The Federal Government has released for comment a draft of the legislation which will introduce the long anticipated statutory definition of ‘charity’.
You can access here at the Treasury’s website a draft of the Charities Bill 2013, Charities (Consequential Amendments and Transitional Provisions) Bill 2013, explanatory material to accompany both Bills and a Fact Sheet.
At present, the meaning of ‘charity’ for the purposes of Commonwealth law (including whether an entity is eligible for Commonwealth charity tax concessions) has been determined by its common law meaning. The common law meaning of ‘charity’ has been developed over 400 years and is based on the Preamble to an English Statute in 1601 which has only 4 heads of charitable purposes – the relief of the needs of the poor, aged or impotent, the advancement of education, the advancement of religion and other purposes beneficial to the community.
The Government is seeking to have a statutory definition of ‘charity’ which “preserves the common law principles with minor modifications to provide clarity and certainty about the meaning of ‘charity’ and ‘charitable purpose”. Overall the draft legislation achieves this purpose.
Under the draft Bill, an entity is a charity if it satisfies the following criteria:
- it is not-for-profit;
- it has only 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 (being activities that are unlawful or contrary to public policy or promoting or opposing a political party or a candidate for political office); and
- it is not an individual, a political party or a government entity.
The potential area for argument is what will be meant by ‘ancillary’ or ‘incidental’.
Rather than relying on the 4 heads of charity established in 1601, the Bill sets out a non-exhaustive list of 13 categories of charitable purposes which have already received significant acceptance by the courts. The list includes the following categories of charitable purposes – promoting reconciliation, mutual respect and tolerance between groups of individuals in Australia, promoting or protecting human rights and advancing the natural environment. The list also incorporates recent court decisions such as Aid/Watch incorporated v Federal Commissioner which extended the circumstances in which a charity may advance public debate.
The Bill has a mechanism for additional categories of charitable purposes to be included by enabling the courts, as well as Parliament, to continue to develop the definition of ‘charity’. This ensures the meaning of a ‘charity’ can continue to develop and be extended to other charitable purposes which reflect Australian society and community needs as they evolve. The need for this flexibility is important – the 4 heads of charitable purposes established in 1601 reflect the fact that at that time, charities were mainly concerned with welfare and benevolent activities. However charities have evolved since 1601 and its purposes are now more preventative and enabling for the community. The 13 categories of charitable purposes in the Bill reflect this evolution of charities.
The Bill also preserves the presumption of public benefit for certain charitable purposes.
The draft legislation is open for comment. The closing date for submissions is Friday 3 May 2013.