On 13 May 2010 the Tax Laws Amendment (Public Benefit Test) Bill 2010 was introduced into the Senate as a private member’s bill.
This bill proposed that the Government introduce a public benefit test for religious and charitable organisations seeking tax exempt status. The bill was referred to the Senate Economics Legislation Committee for examination and this committee released its report on 7 September 2010.
Largely consistent with the Productivity Commission Report and the recent Henry Review, the Committee recommended the establishment of a national commission for charities and consideration of a public benefit test for the endorsement of charities.The Committee made the following relevant recommendations:
The Committee recommends that the incoming government work through COAG to establish a single independent national commission for not-for-profit organisations. The incoming government should establish a working group, or use the COAG Business Regulation and Competition Working Group.
The working group should consult extensively with the sector in a timely manner to address issues arising from the establishment of a commission which applies a public benefit test. The Australian model should draw on the Charity Commissions in the United Kingdom and New Zealand.
The Committee recommends that the working group consider the functions and role of an Australian commission which should include, but not be limited to, the following:
- promote public trust and confidence in the charitable sector;
- encourage and promote the effective use of charitable resources;
- develop and maintain a register of all not-for-profit organisations in Australia using a unique identifying number (for example an ABN) as the identifier;
- develop and maintain an accessible, searchable public interface;
- undertake either an annual descriptive analysis of the organisations that it regulates or provide the required information annually to the ABS for collation and analysis;
- educate and assist charities in relation to matters of good governance and management;
- facilitate, consider and process applications for registration as charitable entities;
- process annual returns submitted by charitable entities;
- supply information and documents in appropriate circumstances for the purposes of the Tax Acts;
- monitor charitable entities and their activities to ensure that registered entities continue to be qualified;
- inquire into charitable entities and persons engaging in serious wrongdoing in connection with a charitable entity;
- monitor and promote compliance with legislation;
- consider, report and make recommendations in relation to any matter relating to charities; and
- stimulate and promote research into any matter relating to charities.
The Committee recommends that the incoming Government should follow the emerging international best practice and work with the Council of Australian Governments to amend legislation governing not-for-profit entities to include a definition and test of ‘public benefit’. So, this represents yet another Government report recommending the establishment of a National Committee. The Senate Committee stated that “there comes a time when a Government has to make a decision either to do something or to stop saying that it is going to do something, because the matter has been on the agenda for many years. It is now time for action”.
This report comes at an interesting time when we look at issues currently facing the Charity Commission in the United Kingdom. The Charity Commission may have to rewrite all of its public benefit guidelines if the UK Courts find defects in its guidelines on independent schools.
In the last week of September 2010, the Attorney General, Dominic Grieve, asked the Charity Tribunal to clarify the operation of charity law in the context of fee charging independent schools. The Charity Commission has used various guidelines that it has published since January 2008 to assess whether sample groups of independent schools, arts charities, care homes and religious charities provide sufficient public benefit to justify their charitable status.
The Independent Schools Council has also challenged the guidelines on fee paying charities and has asked for a judicial review as well. This may be a foretaste of issues the Australian not-for-profit sector may face if a local Charities Commission is established. Time will tell.