The Abbott Government plans to kill off Australia's first charities watchdog just as it starts to make some progress. Given the billions in tax concessions these groups get, why nobble the regulator? Sarah Dingle writes.

When it comes to giving to charity, Australians like to think of themselves as generous. We "dig deep". That's more true than we know.

As taxpayers, we give generously to charities, so much so that the charities and not-for-profit sector is now worth $55 billion. On top of that, we keep giving, in the form of billions of dollars in tax concessions - and we're just as lavish with the title of "charity" itself.

How many charities and not-for-profit organisations are there in Australia? Hundreds? A couple of thousand? Have a guess.

The answer is more than 60 thousand. And prior to 2012, you didn't have to do much to prove you were a charity. In the first instance, you had to be registered by the Tax Office. After that - absolutely nothing at all, according to Professor Ann O'Connell, a taxation expert from Melbourne University.

"They didn't have to do anything after that," she says.

"So they might have applied for endorsement back in 2000 and then simply have had no other contact or reporting obligations or the need to get in touch with any government body again."

Charities didn't have to file tax returns or even stay in contact with the ATO.

In return for charities enjoying tax concessions, Professor O'Connell believes there's a basic expectation that they will at least let the government know their current address.

"Well, I think it's of concern that those bodies were allowed to continue as income tax exempt, with no obligation to provide any details, even change of address details, that would enable them to be contacted," she says.

One of the problems with having tens of thousands of entities with no national regulator, no reporting obligations and generous tax concessions was no one knew just how big those concessions were.

In 2010, the Productivity Commission had a stab at it, estimating not-for-profit organisations could be enjoying annual tax concessions of anywhere between $4-$8 billion. And $8 billion is a lot of money. That's billions of dollars being taken out of the system. It may all be legitimate, but you'd think at the very least we would know how much that is.

The other problem with charities not having to report to the Tax Office or to anyone is that no one knows if they're actually carrying out a charitable purpose, or if they even still exist.

On the December 3, 2012, the Australian Charities and Not for Profits Commission began operations. The ACNC is Australia's first charities regulator - the only national body checking up on whether charities are carrying out their stated charitable purpose.

One of their main initiatives is creating a national register. The aim is to create Australia's first up-to-date list of charities. It also includes basic information, including financial information, about each entity.

The ACNC has been trying to work out which of the country's 60,000 charities actually still exist - and carry out their charitable activities. It's a massive project that the Commission, appropriately, has called "Proof of Life".

Unfortunately, not all the signs are vital ones. From July 8 the ACNC is set to publish the names of charities it's about to strike off the register, which means they'll lose their tax concessions.

ACNC commissioner Susan Pascoe says her organisation has already identified hundreds of defunct charities - all still eligible for those concessions.

"What we will be doing in early July, is that we'll publish a list of charities ... that we believe have ceased operating. We'll then, with a period of time for people to notify us, in case we've somehow managed not to locate them with all those efforts, but they then will be removed from the register," she says.

That's hundreds of charities the ACNC hasn't been able to even contact, despite trying to do so for one-and-a-half years.

But there's more - the ACNC's total list of lost charities, which it may ultimately deregister, numbers in the thousands.

"That could be anything in excess of five thousand charities," Susan Pascoe says. As to whether it's likely any of those five thousand missing charities are using their charitable status as a loophole to conduct scams: "It's possible," she says.

"This piece of work will definitively identify those that are operating, and operating for charitable purposes and therefore can legitimately continue to receive tax concessions, and those that can't."

However, time is running out for Proof of Life project itself.

Axing the charities regulator was a policy the Federal Coalition outlined well before last year's election, as part of their wider agenda of cutting red tape. In March, on "Repeal Day", the Social Services Minister, Kevin Andrews, tabled legislation to abolish the ACNC.

The bill was referred to the Senate Economics Committee. A few weeks ago, that committee delivered a report recommending the ACNC be axed (with Labor and the Greens dissenting).

The bill will now go before the new Senate, and it's likely the PUP Senators will have the deciding vote. However, the Minister has already begun the consultation process about what comes after the ACNC. Andrews says he wants an organisation called the Civil Society National Centre for Excellence.

"That will involve an organisation that we set up and then eventually hand over the ownership and responsibility for it to the civil society sector, and that will be there to do things like encourage better standards of governance, of training of board directors, et cetera," he says.

The key word is "encourage" - the Minister says the Civil Society National Centre for Excellence won't be a regulator. Key functions, like registration, will go back to the ATO and ASIC.

"We believe that we should start from a point of trusting the sector, not distrusting the sector. That we should be removing regulation, not adding regulation to the sector," Andrews says.

That leaves Australia with a $55 billion charities and not-for-profit sector of about 60,000 registered charities, some 5000 of which may not be legitimate, in total collecting billions of dollars in tax concessions. And before the ACNC has finished Proof of Life, the ACNC itself may be killed off. So who can tell you where your dollar goes?

It's something to think about the next time you dig deep.

Sarah Dingle's full investigation "Who Killed the Charity Watchdog?" will air on Background Briefing this Sunday, July 6 on Radio National at 8:05am, and again after the news at 1pm on NewsRadio.

It will be re-broadcast Tuesday, July 8 at 2pm, with the Reverend Tim Costello as guest tweeter.

Sarah Dingle is a reporter for ABC Radio Current Affairs. View her full profile here.