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The status of “charity” is the gateway to tax concessions for organisations in the welfare, religious, education and community sectors.
The proposal to introduce a statutory definition of charity is a significant move in legal history. Over 400 years of case law on charities will be replaced by a definition of charity in an Act of Parliament. This will give Parliament more control over whether or not an organisation is a charity and will reduce the influence of the Courts.
The Australian Government has released a public consultation paper on the introduction of a statutory definition of “charity”. This was one of the Government’s Budget announcements in May this year.
Moores Legal welcomes a statutory definition and the certainty that it will provide to charities. However, it is important to ensure that the definition is carefully analysed.
Moores Legal is concerned about the following:
- The paper states that the new Australian Charities and Not-for-profits Commission (ACNC) will determine whether or not an organisation is a charity but the ATO will determine whether it meets the applicable “special conditions” and is therefore entitled to tax concessions. This seems to defeat the purpose of introducing an independent regulator. This does not seem to get around the perceived conflict of interest of the Commissioner’s “revenue collection focus” and its role as gate-keeper of NFP tax concessions. Our concerns are exacerbated by the problems with the “in Australia” special conditions which were canvassed in the recent public consultation.
- We are concerned that the paper refers to the Aid/Watch case in the context of what are or are not charitable activities but misses the point that the High Court decision dealt with charitable purpose. In so doing, the impact of the High Court’s decision is minimised.
- The paper does not make any reference to the Bicycle Victoria case and simply states that all sporting, recreational or social purposes are not charitable. This is a retrograde step, and a blunt interpretation of the current law.
- It proposes the substitution of the most recent terminology that a charity’s dominant purpose must be charitable, with a requirement that a charity must have an exclusively charitable purpose. This is likely to be misleading. The common law allows a charity to have a non-charitable purpose which is incidental or ancillary.
- It proposes that charities that are for the advancement of education or religion or for the relief of poverty must demonstrate that they are for the public benefit. At present, this is presumed. The UK experience has shown that there are real difficulties in overturning this presumption – particularly in the areas of education and religion.
Submissions are due 9 December 2011. The Government intends to release an exposure draft of legislation introducing a statutory definition of “charity” in the first half of 2012. The submissions to the current consultation will inform the drafting of the legislation.
The consultation paper can be accessed here.
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