In a recent Tribunal decision, Deputy President McCabe has
affirmed the decision of the Minister for Education and Training
(Minister) to revoke the approval of Malek Fahd Islamic School
Limited (MFISL) as an approved authority under the Australian
Education Act 2013 (Cth) (Education Act). Primarily, it was
held that MFISL no longer met the requirements of operating on a
not-for-profit basis under the Education Act.
Malek Fahd Islamic School Limited and Minister for Education
and Training  AATA 1087
The Tribunal held that transactions involving MFISL and an
associated organisation, the Australian Federation of Islamic
Councils (AFIC), constituted conducting a school 'for
profit' within the meaning of the Education Act. It was deemed
that MIFSL had failed to put in place adequate policies and
practices to ensure that spending was only for the purposes of
providing school education.
Due to the relationship between the organisations, the Tribunal
was critical of advanced payments of inflated rent to AFIC as well
as payments to AFIC for 'non-existent' services. The
Tribunal ultimately concluded that the transactions between MFSIL
and AFIC had occurred only for the financial benefit of AFIC and
had no connection with the functioning of the school.
In handing down its decision, the Tribunal reiterated the
importance of (and the care that must be taken) when charities have
dealings with any associated entities.
The Tribunal's approach to the 'not-for-profit
requirement' for education bodies is consistent with the
approach adopted in the Australian Charities and
Not-for-profits Commission Act 2012 (Cth) (Act). Under the
Act, an organisation must ensure that any benefits (whether direct
or indirect) are provided in a way that is genuinely for its
charitable purpose, and is not distributed to its members.
In recent months we have seen a number of prominent charities
unable to demonstrate that their profits are being used for the
attainment of their charitable purposes, an example being Camp
Gallipoli Foundation Incorporated. The similar treatment of the
'not-for-profit requirement' across both the education and
charity contexts highlights the importance of ensuring clarity and
transparency in the management of a not-for-profit organisation and
their use of funding.
Organisations should have particular regard to clearly
articulating how the use of funds is consistent with their
charitable purposes (or at least ancillary to their charitable
purposes) in addition to creating or maintaining sound financial
reporting practices to demonstrate that the purpose is being
Relationships between charities and associated entities where
funds flow from one to the other always pose substantial risk for
the charities involved. Charities must take care and put in place
effective measures to ensure that any such arrangements are
appropriately documented and enforced. If not, it may only be a
matter of time before the ACNC comes knocking.
How we can help
The MFISL decision serves as a timely reminder to the community
of the rigorous process of registration and legislative compliance
for not-for-profit bodies. However, with the appropriate corporate
structure, financial practices and organisational management,
issues relating to the 'not-for-profit requirement' can be
effectively managed to enhance the success and public confidence of
not-for-profit organisations in Australia.
The highly experienced not-for-profit team at Dentons in
Australia has experience assisting charities in:
Managing and effectively documenting dealings with associated
Drafting governing documents, including constitutions, by-laws
and trust deeds, to ensure that the ACNC's requirements are met
and appropriate governance measures are in place.
Providing direction to the board on strategic and
organisational issues, as well as ACNC governance standards.
Dentons is the world's first polycentric global law firm. A
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is committed to challenging the status quo in delivering consistent
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in more than 125 locations serving 50-plus countries.
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