New definition of charities to commence in the New Year

Despite a flurry of parliamentary activity last week, the expected Senate debate on the government’s proposal to delay the commencement of the Charities Act 2013 (Cth) (the Act) from 1 January 2014 to 1 September 2014 did not take place. As a result, the new statutory definition of charity is now set to commence, as planned, from the beginning of the new year.

Legislated in the Charities Act 2013 which commenced on 29 June 2013, the statutory definition of charity updates the 15 pieces of Commonwealth legislation and 163 pieces of state and territory legislation under which organisations had previously looked to ascertain entitlement to some benefit or other legal outcome involving the charitable purpose of status of an organisation.

While the Social Services and Other Legislation Amendment Bill 2013, which proposed the delay to the introduction of the statutory definition of charity, confirming a statement from the Hon Kevin Andrews MP of the Federal Government’s intention in this area, the bill was not debated prior to the conclusion of the parliamentary sitting days for 2013. As a result, the provisions of the Charities Act 2013 continue to apply and the definition of charity officially commences from 1 January 2014.

The final form of the statutory definition is aligned with the previous common law approach, and provides a common definition of the terms ‘charity’ and ‘charitable purpose’ as these terms are used across all Commonwealth legislation. This is very helpful, given that at present these same terms have different meanings depending on their use and definition in different legislation. This is one of the main factors causing uncertainty and complexity in the sector.

The passage of the legislation marks a significant milestone in the NFP reform process with organisations now guaranteed more clarity in relation to their understanding of their charitable status.

The commencement of the statutory definition of charity follows on from the Federal Treasurer’s announcement in November that they will proceed with reform to tax concessions associated with the ‘In Australia’ rule to restate and clarify the rules applicable to income tax-exempt status entities and deductible gift recipients.

The Treasurer also announced that the Federal Government will not proceed with:

  • requiring charities to ensure that any surplus from unrelated commercial activities be applied to furthering the altruistic purpose of the charity in order to retain a tax concession, and
  • updating the definition of the term not-for-profit for the administration of the taxation laws.

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