Chapter 9: Other views on charitable sector reform

Introduction

9.1 A number of submissions raised concerns which were significant to the charitable sector but which are beyond the Board’s Terms of Reference. This chapter provides a summary of these concerns. The Board makes no assessments or recommendations, but identifies the views for the Treasurer’s information.

The draft Bill should be a first step in a program of legislation
to rationalise the regulation of the sector

9.2 A number of submissions supported the draft Bill as a step towards a simpler regulatory system. Some charitable bodies have to deal with the Commonwealth, six State and two Territory jurisdictions. Respondents stated that this is wasteful and confusing. They argued that administrative costs could be reduced with greater coordination between the Commonwealth and the States.

9.3 A number of respondents also preferred a simpler definitional framework along the lines recommended by the CDI Report. They argued that it was confusing for the sector and for the public to continue with a system that has separate rules for ITECs, PBIs and DGR status.

9.4 There was also support for the introduction of an independent administrative body to regulate charitable bodies along the lines of The Charity Commission for England and Wales. Respondents felt that this would help to increase accountability and transparency in the sector. It would also remove the ATO’s current role of assessing charitable status, a move which had support among some respondents. Respondents were in favour of the following CDI recommendations:

24. That the Government seek the agreement of all State and Territory Governments to the adoption nationally of the definitional framework for charities and related entities recommended in this Report. (CDI p 291)

25. That the Government seek the agreement of all State and Territory Governments to establish an independent administrative body for charities and related entities, and to the legislative changes necessary for its establishment. (CDI p 294)

(Refugee Council of Australia; ACFOA; Cancer Council Australia; National Anglican Resources Unit; QCOSS; NAPCAN; NCOSS; Victorian Women’s Refuges & Assoc. Domestic Violence Services)

Interpretation issues

9.5 A number of submissions raised issues about the general legal interpretation of the draft Bill. These included whether the draft Bill is intended to be an orthodox code; if so then the previous common law might not inform the interpretation of the plain words of the statute.

9.6 They also suggested that the draft Bill might achieve greater simplicity and clarity and avoid unintended misinterpretation if it adopted the legislative approach followed in several other jurisdictions that have modified the definition of a charity.

Codification

9.7 The EM states that the legislative definition in the draft Bill ‘is intended to provide clarity to entities within the charitable sector, by codifying the definition’ (paragraph 1.5). An orthodox codifying Act gathers together all the relevant statute and case law on a given topic and restates it as a complete and exclusive statement of the law on that topic. A common issue relating to the judicial interpretation of codifying statutes is whether or not it is possible to have regard to either the case law or the statutes that have been superseded by the code. The High Court has said: ‘It is well settled that the Code must be interpreted according to its terms without resort to any presumption that its provisions reflect the common law either at the time of the Code’s enactment or subsequently.’¹

9.8 Freehills argued that ‘rather than provide clarity, the code approach will raise significant and difficult issues of interpretation.’ Instead they suggested the following:

removing the references to ‘a code’ from the EM; and
inserting a provision similar to section 4 of the Partnership Act 1958 (Vic) along the lines of: ‘The rules of equity and of common law applicable to charities will continue in force except so far as they are inconsistent with the express provisions of this Act’ to ensure that the provisions are not interpreted without the benefit of the common law heritage.

Alternative to codification

9.9 A number of respondents suggested that the Government should consider retaining the common law approach and legislate only for those changes to the common law position that the Government expressly intends to make. (Freehills; Catholic Church in Australia; Philanthropy Australia). This would follow the approach of English law and each Australian State and Territory in widening the definition of charity to include recreational charities. ²

9.10 Submissions noted that this approach would retain the flexibility of the common law to evolve and avoid having to restate the common law which can result in unintended consequences. This would result in a simpler provision with greater certainty and a clearer focus on the specific changes to the common law.

Constitutional validity

9.11 Several respondents submitted the view that the Commonwealth Parliament does not have the explicit power under the Australian Constitution to regulate charities or their activities. The purpose of the draft Bill is to define charities and not to regulate their activities. Respondents pointed out that if the draft Bill went beyond this, there may be grounds for arguing that Parliament has overstepped its constitutional powers. (Central Highlands Community Legal Centre; Federation of Community Legal Centres (Vic) Inc)

9.12 Professor Michael Chesterman, QC submitted that: ‘It can indeed be argued that the existing “disqualification” on political activity by charities infringes a principle of constitutional law known as the “implied freedom of political communication”, or at least is counter to the spirit of this principle. The disqualification has the effect of stifling political debate, to the extent that organisations whose purposes are in other respects clearly charitable are deterred from engaging in the relevant forms of political communication — advocating changes in the law, the administration of the law, or government policy — in pursuit of those purposes. They are wary of doing so because they may be deemed non-charitable and may thereby lose valuable tax benefits.’

9.13 Other submissions argued that the draft Bill could be seen as imposing restrictions on religious freedom. One submission referred to section 116 of the Constitution which states that ‘The Commonwealth shall not make any law … for prohibiting the free exercise of any religion …. ‘ (K. J. Patterson OAM)

¹ R v Barlow (1997) 188 CLR 1 at page 18.

² See, for example: subsection 103(2) of the Trusts Act 1973 (Qld); subsection 69C(1) of the Trustee Act 1936 (SA); subsection 5(1) of the Charitable Trusts Act 1962 (WA); and subsection 4(1) of the Variation of Trusts Act 1994 (Tas).

Next: Appendix 1 - Charities Bill 2003