Australia’s nonprofits need increased government funding to deliver better community services and should operate under improved regulatory oversight, the Productivity Commission said in its final report, released 10 February.
 

The commission recommended the government consider "financial innovation" in the sector - the establishment of an advisory panel chaired by the Treasury to consider and assess developing a sustainable market for nonprofit debt products. 

The government’s economic adviser proposed a 'one-stop shop' for Commonwealth-based regulation in the form of a registrar - a Registrar for Community and Charitable Purpose Organisations - that would fall under the auspices of ASIC.

The report, Contribution of the Not-for-Profit Sector, found Australia has 600 000 nonprofit organisations, which contributed $43 billion to Australia's GDP, growing at an annual rate of 7.7 per cent since 2000. But the rising cost of using volunteers, and Australians volunteering fewer hours, means that many non-profit groups are struggling, the commission found.

The commission criticised government contracts for ''overly prescriptive requirements, increased micro management, requirements to return surplus funds and inappropriately short-term contracts''.
 

On funding, nonprofit income would benefit from the promotion and support of payroll giving arrangements, while gift-deductible status should be extended to all tax-endorsed charities, the commission said.

 

“Specifically, the Australian government should provide funding for a national campaign to promote payroll giving and the associated tax benefits,” the commission said.  The government should encourage the establishment of payroll giving within all its agencies.

 

The commission said federal and local governments should require all programs of over $10 million delivering community services through nonprofit organisations to set aside a small proportion of the program budget (for example, one per cent) to a program

related social innovation fund. The fund should support trials of new approaches to service delivery, including evaluation of their cost-effectiveness.
 

The commission found the use of fringe benefit tax concessions by non-profit hospitals put private operators at a competitive disadvantage. But it warned that if the government decided to remove the exemptions, a long transition period would be needed because so many organisations were dependent on perks such meal allowances and car parking to subsidise low salaries.
 

Tax concessions presently extended to clubs were unfair, which could result on the sector losing $1 billion in additional tax concessions.
 

Social and sporting clubs, such as licensed football clubs, that provide member and community services, are treated as not-for-profit for some tax purposes. They pay less tax on income from pokies, while income made from members, and in some cases non-members, is tax-free. In 2009-10 those concessions were worth about $1.3 billion.
 

The commission said the tax breaks delivered clubs a "significant advantage" over hotels, pubs and entertainment venues, which did not share the same status. The breaks could not be justified because it was not the best way to deliver community services, as intended by the tax breaks.
 

The report called on the government to introduce a statutory definition of charities, as originally recommended in a 2001 inquiry, a move that could have an impact on campaign groups such as Greenpeace.
 

The Australian Council of Social Services (ACOSS) welcomed the report and called on the federal government to implement key reforms, including the establishment of an independent regulator, and to address funding of the community sector, including payment of market wages.
 

"Community service organisations provide vital services such as employment assistance, crisis housing, emergency financial help, and disability support services. They also provide important policy development and advocacy," said Clare Martin, CEO of ACOSS.
 

The minister for community services, Jenny Macklin, said: "The draft report identifies barriers which prevent nonprofit organisations 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".

The government said it would carefully consider the detail of the report.