A definition of charity - consultation paper
Written on the 21 November 2011 by PKF Australia Limited
A review of charities
In the 2011 Federal Budget, the government announced it intended to review charities and the taxation concessions extended to charities.
In response, the government has released a consultation paper A Definition of Charity. The aim of this process is to produce a standard definition of charity throughout Australia, including in the areas of state and federal taxation.
Where are we at?
The paper identifies a number of definitions of charity and charitable purposes throughout the taxation statutes. The paper concludes there are inconsistencies across these definitions which make it difficult for all parties involved, including charities and the Tax Office. The first attempt at drafting a definition of charity came in 2003 as part of a Federal Government review. This draft definition did not proceed into legislation and it is the aim of this paper to develop a more workable definition of charity using the 2003 framework as a foundation.
What has happened since 2003?
There have been several significant developments since the initial attempt to drafting a definition of charity in 2003. A number of key jurisdictions, including the UK and NZ, have legislated definitions of charity as part of an overall charities act. The basis of the definition proposed in this paper draws from key areas identified in the definitions applied in these other countries. Further, the Australian courts have heard a number of cases which have changed the way in which entities are classified as charities. Key cases include Aid Watch, Word Investments and Central Bayside.
The 2003 definition
The definition of charity contained in the 2003 Charities Act was founded on the following key principles:
Extending that definition
The paper canvasses ways in which these principles may need to be modified in light of the recent court decisions, the position of the Tax Office in TR 2011/D2, and the common or general perception of what would constitute
Author: PKF Australia Limited