CHARITIES BILL 2013 Explanatory Memorandum
CHARITIES BILL 2013
2010-2011-2012-2013
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CHARITIES BILL 2013
CHARITIES (CONSEQUENTIAL AMENDMENTS AND TRANSITIONAL
PROVISIONS) BILL 2013
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Definition of charity ........................................................ 5
Chapter 2 Transitional and consequential amendments .............. 33
Chapter 3 Statement of Compatibility with Human Rights ............ 43
Index ..................................................................................................... 49
Glossary
The following abbreviations and acronyms are used throughout this
combined explanatory memorandum.
Abbreviation Definition
ACNC Australian Charities and Not-for-profits
Commission
ACNC Act Australian Charities and Not-for-profits
Commission Act 2012
Charities Definition Inquiry 2001 Report of the Inquiry into the Definition
report of Charities and Related Organisations
Consequential Amendments Charities (Consequential Amendments and
Bill Transitional Provisions) Bill 2013
ITAA 1997 Income Tax Assessment Act 1997
1
General outline and financial impact
Definition of charity
The Charities Bill 2013 and the Charities (Consequential Amendments
and Transitional Provisions) Bill 2013 introduce a definition of charity
and charitable purpose for the purposes of all Commonwealth legislation.
The Government announced in the 2011-12 Budget that it would
introduce a statutory definition of charity based on the 2001 Report of the
Inquiry into the Definition of Charity and Related Organisations, also
taking into account later judicial decisions.
The meaning of charity and charitable purpose has not previously been
comprehensively defined in statute for the purposes of Commonwealth
law. The meaning has been largely determined based on over 400 years
of common law. The statutory definition generally preserves the common
law principles by introducing a statutory framework based on those
principles but incorporating minor modifications to modernise and
provide greater clarity and certainty about the meaning of charity and
charitable purpose.
Date of effect: The definition applies from 1 January 2014.
Proposal announced: The introduction of a statutory definition of charity
was announced by the then Assistant Treasurer and the then Minister for
Human Services and Social Inclusion's Joint Media Release No. 077 of
10 May 2011. The Assistant Treasurer announced the start date of
1 January 2014 in Media Release No. 045 of 8 April 2013.
Financial impact: Unquantifiable but small revenue cost impact.
Human rights implications: This Bill does not raise any human rights
issues. See Statement of Compatibility with Human Rights -- Chapter 3.
Compliance cost impact: The introduction of a statutory definition of
charity is not expected to have any significant compliance cost impacts,
apart from some minor transitional costs for some entities which may
need to revise their registration subtype with the Australian Charities and
Not-for-profits Commission because the Bill lists more specific categories
of charitable purposes. Entities will have 18 months to revise their
registrations. The Bill should reduce compliance costs over the medium
to long term.
3
Chapter 1
Definition of charity
Outline of chapter
1.1 This Chapter explains the context of the statutory definition of
charity, the elements of the definition, charitable purposes, and
disqualifying purposes.
1.2 References in this Chapter to the `Bill' are references to the
Charities Bill 2013 unless otherwise stated.
Context of reform
1.3 The meaning of charity and charitable purpose has not been
comprehensively defined for the purposes of Commonwealth law; rather
the meaning has largely been determined from the common law.
1.4 The Extension of Charitable Purpose Act 2004 extended the
common law meaning for Commonwealth purposes to include child care,
self-help bodies and closed or contemplative religious orders.
1.5 The common law meaning has developed over 400 years,
largely based on the Preamble to the Statute of Charitable Uses (known as
the Statute of Elizabeth), enacted by the English Parliament in 1601.
Charitable purposes are commonly categorised, following the terminology
of the Commissioners for Special Purposes of Income Tax v Pemsel
[1891-1894] All ER Rep 28 (Pemsel case), as the four `heads of charity':
· the relief of poverty;
· the advancement of education;
· the advancement of religion; and
· other purposes beneficial to the community.
1.6 For a purpose to be charitable within the technical legal meaning
of charitable under the common law (which overlaps but does not fully
coincide with the popular or dictionary meaning), the purpose must be
`within the spirit and intendment' of the Statute of Elizabeth, and for the
public benefit.
1.7 The development of the definition of charity and charitable
purpose through case law based on the spirit and intendment of the Statute
of Elizabeth has resulted in charity law that is in some areas unclear,
inconsistent, or does not adequately address matters relevant to the
contemporary Australian charity sector.
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1.8 A statutory definition is intended to provide greater clarity and
certainty for charities, the public and regulators in determining whether an
entity is charitable and consequently reduce the need for costly litigation.
1.9 The statutory definition provides a framework for considering
charity and charitable purposes. However, the definition retains the
flexibility inherent in the common law that enables the courts, as well as
Parliament, to continue to develop and extend the definition to other
charitable purposes beneficial and relevant to contemporary Australia
within the statutory framework. This will ensure that the definition
remains appropriate and reflects modern society and community needs as
they evolve.
1.10 The statutory definition applies to all Commonwealth
legislation. It may provide a common framework which States and
Territories may adopt over time, thereby further reducing complexity and
compliance costs for Australian charities.
1.11 The Commissioner of the national regulator for the not-for-profit
sector, the Australian Charities and Not-for-profits Commission (ACNC),
has predominant responsibility for administering this definition through
the Australian Charities and Not-for-profits Commission Act 2012.
1.12 The Bill is informed by the 2001 Report of the Inquiry into the
Definition of Charities and Related Organisations (Charities Definition
Inquiry report), which expressed principles underlying charity and
charitable purpose, and the 2003 Board of Taxation's Consultation on the
Definition of a Charity: A Report to the Treasurer. It also takes into
account subsequent judicial decisions.
1.13 Significant court decisions since the Charities Definition Inquiry
report which have developed the meaning of charity include:
· Aid/Watch Incorporated v Federal Commissioner of
Taxation, which extended the circumstances in which a
charity may advance public debate;
· Federal Commissioner of Taxation v Word Investments Ltd,
which found that activities undertaken by an entity need not
be intrinsically charitable for the entity to be a charity so long
as they are directed to aiding or furthering the charitable
purpose; and
· Central Bayside General Practice Association Ltd v
Commissioner of State Revenue, which developed the
meaning of government control of an entity and clarified
boundaries to the definition.
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Definition of Charity
1.14 In addition to the Charities Definition Inquiry report, a range of
later reports and inquiries have recommended a statutory definition.
These include:
· the 2010 Australia's Future Tax System Review;
· the Productivity Commission's 2010 Research Report
Contribution of the Not-for-Profit Sector;
· the Senate Economics Legislation Committee Inquiry into
the Tax Laws Amendment (Public Benefit Test) Bill 2010;
and
· the 2011 Final Report of the Scoping Study for a National
Not-for-profit Regulator.
1.15 The Government has conducted public consultation on a
discussion paper, A Definition of Charity, and on an exposure draft of this
Bill, and has consulted extensively with the not-for-profit sector in the
development of the definition.
Summary of new law
1.16 The definition of charity and charitable purposes has been
generally based on existing common law principles with minor
modifications to modernise and clarify the common law. To be a charity,
an entity must be not-for-profit and have only charitable purposes (other
than incidental or ancillary purposes that further or aid the charitable
purpose) that are for the public benefit.
1.17 The categories of charitable purposes described in the Bill
broadly follow the categories described in the Charities Inquiry report in
grouping purposes found by the courts to be charitable. In addition, the
Bill incorporates purposes specified in the Extension of Charitable
Purpose Act 2004, makes further minor extensions to charitable purposes,
and modernises the language and categories.
Comparison of key features of new law and current law
New law Current law
Definition
The Bill defines charity and The meaning of charity and charitable
charitable purpose. purpose is determined from the
common law and the Extension of
Charitable Purpose Act 2004.
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New law Current law
Not-for-profit and for the public benefit
Only charitable purposes
An entity must have only charitable An entity must have only charitable
purposes and must not have an purposes and must not have an
independent, non-charitable purpose. independent, non-charitable purpose.
An entity may have incidental or An entity may have incidental or
ancillary purposes that may be ancillary purposes that may be
non-charitable when viewed in non-charitable when viewed in
isolation but which must aid or isolation but which must aid or
further the charitable purpose. further the charitable purpose.
Purposes for the public benefit
The purpose of preventing and The purpose of relieving poverty, the
relieving sickness, disease or human needs of the aged and impotent, the
suffering, the purpose of advancing purpose of advancing education and
education, the purpose of relieving the purpose of advancing religion are
the poverty, distress or disadvantage presumed as beneficial, unless there
of individuals or families, the purpose is evidence to the contrary.
of caring for and supporting the aged
or people with disabilities, and the
purpose of advancing religion are
presumed as being for the public
benefit, unless there is evidence to the
contrary.
An entity that directs benefits to An entity that directs benefits to
persons who are related may fail the individuals who are related may fail
public benefit test. However, where the public benefit test.
the purpose of an entity that has
land-rights related assets would fail a
public benefit test solely because the
entity directs benefits to indigenous
Australians who are related, the
purpose is treated as being for the
public benefit.
The public benefit test does not apply The Extension of Charitable Purpose
to open and non-discriminatory Act 2004 provides that open and
self-help groups, closed or non-discriminatory self-help groups
contemplative religious orders or and closed or contemplative religious
where the purpose is directed to one orders are deemed to be for the public
or more individuals in necessitous benefit.
circumstances, as described in the
Income Tax Assessment Act 1997
(ITAA 1997).
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Definition of Charity
New law Current law
Disqualifying purpose
A purpose of engaging in, or A purpose of engaging in, or
promoting, activities which are promoting, activities which are
unlawful or contrary to public policy unlawful or contrary to public policy
is disqualifying. Public policy refers is disqualifying.
to such matters as the rule of law and
system of government. It does not
refer to government policies.
A purpose of promoting or opposing A purpose of promoting or opposing
a political party or candidate is a political party or candidate is
disqualifying disqualifying.
Charitable purposes
Categories of charitable purposes are: Charitable purposes established under
· advancing health; the common law are:
· advancing education; · the relief of the needs of the poor,
· advancing social or public aged or impotent;
welfare; · the advancement of education;
· advancing religion; · the advancement of religion;
· advancing culture; · other purposes beneficial to the
· promoting reconciliation, mutual community that are within the
respect and tolerance between spirit and intendment of the
groups of individuals that are in Statute of Elizabeth; and
Australia; · purposes charitable under the
· promoting or protecting human Extension of Charitable Purposes
rights; Act 2004.
· advancing the security or safety of
Australia or the Australian public;
· preventing or relieving the
suffering of animals;
· advancing the natural
environment;
· any other purpose beneficial to the
general public that may
reasonably be regarded as
analogous to, or within the spirit
of, the above purposes;
· promoting or opposing a change
to any matter established by law,
policy or practice in the
Commonwealth, a State, a
Territory or another country, in
furtherance or protection of one or
more of the above purposes.
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New law Current law
Charitable purpose extends beyond The common law limits charitable
the relief of individual distress after a purpose to the relief of individual
disaster to include assisting with the distress after a disaster.
rebuilding of a community within
specified limits.
Charity-like government entities
Funding charity-like government Funding charity-like government
entities does not prevent a entities prevents a contributing fund
contributing fund from being from being a charity for the purposes
charitable for the purposes of of Commonwealth law.
Commonwealth law.
Cy pres schemes
A trust subject to a cy pres (or A trust subject to a cy pres (or
similar) scheme that leaves only similar) scheme that leaves only
charitable purposes may be charitable charitable purposes may not be
under Commonwealth law. recognised as charitable under
Commonwealth law.
Detailed explanation of new law
Definition of charity
1.18 The preamble explains that the Parliament of Australia
recognises the unique nature and diversity of charities and acknowledges
the distinctive and important role they play in Australia and that a modern,
comprehensive statutory definition, applying for all Commonwealth
purposes and utilising familiar concepts from the common law, will
provide clarity and certainty to the meaning of those concepts in
contemporary Australia.
1.19 While the existing common law on the definition of charity will
take have different role under a statutory definition, it will nonetheless
remain relevant for the purposes of interpreting those principles, concepts
and terms that have been derived from the common law and utilised in the
statutory definition.
1.20 The Bill establishes the requirements for an entity to satisfy the
definition of a charity. The Bill commences on 1 January 2014. A
dictionary is included to assist in interpreting the terms used in the Bill.
[Sections 1, 2 and 3]
1.21 An entity is a charity if it satisfies the following criteria:
· it is not-for-profit;
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Definition of Charity
· it has all charitable purposes (other than ancillary or
incidental purposes that further or aid the charitable purpose)
that are for the public benefit;
· it does not have disqualifying purposes; and
· it is not an individual, a political party or a government
entity.
[Paragraphs 5(a) to (d)]
Not-for-profit
1.22 The term `not-for-profit' currently takes its ordinary meaning.
However, the Tax Laws Amendment (Special Conditions for
Not-for-profit Concessions) Bill 2012 inserts a definition of
`not-for-profit' in subsection 995-1(1) of the ITAA 1997 which will be
applied to this Bill when passed.
1.23 The Explanatory Memorandum to the Tax Laws Amendment
(Special Conditions for Not-for-profit Concessions) Bill 2012 explains its
meaning in detail. [Paragraph 5(a)]
Charitable purposes
1.24 To be a charity, an entity's purposes must all be charitable, other
than incidental or ancillary purposes that further or aid the charitable
purpose. [Paragraph 5(b)]
1.25 An entity cannot have an independent non-charitable purpose,
however minor that purpose may be. A purpose is independent if it is an
end in itself, or has substance in its own right, or is not intended to further
or aid a charitable purpose.
1.26 However, an entity may have incidental or ancillary purposes
that may be non-charitable when viewed in isolation but which must
further or aid the charitable purpose. These purposes must not be ends in
themselves, but tend to assist, or naturally go with, the achievement of the
charitable purpose. They must be merely for the sake of, in aid of, in
furtherance of, or concomitant to, the accomplishment of the entity's
charitable purpose.
1.27 In determining or substantiating an entity's purpose, it is the
substance and reality of the purpose that must be identified. To
substantiate -- that is, to confirm or corroborate or demonstrate -- the
entity's charitable purposes, the activities of an entity may be considered.
It is the role of its activities and the extent to which they further, or are in
aid of, the entity's purpose that is relevant, not the nature of the activities.
In considering activities to substantiate the charitable purpose, it may be
necessary to go beyond governing rules to operating rules and activities to
substantiate its stated objects.
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1.28 Other relevant factors may include elements of the governing
documents such as powers, rules, not-for-profit and winding up clauses,
clauses governing who can benefit from the entity's activities and in what
ways, the entity's policies and plans, administration, finances, origins,
history and control, and any legislation governing the entity's operation.
[Note 1 in paragraph 5(b)]
1.29 Where an entity has a non-charitable independent purpose, or its
activities or other features demonstrate that it has a non-charitable
independent purpose, the entity will not be a charity.
1.30 If an entity's governing rules indicate that it does not have all
charitable purposes (other than incidental or ancillary purposes that
further or aid the charitable purpose), the entity cannot be charitable even
if some of its activities are charitable in nature or charitable consequences
may result from its activities.
1.31 As explained in paragraph 1.27, an entity may engage in
activities that are not intrinsically charitable provided the role of the
activities is to further or aid its charitable purpose. Such activities include
those that are integral to the functioning of the entity itself, such as
accounting or insurance, and activities that operate to contribute to the
achievement of the entity's charitable purpose, such as fundraising.
1.32 An entity is also not a charity because it uses means similar to
that of a charity. For example, if an entity disseminates information, this
is not sufficient to show the purpose is educational.
1.33 Similarly, an entity cannot be charitable simply because it is
controlled by another entity that is charitable. It is the purpose of the
entity itself that must be charitable.
1.34 The assessment as to purpose (and therefore as to whether the
entity is a charity) is an ongoing one and consideration has to be given to
the purpose for which it continues to be conducted, not just the purpose
for which it was established.
1.35 An entity with a power to accumulate surplus funds can still be
charitable as long as the surplus funds are being accumulated in order to
augment the funds available to give effect to the entity's charitable
purpose.
1.36 However, an entity that accumulates most of its funds over a
number of years will need to show that this accumulation is still consistent
with the entity having a charitable purpose. Relevant considerations
include whether funds that are to be applied to its charitable purpose have
been identified, and when and how they are to be applied has been
considered.
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Definition of Charity
Commercial purposes
1.37 An entity which has a purpose of carrying on a commercial
enterprise to generate surpluses as an end in itself cannot be charitable.
1.38 Where an entity's governing documents allow for purposes
wider than those capable of being characterised as charitable the entity
cannot be charitable.
1.39 An entity undertaking commercial or business-like activities can
still be charitable if its purposes are all charitable and it carries on a
commercial enterprise to generate surpluses in order to further that
charitable purpose rather than as an end in itself. The fact that the
activities undertaken by the entity are not intrinsically charitable does not
affect the characterisation of the entity as charitable.
1.40 An entity may be charitable where the purpose of the entity is
charitable and the commercial activities directly carry out the charitable
purpose. An example is an entity that conducts a business activity solely
for the purpose of providing training and employment opportunities for
people with disabilities who would otherwise find it difficult to obtain
training and employment.
1.41 An entity may be charitable where the commercial operations
are merely incidental to the carrying out of the charitable purpose. An
example is an entity which runs a home for disadvantaged boys that also
provides training through its farm.
1.42 An entity may also be charitable where the activities undertaken
by the entity are themselves intrinsically charitable but are being carried
on in a way that is commercial. An example is the preparation and sale of
law reports. However, a commercial enterprise that is not operated in a
commercially viable manner may demonstrate that the entity has another
purpose, for example, a purpose of supporting its clients or subsidising the
goods and services it provides to these clients.
1.43 Where a commercial entity operates for, or is owned by, a
charity, it is not automatically charitable. It is the purpose of the entity
itself, not of the owning charity, that must be determined. Charitable
status cannot be attributed to an entity merely on the basis that it is
associated with a charity. Control, ownership, the use of surplus funds, or
a trust relationship, are not sufficient on their own to change a commercial
entity into a charity. This does not mean that the extent of any
relationship with a charity is irrelevant, but a simple `look through'
approach, which ignores the features and circumstances of the relevant
entity itself, is not a relevant test for determining whether the entity is a
charity.
1.44 An entity may hold passive investments to receive a market
return to further its charitable purposes, or to meet reasonable operational
expenses, and this will not affect its charitable status.
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Peak bodies and infrastructure entities
1.45 Where charities establish a peak or similar body to further their
common charitable purposes, the same principles and considerations
apply in determining the purpose of that entity as would apply to any
entity.
1.46 An entity that has a charitable purpose may advance that
purpose through activities that increase the effectiveness, or enhance the
long term viability, of other charities. For example, a peak body that
undertakes research, policy, advocacy, educational or other supporting
activities to advance the effectiveness of its member charities may be a
charitable entity.
1.47 It is commonality of purpose with its members that determines
whether such an entity is a charity although the purpose may be pursued
in different ways and, while it must also meet the public benefit test, this
may not be by dealing directly with, or to, the public.
1.48 For an entity to be a charity, even where owned or controlled by
another charity, for example as an infrastructure entity that supports the
entity's organisation, it must itself be a not-for-profit entity and must have
only charitable purposes.
1.49 Such entities may give effect to their charitable purpose by
contributing to the owner/controller entity's accomplishment of its
purpose but each entity needs to be considered in terms of its own
particular purposes and characteristics. As explained in paragraph 1.43, it
is not possible to merely attribute the characteristics and purposes of a
charitable entity to a different entity, ignoring the characteristics and
purposes of the entity itself. The Commissioner of Taxation's
(Commissioner) taxation ruling TR 2005/22 explains in detail the
requirements concerning controlled entities. This Ruling sets out
principles which continue to remain relevant in interpreting this statutory
definition of charity.
Type of entity that may be a charity
1.50 The term `entity' takes its meaning from the Australian
Charities and Not-for-Profits Commission Act 2012, being:
· an individual;
· a body corporate;
· a body politic;
· any other unincorporated association or body of persons; or
· a trust.
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Definition of Charity
1.51 A charity must be an entity. However, it cannot be one of the
following entity types: an individual, a political party or a government
entity. [Paragraph 5(d)]
1.52 The purposes of government in carrying out its functions and
responsibilities are not charitable and a government entity cannot be a
charity. However, the definition of a government entity and, in particular,
its boundaries, has remained uncertain in the common law, with various
factors, particularly government control, being considered as determining
factors.
1.53 To give greater certainty about what is a government entity, the
Bill provides that the term has the same meaning as `government entity'
within the meaning of the A New Tax System (Australian Business
Number) Act 1999 (ABN Act). [Paragraph 4(1)(a)]
1.54 As state and territory laws describe `government entity' in
various ways, the Bill enables the Minister to prescribe additional classes
of government entities to allow the Government to list the state and
territory equivalents to Commonwealth concepts already incorporated into
the ABN Act definition and to allow those terms to be more easily kept up
to date. The Bill gives an example of those entities likely to be
prescribed, such as the state and territory equivalents of Commonwealth
executive and statutory agencies. [Paragraph 4(1) (b)and subsection 4(2)]
1.55 The Bill includes a foreign government agency (within the
meaning of the term in the ITAA 1997) within the meaning of government
entity. [Paragraph 4(1)(c)]
Purposes for the public benefit
1.56 To be a charity, an entity's purpose or purposes must be for the
public benefit. The public benefit is at the core of charity and charitable
purposes. There are two aspects to the public benefit: there must be a
purpose the achievement of which is of public benefit; and the benefit
from the purpose must be broadly available to a sufficient section of the
public. [Subsection 6(1)]
Achievement of purpose would be of public benefit
1.57 Each purpose of an entity must be for the public benefit. Only
benefits arising from carrying out those purposes can be taken into
consideration, and the recipients of benefits from the purpose must be
appropriately targeted to that purpose.
1.58 The purpose of an entity and the benefit it provides must be
identifiable. [Paragraph 6(2)(a)]
1.59 A purpose that is vague, uncertain or ambiguous, or is of
indeterminable value, does not meet the public benefit test.
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1.60 The benefit must be not be negligible. The value or benefit
must be of adequate worth, advantage, utility, importance or significance.
1.61 Benefits are not restricted to material benefits. They may be
tangible, such as accommodation provided by a hostel for the homeless, or
intangible, such as the social, psychological or emotional benefits derived
from a visitors program for aged persons or spiritual benefits derived from
religious services. [Paragraph 6(2)(a)]
1.62 A charitable purpose must be of benefit overall and cannot be
harmful on balance. In determining public benefit, consideration must be
given to any possible detriment which arises from the purpose, or would
commonly arise, from carrying out of the purpose to the general public or
a section of the general public. Examples of detriment or harm could
include damage to mental or physical health, damage to the environment,
encouraging violence or hatred towards others, or engaging in illegal
activities such as vandalism or restricting personal freedom.
[Paragraph 6(2)(b)]
Available to the public
1.63 The benefit of a charitable purpose does not have to be available
for the whole of the general public in order to satisfy the public element.
The benefit can be available to a section of the general public as long as
that section is not negligible compared to the size of that part of the
general public to whom the purpose would be relevant. [Subsection 6(4)]
1.64 A sufficient section of the general public may be a limited
number of individuals where the charitable purpose would be relevant to
only a small group of people. For example, where an entity supports
medical research into a very rare disease that affects only a few people in
Australia, it may be for the public benefit if its purpose is directed to only
those individuals suffering from the disease in Australia.
1.65 Limiting benefit recipients to groups with particular
characteristics such as residents of a particular geographic area, the
followers of a particular religion to which anyone can adhere, or sufferers
of a particular disability or condition can be consistent with the public
benefit test, provided such limitation is justified and reasonable having
regard to the nature of the purpose and the benefit.
1.66 Charging fees to members of the public for goods, services, or
other benefits where the purpose is otherwise charitable is not inconsistent
with a charitable purpose. While there must be a public benefit from the
purpose, the benefit may be made available in various ways and fees will
merely be another factor to be considered in applying the public benefit
test.
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Definition of Charity
Private benefit
1.67 An essential element of a charity is that it does not confer
benefit on anyone other than intended benefit recipients of the charitable
purpose as members of the public, except incidentally (see
paragraph 1.70).
1.68 In determining public benefit, regard must be had to any benefits
to entities (including individuals) directly or indirectly associated with the
entity, other than where these benefits are to other charities, for example,
members of peak bodies. The greater the scope to provide private
benefits, the greater the potential that the purpose is not to benefit the
general public but to provide private benefits. [Paragraph 6(3)(a)]
1.69 Benefits or payments to officers, suppliers, and associates must
not exceed what is reasonable and appropriate. Pecuniary benefits
received by individuals are also relevant in considering the not-for-profit
definitional element of the statutory definition.
1.70 Where there are private benefits, these must be incidental or
ancillary, that is, a necessary minor result or by-product, or conferred as a
necessary means, of carrying out the entity's charitable purpose, and be
genuine and reasonable.
1.71 An entity that exists to advance the interests of members in their
capacity as members cannot be charitable as it would not satisfy the public
benefit test. The members of such entities do not, as members, constitute
a section of the public in the relevant sense (because of size or the
relationship between the benefit recipients), and the benefits derived by
the members are, as a result, private in nature. However, an entity that
benefits its members can still be charitable if the member benefits are
merely incidental, ancillary and concomitant to the purpose of benefiting
the public.
1.72 A purpose of providing benefits to members does not become
charitable simply because the motivation of the entity has some social
value or, as a consequence of its activities, some indirect value to the
general public arises. For this reason, professional or occupational
associations are unlikely to be charitable.
1.73 Similarly, community and economic development, and the
advancement of industry, commerce or agriculture can be charitable
purposes in certain circumstances but particular consideration must be
given as to whether carrying out such purposes allows an entity to provide
benefits to individual entities or members that cannot be considered
incidental to the public benefit. If benefiting or advancing the interests of
individual entities or advancing the commercial interests of a particular
industry can be construed as a purpose, the entity cannot be charitable.
1.74 Placing limits on those who can benefit is generally
incompatible with an intention of benefiting the general public if the
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limits are by reference to some personal connection such as being
members of a family or a group, which is based on personal or
employment relationships to particular individuals, or on membership of
bodies that can admit or exclude members of the public. Benefits in these
cases are usually intended for people in their capacity as relatives,
employees or members rather than as a section of the public and therefore
do not meet the public benefit test. (See paragraphs 1.89 to 1.94 about
benefits directed to indigenous persons who are related.) [Paragraph 6(3)(b)]
1.75 A public benefit does not generally exist where there is a
relationship between the donor entity and the possible benefit recipients
such as a family or employment relationship.
`Poor relations' and `poor employees'
1.76 As the public benefit test has been applied less strictly to a
purpose for the relief of poverty, gifts or trusts have been established in
the past to provide benefits to a limited range of people that are closely
connected, for example, because of family ties (poor relations) or a shared
employer (poor employees) or members of an association (poor
members). These trusts, some of which seek to operate indefinitely, are
widely considered anomalous in contemporary Australia and such a
purpose is no longer likely to satisfy a public benefit requirement.
1.77 However, entities that have a purpose of relieving poverty and
were registered with the ACNC before the commencement of the Bill will
continue to be treated as being for the public benefit following the
commencement of this Bill. [Schedule 2, item 6 of the Charities (Consequential
Amendments and Transitional Provisions) Bill 2013]
1.78 The Commissioner's taxation ruling TR 2011/4 explains in
further detail the elements and requirements of the public benefit test.
This Ruling sets out the principles which continue to remain relevant in
interpreting this statutory definition of charity.1
Certain purposes presumed to be for public benefit
1.79 Under the common law, a purpose that is for the relief of the
needs of the poor, the aged and the impotent, advancing education or
advancing religion is presumed to be a purpose that benefits the public,
unless there is evidence to the contrary. Entities with other charitable
purposes must positively establish that their charitable purposes are
beneficial. [Section 7]
1.80 The Bill retains the presumption of benefit for the purposes of
advancing education, advancing religion and the relief of poverty, distress
1
See paragraphs 15 to 19 and 129 to 149 for detail on the public benefit test.
18
Definition of Charity
or disadvantage. Distress or disadvantage relate to lack of financial
resources. [Paragraph 7(b)(c) and (e)]
1.81 The purposes presumed to be beneficial also include caring for
and supporting the aged and individuals with disabilities. [Paragraph7(d)]
1.82 The term `impotent' in the common law covers a range of
circumstances involving vulnerability, such as sickness, the inability of
children to care for themselves, or a need for refuge accommodation. The
parameters of a modern equivalent are not readily identifiable. The Bill
applies the presumption of benefit to a purpose of preventing and
relieving sickness, disease or human suffering attributable to a
health-related cause as part of a modern proxy for the purpose of relieving
the needs of the impotent.
1.83 The purposes of preventing and relieving sickness is
encompassed by the higher level category of purposes described in the
Bill as advancing health. The purposes of relieving poverty, distress or
disadvantage or caring for and supporting the aged or individuals with
disabilities are encompassed by the purpose of advancing social or public
welfare. These categories were identified in the Charities Definition
Inquiry report. [Section 7 and Note 1, section 14 and subsections 15(1) and (2)]
1.84 The Bill extends the presumption to the whole of the public
benefit test, rather than merely a presumption that the purpose is
beneficial. This reflects the more common approach to how the test is
being applied in practice by charities.
1.85 Similar to the position under the common law, the presumption
of public benefit is rebutted or overturned where there is evidence
available to suggest that an entity does not in fact meet the public benefit
test or an element of the test. If the Commissioner of the ACNC has
reason to believe there is evidence to the contrary, the Commissioner may
decline to register an entity or may notify a registered entity to the effect
that the presumption does not apply and that entity must then provide
evidence demonstrating that its purpose is for a public benefit. [Section 7 ]
Relief of necessitous circumstances
1.86 The public benefit test has been applied less strictly to a purpose
for the relief of poverty. As outlined in paragraph 1.76, the Bill does not
exclude the purpose of the relief of poverty from the need to be for the
public benefit. However, a purpose for the relief of poverty, for example,
in disadvantaged communities or among a particular description of poor
people, provided it is not unduly restrictive, is unlikely to fail a public
benefit test.
1.87 The Bill nonetheless ensures that entities established for the
relief of one or more individuals in `necessitous circumstances', which
may otherwise not meet a public benefit test, may continue to be
charitable entities. [Section 8]
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Charities (Consequential Amendments and Transitional Provisions) Bill 2013
1.88 `Necessity' refers to financial necessity or needs which are not
financial but can cause financial need, such as health needs. Generally
these funds are set up to benefit particular individuals such as disabled
individuals or individuals affected by disaster. The Bill provides that such
a purpose does not need to be for the public or a sufficient section of the
public. [Section 8]
Purposes of entities that receive, hold or manage benefits that relate to
native title etc.
1.89 As explained in paragraph 1.74, an entity that places limits on
who can benefit from its charitable purpose where the limits are by
reference to a special or personal relationship or connection may fail a
public benefit test.
1.90 Some entities that provide benefits to indigenous Australians
may fail a public benefit test solely because benefits are limited to persons
who have family or other traditional relationships.
1.91 These limits may arise because the entity holds, receives or
manages amounts or non-cash benefits (within the meaning of the
ITAA 1997) including assets that relate to native title or traditional
indigenous rights of ownership, occupation, use or enjoyment of land. As
traditional land ownership or usage involves persons who are related or
who are otherwise connected in a way traditionally recognised by
indigenous persons, the effect may be that these entities direct benefits
only to such persons.
1.92 The Bill ensures that such entities do not fail a public benefit test
solely because the beneficiaries are related. [Section 9]
1.93 However, other aspects of the public benefit test, including the
nature and purposes of the entity, the beneficiary class, other relationships
between the beneficiaries and the number of beneficiaries, are still
relevant when determining whether the entity is charitable.
1.94 Where entities with a charitable purpose provide benefits to
indigenous Australians, and the recipients happen to be related, (because,
for example, the purpose is directed to a benefit within a particular
geographic region), provided the relationship is merely incidental to the
characteristic the benefit that is being addressed, and the benefits are not
directed in an unduly restrictive way, the purpose is not likely to fail a
public benefit test.
When the public benefit test does not apply
1.95 The public benefit test does not apply in the case of open and
non-discriminatory self-help groups and closed or contemplative religious
orders that regularly undertake prayerful intervention at the request of
members of the public. These entities were relieved from the public
benefit test in the Extension of Charitable Purpose Act 2004. [Section 10]
20
Definition of Charity
1.96 Open and non-discriminatory self-help groups are often
organised and managed by the same people that benefit from the group.
For this reason, such groups would not typically be able to satisfy the
public benefit test.
1.97 To satisfy the statutory definition of `open and
non-discriminatory self-help group', the entity must be established for the
purpose of assisting individuals. The individuals must be affected by a
particular disadvantage or discrimination, or a need arising out of a
particular disadvantage or discrimination that is not being met. While
self-help groups are particularly common in the area of health for
particular diseases or disabilities, or for particular treatments, the
definition is not limited to these purposes. However, the disadvantage or
discrimination identified must be of a kind that is consistent with the
meaning of charitable purpose.
1.98 The assistance provided by the self-help group must be of a kind
that is connected with the particular disadvantage, discrimination or unmet
consequential need.
1.99 The requirement of open membership refers to both the entity's
rules and also to its reality and substance. It is not sufficient for an entity
to have rules that are consistent with open and non-discriminatory
membership. It must also in reality operate in a manner that is consistent
with having open and non-discriminatory membership.
1.100 There has been some doubt under the common law about
whether a closed or contemplative religious order fulfils the public benefit
test and the Bill ensures such an entity does not fail a public benefit test.
1.101 Although open and non-discriminatory self-help groups and
closed or contemplative religious orders will not be required to meet the
public benefit test, it will still be necessary for the entity to satisfy the
other requirements to be a charity, including having only charitable
purposes.
Disqualifying purpose
1.102 The purpose of engaging in, or promoting, activities which are
unlawful or contrary to the public policy is not a charitable purpose under
the common law and is a disqualifying purpose in the Bill.
1.103 The Bill clarifies that the reference to public policy refers to
matters such the rule of law, the system of government of the
Commonwealth, the safety of the general public and national security and
that activities are not contrary to public policy merely because they are
contrary to government policy. [Paragraph 11(a) and Note]
1.104 Political parties are not charitable and a purpose of promoting or
opposing a political party or a candidate for political office is not a
charitable purpose. [Paragraph 11(b)]
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Charities (Consequential Amendments and Transitional Provisions) Bill 2013
1.105 However, a means that entities commonly use to achieve their
charitable purposes is generating, and engaging in, debate about
government laws and policy. The Bill notes that a purpose of promoting
or opposing a change to any matters established by law, policy or practice
in the Commonwealth, a State or Territory or another country may be a
charitable purpose in certain circumstances. [Paragraph 11(b) and
paragraph 12(1)(l)]
1.106 The independent nature of the charitable sector is greatly valued
by the public.
1.107 The disqualifying purpose is concerned with direct partisan
political engagement that supports or opposes a candidate or party for
office or other partisan political engagement to the extent and in a way
that this can be construed as a purpose.
1.108 This does not prevent entities from distributing information,
critiquing or comparing party policies in order to further the achievement
of their charitable purpose. [Paragraph 11(b)]
1.109 Entities may engage with candidates or representatives of
political parties to lobby, debate or seek explanation of policies relevant to
their charitable purposes. They may also assess and critique their policies.
1.110 In determining whether an entity has a purpose to promote or
oppose a candidate or political party, considerations could include
whether the focus of the entity is on promoting or opposing a particular
candidate or a political party in general, rather than on their policies that
are relevant to the charitable purpose, the direct nature and extent of
engagement and association with a candidate's or a party's campaigns or
publications, or lack of balance in promoting or opposing the policies of
another political party or candidate with similar policies relevant to the
charitable purpose.
1.111 Directly funding a political party is not permitted under the
Commonwealth Electoral Act 1918. In addition, the electoral law has
rules about activities that could be seen as election-related campaigning
by organisations, including charities, and party political activities could
put charities in conflict with, or allow them to circumvent, the strict
regulation of political parties, elections, and funding and disclosure
requirements and limitations in that law. The requirements of the
electoral laws are relevant in considering whether an entity has a
disqualifying purpose.
Definition of charitable purpose
1.112 The Bill describes categories of charitable purposes that have
significant recognition in the common law, broadly following the
categories identified in the Charities Definition Inquiry report.
22
Definition of Charity
1.113 The charitable purposes listed in the Bill are not limited in their
jurisdiction, other than where the purpose is specific to Australia.
However, there may be requirements in other legislation that affects
whether and how entities may carry out a charitable purpose overseas.
[Subsection 12(3)]
1.114 Where an entity has a charitable purpose before the
commencement of the Bill and the purpose does not come within the
categories described in the Bill, that purpose is treated as being a purpose
beneficial to the general public that may reasonably be regarded as
analogous to, or within the spirit of, any of the purposes mentioned in the
Bill. [Paragraph 12(1)(k) and Charities (Consequential Amendments and Transitional
Provisions) Bill 2013, Schedule 2, item 7]
1.115 The charitable purposes listed in the Bill have been derived from
principles from the common law. While those principles may be
expressed using a different form of words in order to use a clearer or
simpler style of expression, this is not to be taken to mean that a different
idea is intended to be expressed by those different words.
1.116 The common law remains relevant in interpreting the charitable
purposes, including their meaning and scope.
1.117 Generally, where the scope of a charitable purpose is intended to
be altered it has been included in Division 2 of Part 2 of the Bill.
Advancing health
1.118 Advancing health includes, without limitation, the prevention
and relief of sickness, disease or human suffering through, for example:
· care, treatment and rehabilitation by hospitals, alcohol and
drug treatment centres, mental health institutions and
community health services such as home nursing, alcohol
and drug rehabilitation and patient transport services;
· the provision of public health services aimed at advancing
the health of the general public or sections of the general
public, such as health promotion, nutrition services,
immunisation and screening for diseases; and
· research related to the nature, prevention, diagnosis,
treatment and incidence of disease and other health problems,
research into health services, nutritional problems,
pharmacology and similar services.
[Paragraph 12(1)(a)]
Advancing education
1.119 Advancing education includes, without limitation:
23
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Charities (Consequential Amendments and Transitional Provisions) Bill 2013
· providing formal education through preschools, schools and
tertiary education institutions, including building and related
educational facilities;
· vocational training;
· research directed towards expanding human knowledge and
made publicly available;
· less formal education aimed at the development of
citizenship and core life skills;
· the support of education, such as through the provision of
prizes and scholarships,
· the provision and support of facilities and services integrally
associated with the operation of education institutions, such
as parents and citizens associations organisations.
[Paragraph 12(1)(b)]
1.120 Advancing education can occur irrespective of the age of the
beneficiaries.
1.121 Advancing education does not include education in the sense
that all experience is educative. Less formal education is limited to the
development of citizenship and core life skills.
1.122 Where the purpose of an entity is to promote a particular view,
the purpose may not be charitable on the basis that it is not genuinely
educational. Education does not have to be value free but the information
presented should be based on evidence and reasonable analysis.
1.123 A purpose is not charitable where it lacks any educational merit
or is of little or no value to the public.
Advancing social or public welfare
1.124 Advancing social and community welfare, without limitation,
includes:
· relieving poverty, distress or disadvantage of individuals or
families;
· caring for and supporting the aged, including the provision of
residential and non-residential care;
· caring for and supporting people with a disability, including
the provision of residential and non-residential care;
· assisting and supporting Australia's disadvantaged
Indigenous people, including advancing economic
opportunities in disadvantaged communities; and reducing
the disadvantage experienced by Indigenous peoples and
enhancing their general wellbeing;
24
Definition of Charity
· alleviating disadvantage experienced by people with special
needs, such as refugees;
· assisting and supporting people who are disadvantaged in the
labour market;
· providing housing and accommodation support for people
with special needs or who are otherwise in a special
disadvantage in terms of their access to housing;
· relieving distress caused by natural disasters and sudden
catastrophes;
· addressing disadvantage through international development,
for example, through overseas aid.
[Paragraph 12(1)(c)]
1.125 The persons to benefit under the purpose of relieving poverty
need not be destitute or on the border of destitution. In Australia, those
lacking the resources to obtain what is necessary for a modest standard of
living in the Australian community may be accepted as suffering poverty.
To relieve poverty implies that the people in question have a need
attributable to their condition which requires alleviating, and which those
people could not alleviate or would have difficulty in alleviating by
themselves. The ways in which poverty can be relieved include providing
money, accommodation, legal or medical aid.
1.126 Advancing social or community welfare includes the purpose of
caring for, supporting and protecting children and young people and, in
particular, providing child-care services. This charitable purpose was
included in the Extension of Charitable Purpose Act 2004 as it was not
clearly charitable under the common law. [ Subsection 15(3)]
1.127 Advancing social and community welfare includes the purpose
of assisting rebuilding, repairing or securing assets after a disaster, in
furtherance of the purposes of exempt entities within the meaning of the
ITAA 1997. [Subsection 15(4)]
1.128 The effect of the provision is to extend charitable purposes to
include re-establishing not-for-profit community assets after a disaster,
independently of the relief of individual distress. Any benefits of a
commercial or private nature must be only incidental or ancillary to
re-establishing the community assets and the assets must not be
government assets.
1.129 Rebuilding may be in a different location and to a higher
standard where necessary to mitigate future risk.
1.130 The Bill describes a disaster in the terms used in the ITAA 1997
relating to the declaration of a disaster for the purposes of Australian
Disaster Relief Funds. [Paragraph 15(4)(a)]
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Charities (Consequential Amendments and Transitional Provisions) Bill 2013
Advancing religion
1.131 Advancing religion involves the promotion of spiritual teaching
and the observances that serve to promote and manifest it. The purpose
must be directly and immediately religious and involve various ways of
advancing religion, including providing and maintaining facilities for
worship; supporting religious clergy; missionary bodies; and religious
associations.
1.132 It is not enough that a purpose arises out of or has a connection
with a faith, a church or a denomination. If the purpose is not directly or
immediately religious it is not charitable. For example, social,
recreational or sporting purposes are not charitable even if membership is
limited to followers of a particular religion.
1.133 It is also not enough that an entity does something merely in the
name of religion for it to be a charity advancing religion. A purpose
expressed as advancing religion cannot be used as a means of promoting
or expressing aims or opinions that are not charitable and would not be for
charitable purposes if expressed by a non-religious organisation.
[Paragraph 12(1)(d)]
Advancing culture
1.134 Advancing culture increases the public appreciation of arts,
music or literature, national identity and heritage and, without limitation,
includes:
· promoting and fostering culture;
· caring for, preserving and protecting the Australian heritage;
· promoting participation in the arts, including literature,
music, the performing arts and visual arts;
· establishing and maintaining public museums (including
botanical or zoological gardens), libraries and art galleries,
and moveable cultural heritage;
· promoting Australian Indigenous culture and customs;
· promoting culture and customs of language and ethnic groups
(other than where the purpose is social in nature); and
· protecting and preserving national monuments, areas of
national interest and national heritage sites and buildings.
[Paragraph 12(1)(e) and section 16]
Promoting reconciliation, mutual respect and tolerance between groups
of individuals that are in Australia
1.135 Promoting reconciliation, mutual respect and tolerance between
individuals in Australia which, without limitation, includes:
26
Definition of Charity
· promoting harmony and understanding and the lessening of
conflict between people from different races, religions or
belief systems;
· eliminating discrimination, for example on grounds of age,
gender or sexual orientation, and promoting equality and
diversity;
· promoting restorative justice and other forms of conflict
resolution or reconciliation; and
· mediating, conciliating or reconciling persons, organisations,
authorities or groups involved, or likely to become involved,
in dispute or conflict.
[Paragraph 12(1)(f)]
Promoting or protecting human rights
1.136 The purpose of promoting or protecting human rights refers to
the rights and freedoms recognised or declared by the international
instruments specified in the Human Rights (Parliamentary Scrutiny)
Act 2011 as they apply to Australia.
1.137 The international instruments cover the elimination of racial
discrimination and discrimination against women; economic, social and
cultural rights; civil and political rights; conventions against torture and
cruel, inhuman or degrading treatment or punishment; rights of the child;
and rights of individuals with disabilities.
1.138 Promoting or protecting human rights includes, without
limitation:
· promoting human rights, at home or abroad;
· relieving victims of human rights abuse; and
· raising awareness of human rights issues.
[Paragraph 12(1)(g)]
Advancing the security and safety of Australia and the Australian public
1.139 The purpose of advancing the safety and security of the general
public, without limitation, includes:
· providing safe houses;
· promoting Neighbourhood Watch, establishing and operating
`crimestoppers' or similar schemes, and liaising with the
police on addressing the causes of crime in an area;
· establishing, operating and supporting volunteer fire
brigades, volunteer emergency services organisations and
other safety services such as surf lifesaving;
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Charities (Consequential Amendments and Transitional Provisions) Bill 2013
· providing a conciliation service;
· providing advice and support to victims and offenders: and
· promoting the efficiency of the Australian Defence Forces
including by providing aid, comfort and encouragement to
serving and former defence personnel and their families
[Section 17].
[Paragraph 12(1)(h)]
Preventing or relieving the suffering of animals
1.140 The purpose of preventing or relieving the suffering of animals,
without limitation, includes:
· promoting benevolence and preventing or suppressing cruelty
to animals;
· providing animal sanctuaries;
· providing veterinary care and treatment; and
· caring for, and re-homing, animals that are abandoned
mistreated or lost.
[Paragraph 12(1)(i)]
Advancing the natural environment
1.141 Advancing the natural environment, without limitation, includes:
· preserving native flora and fauna;
· rescuing and caring for native animals;
· preserving or rehabilitating habitats;
· promoting sustainable development and biodiversity; and
· protecting, preserving, caring for, and educating the
community about, the environment.
[Paragraph 12(1)(j)]
1.142 It is not enough for an entity to carry out activities in the name
of advancing the natural environment. The benefit must be identifiable
and of sufficient value and cannot be incidental to a non-charitable
purpose. For example, an entity that provides recreational experience in a
natural environment is unlikely to have a charitable purpose of advancing
the environment where the educational benefit is relatively minor or
incidental to the recreational experience.
28
Definition of Charity
Any other purposes beneficial to the public that may reasonably be
regarded as analogous to, or within the spirit of, any of the preceding
purposes
1.143 This provision encompasses other purposes which the courts
have found to be charitable, which do not come within the categories
described in the Bill and which were charitable purposes before the
commencement of the Bill. [Paragraph 12(1)(k), Charities (Consequential
Amendments and Transitional Provisions) Bill 2013, Schedule 2, item 7]
1.144 The provision also allows for the meaning of charitable purpose
to develop through future court decisions interpreting the definition within
the new statutory framework, in accordance with contemporary Australian
society's needs and expectations.
1.145 The meaning of charity (at Commonwealth level) is not affected
by state or territory law. Where state or territory legislation extends
charitable status to new purposes, those purposes are not accepted as
charitable for Commonwealth purposes. For example, while some States
have enacted legislation that extends charitable status to the provision of
recreational facilities, recreational purposes are not charitable for
Commonwealth purposes.
1.146 A purpose that is essentially social, recreational or sporting is
not charitable regardless of motivation or the benefits to the general public
that can result.
1.147 While social, sporting and recreational purposes are not
charitable purposes, social, recreational or sporting activities that are
incidental to a charitable purpose and further or aid that purpose, such as
health or education, do not necessarily prevent that purpose from being
charitable.
Promoting or opposing a change to matters established by law, policy or
practice in relation to another charitable purpose
1.148 A purpose of generating public debate with a view to
influencing legislation, government activities or government policy in
furtherance or protection of one or more existing charitable purposes, in a
manner consistent with those purposes, may be charitable.
1.149 However, such a purpose will only be charitable where the
means used and the ends to be achieved are not inconsistent with the rule
of law and the established system of government, for example, the use of
bribery to achieve an end or promotion of anarchy would not be a valid
charitable purpose. [Paragraph 12(1)(l)]
1.150 A purpose of generating public debate that is not in furtherance
of or protection of another valid charitable purpose is not itself a
charitable purpose. A purpose of generating public debate must be
sufficiently connected with, operating in a manner consistent with, and
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Charities (Consequential Amendments and Transitional Provisions) Bill 2013
attempting to further or protect another recognised charitable purpose for
the purpose to be a charitable purpose. [Subsection 12(2)]
Funds that contribute to charity-like government entities
1.151 Charitable funds, such as private and public ancillary funds, lose
their charitable status under Commonwealth law if they distribute to an
entity that is not a charity. However, some government entities, such as
certain public health services, would be a charity except for the fact that
they are a government entity. Further, under some state laws, charitable
funds are able to donate to charity-like government entities and maintain
their charitable status.
1.152 The Bill makes similar provision to allow charitable funds, to
retain their charitable status for the purposes of Commonwealth law where
they provide benefits to an entity that would be a charity except that it is a
government entity. [Section 13]
Miscellaneous
Cy pres and similar schemes
1.153 When determining the purpose of the trust, a cy pres scheme
allows for the purposes of a trust to be altered to remove purposes that are
not charitable purposes. The Bill provides that cy pres schemes are to be
recognised when determining whether an entity is a charity.
[Paragraph 18(a)]
1.154 In determining whether an entity that is subject to a cy pres
scheme is a charity for Commonwealth law purposes, the most recent
court order concerning the scope of its charitable purpose should be taken
into account.
1.155 States and Territories also regulate the operation of trusts in their
jurisdiction through trust legislation. These jurisdictions have legislation
which may give effect to a scheme, similar in substance to the cy pres
scheme under the general law, which may sever any non-charitable
purposes from a mixed purpose trust to leave a valid charitable trust in
respect of charitable purposes only.
1.156 State and Territory laws which provide for these `cy pres-like'
schemes include:
Jurisdiction Relevant provisions
New South Wales Section 23 of the Charitable Trusts Act 1993 (NSW)
Victoria Section 7M of the Charities Act 1978 (Vic)
Queensland Section 104 of the Trusts Act 1973 (Qld)
Western Australia Section 102 of the Trustees Act 1962 (WA)
South Australia Section 69A of the Trustee Act 1936 (SA)
30
Definition of Charity
1.157 The Bill provides that if a mixed purpose trust is subject to a
cy pres-like scheme under State or Territory law, the scheme is to be
considered in determining whether the entity may be charitable for
Commonwealth law purposes. [Paragraph 18(b)]
31
Transitional and consequential
amendments
2.1 This Chapter explains the amendments to Commonwealth
legislation by the Charities (Consequential Amendments and Transitional
Provisions) Bill 2013 as a consequence of the introduction of a statutory
definition of charity in the Charities Bill 2013.
2.2 This Chapter covers:
· how the terms charity and charitable purpose have
application to Commonwealth legislation;
· the grandfathering of existing charitable purposes, so these
purposes remain charitable after the commencement of this
legislation;
· the repealing of existing legislation addressing some aspects
of charitable purpose that has been included in the Charities
Bill 2013;
· changes required to give effect to the expanded number of
categories of charitable purpose, including transitional
arrangements for streamlining registration of the new
subtypes of entities with the Australian Charities and
Not-for-profits Commission (ACNC); and
· consequential changes as a result of the amendments in the
Charities Bill 2013 to enable charities to provide funds to
entities that are connected to government without losing
charitable status.
2.3 References in this Chapter to the `Consequential Amendments
Bill' are references to the Charities (Consequential Amendments and
Transitional Provisions) Bill 2013.
Context of amendments
2.4 The Charities Bill 2013 defines charity and charitable purpose
for the purposes of Commonwealth laws. Consequential amendments are
needed to Commonwealth legislation that refers to these concepts in
different terms.
Summary of new law
2.5 As a result of the introduction of a definition of charity and
charitable purpose in the Charities Bill 2013, a number of consequential
33
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Charities (Consequential Amendments and Transitional Provisions) Bill 2013
amendments to Commonwealth legislation and transitional arrangements
are required.
2.6 The key features of the Consequential Amendments Bill are to:
· include the terms charity and charitable purpose in the Acts
Interpretation Act 1901 to ensure that they have a consistent
meaning for all Commonwealth law purposes;
· repeal the Extension of Charitable Purpose Act 2004,
recognising that the Charities Bill 2013 provides that
charitable purpose includes child care and open and
non-discriminatory self-help groups and closed or
contemplative religious orders;
· amend the Australian Charities and Not-for-profits
Commission Act 2012 (ACNC Act) to reflect the new
characterisation of charitable purpose that has been included
in the Charities Bill 2013 resulting in changes to applications
for registration and sub-types of charities that are registered;
· repeal the income tax exemption available to non-charitable
public and private ancillary funds that provide money,
property and benefits to deductible gift recipients that are
income tax exempt. This recognises that the Charities
Bill 2013 extends charitable purposes to funds that provide
money, property and benefits to entities that would be
charitable if they were not government entities; and
· amend legislation to ensure that the terms `charity' and
`charitable purpose' are used consistently across
Commonwealth laws.
Detailed explanation of new law
Definition of charity and charitable purpose
2.7 The Consequential Amendments Bill ensures that the definition
of charity and charitable purpose applies consistently across
Commonwealth legislation. This is achieved by amending the Acts
Interpretation Act 1901 and other legislation to provide that references in
Commonwealth Acts to charitable, charity or charitable purpose take their
meaning from the Charities Bill 2013 unless the contrary intention is
specifically provided for in Commonwealth legislation. [Schedule 1, items 1,
2 to 4, 14, 38 and 39 of the Consequential Amendments Bill]
2.8 The Criminal Code Act 1995 is an example of where the
legislation has a contrary intention, so this legislation is amended to make
it clear that the definitions of charitable purpose in the Charities Bill 2013
do not apply to that legislation. [Schedule 1, items 10 to 13 of the Consequential
Amendments Bill]
34
Transitional and consequential amendments
Previous legislation -- charitable purposes
2.9 The Consequential Amendments Bill repeals the Extension of
Charitable Purpose Act 2004. This Act provided a statutory extension to
the common law meaning of `charity' for the purposes of all
Commonwealth legislation. [Schedule 1, item 43 of the Consequential
Amendments Bill]
2.10 The Extension of Charitable Purpose Act 2004 ensured that:
· organisations providing child care to the public on a
not-for-profit basis;
· self-help bodies with open and non-discriminatory
membership; and
· closed or contemplative religious orders that offer prayerful
intervention at the request of the public,
were treated as charities for the purposes of Commonwealth legislation.
2.11 The repeal of the Extension of Charitable Purpose Act 2004
allows the Charities Bill 2013 to deal comprehensively with the meaning
of charity and charitable purpose. Accordingly, the Charities Bill 2013
ensures that public not-for-profit child care, open and non-discriminatory
self-bodies help bodies and closed or contemplative religious orders
offering prayerful intervention at the request of the public continue to be
charitable.
2.12 The national rental affordability scheme has not been included
as a charitable purpose in the Charities Bill 2013. This reflects that,
following the decision of the High Court of Australia in Federal
Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204,
entities can be charitable despite undertaking commercial activities
provided the activities are in aid of, or further their charitable purpose.
Grandfathering of charitable purposes
2.13 Where an entity has a purpose which, on the day before the
commencement day, was a charitable purpose, and to which
paragraphs 12(1)(a) to (j) and (l) of the Charities Bill 2013 do not apply,
that purpose is treated as being a purpose beneficial to the general public
that may reasonably be regarded as analogous to, or within the spirit of,
any of the purposes mentioned in paragraphs (a) to (j) of that definition.
[Schedule 2, item 7 of the Consequential Amendments Bill]
2.14 This provision has the effect of grandfathering existing
charitable purposes so that they remain charitable purposes after the
commencement of the Charities Bill 2013.
35
Charities Bill 2013
Charities (Consequential Amendments and Transitional Provisions) Bill 2013
Registration of charity subtypes
Expanded categories of subtypes of entity
2.15 The Charities Bill 2013 expands the number of categories of
charitable purpose from four to 12. Public benevolent institutions and
health promotion institutions also continue to qualify for a separate
subtype of entity registration.
2.16 As a result of the expanded number of categories of charitable
purposes, amendments are made to the ACNC Act to reflect that there are
14 subtypes of charity, rather than the existing six categories. [Schedule 1,
item 7 of the Consequential Amendments Bill]
2.17 Transitional provisions are also included in the Consequential
Amendments Bill to address the need to revise existing subtypes of
charity registration and to deal with applications for registration from the
commencement of the legislation to the new subtypes of charity
registration with the ACNC.
2.18 The transitional arrangements apply to entities that on the day
before the legislation commences:
· are registered with the ACNC as one or more of the existing
six subtypes of charity; or
· have outstanding applications for registration with the ACNC
as one or more of the existing six subtypes of charity.
Registration -- old subtypes equivalent to new subtypes
2.19 There are five existing subtypes of charity that are treated as
having a corresponding new subtype of charity from the commencement
of the legislation. These are:
Table 2.1: Transitional arrangements for corresponding subtype of
entity registration
Existing subtype of entity on New subtype of entity from
31 December 2013 1 January 2014
Advancing education Advancing education
Advancing religion Advancing religion
Health promotion institution Health promotion institution
Public benevolent institution Public benevolent institution
Provision of child care services Advancing social or public welfare
[Schedule 2, subitem 2(3) of the Consequential Amendments Bill]
2.20 The transitional amendments ensure that on the day before the
commencement of the legislation, entities with one or more of the above
five existing subtypes of charity registration, and applications for such
36
Transitional and consequential amendments
registration, are automatically transitioned into the new category of
subtype. [Schedule 2, subitems 2(1) and (2) of the Consequential Amendments Bill]
Registration -- old subtypes possibly equivalent to new subtypes
2.21 In contrast, entities that are registered or have an application
for registration pending on the day before the commencement of the
legislation for a subtype of charity for the relief of poverty, sickness or the
needs of the aged, or other purposes beneficial to the community may
qualify under a number of different new categories of charitable purpose.
2.22 Accordingly the transitional provisions provide for registration
and applications for registration for the relief of poverty, sickness or the
needs of the aged, or other purposes beneficial to the community to
correspond to the following new subtype of entity registration on the
commencement day:
Table 2.2: Transitional arrangements for potentially corresponding
subtypes of entity registration
Existing subtype of entity from New subtype of entity from 1 January
31 December 2013 2014
Relief of poverty, sickness or the Advancing health
needs of the aged Advancing social or public welfare
Other purposes beneficial to the Advancing social or public welfare
community Advancing culture
Promoting reconciliation, mutual respect
and tolerance between groups of
individuals that are in Australia
Promoting or protecting human rights
Advancing the security or safety of
Australia or the Australian public
Preventing or relieving the suffering of
animals
Advancing the natural environment
Purposes beneficial to the general public
Promoting or opposing a change to law,
policy or practice in Australia or
overseas
[Schedule 2, item 3 of the Consequential Amendments Bill]
2.23 Entities that on the day before the legislation commences:
· are registered or have applied for subtype registration that
has not yet been determined by the ACNC; or
· are registered or have applied for registration as the existing
subtypes of the relief of poverty, sickness or the needs of the
aged and, other purposes beneficial to the community;
37
Charities Bill 2013
Charities (Consequential Amendments and Transitional Provisions) Bill 2013
may advise the ACNC which new category of subtype of charity that they
should be registered under. [Schedule 2, subitems 3(1) and (2)]
2.24 Entities have 18 months from the commencement of the
legislation to make a request in the approved form to the Commissioner of
the ACNC under the transitional provision. [Schedule 2, subitem 3(4) of the
Consequential Amendments Bill]
2.25 In addition, an entity can revise an application for registration
or seek registration under a different subtype of charity at any time. The
purpose of the transitional provisions is to streamline the transition of
existing subtype registrations and outstanding applications for subtype
registrations on the day before commencement of the legislation.
2.26 The Consequential Amendments Bill contains a dictionary of
terms to ensure that terms used in the transitional provisions in the Bill are
consistent with the ACNC Act. These include:
· adopting the abbreviation of ACNC Act;
· adopting the meaning of approved form from the ACNC Act;
· clarifying the meaning of commencement as the day that the
transitional provisions commence; and
· inserting a definition of endorsed as a contributing fund.
[Schedule 2, item 1 of the Consequential Amendments Bill]
Income tax exemption: private and public ancillary funds
2.27 Previously, a specific income tax exemption was provided to
public and private ancillary funds to allow them to contribute to
deductible gift recipients whether or not they were charitable, for
example, entities that would be charities if they were not government
entities.
2.28 This specific income tax exemption was introduced to address
a court decision, Central Bayside, which clarified that a charity could not
give to charity-like government entities without affecting its status as a
charity.
2.29 The Charities Bill 2013 extends charitable status to ancillary
funds where they contribute to an entity that would be charitable if it were
not a government entity. This enables such entities to retain their
charitable status and therefore removes the need for a specific income tax
exemption to be available to overcome the Court decision.
2.30 This treatment is similar to section 7K of the Charities
Act 1978 (Vic) which provides `(1) The powers of the trustees of a
charitable trust include a power to provide money, property or benefits to
or for an eligible entity, or for the establishment of an eligible entity, that,
but for a connection to government, would be a charity to or for which, or
38
Transitional and consequential amendments
for the establishment of which, money, property or benefits could be
provided in accordance with the trust instrument'.
2.31 In harmonising the treatment of these funds, new funds
established after the commencement of this legislation in States with more
flexible rules than the Victorian model may need to change the entities to
which they contribute to avoid losing income tax exemption.
2.32 The income tax exemption in item 4.1 in section 50-20 of the
Income Tax Assessment Act 1997 (ITAA 1997) that applies to
non-charitable public and private ancillary funds which provide money,
property and benefits to income tax exempt deductible gift recipients is
repealed. Existing funds falling under item 4.1 will benefit from the
grandfathering provision discussed at paragraph 2.34 below.
2.33 A number of consequential changes are required to the Income
Tax Assessment Act 1936 and the ITAA 1997 to reflect this change.
[Schedule 1, items 19 to 23, and items 26 to 35 of the Consequential Amendments Bill]
Transitional arrangements for endorsement of funds that contribute to
charity-like government entities
2.34 The Bill ensures that existing item 4.1 type income tax exempt
funds that are endorsed by the Commissioner of Taxation are treated as
registered charities following these amendments. [Schedule 2, item 4 of the
Consequential Amendments Bill]
2.35 These income tax exempt funds are provided with an opt out
provision, should they not wish to be endorsed as a registered charity.
[Schedule 2, item 5 of the Consequential Amendments Bill]
Grandfathering of `poor relations' and `poor employees' trusts
2.36 As discussed at paragraph 1.76 above, gifts or trusts that provide
benefits to a limited range of people that are closely connected, whether
because of family ties (poor relations) or a shared employer (poor
employees) may have been charitable under the common law.
2.37 These trusts, which may continue indefinitely, are widely
considered anomalous in contemporary Australia. Such a purpose is no
longer likely to satisfy a public benefit requirement. However, to reflect
that these trusts may be difficult to change, the Consequential
Amendments Bill will `grandfather' these existing trusts, so that where a
trust has a purpose of relieving poverty, and these trusts were established
before the commencement of the Charities Bill 2013 and were registered
with the ACNC, this purpose will be treated as being for the public benefit
following the commencement of the Charities Bill 2013. [Schedule 2, item 6
of the Consequential Amendments Bill]
2.38 Minor changes are made to the wording in Division 30 of the
ITAA 1997 relating to public funds established and maintained for the
purpose of relieving the necessitous circumstances of one or more
39
Charities Bill 2013
Charities (Consequential Amendments and Transitional Provisions) Bill 2013
individuals who are in Australia. The effect of this general DGR category
item is unchanged. [Schedule 1, items 24 and 25]
Minor consequential changes
2.39 A number of minor changes are made to the A New Tax
System (Goods and Services Tax) Act 1999, the ACNC Act, the Fringe
Benefits Tax Assessment Act 1986, the ITAA 1997, and the Social
Security Act 1991 to recognise that:
· the existing four categories of charitable purpose have been
expanded to 12 categories of charitable purpose; and
· the relief of poverty, sickness or the needs of the aged now
forms part of the charitable purpose of advancing social or
public welfare.
[Schedule 1, items 5, 6, 8, 9, 15 to 18, 36, 37 and 40 to 42 of the Consequential
Amendments Bill]
2.40 Amendments are made to the Tax Laws Amendment (Special
Conditions for Not-for-profit Concessions) Act 2013 if enacted. Further
information about the transitional arrangements is below. [Schedule 1,
items 45 to 47 of the Consequential Amendments Bill]
Cy pres and cy pres-like schemes
2.41 The Charities Bill 2013 allows cy pres and other similar
schemes to be taken account of in determining charity status under
Commonwealth law. The Consequential Amendments Bill contains an
amendment which extends that treatment to the ACNC Act. This ensures
that, consistent with the Charities Bill 2013, if a cy pres or similar scheme
applies:
· non-charitable purposes of a mixed purpose trust are
disregarded in determining if it is charitable; and
· the Charities Bill 2013 and the ACNC Act apply consistently
to such trusts.
[Schedule 1, item 7 of the Consequential Amendments Bill, subsection 25-5(6)]
Application and transitional provisions
2.42 The Consequential Amendments Bill generally applies from
1 January 2014, being the date that the Charities Bill 2013 commences.
[Clause 2 of the Consequential Amendments Bill]
2.43 However, the inclusion of the definition of not-for-profit
entity, which will be included in the income tax law by the Tax Laws
Amendment (Special Conditions for Not-for-profit Concessions)
Bill 2012 is contingent on the commencement of the Charities Bill 2013
and the Tax Laws Amendment (Special Conditions for Not-for-profit
Concessions) Bill 2012. If the Tax Laws Amendment (Special Conditions
40
Transitional and consequential amendments
for Not-for-profit Concessions) Bill 2012 does not commence then the
meaning of not-for-profit entity takes its ordinary meaning. [Schedule 1,
item 44 of the Consequential Amendments Bill]
2.44 Similarly, consequential amendments in the Tax Laws
Amendment (Special Conditions for Not-for-profit Concessions)
Bill 2012 are redundant if amendments in the Consequential Amendments
Bill have already taken effect. This reflects that both Bills make
conflicting amendments to the same provisions.
2.45 Accordingly, the amendments to section 50-20 and
subsection 50-110(5) of the ITAA 1997 in the Tax Laws Amendment
(Special Conditions for Not-for-profit Concessions) Bill 2012 do not take
effect if the Consequential Amendments Bill commences prior to that Bill.
41
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Charities Bill 2013 and Charities (Consequential Amendments and
Transitional Provisions) Bill 2013
3.1 These Bills are compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
3.2 The Charities Bill 2013 (the Bill) and the Charities
(Consequential Amendments and Transitional Provisions) Bill 2013
introduce a definition of charity and charitable purpose for the purposes of
all Commonwealth legislation.
3.3 The Government announced in the 2011-12 Budget that it would
introduce a statutory definition of charity based on the 2001 Report of the
Inquiry into the Definition of Charity and Related Organisations, also
taking into account later judicial decisions.
3.4 The meaning of charity and charitable purpose has not
previously been comprehensively defined in statute for the purposes of
Commonwealth law. The meaning has been determined based on over
400 years of common law. The statutory definition largely preserves the
common law principles with modifications to modernise and provide
greater clarity and certainty about the meaning of charity and charitable
purpose.
Human rights implications
3.5 The Bill engages three separate human rights under the
International Covenant on Civil and Political Rights (ICCPR): the right to
freedom of expression; the right to take part in public affairs; and the right
to equality and non-discrimination.
3.6 Human rights do not apply to charities, only individuals. The
Bill does not restrict individuals -- it places limitations at the entity level,
but only in respect of eligibility for registration under a voluntary
regulatory framework. Human rights are only engaged to the extent that
the Bill impacts on individuals involved with charities. Individuals are
43
Charities Bill 2013
Charities (Consequential Amendments and Transitional Provisions) Bill 2013
free to engage in behaviours restricted by the Bill by means other than
collectively through a charity.
3.7 Registering a charity under the Bill is voluntary. The primary
reason that a charity would seek registration would be to access the
associated tax concessions. Entities are not required to comply with the
limitations under the Bill unless they choose to register as a charity.
3.8 The Bill largely reflects the current requirements on charities
under the common law.
Right to freedom of expression
3.9 The right to freedom of expression is contained in article 19 of
the ICCPR. The right to freedom of expression `includes the freedom to
seek, receive and impart information and ideas of all kinds, regardless of
frontiers, either orally, in writing or in print, in the form of art, or through
any other media of his choice' (article 19(2)). Under article 19(3), the
right may be limited by law, where those limitations are necessary for the
respect of the rights or reputations of others; for the protection of national
security or of public order; or of public health or morals.
3.10 This right is engaged because the definition of charity provides
that an entity which is a charity must not have any of the disqualifying
purposes set out in section 11 of the Bill.
3.11 The Bill is consistent with the right to freedom of expression.
3.12 Limitations on registered charities do not engage human rights.
Human rights are only engaged to the extent that an entity which is able to
access the regulatory framework and tax concessions available to charities
will offer greater benefit to individuals in furthering charitable purposes
than an entity which operates outside that framework and without those
concessions.
3.13 Disqualifying purposes in the Bill are: the purpose of engaging
in, or promoting, activities that are unlawful or contrary to public policy;
or the purpose of promoting or opposing a political party or a candidate
for political office. The meaning of these disqualifying purposes is
discussed in the explanatory memorandum at paragraphs 1.102 to 1.111.
3.14 Activities engaged in by a charity will not necessarily constitute
a purpose of that charity, that is, a charity may engage in an activity
without having the purpose of engaging in that activity. For example, a
charity may produce `score cards' setting out how a particular party's
policies aligns with the charity's aims and this is unlikely to constitute a
purpose of that charity.
3.15 The disqualifying purposes provisions set out in the Bill are
necessary for the protection of public order and national security, and they
constitute a reasonable and proportionate way of achieving this protection.
They reflect the common law.
44
Statement of Compatibility with Human Rights
3.16 First, charities must not have a purpose of engaging in, or
promoting, activities that are unlawful or contrary to public policy. This
restriction is currently imposed by the common law. Although `public
policy' is not defined, the Bill clarifies that it refers to matters such the
rule of law, the system of government of the Commonwealth, the safety of
the general public and national security.
3.17 The right to freedom of expression is engaged because
individuals cannot use a charity to further a purpose of engaging in, or
promoting these activities. This is necessary for the protection of public
order and national security because it restricts individuals from using
charities to engage in or promote certain activities, such as illegal
activities, or activities which threaten national security.
3.18 This limitation on registration is reasonable and proportionate
because:
· individuals may engage in, or promote, these activities
through other means (although they may contravene other
laws);
· activities are not contrary to public policy merely because
they are contrary to government policy; and
· it does not affect the ability of individuals to use charities to
promote a change in the law. Promoting a change to any
matter established by law is a charitable purpose under
section 12 of the Bill, where that promotion or opposition
relates to one of the other charitable purposes listed in
section 12.
3.19 Second, charities must not have a purpose of promoting or
opposing a political party or a candidate for political office. This is an
existing limitation on charities imposed by the common law, and is
necessary for the protection of public order. It promotes the integrity of
both the electoral system and the not-for-profit sector by preventing both
the system and the sector from misuse by people seeking to obtain a tax
benefit. Further it preserves and protects the independence of the
charitable sector.
3.20 This limitation on the purposes of a registered charity is
reasonable and proportionate. As noted in paragraph 1.105, charities may
still engage in activities such as policy debates, advocacy or lobbying
activities to further charitable purposes, or publishing comparisons of
party policies and how they align with their charitable purpose. They may
have a purpose, including a sole purpose of promoting or opposing a
change to any matter established by law, policy or practice in the
Commonwealth, a state, a territory or another country may be a charitable
purpose.
45
Charities Bill 2013
Charities (Consequential Amendments and Transitional Provisions) Bill 2013
3.21 The Bill enables entities to generate and engage in public debate
with fewer restrictions than the provisions relating to political purposes in
comparable overseas jurisdictions such as the United Kingdom and
New Zealand where such purpose may be only incidental or ancillary to
another charitable purpose.
3.22 The engagement of charities in electoral activities may also have
consequences under electoral laws. (See paragraph 1.110.)
3.23 As discussed above, this restriction on charities through
disqualifying purposes is a reasonable, necessary and proportionate step
towards ensuring the integrity of the not-for-profit sector.
Right to take part in public affairs
3.24 The right to take part in public affairs is contained in article 25
of the ICCPR. Relevantly, article 25 provides that `every citizen shall
have the right and the opportunity, without any of the distinctions
mentioned in article 2 and without unreasonable restrictions, to take part
in the conduct of public affairs, directly or through freely chosen
representatives'. None of the distinctions mentioned in article 2 of the
ICCPR are relevant to these provisions of the Bill.
3.25 This right is engaged in the same context as the right to freedom
of expression: because the definition of charity provides that an entity
which is a charity must not have any of the disqualifying purposes set out
in section 11 of the Bill. These rights are closely linked.
3.26 Requiring charities to not have any disqualifying purposes is
consistent with the right to take part in public affairs, and pursues the
legitimate objectives of protecting public order and ensuring the integrity
of the not-for-profit sector.
3.27 The objective of protecting public order is discussed above in
relation to freedom of expression, and the same arguments apply to the
right to take part in public affairs. The relevant provisions are reasonable
restrictions based on objective criteria.
3.28 As discussed above in relation to freedom of expression,
charities may still engage in activities such as policy debates, advocacy or
lobbying activities to further charitable purposes, or publishing
comparisons of party policies and how they align with its charitable
purpose. Charities may play a significant role in public affairs, and are
free to have the purpose of promoting or opposing laws, policies, and
practices, where this aids an existing charitable purpose.
3.29 The disqualifying purpose of engaging in, or promoting,
activities that are unlawful or contrary to public policy reflects the
common law. It promotes the integrity of the not-for-profit sector by
bringing the purposes of charities in line with public expectations, and
ensuring that those charities do not have a purpose which is detrimental to
46
Statement of Compatibility with Human Rights
Australian public policy and society. The Bill notes that activities are not
contrary to public policy merely because they are contrary to government
policy.
3.30 This provision does not prevent a charity from promoting a
change to the law which is relevant to an existing charitable purpose. A
purpose of promoting or opposing a change to any matter established by
law, policy or practice in respect of an existing charitable purpose may
itself be a charitable purpose. For example, although a charity could not
have the purpose of promoting an illegal act, it may campaign for a
change to that law, if such a change is in furtherance or in aid of one of
the other charitable purposes listed in section 12.
3.31 Individuals are not bound by the Bill, and are free to participate
in public affairs through other means. Individuals may also act
collectively through entities other than charities.
3.32 The disqualifying purpose of promoting or opposing a political
party or a candidate for public office promotes the not-for-profit sector by
ensuring that the tax concessions associated with charities are not used for
a political party or individual candidate's political benefit or detriment.
3.33 This would be inconsistent with the goals of the regulatory
frameworks for the not-for-profit sector, and could undermine public
confidence in the independence of the sector if such disqualifying
purposes were permitted as charitable purposes.
3.34 As explained in paragraph 3.21 the provisions in the Bill
relating to generating and engaging in public debate are less restrictive
than in comparable overseas jurisdictions.
Right to equality and non-discrimination
3.35 Article 26 of the ICCPR provides: `All persons are equal before
the law and are entitled without any discrimination to the equal protection
of the law. In this respect, the law shall prohibit any discrimination and
guarantee to all persons equal and effective protection against
discrimination of any ground such as race, colour, sex, language, religion,
political or other opinion, national or social origin, property, birth or other
status.'
3.36 Distinction based on race is permissible if it constitutes
legitimate differential treatment. The United Nations Human Rights
Committee has noted in General Comment 18 that `not every
differentiation of treatment will constitute discrimination, if the criteria for
such differentiation are reasonable and objective and if the aim is to
achieve a purpose which is legitimate under the Covenant'.
3.37 As explained in paragraphs 1.89 to 1.94, the Bill creates
differential treatment to address a circumstance particular to Indigenous
47
Charities Bill 2013
Charities (Consequential Amendments and Transitional Provisions) Bill 2013
individuals which may otherwise prevent them from meeting a public
benefit test.
3.38 The requirement that a purpose be for the public benefit
generally prevents entities which limit benefits to persons who are related
from being charitable as such limits are not in the public benefit (a core
part of charity).
3.39 However, entities may be required to provide benefits only to
related Indigenous individuals where the entity manages, holds or receives
property or payments related to native title or traditional land ownership,
occupation, use or enjoyment rights.
3.40 The Bill allows for the purpose of an entity in these
circumstances to be treated as being for the public benefit if the only
reason that the purpose is not for the public benefit is because the
beneficiaries are related.
3.41 The potential disadvantage arises because the common law does
not allow for the special circumstances relating to native title benefits and
the traditional relationships exiting between Indigenous individuals. The
differential treatment is intended to rectify any disadvantage caused by the
operation of the public benefit test.
3.42 The differential treatment is based on reasonable and objective
criteria: it applies to the specific circumstances that create the
disadvantage. That is, where any entity which has property or payments
relating to native title or traditional land ownership or use has a purpose
that directs benefits to Indigenous individuals only, and which does not
meet the public benefit test solely because the individuals to whose
benefits the purpose is directed are related to one another.
3.43 The differentiation is a proportionate response because it is
limited to the specific circumstances where an entity would fail the public
benefit test due only to particular restrictions on who may hold or receive
benefits. The relevant entities must still meet all other requirements of the
definition of a charity.
Conclusion
3.44 These Bills are compatible with human rights.
Assistant Treasurer, The Hon David Bradbury
48
Index
Charities Bill 2013
Bill reference Paragraph number
Sections 1, 2 and 3 1.20
Paragraph 4 (1) (b)and subsection 4(2) 1.54
4(1)(c) 1.55
Paragraph 4(1)(a) 1.53
Paragraphs 5(a) to (d) 1.21
Paragraph 5(a) 1.23
Paragraph 5(b) 1.24
Note 1 in paragraph 5(b) 1.28
Paragraph 5(d) 1.51
Paragraph 6(1) 1.56
Paragraph 6(2)(a) 1.58
Subsection 6(2)(a) 1.61
Paragraph 6(2)(b) 1.62
Paragraph 6(3)(a) 1.68
Paragraph 6(3)(b) 1.74
Subsection 6(4) 1.63
Section 7 1.79, 1.85
Paragraph 7(b)(c) and (e) 1.80
Paragraph7(d) 1.81
Section 7 and Note 1, section 14 and subsections 15(1) and (2) 1.83
Section 8 1.87, 1.88
Section 9 1.92
Section 10 1.95
Paragraph 11(a) and Note 1.103
Paragraph 11(b) 1.104, 1.108
Paragraph 11(b) and paragraph 12(1)(l) 1.105
Paragraph 12(1)(a) 1.118
Paragraph 12(1)(b) 1.119
Paragraph 12(1)(c) 1.124
Paragraph 12(1)(d) 1.133
49
Charities Bill 2013
Charities (Consequential Amendments and Transitional Provisions) Bill 2013
Bill reference Paragraph number
Paragraph 12(1)(e) and section 16 1.134
Paragraph 12(1)(f) 1.135
Paragraph 12(1)(g) 1.138
Paragraph 12(1)(h) 1.139
Paragraph 12 (1)(i) 1.140
Paragraph 12(1)(j) 1.141
Paragraph 12(1)(k) and Charities (Consequential Amendments and 1.114
Transitional Provisions) Bill 2013, Schedule 2, item 7
Paragraph 12(1)(k), Charities (Consequential Amendments and 1.143
Transitional Provisions) Bill 2013, Schedule 2, item 7
Paragraph 12(1)(l) 1.149
Subsection 12(2) 1.150
Subsection 12(3) 1.113
Section 13 1.152
Subsection 15(3) 1.126
Subsection 15(4) 1.127
Paragraph 15(4)(a) 1.130
Section 17 1.139
Paragraph 18(a) 1.153
Paragraph 18(b) 1.157
Clause 2 of the Consequential Amendments Bill 2.42
Charities (Consequential Amendments and Transitional
Provisions) Bill 2013
Clauses
Bill reference Paragraph number
Clause 2 2.42
Schedule 1: Consequential amendments
Bill reference Paragraph number
Item 7 of the Consequential Amendments Bill 2.16
Item 7 of the Consequential Amendments Bill, subsection 25-5(6) 2.41
Items 10 to 13 of the Consequential Amendments Bill 2.8
50
Index
Bill reference Paragraph number
Items 19 to 23, and items 26 to 35 of the Consequential 2.33
Amendments Bill
Items 24 and 25 2.38
Item 43 of the Consequential Amendments Bill 2.9
Item 44 of the Consequential Amendments Bill 2.43
Items 45 to 47 of the Consequential Amendments Bill 2.40
Schedule 2: Transitional provisions
Bill reference Paragraph number
Item 1 of the Consequential Amendments Bill 2.26
Items 1, 2, to 4, 14, 38 and 39 of the Consequential Amendments 2.7
Bill
Subitems 2(1) and (2) of the Consequential Amendments Bill Table 2.1
Subitem 2(3) of the Consequential Amendments Bill 2.20
Item 3 of the Consequential Amendments Bill Table 2.2
Subitems 3(1) and (2) 2.24
Subitem 3(4) of the Consequential Amendments Bill 2.23
Item 4 of the Consequential Amendments Bill 2.34
Item 5 of the Consequential Amendments Bill 2.35
Items 5, 6, 8, 9, 15 to 18, 36, 37 and 40 to 42 of the Consequential 2.39
Amendments Bill
Item 6 of the Consequential Amendments Bill 1.77, 2.37
Item 6 of the Charities (Consequential Amendments and Transitional 2.13
Provisions) Bill 2013
Item 7 of the Consequential Amendments Bill 2.13
51
53