Charity Inquiry - Special Report

The long awaited report by the Federal Government’s Charity Inquiry Committee recommends a new definition of charity to be set down in legislation and to operate within a framework of three distinct categories.

The recommended definition of a charity is that it is an ‘entity’ that must have a dominant purpose that is charitable, altruistic and for the public benefit, and with that is a strengthening of the ‘public benefit’ test.

The Report Committee says its definition of a charity builds on the principles that have been developed from common law, but provides greater clarity and certainty while maintaining flexibility.

The 438-page report says the three categories would be Altruistic Community Organisations, Charities, and Benevolent Charities all based on dominant purpose rather than activity.

The category known as Benevolent Charity would replace Public Benevolent Institutions and distinguishes charities whose main purpose it to benefit the disadvantaged, from charities whose dominant purpose is to provide benefits to the community more broadly.

Altruistic Community organisations would replace community service organisations and would include all charities that have charitable and some non-charitable purposes such as social purposes as well as membership purposes. They can have secondary commercial purposes that will not deny them charitable status.

The Charities Definition Inquiry, headed by Justice Ian Sheppard, was established following an agreement between the Democrats and the Federal Treasurer. In particular the Inquiry looked at the definition of charities as used by the Australian Tax Office.

The Inquiry recommends that many community organisations not currently recognised as charities by the Tax Office should be given charitable status.

According to the Democrats these include advocacy groups, self help and neighbourhood centres, childcare, community development, assistance to migrants, refugees and indigenous people, human rights, environment and animal welfare groups.

For example the report recommends that the care, support and protection of children and young people including the provision of childcare services be considered a charitable purpose.

The Committee believes that the `care’ element of childcare clearly serves a charitable purpose. The report says children do not have the ability to care for themselves because of their immaturity and lack of resources, and as such they represent a vulnerable and helpless section of the community.

Democrats Senator John Cherry says the Inquiry’s approach overcomes serious difficulties with the current legal definition of charity which, in the Tax Acts, has five overlapping categories.

He says simplifying the tax treatment of charities would also reduce compliance costs.

The report also recommends the establishment of an independent administrative body to determine the status of charities and that its decisions would be binding on the Australian Tax Office.

The Inquiry Committee says an independent body would be a central point for ensuring accountability of charities to the public.

The recommendations have been welcomed by the Fundraising Institute of Australia which included the establishment of an independent body in its submission to the inquiry.

National President, David Zerman says the FIA will prepare a response to the report to go to the Government and the Opposition parties before the next sitting of Federal Parliament.