In the continuing barrage of information relating to the reforms
to the not-for-profit sector, on 28 October 2011 the Commonwealth
Treasury released its consultation paper on a definition of charity
to apply for all Commonwealth laws with effect from 1 July 2013.
Although Treasury has indicated that existing charities will not
need to reapply to the new Australian Charities and Not-for-profits
Commission for registration, it has indicated that registration
will be reviewed by the ACNC over time.
Existing charities should review the consultation paper to
ensure that they take advantage of the opportunity for consultation
in relation to the issues relating to their existing
Submissions to Treasury on the consultation are due 9 December
2011. Given the definition is due to start in July 2013 and an
exposure draft of legislation will be prepared during 2012, it is
clear there is a long way to go in finalising the reforms.
The current definition of charity comes from the common law and
can be broadly described as the 'four heads of charity'
identified in Pemsel's case(1). These 'heads of
relief of poverty
advancement of education
advancement of religion
other purposes beneficial to the community.
The ATO has also recently finalised TR 2011/4 which sets out its
views on the meaning of 'charitable' in the context of
determining whether the purpose of an organisation is charitable
and therefore eligible for tax concessions (see our update
The new definition
The idea of a statutory definition of charity is not new. In
2001, the Australian Government commissioned an inquiry into the
definition of charities and related organisations which led to the
introduction of the Charities Bill 2003. However, this
bill was subsequently withdrawn before being passed.
The consultation paper makes extensive reference to TR 2005/D2
which was the draft form of TR 2011/4.
Treasury has proposed that the new definition will be based on
the 2001 inquiry and the Charities Bill 2003, taking into
account the developments since 2003, including the High Court's
decision in Aid/Watch. The Charities Bill 2003
defined charity with reference to a 'core definition' and
that the entity's domininant purpose was charitable. The
concepts of 'core definition' and 'charitable
purpose' are defined and described and will invariably be
subject to interpretation and guidance over time.
The definition of 'not-for-profit' is also to be
developed. A further exposure draft of these amendments is expected
in the coming months.
Issues for consultation
The consultation paper sets out a number of questions for
consultation and invites response from the industry. The are a
number of issues that are particularly relevant for existing
charities. They will will need to consider and assess the
implications and engage in the consultation to ensure Treasury
understands their impact. These issues go to the operation,
structure and financial foundation of an organisation and include
activities - nature and breadth
lobbying and advocacy.
Gadens Lawyers is able to assist organisations
seeking to understand and assess the issues raised in the
consultation and in making submissions to Treasury.
1 Commissioners for Special Purposes of Income
Tax v Pemsel [1891-1894] All ER Rep 28
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