The Federal Government passed its Charities Bill into law on 29
June 2013 and is due to take effect from 1 January 2014.
A charity is defined as a "not for profit"
entity where all of its purposes are charitable purposes for the
public benefit or purposes that are incidental or auxiliary to and
in furtherance of or in aid of the charitable purposes of the
The following activities have been defined to be charitable:
the advancement of health or the prevention or relieving of
sickness, disease or human suffering;
the advancement of education;
relieving poverty, distress or disadvantage of individuals or
the care and support for the aged or individuals with
social or public welfare;
the advancement of religion (including closed or contemplative
religious orders qualify if the order regularly undertakes
prayerful intervention at the request of members of the general
the advancement of culture;
reconciliation and tolerance between groups;
protecting human rights;
advancement of security or safety;
preventing suffering of animals;
organisations managing benefits relating to Native Title;
self help groups for individuals with particular disadvantages
or that face discrimination provided membership is open and non
discriminatory to all individuals affected; and
advancing the natural environment.
The following cannot be Charities:
individuals or government entities;
political parties or organisations promotion of a political
party or candidate; or
organisations promoting activities that are unlawful or
contrary to public policy.
Commercial Activities of Charities
Whilst the Act provides little insight into commercial
activities the Explanatory Memorandum addresses the issues in some
details. In summary:
The nature of the activities must be looked at on a "case
by case" basis and a simple "look through" approach
is not to be applied.
A charity can undertake commercial or business like activities
but the purpose of the organisation must be charitable. For example
where the purpose of the business is to provide training
opportunities for disadvantaged persons.
If the purpose of an entity is to generate a surplus then it
will not be charitable.
A commercial entity is not charitable merely because it is
controlled or owned by a charitable entity.
A charity can hold investments to generate market returns to be
used for their charitable purposes without affecting their
A charity can carry out incidental or auxiliary purposes which
may be non charitable such as accounting or insurance functions or
fund raising purposes. These activities are not the end themselves
but are necessary to further, aid or assist with the achievement of
the charitable purpose.
An organisation with a purpose for furthering charitable works
via carry on a commercial enterprise to generate funds is
If a charity were to establish a wholly owned commercial,
investment or service entity to provide support to the charity,
then the entity must have its own charitable purpose to be a
It is expected this definition will be adopted by the Australian
Charities and Not for Profit Commission (ACNC) and
the Tax Office in determining which organisations are charitable.
It will therefore have impacts on public benevolent institution
status, income tax exemption status and deductible gift recipient
status for all charities and in particular those with commercial
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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