The purpose of a statutory definition of charitable purpose as is explained in the Preamble and the Explanatory Memorandum is to modernise the technical legal definition of charity at the Commonwealth level for all Commonwealth purposes. The common law meaning had developed over some 400 years originating in a Preamble to an English statute, the Charitable Uses Act 1601. Courts and Parliaments in the UK and later in Australia thereinafter would ask if the contested purpose ‘fell within the letter, or the spirit and intendment of the Preamble of the Charitable Uses Act.’ (Morice v Bishop of Durham). Those purposes contained in the Preamble were subsequently regrouped into the ‘four heads of charity’ derived from Pemsel’s case in the late 19th century. These four heads are relief from poverty, advancement of religion and education and other purposes beneficial to the public. It should be noted that this intention to modernise by way of legislation is consistent with many of the recommendations from various reviews including the Charities Definition Inquiry, the Henry Review and takes into account the changes brought about by recent court decisions Central Bayside, Aid/Watch and Word Investments.
Under the transitional provisions existing charitable funds or institutions that are endorsed for tax concessions by the ATO prior to the commencement of the Australian Charities and Not-for-profits Commission Act 2012 (Cth) are automatically treated as being registered by the ACNC as a charity. From 1 January 2014 however any new charities have to meet the tests set out in the Charities Act. An entity is a charity if it is both a not-for-profit entity and all of the purposes are charitable purposes that are for the public benefit.
It is the charitable purposes that are listed in section 12 that is of interest because the list goes beyond the Pemsel four heads and bears close scrutiny by those involved in human rights, social welfare, reconciliation, the environment and animal rights. The charitable purposes can be loosely grouped around ‘advancing’, ‘promoting’, ‘prevention’ and ‘other’.
The purposes concerned with advancing include health, education, social or public welfare, religion, culture, security/safety (of Australians or those in Australia) or the natural environment. Charities concerned with Indigenous issues should consider the recently released ACNC Commissioner’s Interpretation Statement on how charity law is to be applied by the ACNC to Indigenous charities, including the recognition of Indigenous disadvantage and applying the public benefit test. An organisation with the purpose of addressing Indigenous disadvantage will be registered under ‘advancing social or public welfare’, unless the organisation seeks registration for another charitable purpose.
The second grouping is shorter, those purposes concerned with the promotion of human rights or reconciliation, and those concerned with promoting mutual respect and tolerance between groups of individuals in Australia. ‘Prevention’ has only one charitable purpose — preventing or relieving the suffering of animals.
The final grouping of ‘the other’, echoes Pemsel’s fourth head, and allows ongoing interpretative flexibility; ‘any other purpose beneficial to the general public that may reasonably be regarded as analogous to, or within the spirit of, any of the purposes mentioned in paragraphs s 12 (a) to (j);’. The existing common law is intended to remain relevant in interpreting charitable purpose including the meaning and scope of each purpose unless otherwise legislated.
Recognition as having a charitable purpose is only part of the process, for example, public benefit tests may still apply to exclude (and apply differently to different types of charitable purposes) and the ATO continues to have a role in determining eligibility for (and breach of) tax concessions. However we may well see a surge in growth of new charities as organisations that once perhaps were uncertain as to whether their purposes were charitable purposes now find a degree of certainty in the legislation and the confidence to apply to the ACNC.
* At the time of going to print, changes continue to apply but the regulatory enforcement aspect may be done by ATO if and when ACNC is abolished.
ELEN SEYMOUR teaches law at University of Western Sydney.