Submission on a definition of charity

On 23 December 2011, the Institute lodged a submission on the Treasury consultation paper on a definition of charity.

The government is introducing a new statutory definition of ‘charity’ applicable across all Commonwealth laws from 1 July 2013. The October 2011 Treasury consultation paper entitled A Definition of Charity outlines the background to a statutory definition, including previous recommendations and inquiries, as well as developments that have occurred since the 2003 consultation package on a charity definition was released. It then discusses elements of a possible core definition of charity by raising for discussion possible refinements to the exposure draft of the Charities Bill 2003.

The submission begins with the Institute highlighting some important overarching issues. These include expressing concern that this consultation is being carried out separately from other concurrent consultations affecting the not for profit sector, including ones on the ‘not for profit’ test for tax concessions and the ‘unrelated commercial activities’ of not-for-profit entities. The Institute believes they are all sufficiently interrelated to warrant being considered as one consolidated process. The submission also calls for clarity on the appeals process for approval of organisations under the definition and the retention of a procedure which would allow charities to obtain private rulings about their charitable status (currently available from the ATO but not included in the proposed new Australian Charities and Not-for-Profits Commission, ACNC bill). The Institute also expresses concern about the potential compliance burden that charitable organisations face complying with multiple state and federal definitions of a charity until such time as all legislation is harmonised.

In response to the consultation paper’s specific questions, the Institute’s key comments and recommendations include:

• Supporting the retention of the ‘dominant purpose’ requirement in the 2003 definition (as the term ‘exclusively charitable’ is too onerous and highly restrictive) 
• Recommending the adoption of the approach taken in England and Wales to rely on common law for the definition of public benefit and providing guidance on its meaning 
• Commenting that the current 'presumption' of public benefit puts the onus on a government authority to demonstrate the absence of such benefit and any proposed removal of this presumption would put the onus on the entity to demonstrate 'public benefit'. This may impose an additional compliance cost for affected entities 
• Recommending that the proposed statutory definition should have prospective operation for entities created from 1 July 2013 or for operations commenced from 1 July 2013 for pre-existing dormant entities. If contrary to this submission existing organisations will be transitioned into the proposed statutory definition, this should be subject to specified milestone triggers, such as a significant variation to the constitution of the entity (for example, amendments to the entity’s objects clause or distribution clauses). Otherwise, there will be an enormous resourcing burden placed on the ACNC as well as the compliance burden placed on individual entities.

Full details are in the submission.

Article last Updated 23 April 2012