Pressure will mount on the Albanese government to remove the privileges that apply to religious charities following recommendations from the nation’s Productivity Commission.

In a draft report released last week, the Productivity Commission called for the removal of the concept of ‘Basic Religious Charities’ (BRCs) in order to enhance “public transparency and accountability” in the charities system.

The report said that the “unjustified reporting exemptions” to governance and reporting standards created “a gap” in the regulatory framework.

Removing the exemptions would mean such religious charities would, just like other charities, be required to provide financial information to the Australian Charities and Not-for-profits Commission (ACNC).

The draft report was published as part of the Productivity Commission’s inquiry into philanthropy, with further public consultation taking place ahead of a final report in May next year.

Draft recommendation 7.1 calls for a “more transparent and consistent approach to regulating basic religious charities”, and says:

The Australian Government should amend the Australian Charities and Not-for-profits Commission Act  2012 (Cth) to remove the concept of ‘basic religious charity’ and associated exemptions, so all charities registered with the Australian Charities and Not-for-profits Commission have the same governance obligations and reporting requirements proportionate to their size.

In a submission to the inquiry earlier this year, the Rationalist Society of Australia called for the removal of religious exemptions, arguing that they undermined the integrity of the charities system.

On multiple occasions in its draft report, the Productivity Commission referenced the RSA’s submission in noting concerns about different governance and reporting requirements contributing to a lack of transparency and accountability in the charities system.

At an RSA Webinar in June, researcher Dr Philip Saj said the concept of ‘Basic Religious Charities’ had been inserted into the ACNC Act in 2012 during the legislative process at the behest of religious interests and without public commentary or justification.

He said the provision was at odds with one of the primary objectives of the ACNC Act – which was to promote “public trust and confidence” in the charity sector.

Through his research, Dr Saj found that 82 per cent of BRCs were small (revenue below $250,000), 14 per cent were medium (between $250,000 to $1 million) and 3.6 per cent were large (more than $1 million).

At Senate estimates last year, officials confirmed that “potentially billions” of dollars were going unreported in the economy because BRCs – accorded charity status solely for ‘advancing religion’ – did not have to submit financial information to authorities and or meet other governance standards.

According to the Productivity Commission’s draft report, 94 per cent of BRCs chose not to provide voluntary financial information in their annual information statement in 2021.

RSA president Meredith Doig has welcomed the Productivity Commission’s recommendations.

“Clearly, the writing is on the wall for the privileged category of ‘Basic Religious Charities’. The Australian community will be watching closely to see if the Albanese government and the assistant minister responsible for the charities sector, Andrew Leigh, listen to the Productivity Commission or special religious interests,” she said.

The Productivity Commission also recommended reforms of the Deductible Gift Recipient (DGR) system, including to exclude all activities for the purpose of ‘advancing religion’.

Si Gladman is the Campaigns & Communications Coordinator for the Rationalist Society of Australia. He also hosts ‘The Secular Agenda’ podcast.

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