Hey Siri, define ‘Charitable Purpose’
Any charity of NFP’s ACNC registration requires organisational compliance with five essential governance standards.
Arguably the most important of which is that the charity must be not-for-profit and work towards its ‘charitable purpose’. A ‘charitable purpose’ (also called a mission or object) is the reason a charity has been set up and what its activities work towards achieving.
This charitable purpose is an essential cog in the registration process of any charitable organisation as it provides a baseline to ensure that an organisation retains its charitable status. This article will explain the obligation of working towards a charitable purpose and the consequences of a failure to do so.
How does ACNC decide if purposes are charitable?
Generally, the ACNC looks at the organisation’s constitution, its current and proposed activities, annual reports, financial statements and corporate documents to determine whether the activities advance an exclusively charitable purpose.
The Supreme Court clarifies that the organisation’s purposes may either be “identified through its statement of objects or inferred from the activities it undertakes.”
What does ACNC recognise as charitable purposes?
There are 12 charitable purposes set out in section 12(1) of the Charities Act 2013 (Cth). The Charities Act 2013 (Cth) states that each charity organisation’s ‘charitable purpose’ must fall under one or more of the following purposes:
Purposes that are NOT recognised as charitable:
Some purposes may benefit the community, but do not meet the legal definition of ‘charitable purpose’ in section 12(1). See three examples below:
· Social club: A social club will only meet the legal definition if its main purpose is to “help people who are socially isolated or disadvantaged, and the club’s social activities are the way it achieves this purpose.”
· Sporting or recreational organisation: A sporting body is not charitable. The only way it could meet the legal definition would be if its main purpose is to “provide sporting activities for people with disabilities.”
For example: a school class wants to set up a fund to help their classmate get cancer treatment in America. The only way this would meet the legal definition would be if the class wanted to help a substantial number of people, not just their classmate.
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Purposes that are NOT recognised as charitable because they are unlawful:
Some ‘purposes’ are deliberately disqualified from being charitable, such as the purposes of funding terrorism or engaging in or promoting activities that are unlawful – shocker!
Consequences of a failure to operate for a ‘charitable purpose’:
The ACNC will not register an organisation when the organisation is not operating for an exclusively ‘charitable purpose’. Furthermore, the ACNC will not hesitate to use its powers when a charity acts unlawfully or unreasonably.
Revocation of the charity’s registration is among the harshest penalties an organisation itself may face where a pattern of behaviour indicates that an organisation is operating for a non-charitable purpose. This will occur where a charity’s non-compliance is significant because non-compliant charities have a significant impact on public trust and confidence in this area.
Where the charity’s non-compliance is less significant and the ACNC is confident that the charity’s responsible persons are willing and able to correct matters, the ACNC’s response may include a compliance agreement, enforceable undertaking or loss of government funding.
Warlows Legal specialise in the Charity and Not-for-profit sector. If you are seeking to be apply for DGR endorsement or are already a DGR entity and require advice surrounding compliance obligations, we can help you.
Get in touch with us to book your free initial consultation today.
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