On 11 May 2011, the ATO issued draft Ruling TR 2011/D2
(Draft Ruling) and a Decision Impact Statement
setting out their views in relation to the Aid/Watch(1)
case (see our case update
here). The Decision Impact Statement and Draft Ruling have a
significant impact on future or proposed activities and on some
organisations not previously considered 'charitable'.
Does this mark the beginning of the public consultation
on a statutory definition of 'charity'?
Despite the timing of the release, the Federal Treasury has said
to Gadens Lawyers that the request for feedback on the Draft Ruling
and the Decision Impact Statement is not the 'consultation'
on the proposed statutory definition of charity foreshadowed in the
2011 Federal Budget (see our update here).
Organisations previously not considered charitable may wish to take
this opportunity to make a submission before future consultation on
a statutory definition of 'charity'.
Decision Impact Statement
A decision impact statement sets out how the ATO interprets and
proposes to administer the tax law in light of a relevant judicial
The Decision Impact Statement clarifies that the generation of
public debate will only be considered charitable by the ATO if the
subject matter falls within the four heads of charity:
'the relief of poverty';
'the advancement of education';
the advancement of religion' and
'other purposes beneficial to the community'.
In Aid/Watch, the High Court found it unnecessary to
determine whether 'other purposes beneficial to the
community' includes the encouragement of public debate in
relation to government activities outside of the four heads of
charity. This leaves the question open for clarification.
The ATO has indicated that it will assess other entities that
generate public debate about a government activity or policy beyond
the four heads of charity on a case by case basis.
The request for Feedback on the Decision Impact Statement
provides an opportunity for not-for-profit organisations to explore
the question left open by the High Court on the subject matter
about which public debate may be generated and still be considered
A copy of the Decision Impact Statement can be accessed
A tax ruling sets out how the ATO will administer the tax
The Draft Ruling is intended to replace TR 2005/21 on the
ATO's definition of 'charity' and 'charitable
An entity can be charitable if it has a purpose of generating
public debate in relation to subject matters within one or more of
the four heads of charity. This change results from the
The charitable status of an institution will not be affected by
it carrying on a business or commercial enterprise to give effect
to its charitable purpose, and even if its activities are not
intrinsically charitable. These are a long-awaited changes to bring
the tax ruling in line with the decision in Word
The ATO has invited comments on the Decision Impact Statement
and comments on the Draft Ruling can be made until 24 June
Gadens Lawyers is able to assist and advise organisations that
consider themselves charitable to provide feedback or a submission
to the ATO, or in reviewing whether their activities may be
considered charitable in light of the new Decision Impact Statement
or Draft Ruling.
(1) Aid/Watch Incorporated v Commissioner of Taxation 
HCA 42 (1 December
(2) Word Investments Limited v Commission of Taxation 
HCA 55 (3 December
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