Statutory definition of charity - consequential amendments
In the 2011-12 Budget, the Government announced it would introduce a statutory definition of charity. This definition is based on the 2001 Report of the Inquiry into the Definition of Charity and Related Organisations, also taking into account later judicial decisions.
A number of consequential amendments to legislation and transitional arrangements are required as a result of introducing the definitions of a charity and charitable purpose.
Legislation to progress this measure received royal assent in June 2013 and commences on 1 January 2014.
The Charities Act 2013 among other things:
- defines charity and charitable purpose for the purposes of Commonwealth law
- describes 12 categories of charitable purposes derived from principles in common law
- allows charitable funds to retain their charitable status for the purposes of Commonwealth law where they provide benefits to an entity that would be a charity except that it is a government entity.
The Charities (Consequential Amendments and Transitional Provisions) Act 2013 includes amendments to the tax law to remove the income tax exemption for non-charitable ancillary funds. These are funds that provide money, property and benefits to tax exempt deductible gift recipients (DGRs), whether or not the DGR is charitable. An example of a non-charitable DGR is a government DGR.
From 1 January 2014, these funds must apply for registration with the Australian Charities and Non-Profits Commission (ACNC) as a charity and be endorsed by us to be income tax exempt.
Funds endorsed by us as an income tax exempt fund (ITEF) as at 31 December 2013 will be transitioned into the new arrangements as follows:
- the purpose of each fund will be treated as a charitable purpose
- they will be automatically registered with the ACNC as charities and endorsed by us to access income tax exemption as a charity from 1 January 2014
- they will be provided with an opt-out provision, should they not wish to be a registered charity and income tax exempt.
This will allow funds previously endorsed as ITEFs to continue to contribute to the same types of DGRs provided for in their trust deeds as at 31 December 2013, including if they have utilised powers in state trust law to contribute to DGRs that are not charities. This concession continues until the fund ceases to meet the requirements that previously entitled it to endorsement as an ITEF.
For more information refer to the following media releases:
Legislation and supporting material
The following legislation received royal assent on 28 June 2013:
For more information refer to: