New Law for ‘Not for Profit’ Associations and Clubs - Model Rules in the Associations Incorporation Act 2015
April 19, 2023
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There will be few of us whom have never had any involvement with an incorporated association or club. In Western Australia they include groups ranging from the local country football club to our very own Farmers Federation. It is significant to remember that the amazing volunteer fire-fighters who have bravely fought to protect home and hearth throughout this terrible bushfire season are members of a ‘not for profit’ association.
At present many social, sporting and community groups are incorporated under the Associations Incorporation Act 1987 however, this situation is due to change from 1 July 2016 with the proposed introduction of the Associations Incorporation Act 2015. We will briefly examine some of the key changes to the law due to be enacted soon.
MODEL RULES
The new Act will introduce a set of Model Rules designed to help simplify the process for incorporation and set out minimum standards for accountability. Existing associations’ constitutions may need to be modified to successfully reflect the new legal requirements.
The Model Rules are not compulsory but must be adopted if the existing association’s laws do not comply with the new laws.
Compliance will be essential for organisations to demonstrate eligibility to be considered a ‘not for profit’ incorporated association. Associations will have three years from the time the new law commences to ensure that either their rules are consistent with the new law or to adopt the new model rules.
COMMITTEE MEMBERS OBLIGATIONS
The new Act codifies the obligations that already exist within the common law in regards to committee members. They include provision for: the duty of care and diligence; the duty to act in the best interests of the association and for a proper purpose; and the duty of a committee member not to misuse their position or information. Other changes include the introduction of stricter eligibility requirements for those people seeking a seat on management committees.
ACCOUNTABILITY
The new Act will require incorporated associations to demonstrate different levels of financial accountability based upon their revenue. There will be a three tired system which will create different reporting requirements dependent upon the association’s revenue.
Tier 1 associations have revenue of less than $250,000. They can chose to prepare basic financial statements with no independent review or audit. Tier 2 associations are those with revenue from $250,000 to $1,000,000. They must prepare financial reports in accordance with Australian Accounting Standards and these reports must be reviewed by a member of a professional accounting body. Tier 3 associations are those with revenue of more than $1,000,000. These associations must prepare financial reports in accordance with Australian Accounting Standards and reports must be audited by a member of a professional accounting body holding a public practicing certificate.
WHAT NEXT?
The new Act is aimed to improve accountability, minimise administration and compliance costs, and align our State legislation with contemporary laws already existing in other Australian jurisdictions.
To be ready for the changes coming there are a number of things you can do. The first step is to find out more about the changes by viewing and downloading a copy of the Associations Incorporation Act 2015 from the State Law Publisher website. Secondly, check that the details of your association are up to date at ‘Associations Online’ via the Department of Commerce and sign up to their newsletter. Thirdly, start talking to your members about the rule changes you will need to make.
These associations and clubs contribute to rural and farming communities’ vibrancy and engagement with the world around them. For the work of these groups to continue without disruption, it is important that these new laws are given proper consideration.
For further information and guidance contact Phil at (08) 9321 5451
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