Chapter 1: Summary of recommendations

The Board has examined all matters relating to its brief and has considered the many submissions it has received. It believes the following recommendations would enhance the workability of the draft Charities Bill 2003 (the draft Bill) and the Explanatory Material (EM).

Disqualifying purpose (subsection 8(2))

3.44 The Board recommends that the Government provide greater clarity to the sector on how charitable bodies may be affected by the interrelationship between subsection 8(2) and paragraphs 4(1)(a), (b) and (c).

3.45 The Board makes the following recommendations in the event that the Government decides to retain subsection 8(2) in substantially its current form:

(a) The Board recommends that the EM and if necessary the draft Bill be revised to clarify how the provisions of the draft Bill are intended to operate, and to deal with the following issues in particular:

• The discrepancy between the words of the draft Bill, which maintain a clear distinction between activities and purposes, and the view expressed in the EM that charitable purpose may be determined by an examination of activities and other matters as well as purposes.

• The tests that will be applied to determine whether particular activities have become purposes in their own right.¹

(b) The Board recommends that the draft Bill be amended to clarify whether ‘cause’ as used in paragraph 8(2)(a) is intended to mean ‘political cause’ or to have a more general application.

(c) The Board recommends that consideration be given to whether paragraph 8(2)(b) should also refer to opposing a candidate for political office.

(d) The Board recommends that the EM be revised to emphasise that subsection 8(2) applies only to:

• the purpose of advocating a political party or [a political] cause;

• the purpose of supporting [or opposing] a candidate for political office;

• the purpose of attempting to change the law or government policy;

  rather than advocacy as this word is commonly understood in the community.

Core definition (section 4); Not-for-profit entities (section 5);
and Dominant purpose (section 6)

4.33 The Board recommends that, to improve the workability of the Bill, some clarity be provided in the Bill as to whether or not peak bodies would generally qualify as charities.

4.34 The Board recommends that the draft Bill should be amended to provide a clear definition of ‘government body’, including whether local government (currently omitted) is included, and a clear definition of ‘controlled by government’.

4.35 The Board recommends that consideration be given to addressing the problems that may be caused for testamentary trusts by subsection 7(1).

4.36 The Board recommends that the meaning of ‘partnership’ in paragraph 4(1)(f) be clarified in the EM or by the insertion of a note in the draft Bill along the following lines:

‘Note: Under paragraph 4(1)(f) of this Act, some entities covered by the Income Tax Assessment Act 1997 are not able to be recognised as charities, charitable institutions or any other kind of charitable bodies.’

4.37 The Board recommends that the words ‘small scale’ be removed from the EM’s example of ‘ancillary or incidental’ activities as it does not appear to be supported by the draft Bill, and further that the intent of paragraph 4(1)(c) be clarified in the EM or the draft Bill.

4.38 The Board recommends that the relationship between paragraph 4(1)(c) and section 6 be clarified, possibly by the inclusion of a new subsection 6(3) along the following lines:

‘(3) If an entity has a dominant purpose as described in subsection (1) or (2), then an activity engaged in by the entity furthers or is in aid of its dominant purpose if it furthers or is in aid of any of the purposes covered by that subsection.’

Serious offence (paragraph 4(1)(e))

5.15 The Board notes that subsection 8(1) would ensure that an entity with an unlawful purpose was not entitled to charitable status, and recommends that paragraph 4(1)(e) be removed, so that an instance of unlawful conduct would not disqualify an entity from obtaining or retaining charitable status.

Public benefit: numerically negligible (subsection 7(2))

6.25 The Board recommends that section 7 be amended to provide that ‘sufficient section’ is defined as one which is not ‘numerically negligible’ compared with the size of that part of the community to whom the purpose would be relevant.

Altruism

7.16 The Board recommends that it is not necessary to require an entity’s dominant charitable purpose to be altruistic as the public benefit test is adequate.

Administrative burden

8.12 The Board recommends that:

• the practical application of the draft Bill should be the subject of a post-implementation review within two to three years of its implementation; and

• for the purposes of the post-implementation review, a base-line study of the current administrative burden should be started before the draft Bill is implemented.

8.13 The Board recommends that an education program and compliance tool-kit be provided by government to the charitable sector to accompany the enactment of the draft Bill.

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¹ The Board notes that, under the draft Bill, the tests ‘ancillary or incidental’ apply only when these activities have become purposes — they are not a test for when an activity becomes a purpose. Refer to paragraph 3.39.

 

Next: Chapter 2 - Overview