On 8 April the government commenced public consultation on exposure draft legislation for a statutory definition of charity.
The definition is contained in the Charities Bill 2013 and is expected to commence on 1 January 2014. The Bill seeks to define both charity and charitable purpose. At present these two concepts are defined by common law. The statutory definition has been developed in response to concerns that the common law does not adequately address matters relevant to the contemporary Australian charity sector.
To be a charity an entity must be a not-for-profit entity and be established for charitable purposes. As the explanatory material notes the definition of charitable purpose provides a framework for considering charity and charitable purposes. The definition retains the flexibility inherent in the common law that enables the courts, and parliament, to continue to develop the definition and extend it to other charitable purposes beneficial to contemporary Australia.
Under the draft legislation, a charity is permitted to have purposes other than charitable purposes only to the extent that those non-charitable purposes are “incidental or ancillary to, and in furtherance or in aid of” the entity’s charitable purposes. Where an entity undertakes commercial activities, those activities must be only to further its charitable purpose.
In general, a charity must be for the public good. However, the public benefit test will not apply to open and non-discriminatory self-help groups and closed or contemplative religious orders.
The new statutory definition will apply to all Commonwealth legislation. It is hoped that it will provide a framework that will be adopted by the States and Territories over time.
Public consultation on the draft legislation closes on 3 May 2013.
If you are a charity nothing will change for you when the statutory definition starts on 1 January 2014.