the right finance
  • Data, information and measurement
  • Developing the sector
  • Smarter and simpler regulation of the sector.

Social Traders ends their statement with a strong comment of support for the Productivity Commission Draft Report.

“We believe it is a timely piece of work and lays the foundation stones for an overarching strategic framework that can assist all stakeholders and improve the NFP Sector’s contribution to both the Australian economy and society. We strongly support the Productivity Commission’s recommendation on new models of engagement between Australian governments and the NFP Sector.

“We believe that the Social Enterprise Sector has the potential to add value to the work of the NFP Sector through new and innovative ways of doing business. The sector also has the capacity to engage with some of our most socially and economically disadvantaged communities and to come up with sustainable outcomes that can make a difference.

“Our proposal for a Social Enterprise Action Plan is about creating a platform that all critical stakeholders can use as the basis for an agreed medium to long term roadmap for the Social Enterprise Sector. We have experienced the energy and commitment that has taken the Social Enterprise Sector to where it is now. We believe the time is right to create the framework that will channel these qualities and move the Social Enterprise Sector forward as a new way of doing business in the Australian context.”

More information can be found at Social Traders
and in their full Submission to the Productivity Commission draft report.

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