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Explainer: Why is the religious organisations’ charitable status under threat?

Recommended changes to charity regulations could result in interference with religious appointments and school funding

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The charitable status of some religious organisations may be under threat. Photo: Unsplash

How many times have you seen extreme comments online calling for churches, religious schools and hospitals to be stripped of their “privileged” charitable status?

The Productivity Commission wants to advise the Federal Government to step towards doing just that.

In a draft report it proposes scrapping a religious exemption with the aim of treating all charities the same based on their size.

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But not all charities are the same and this would drag more than 20 parishes in the Archdiocese of Sydney into costly compliance and reporting burdens.

It also wants to change rules around tax-deductibility that would make donating or gifting to faith-based schools much less attractive—making the choice of Catholic schooling harder for many cash-strapped parents and potentially affecting Australian’s education standards.

What is a Basic Religious Charity?

It’s a charity registered with the Australian Charities and Not-for-profits Commission (ACNC) with the stated purpose of “advancing religion.”

It meets six strict criteria—including being a member of the National Redress Scheme.

Charities defined as a BRC do not have to include financial information in annual information statements, submit annual financial reports, or comply with ACNC’s governance standards.

Some of these standards conflict with Catholic governance requirements under canon law, particularly the way priests and bishops are appointed and are responsible for their parishes and dioceses.

But BRCs must still meet all other requirements, including submitting an annual information statement each year which is published on the ACNC website.

BRCs include the Catholic Archdiocese of Sydney and its parishes, the Catholic Enquiry Centre and peak body Catholic Religious Australia.

What does Deductible Gift Recipient status provide?

When a donor makes a gift or contribution to a DGR-endorsed charity, they may be able to claim a tax deduction. It means, importantly at a time with huge cost-of-living pressures, there will be more people willing to give a larger donation or gift than they otherwise would be able to afford.

What’s being proposed?

The Productivity Commission’s draft report acknowledges the value of charities and proposes reforms it says will double philanthropic giving by 2030.

But the Australian Catholic Bishops Conference and other religious groups, charities and faith-based schools say some proposals including scrapping the Basic Religious Charity category would be counter-productive; increasing their costs, gutting their ability to recruit and resource volunteers such as chaplains and catechists, and interfering unnecessarily with their governance.

“We are very happy to comply both with our own church canon law and with just state laws,” Michael Digges, Archdiocesan Executive Director of Administration and Finance told The Catholic Weekly.

“But I’m concerned about the 25 parishes in our archdiocese which, say, might have some small rental income or early childhood centre or that have very generous parishioners.

“That can tip them over a threshold into the ‘medium’ size category, which without the BRC exemption, would mean they have an additional reporting burden which translates into more costs for them.”

It might also mean the potential for government interference with religious appointments, which the Australian Catholic Bishops Conference argued in a submission is unconstitutional.

Under canon law bishops and priests are responsible spiritually and materially for their dioceses and parishes, but not in the same way the ACNC defines “responsible persons” for charities and not-for-profits.

In theory, without the religious exemption, this means that the ACNC could have the power to force the removal of—for example—Archbishop Anthony Fisher OP as a legally “responsible” person for the Archdiocese of Sydney, or a parish priest as the legally “responsible” person for his parish if it was considered not to be meeting ACNC obligations.

The Productivity Commission also wants to extend eligibility for tax-deductible donations to many more groups—but withdraw school building funds and religious education in public schools from the scheme.

It would exclude from DGR status some childcare and aged care services, primary, secondary, religious and other informal education activities, where religious groups are often of service, and any activities advancing religion.

“Religious organisations play an important role in many people’s lives and communities across Australia. However, the Commission does not see a case for additional government support for the practice of religion through the DGR system,” the draft report says.

Jacinta Collins, Executive Director of the National Catholic Education Commission, slammed the schools’ building funds proposal as an “out-of-scope provocation.”

The Productivity Commission should look for ways to broaden the ability of people to give, not undermine them, she said.

“For Catholic schools it will add a further financial burden on families who contribute to their school education and are already dealing with significant cost-of-living pressures,” she said.

She said the DGR facilitates families of students enrolled in Catholic schools to take on almost 90 per cent of the funding required to support their school buildings and capital works—contributing to the nation as a whole.

All up, some proposals in the draft report may cripple the church’s ability to operate effectively, shifting a greater share of the cost of (and control over) the country’s needs, such as quality education, to governments and wealthy individuals and communities.

And they don’t fully take into account the fact religious charities don’t operate strictly in terms of financial arrangements but are about the embodiment and transmission of faith and good works spanning generations for the benefit of all, not just believers.

What happens next?

Submissions and public hearings have closed and the Productivity Commission is due to make its final report back to the government by 11 May.

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