We have all heard of charities. However, defining a charity and determining what is a charitable purpose can be a little tricky and will depend on the context.
The concept of “charity” or “charitable” has an everyday meaning and a legal meaning. Even within the legal meaning, there are variances depending on whether we are talking about:
- registering as a charity with the Australian Charities and Not-for-profits Commission (ACNC);
- accessing Commonwealth tax concessions from the Australian Taxation Office – such as income tax exemption, fringe benefits tax concessions and deductible gift recipient endorsement;
- accessing state-based tax concessions – such as exemptions from stamp duty, payroll tax and land tax; or
- obtaining authorities to undertake charitable fundraising activities – such as asking the public to donate.
And these are only examples!
Whilst the legal meaning of charity has a long and interesting history, much of this is now codified in the Charities Act 2013 (Cth) (Charities Act). The Charities Act lists 12 different categories (sometimes called ‘heads’) of charity. These are:
- advancing health;
- advancing education;
- advancing social or public welfare;
- advancing religion;
- advancing culture;
- promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia;
- promoting or protecting human rights;
- advancing the security or safety of Australia or the Australian public;
- preventing or relieving the suffering of animals;
- advancing the natural environment;
- any other purposes beneficial to the general public that may reasonably be regarded as analogous to, or within the spirit of, any of the purposes mentioned in the subtypes above; and
- advancing public debate (promoting or opposing a change to any matter established by law, policy or practice in the Commonwealth, a state, a territory or another country).
There is a large amount of case law and explanatory material that helps unpack and understand what each of the above categories mean and include which we won’t go into now. We hope however this article has given you a flavour of what a not-for-profit is and what makes a not-for-profit a charity.
As we are sure you can appreciate, we have only really scratched the surface. For instance, we haven’t covered the charity registration process, what might disqualify an organisation from being a charity, what deductible gift recipient endorsement is and how to obtain it, when a non-charitable not-for-profit can self-assess as income tax exempt or when a charitable fundraising authority is required.
The world of not-for-profits and charities is fabulously diverse and complicated, which is why we love working exclusively to serve this sector.