Charitable purposes: politically correct?

By Jon Cheung and Lucy Gray

"...in Australia there is no general doctrine which excludes from charitable purposes 'political objects'..."^[1]

A case handed down by the High Court of Australia yesterday held that an organisation whose objects are to promote greater efficiency and effectiveness of foreign aid directed to the relief of poverty, by campaigning and generating public debate, may be considered a charitable institution for the purpose of tax concessions. 

The High Court's decision in Aid/Watch Incorporated v Commissioner of Taxation [2010] HCA 42 (1 December 2010) can be accessed here.

Effect

The effect of the decision beyond promoting public debate is that some organisations which do not fall within the charitable purposes set out in the Australian Taxation Office (ATO) Not for Profit Guidelines (NFP Guidelines) may be considered charitable if they are able to show some degree of contribution to the public welfare. 

The current NFP Guidelines can be accessed here.

Background

In October 2006 the Commissioner of Taxation (Commissioner) revoked Aid Watch's endorsements as a charitable institution on the basis that its purposes were 'political' and not 'charitable'. 

Aid Watch is an organisation focused on promoting the effectiveness of aid provided in foreign countries through investment programs, projects and policies. 

In 2008 the Administrative Appeals Tribunal (AAT) set aside the decision of the Commissioner and determined that Aid Watch's political campaigning seeking to influence government policy in relation to foreign aid fell within the activities for a charitable institution.

In 2009 the Commissioner appealed the decision to the Full Court of the Federal Court.  The Federal Court set aside the AAT decision and held that the activities undertaken by Aid Watch was a 'political purpose' and could not be considered a charitable institution.

In March 2010, Aid Watch Incorporated was granted special leave to appeal to the High Court to confirm that their objects and activities fell within the meaning of a charitable institution.

Findings

The High Court held:

• that the objects of Aid Watch to generate lawful means of public debate concerning foreign aid policy directed at the relief of poverty is in itself beneficial to the community; and;
• there is no broad rule excluding political objects from charitable purposes. 

Implications

An organisation may be classed as charitable if its activities are for:

• the relief of poverty;
• the advancement of education;
• the advancement of religion; or
• another purpose that is beneficial to the community.

The decision opens up the wider debate of a charitable institution's activities in promoting its objects. Organisations that 'lobby' may not necessarily be excluded as charities but this depends on other factors, such as its objectives in carrying out its activities.

Practical effect

The ATO NFP Guidelines lists among the institutions and funds whose purposes are not charitable: political parties and lobbying groups.  Organisations seeking to apply to the ATO for charity tax concessions should seek clarification as to whether their activities are considered charitable under the High Court's decision. 

The ATO may publish an impact statement on the effect of the High Court's decision. 

Gadens Lawyers is able to assist organisations seeking to apply for charity tax concessions and to review activities to assess whether their objects and activities may be considered charitable.

[1] Aid/Watch Incorporated v Commissioner of Taxation [2010] HCA 42 (1 December 2010) at [48] per French CJ, Gummow, Hayne, Crennan and Bell JJ

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