Our plan:

To clarify and align the concept of charity in Victorian Law with 21st century expectations.

OUR PLAN:

To clarify and align the concept of charity in Victorian Law with 21st century expectations.

IN BRIEF:

The Charities Amendment (Charitable Purpose) Bill 2017 is published as an ‘exposure draft’.

Its purpose is to redefine the definition of charity; to protect genuinely charitable work and crack down on for-profit businesses taking advantage of tax exemptions.

The bill DOES address:

  • Tax avoidance by for-profit businesses who claim charitable status but are not engaged in charitable activity, even if they are owned by a religious institution.

The bill DOES NOT affect churches or charities:

  • Religious run charities will retain their tax exempt status.
  • Places of public worship remain exempt from land tax.
  • Existing payroll tax thresholds protect local congregations.

IN DETAIL

Most people understand a charity to be ‘an organization set up to provide help and raise money for those in need’[1].

Genuine charitable work, including the charitable work performed by religious institutions, should be tax exempt and will remain tax exempt under our plan.  However, the current construction of ‘advancement of religion’ as a charitable head permits something else. Many large and highly profitable commercial enterprises owned by religious institutions take advantage of this charitable head to avoid certain taxes, despite operating as for-profit businesses, and despite not carrying out objectively charitable works.

The  Charities Amendment (Charitable Purpose) Bill 2017 corrects this imbalance.

The bill will ensure that tax exemptions for charities in Victoria only apply to those organisations engaging in objectively charitable works including:

  • advancing health, including preventing and relieving sickness, disease or human suffering
  • advancing education
  • advancing social or public welfare
  • relieving the poverty, distress or disadvantage of individuals or families
  • caring for and supporting the aged
  • caring for and supporting individuals with disabilities
  • caring for, supporting and protecting children and young individuals; and
  • assisting the rebuild after a disaster.

 

Removing ‘advancement of religion’ as a charitable status does not prevent religious institutions from maintaining their ‘charitable purpose’. Soup Kitchens, Food Banks, Schools and Support groups are amongst the many activities that will remain protected under the definitions of ‘charitable purpose’ – as they should be. Places of public worship will remain exempt from paying land tax.

What this bill does do, is crack down on for-profit businesses taking advantage of tax exemptions.

Paying its ‘fair share of tax’ does not abrogate the ability of a religious-run business to generate profits for a religious institution – just as normal businesses  will pay tax and return profits to shareholders. Taxes collected and spent in the State, benefit  the community in a pure form, just as charitable activities do.

Tax exemptions for religions have a long history founded in the Statute of Charitable Uses 1601 (UK) preamble, which although long repealed, has informed the meaning of charity for centuries. These purposes were condensed and adopted at common law in Income Tax Special Purposes Commissioners v Pemsel [1891], with charitable heads including the ‘advancement of religion’. This head remains part of Victorian law today, despite being abolished in the United Kingdom in 2011.

It is time that Victoria too modernised its laws to clarify and align the concept of charity with 21st century expectations. This is what the Charities Amendment (Charitable Purpose) Bill 2017 achieves.

The merits of this plan will be debated in the Victorian Parliament on the 9th of May, 2018.

We welcome any feedback through our contact form.