Yesterday afternoon, the Assistant Treasurer and the Minister for Social Inclusion released the exposure drafts of a Charities Bill 2013 and Charities (Consequential Amendments and Transitional Provisions) Bill 2013. Consultation on the draft legislation is open until Friday 3 May 2013, which is the deadline for lodging a submission with Treasury.
The over 200 submitters to the 2011 consultation on the definition of charity have reason to be pleased. The Charities Bill 2013 reflects significant movement from the ideas set out in that consultation paper. This note summarises and comments briefly upon several matters that are likely to be of interest to many arising from the two draft Bills.
Heads of charity – new and preserved
Firstly, the traditional heads of charity are recognised and preserved. Secondly, numerous extended purposes have been added. These include:
- Advancing health
- Advancing social or public welfare
- Advancing culture
- Promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia
- Promoting or protecting human rights
- Protecting the safety of the general public
- Preventing or relieving the suffering of animals
- Advancing the natural environment
- Purposes beneficial to the general public within the spirit of any of the above purposes
- Promoting or opposing a change to law, policy or practice in pursuit of one of the above purposes.
Sport – not part of the extension of ‘charity’ at present
Advancement of amateur sport is one of the more notable exceptions to the extensions proposed by the draft legislation. Advancement of amateur sport has been recognised as charitable in various UK jurisdictions since the introduction of their modern definition of charity Acts.
The absence of amateur sport from the draft legislation is more difficult to understand where the advancement of culture has been included; obesity is a social concern; and encouragement of a game or sport is already exempt under the section 50-45 of the Income Tax Assessment Act 1997.
Public benefit
The existing presumption that a charity for the purposes of relieving poverty, advancing education and advancing religion exists for the public benefit, unless the contrary is proved, has been preserved. There are, however, qualifications and limitations. Careful scrutiny will no doubt be given to the practical effect of these qualifications and limitations in shifting the onus of proof.
At common law, different tests apply to the different classes of charity. The onus of proof to set aside the presumption is quite low at common law, and under the draft legislation, ‘any possible detriment’ to a ’member of the general public’ is now to be taken into account. If there is evidence of ‘any possible detriment to a member of the public’, will this be enough to shift the onus of proof of public benefit to a charity? Similarly, on the question of private benefit, if there is evidence of private benefit is that enough to shift the onus? If not, when does the onus shift? Careful thought will need to be given to the interplay between the statutory provisions and the common law.
The draft legislation does not spell out how the common law and the statutory provisions are to interact. The statute law in Ireland, for example, sets out in some detail how the onus question is to be interpreted in relation to religious charities.
Not-for-profit not defined – implications
The draft Bill requires charities to be ‘not-for-profit’, but does not define what ‘not for profit’ means. The Explanatory Memorandum states at paragraph 2.34 that ‘if the Tax Laws Amendment (Special Conditions for Not‑for‑profit Concessions) Bill 2012 does not commence then the meaning of not-for-profit entity takes its ordinary meaning.’
The government is intending to pass the two Charities Bills in the winter sitting. It seems from the lack of a definition of not-for-profit that the government is hopeful that it will be able to pass the Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012, which included a definition of ‘not-for-profit’. Those familiar with the debates will recall that it was that Bill which introduced the much contested definition of ‘not-for-profit’ and the equally contested revised ‘in Australia test’. The Bill is currently stalled in the House of Representatives.
What this means for you
Charities and those entities which hope to gain charitable status in the future should act promptly to assess the impact of the proposed changes – including, it would seem, the proposed definition of ‘not-for-profit’.
You may decide that making a submission on the Bills is required. You should be aware that the deadline of 3 May 2013 is a ‘hard’ deadline and Treasury’s preference is for early submissions. We also note that the Treasury has specifically requested that 2011 submitters do not simply resubmit previous material, but respond to the Bills as drafted. If the assistance of professional advisors in writing a submission is desired, you should act promptly to brief your chosen consultants so the deadline can be met.
DISCLAIMER: This update contains general information only. It is not all inclusive and should not be considered legal advice. You should always obtain legal advice for your specific circumstances before relying on general information.