On 28 October 2011, the Assistant Treasurer and Minister for Social services and Social Inclusion released a consultation paper proposing a “statutory definition of charity to clarify exactly what does – and does not – qualify as a ‘charity’ and as a ‘charitable purpose’”.
The Government announced in the 2011-12 Budget that it would introduce a statutory definition of charity, applicable across all Commonwealth laws from 1 July 2013.
Submissions are due on 9 December 2011.
The joint Press Release issued by the two Ministers explains that:
“The Government is seeking the views of charities and other stakeholders on a definition of charity and charitable purposes. The consultation builds on a range of previous inquiries including the 2001 Report of the Inquiry into the Definition of Charities and Related Organisations, the Charities Bill 2003 and recent court decisions including the High Court’s decision in Aid/Watch Incorporated v the Commissioner of Taxation.
As this is the first round of consultation on this issue, the Government is seeking important feedback from the community. The Government wants to hear from the sector about how a single definition can best serve the needs of not-for-profits and their clients, as well as encourage charitable giving. The Government will also consult on an exposure draft of the legislation in the first half of next year.
The Government is also working with the States and Territories to achieve greater harmonisation between the Commonwealth and the States and Territories through the Council of Australia Governments.
Minister for Social Inclusion, Tanya Plibersek, said
“Charities provide vital services to the Australian community. We want not-for-profits to be able to direct their resources to charitable work rather than unnecessarily complex administration.”“By establishing a modern and workable definition of ‘charity’ the Government is reducing compliance burden for the sector and making it easier for charities to get on with the job of providing charitable services.”
It might be unfair to observe that rarely, if ever, has a Government been successful in introducing new regulations and, at the same time, reducing compliance burdens.
The Ministers released a consultation paper and fact sheet. Both are available on the Treasury website.
The Implementation Taskforce for the Australian Charities and Not for profit Commission (ACNC), which was announced in the May Budget will be responsible for determining the legal status of groups seeking charitable, public benevolent institution, and other not-for-profit benefits on behalf of all Commonwealth agencies.
The Taskforce is responsible for ensuring the ACNC is ready for operation by 1 July 2012.
The ACNC will also implement a ‘report-once use-often’ reporting framework for charities, provide education and support to the sector on technical matters, and establish a public information portal by 1 July 2013.
Treasury has also recently brought together all of its work on the Government’s important not-for-profit reform agenda into one place on its website – www.treasury.gov.au.
The consultation paper records that the then Government attempted to introduce a statutory definition of charity at the Commonwealth level in the Charities Bill 2003. This Bill, which did not proceed, proposed a definition of both charity and charitable purpose consistent with the existing common law interpretation at that time.
The consultation paper proposes to base the new definitions on the work already done on the Charities Bill 2003. In doing so, it raises the following focus questions;
1. Are there any issues with amending the 2003 definition to replace the ‘dominant purpose’ requirement with the requirement that a charity have an exclusively charitable purpose?
2. Does the decision in Social Ventures Australia Limited v. Chief Commissioner of State Revenue [2008] NSWADT 331 provide sufficient clarification on the circumstances when a peak body can be a charity or is further clarification required?
3. Are any changes required to the Charities Bill 2003 to clarify the meaning of ‘public’ or ‘sufficient section of the general community’?
4. Are changes to the Charities Bill 2003 necessary to ensure beneficiaries with family ties (such as native title holders) can receive benefits from charities?
5. Could the term ‘for the public benefit’ be further clarified, for example, by including additional principles outlined in ruling TR 2011/D2 or as contained in the Scottish, Ireland and Northern Ireland definitions or in the guidance material of the Charities Commission of England and Wales?
6. Would the approach taken by England and Wales of relying on the common law and providing guidance on the meaning of public benefit, be preferable on the grounds it provides greater flexibility?
7. What are the issues with requiring an existing charity or an entity seeking approval as a charity to demonstrate they are for the public benefit?
8. What role should the ACNC have in providing assistance to charities in demonstrating this test, and also in ensuring charities demonstrate their continued meeting of this test?
9. What are the issues for entities established for the advancement of religion or education if the presumption of benefit is overturned?
10. Are there any issues with the requirement that the activities of a charity be in furtherance or in aid of its charitable purpose?
11. Should the role of activities in determining an entity’s status as a charity be further clarified in the definition?
12. Are there any issues with the suggested changes to the Charities Bill 2003 as outlined above to allow charities to engage in political activities?
13. Are there any issues with prohibiting charities from advocating a political party, or supporting or opposing a candidate for political office?
14. Is any further clarification required in the definition on the types of legal entity which can be used to operate a charity?
15. In the light of the Central Bayside decision is the existing definition of ‘government body’ in the Charities Bill 2003 adequate?
16. Is the list of charitable purposes in the Charities Bill 2003 and the Extension of Charitable Purposes Act 2004 an appropriate list of charitable purposes?
17. If not, what other charitable purposes have strong public recognition as charitable which would improve clarity if listed?
18. What changes are required to the Charities Bill 2003 and other Commonwealth, State and Territory laws to achieve a harmonised definition of charity?
19. What are the current problems and limitations with ADRFs?
20. Are there any other transitional issues with enacting a statutory definition of charity?
A few comments
- It is difficult to imagine that a statutory definition of charity can respond to changes in society in a way that the common law has achieved for 400 years.
- The consultation paper makes reference on many occasions to the Commissioner’s draft ruling TR 2011/D2. It is concerning that the paper contemplates including the Commissioner’s (preliminary) views of the principles in the new definition.
- The paper comments on the difference between charitable purpose and activities but seems to focus on the question of whether an “entity” is – or should be – a “charity”. Our current taxation laws are showing signs of extreme weakness where the term “entity” is used to describe relationships that are enforced by the common law, e.g.,
- the “trust” and “trust estate” issue described in Leighton v Commissioner of Taxation [2011] FCAFC 96; and
- the proposals to amend the GST law to deal with bare trusts and trustee services.
I might be wrong, but I thought equity would only enforce a gift for purposes if the purposes are charitable. These do not have legal personality as such. The done is forced by equity to act in accordance with the terms of the gift.
So the proposals will need to consider how “funds” and “trust”, rather than “entities” are to be afforded charitable status – see focus question 1 above.