On 27 March 2024, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 was introduced before Federal Parliament. If enacted as drafted, it will introduce a framework for mandatory climate related disclosure regime by certain companies.

We have been asked by some charities which are companies whether they are impacted by this proposed disclosure regime. The purpose of this short article is to provide a brief overview of the proposed regime, and its applicability to charities.

What does the Bill do?

The Bill amends parts of the Corporations Act 2001 (Cth), as well as eight other Acts, in order to ‘implement recommendations by the Council of Financial Regulators in relation to Australia’s financial market infrastructure’.[1]

Schedule 4 of the Bill contains the proposed legislation that will introduce the mandatory climate related disclosure regime, and is titled ‘Sustainability Reporting’. Among other matters, it proposes changes to Chapter 2M of the Corporations Act 2001 (Cth).

Chapter 2M of the Corporations Act 2001 (Cth) addresses financial reporting by companies and audit requirements. In particular, Part 2M.3 of that chapter places obligations on various entity types to report to the Australian Securities and Investments Commission (‘ASIC’) each financial year. The proposed changes would add to the recording keeping and reporting obligations by introducing the requirement to:

• keep ‘sustainability records’; and
• prepare and lodge a ‘sustainability report’ each financial year.

The purpose of this is stated to be to establish an internationally aligned mandatory climate disclosure reporting regime in Australia, the intention being to give investors and companies ‘the transparency, clarity and certainty they need to invest in new opportunities as part of the net zero transformation’.[2] ASIC will be responsible for enforcing this proposed regime.

Does the proposed regime apply to Charities?

As drafted, the mandatory climate related disclosure regime will fall within Parts 2M.1 to 2M.3 of Chapter 2M of the Corporations Act 2001 (Cth). In what may offer some relief to charities, the proposed reporting regime will therefore not apply to charities that are registered with the Australian Charities and Not-for-profits Commission (‘ACNC’), as section 111L of the Corporations Act 2001 (Cth) provides that Parts 2M.1, 2M.2 and 2M.3 do not apply to ACNC registered charities.

However, despite the carve out for ACNC registered charities in these proposed changes, the changes reflect a growing concern by governments and the community in general about climate change. It may therefore be prudent for charities to consider the size of their operations, be aware of the reporting requirements that are ultimately introduced within Chapter 2M, and take steps to position themselves to be ready for if such reporting requirements are ever extended to ACNC registered charities in the future.

Vocare Law is well equipped to assist our charity and not-for-profit clients with a wealth of collective knowledge and over two decades experience providing insight and advice in this area. Please don’t hesitate to contact our office if you have any questions on ensuring your charity is able to adequately comply with the ACNC governance standards. Contact us on 1300-VOC-LAW / 1300-862-529 or email: enquiry@vocarelaw.com.au

This article was written by Reece Morrison. 

Footnote

[1] ‘Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024’, Parliament of Australia, Summary, <https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7176>

[2] See the media release from The Hon. Dr Jim Chalmers MP here: https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/new-climate-reporting-reforms-stronger-financial-system

Operating in the charity and not-for-profit space comes with many and varied responsibilities. From the time the decision is made to register a charity, and throughout the charity’s life, directors, board members and committee members must meet their obligations to ensure the ongoing prosperity of the organisation and shield themselves against personal liability. In this article we consider some of the main responsibilities required of directors, board members and committee members by the Australian Charities and Not-for-profit Commission (the ACNC).

Overview

Prior to the introduction of the ACNC and the associated regime, directors of charities were primarily governed by the directors’ duties provisions in the Corporations Act 2001 (Cth) (the ‘Corporations Act’). However the Corporations Act did not take into account the nuances of operating in the charity sector, and seemed to impose an ever increasing level of liability on those directors (as seen in the Centro case ASIC v Healey [2011] FCA 717). The introduction of the Australia Charities and Not-for-profit Commission Act 2012 (Cth) (the ‘ACNC Act’) marked a significant shift, and meant that the Centro decision and the related civil penalty provisions of the Corporations Act would no longer apply to registered charities.

Whilst a collective exhale could be heard across charity boardrooms Australia wide, the question remains, what is the standard of diligence required from charity directors and in what circumstances would liability for a charity director arise?

Australian Charities and Not-for-profit Commission

Many reading this article will be familiar with the ACNC, who is the independent regulator of registered charities in Australia. It is prudent here to note that not all charities in Australia are registered charities, and the contents of this article specially relate to people involved with charities that are in fact registered. The ACNC uses the term ‘Responsible People’ to refer to the different roles that attract duties within a registered charity (as each registered charity will have one of several different legal structures). These roles generally include each director of a company limited by guarantee, each of the members of an association’s committee of management of an incorporated association, each trustee of a trust and each director of a corporate trustee[1]. Each of these Responsible People has duties that they must comply with, the most pertinent of which are set out below.

ACNC Governance Standards

There are six governance standards set out in the Australian Charities and Not-for-profits Commission Regulations 2022 (Cth) (the ACNC Regulations) which entities are required to meet (in order to become registered, and on an ongoing basis). According to Governance Standard 5, charities must take reasonable steps to ensure that their Responsible People comply with their duties as follows[2]:

•  To act with reasonable care and diligence. It is the responsibility of the registered charity’s Responsible People to manage the charity. This includes staying informed of the charity’s activities and finances. Whilst is it at times necessary for a responsible person to rely on the expertise of others, this does not alleviate the requirement to make an independent assessment of the information provided.
• To act honestly and fairly in the best interests of the charity and for its charitable purposes. Responsible People are obligated to act in the best interests of the charity in order to further its charitable purposes. It would be a breach of this duty if their dealings were not honestly in the charities best interests, but rather in the best interests of the Responsible People or their associates.

• Not to misuse their position or information they gain as a Responsible Person. Often responsible people will need to make decisions about the finances or other resources of the charity. It would be a misuse of that position to use information for their own benefit or benefit of others such as family and friends.

• To disclose conflicts of interest. A conflict of interest between a responsible persons duty to the charity and their own personal interest, whether actual or perceived, must be disclosed to the other Responsible People of the registered charity. That person should also then refrain from voting on any issue relating to the conflict of interest. A key here is early and full disclosure, even in a circumstance where it may only look as though there is a conflict of interest.

• To ensure that the financial affairs of the charity are managed responsibly. This includes reading financial statements and making enquiries in relation to anything the responsible person doesn’t understand (those familiar with the Centro case may notice a similar representation here). Improper financial management is the most common way in which directors and other responsible persons get themselves into trouble. There is no substitute for taking care to discharge due diligence when it come to the charity’s financial management.
• Not to allow the charity to operate while it is insolvent. If the Responsible Person reasonably suspects that the charity cannot pay all its debts when they become due, then they must take all reasonable steps to prevent the charity from incurring any more debt.

Whilst the ACNC Regulations outline some protections for Responsible People, failure to comply with any of the above requirements of Governance Standard 5 can attract regulatory action by the ACNC and in some more extreme circumstances (discussed below) the criminal sanctions set out in the Corporations Act may apply.

ACNC Compliance Powers

As the national regulator the ACNC has statutory powers to ensure that the regulatory framework is complied with. These powers include the ability to take action against the charities ‘Responsible Persons’ and the registered charity itself. It may suspend or remove a Responsible Person (for example a member of the charity’s board or committee) and also disqualify them from being eligible to be on the governing body of another registered charity. If a person is disqualified they will be listed on the ACNC disqualified persons register.

In relation to the charity itself, the ACNC may issue a warning, a direction (directing the charity to do or not do something) or an enforceable undertaking (these arrangements can be enforced by a court). It may also seek an injunction from a court to make the charity do or not do something. In exceptional circumstances the ACNC may revoke the charity’s registration, which may in turn affect their ability to access government funding, exemptions, and tax concessions. The ACNC can apply administrative penalties if a charity makes false or misleading statements or fails to lodge documents on time. Ultimately it is the responsibility of the registered charity as an entity to ensure that the Responsible People comply with the governance standards, which in turn makes this a collective duty of all of the organisations Responsible People.

Criminal Offences of the Corporations Act

Unlike the civil sanctions that apply to directors for breaching their duties – which are generally not applicable to charity directors – there are criminal offences under the Corporations Act that still apply. Charity directors may face criminal penalties for breaching duties such as acting in good faith, acting for a proper purpose and not misusing their position or information. These sanctions will generally only apply in circumstances where directors are intentionally dishonest or reckless towards fulling their duties.

Furthermore, the duty to prevent insolvent trading under s588G of the Corporations Act continues to apply to directors of registered charities.

Breaching these duties can attract significant penalties. As such it is important that directors and Responsible Persons of registered charities act with a high level of care and diligence.

Practical guidance

There are some steps that you can take to ensure that you limit your exposure to personal liability, and in turn your charities exposure to risk as well, including;

1. 1. Always act with a high level of care and your discharge your due diligence;
   2. Read documents thoroughly, make sure you understand what you’re signing off on;
   3. Ask questions: if there’s something you don’t understand, seek clarification;
   4. If you consult an expert, ensure that you understand and accept their advice, consider their methods, and enquire to ensure they’ve acted according to industry standard;
   5. Keep records: ensure appropriate and accurate records are kept by the charity;
   6. Seek advice: if you are uncertain, seek advice from a qualified advisor before signing off.

The governance standards outlined within the ACNC Act create a minimum standard of operation for registered charities in Australia. Ensuring compliance to the governance standards is a requirement for a charity to maintain its registered status.

Vocare Law is well equipped to assist our charity and not-for-profit clients with a wealth of collective knowledge and over two decades experience providing insight and advice in this area. Please don’t hesitate to contact our office if you have any questions on ensuring your charity is able to adequately comply with the ACNC governance standards.

This article was written by Alice Osborne & Simon Mason.

**The information contained herein does not, and is not intended to, constitute legal advice and is for general informational purposes only.  

Footnotes

[1] This is a non-exhaustive list. There are other structures of registered charities that will attract duties and other roles within the organisations listed that will also attract duties.

[2] Whilst governance standard 5 relates directly to the duties of Responsible People, there are other related governance standards that Responsible People should also be aware of.

The Queensland Office of Fair Trading has introduced changes relating to dispute resolution procedures and remuneration disclosure requirements for Incorporated Associations, effective from 1 July 2024.

Dispute Resolution Procedures

Pursuant to recent amendments to the Associations Incorporation Act 1981 (Qld), Incorporated Associations are now required to implement and follow the new model rules’ grievance procedure or adopt another compliant procedure into their governing rules. This change has been introduced to ensure that Incorporated Associations have a formal process to handle internal conflicts and reduce the need for members to seek legal recourse in applying to the Supreme Court.

Action steps required for Incorporated Associations

The model rules’ grievance procedure will automatically apply to any Incorporated Associations who follow the model rules – no constitutional change is required. An overview of the procedure can be accessed here.

Incorporated Associations who already have their own grievance procedure or otherwise wish to adopt a custom procedure must ensure that the procedure complies with section 47A of the Associations Incorporations Act 1981 (Qld). This provision requires that grievance procedures must:

• allow a member to appoint any person to act on their behalf;
• give each party an opportunity to be heard;
• allow unbiased mediation if the dispute cannot initially be resolved; and
• ensure a decision-maker is unbiased if the grievance procedure allows a person to decide the outcome of the dispute.

Any current grievance procedures that do not comply with section 47A will be invalid. In this case, Incorporated Associations will be required to follow the model rules’ grievance procedure, until a valid procedure is adopted.

We note that outlining a grievance procedure in internal policy documents rather than in the governing rules of an Incorporated Association will be insufficient for the purpose of section 47A of the Act,  and will arguably cause the grievance procedure outlined in the model rules to apply to the association. As such, Incorporated Associations which currently outline a grievance procedure in policy documents should seek to amend their rules to ensure their preferred procedure continues to apply (subject of course to the requirements of the Act.

Remuneration Disclosure

Incorporated Associations are now required to disclose remuneration and other benefits received by management committee members, senior staff and their relatives at their annual general meeting (AGM). This change has been introduced to promote grater transparency and accountability within Incorporated Associations.

Remuneration and benefits may be disclosed as a total figure given to all persons, so long as the number of persons who have benefited is reported. Reporting is required even where the amount to report is zero.

It is important to note that Incorporated Associations registered with the Australian Charities and Not-for-profits Commission (ACNC) who are exempt from submitting annual financial reports to the Office of Fair Trading are not exempt from this requirement.

For the purpose of the reporting requirements, remuneration includes salary, allowances and other entitlements (eg. free coaching sessions, waived membership fees, or discounted purchases at the association’s club). The meaning of “benefit” is undefined by the relevant legislation, but guidance issued by the Office of Fair Trading suggests that “benefit” will be interpreted as all forms of compensation paid or provided by the Incorporated Association (which is not remuneration) in exchange for services. Examples include:

• Paid leave entitlements;
• Termination benefits;

Non-monetary benefits such as medical care, housing, care and free or subsidised goods and services.

Our team of not-for-profit lawyers are experienced in providing advice to incorporated associations. If your association is looking for advice, please contact us today on 1300 862 529.

This article was written by Sarah Gates & Jessica Lipsett.

More than 6 years after the Royal Commission into Institutional Reponses to Child Sexual Abuse (Royal Commission) delivered its Final Report, Queensland is implementing its recommendations with the introduction of the Child Safe Organisations Bill.

Following a five-year inquiry, the Royal Commission presented its Final Report in December 2017. In this report, the Royal Commission recommended that state and territory governments:

1. 1. require relevant organisations to comply with 10 Child Safe Standards; and
   2. establish nationally consistent reportable conduct schemes to provide independent oversight of organisational responses to allegations of child abuse.

The Child Safe Organisations Bill 2024 (the Bill) will deliver the Queensland Government’s commitment to implement the Child Safe Standards and Reportable Conduct Scheme recommendations made by the Royal Commission through the enactment of two protective schemes, which will be monitored, guided and enforced by the Queensland Family and Child Commission.

The Bill’s definitions of “Child Safe Entities” and “Reporting Entities” casts a wide net on organisations that work with children. Organisations that will be impacted by the Bill include (but are not limited to) schools, religious bodies, early childhood care, health services, disability services and community services.

Child Safe Standards

The Child Safe Standards are principle-based and outcome focused standards designed to effectively improve the safety of child in institutions. The Standards are intended to be applied to Child Safe Entities in a flexible way, guided by an organisation’s structure, size, level of risk and characteristics. Many organisations will already have these standards in place as per the Human Right’s Commission’s National Principles which are built upon the work of the Royal Commission. For a list of the Standards as outlined in the Bill, click here.

Reportable Conduct Scheme

The Reportable Conduct Scheme outlines procedure for the reporting of certain conduct, as well as reportable allegations and convictions. Reporting Entities will be required to ensure that systems are in place to prevent, notify and investigate reportable conduct in the prescribed manner.

What action should organisations take now?

The Bill establishes a phased approach for the commencement of enforcing the Child Safe Standards and Reportable Conduct Scheme. Obligations under the Standards will commence for certain sectors from 1 October 2025 and for all Child Safe Entities by 1 April 2026. Obligations under the Scheme will commence for certain sectors from 1 July 2026 and for all Reporting Entities by 1 July 2027.

In preparation for the proposed changes, we recommend that organisations affected by the Bill seek to become familiar with the Child Safe Standards and Reportable Conduct Scheme and consider how these may be applied and enforced within the organisation through an audit of current organisation policies and procedures.

Our team of Charity and Not-for-Proffit Lawyers are experienced in providing advice to organisations that work with children regarding governance, policy and procedure. If your organisation is looking for advice, please contact us today on 1300 862 529.

This article was written by Sarah Gates & Jessica Lipsett.

As a recap of the ACNC Charities Series so far:

• In Part 1 we discussed registration as a “charity” with the Australian Charities and Not-for-profits Commission (“ACNC”), and identified some of the taxation and other benefits of obtaining “charity” status.

• In Part 2 we explained the nature of Deductible Gift Recipients (“DGR”), why obtaining DGR status is attractive in encouraging larger and more frequent donations, and how a charity might become eligible to be endorsed as a DGR to issue tax-deductible receipts to potential donors.

• Part 3 we explored the nature and objectives of Public Benevolent Institutions, their place in the community in providing benevolent relief to people in need, and discussed how an institution might become endorsed as a PBI.

In Part 4, we will now discuss a further category of charities recognised by the ACNC: the Health Promotion Charity.

What are Health Promotion Charities?

A Health Promotion Charity (or “HPC”) is an organisation that is registered with the ACNC under the Health Promotion Charity charitable subtype (one of the fourteen different types of charities recognised by the ACNC). To be an HPC, the institution must be an “institution whose principal activity is to promote the prevention or the control of diseases in human beings.”[i]

The definition above shows that an entity seeking registration as a Health Promotion Charity:

1. Must be ‘charitable’ in nature (i.e. be registered as a charity with the ACNC);

2. Must be an ‘institution’;

3. Must have a ‘principal purpose’;

4. That principal purpose must be:

a. to promote the prevention of diseases; or

b. to promote the control of diseases;

5. The institution must be targeted towards addressing a “disease”; and

6. The disease(s) focussed on by the HPC must be diseases in humans.

Why Choose the HPC Structure?

Entities successfully registered as HPCs may be entitled to the following tax concessions:

• Relevant tax concessions available to all registered charities (income tax exemption; GST concessions; potential exemption on franking credits); and

• Fringe benefit tax exemptions.

Similar to Public Benevolent Institutions, Health Promotion Charities also have their own Deductible Gift Recipient (“DGR”) category. This means a registered HPC may be entitled to whole-of-entity DGR status and to provide to tax deductible receipts to its donors – which is a significant advantage in potentially encouraging larger and more frequent donations to the HPC.

Meeting the Eligibility Criteria

Institutions seeking to be registered as HPCs must meet the eligibility requirements of HPCs. These requirements are most clearly set out in the Commissioner’s Interpretation Statement: Health Promotion Charities[ii] and are discussed below.

The “charity” and “institution” aspects of this category are dealt with in our previous articles in this series.

1.   Promotion of prevention or control of diseases in humans

The uniqueness of HPCs derives from its purpose of promoting the prevention or control of diseases in humans. Some notable points arising out of the Commissioner’s Interpretation Statement are outlined below:

• Definition of Disease: The ACNC interprets the definition of “disease” broadly, with reference to the Income Tax Assessment Act 1997 (Cth) and the case of Waubra Foundation and Commissioner of Australian Charities and Not-for-profits Commission.[iv] The starting point is that the definition “includes any mental or physical ailment, disorder, defect or morbid condition, whether of sudden onset or gradual development and whether of genetic or other origin”.[v] This can include mental health conditions.[vi] Furthermore, “disease” may also include conditions not yet recognised as being diseases if certain prerequisites are met.[vii]

• What is not a Disease: “Diseases” are more than just general health conditions or symptoms of disease,[viii] or injuries.[ix]

• “Promote” means “to further the growth, development or progress of; to encourage.”[x]

• “Prevention” means “to keep from occurring; to hinder.”[xi]

• “Control” means “to hold in check; to curb or restrain”.[xii] 

• Diseases in humans: The disease must be diseases arising in humans (as opposed to those exclusive to animals, plant life or other living organisms).[xiii]

Importantly, it is promoting the prevention OR control of diseases in humans which must be the principal activity. This makes the permissible activities for HPC’s quite broad. Examples include:[xiv]

1. raising public awareness about the symptoms of a disease
2. raising public awareness about how to seek treatment for a disease
3. raising public awareness about steps that can be taken to prevent a disease being contracted, such as via vaccination or good hygiene practices
4. raising public awareness of the prevalence or risk of a disease
5. research into prevention of disease
6. research into identification and diagnosis of disease
7. research into management and treatment of disease
8. action to reduce the spread of disease, such as providing personal protective equipment
9. diagnosing, managing and treating disease
10. training carers and health professionals in methods of controlling disease
11. fundraising for HPCs or other entities that promote the prevention or control of disease, or directly prevent or control disease, as their purpose
12. providing support to sufferers of a disease to alleviate their distress and suffering.

2.   Principal Activity

The prevention or control of diseases in humans must be the “principal activity” of the entity seeking registration as an HPC. This means ‘main’ or ‘predominate’.[xv] Paragraph 51 of the Commissioner’s Interpretation Statement is instructive:

An organisation’s principal activity does not need to take up the majority (meaning more than 50%) of its time and resources. The principal activity is the activity that takes up a greater share of the organisation’s time and money than each of its other activities. For example, an organisation could spend 40% of its time and money on one activity, 30% of its time and money on a second activity, and 30% of its time and money on a third activity. The activity that takes up 40% of the organisation’s time and money is its principal activity, even though it takes up less than 50% of its overall time and money.

This principal activity test is notably more flexible than the test applied for Public Benevolent Institutions, meaning that this category may be appropriate for charities looking to have a number of related activities which are not all strictly the prevention or control of diseases in humans but still obtain the benefits this category allows.

The ACNC will undertake a thorough assessment of the organisation’s activities to ensure that the entity has a principal activity of promoting the prevention or control of diseases in humans.

This article is general information only and is current only as at the time of publication. If you are considering or are in the process of establishing a charity and are wondering whether a Health Promotion Charity might be the right structure for you, Corney & Lind Lawyers can help. Contact our friendly team today on (07) 3252 0011 or email us at: enquiry@corneyandlind.com.au

_______________________

[i] See Australian Charities and Not-for-profits Act 2012 (Cth) s 25-5.

[ii] See a link to the Commissioner’s Interpretation Statement: Health Promotion Charities available here: https://www.acnc.gov.au/tools/guidance/commissioners-interpretation-statements/commissioners-interpretation-statement-health-promotion-charities

[iii] See ACNC Charities Part I for the requirements of “charity” status, and ACNC Charities Part III for the requirements of “institution” status.

[iv] [2017] AATA 2424. See Australian Charities and Not-for-profits Commission, ‘Commissioner’s Interpretation Statement: Health Promotion Charities’, Version 4, published 30 June 2023, at [24].

[v] Income Tax Assessment Act 1997 (Cth) s 34-20(3).

[vi] Australian Charities and Not-for-profits Commission, ‘Commissioner’s Interpretation Statement: Health Promotion Charities’, Version 4, published 30 June 2023, at [27].

[vii] Ibid, [30]-[34].

[viii] Ibid, at [28].

[ix] Ibid, at [37].

[x] Ibid, at [40].

[xi] Ibid, at [41].

[xii] Ibid, at [42].

[xiii] Ibid, at [38].

[xiv] Ibid, at [43].

[xv] Ibid, at [50].

It is commonplace for not-for-profit (“NFP”) organisations to engage in fundraising strategies to assist them in achieving their objectives. Organisations that achieve fundraising success are those able to generate “buy-in” from the community, appeal to the community’s interests and/or to their sense of compassion, and tailor their fundraisers to comply with legal regulations.

Regulatory approvals are pertinent when an NFP organisation seeks to fundraise through the sale of alcohol. While often an easy way to generate the “buy-in” required for fundraising successes, when the sale of alcohol is not appropriately licensed there are significant risks to the NFP.

If seeking to generate funds through the sale of alcohol as a one-off event or through their regular activities, NFPs should ensure they do so in a way that is compliant. This article walks through some of the main avenues through which NFPs might seek to use alcohol to fundraise in Queensland.

Regulation of Alcohol in Queensland

The sale of liquor in Queensland is governed by two major laws:

• Liquor Act 1992 (Qld) (the “Liquor Act”); and
• Wine Industry Act 1994 (Qld).

The Liquor Act is of particular importance to NFP entities, as it is the primary legislation governing exceptions for NFPs fundraising through alcohol sales.

The NFP Exemption

The Liquor Act may permit an NFP an exemption from the requirement to be licensed for the sale of alcohol for specified one-off events. This exemption may apply:

1. If the event meets the definition of a “fundraising event”;
2. If all net proceeds from the liquor sales will be used to benefit the community;
3. The sale of liquor is not the main purpose of the event (i.e. the sale is “ancillary to the fundraising event”);
4. The liquor is only sold between 7.00am and 12.00am midnight on days that do not include Christmas Day, Good Friday, or prior to 1.00pm on Anzac Day; and
5. The liquor is sold by an adult in open containers for consumption at the event, and such sale will not create an unsafe environment at the event.

What is a “Fundraising Event”?

The Liquor Act defines “fundraising event” as an event/occasion that:

1. Is held primarily for the purpose of raising funds for the benefit of the community; and
2. Is either a one-off small regional show, or another one-off event or occasion starting and finishing on the same day.

Further Requirements

Further eligibility requirements apply to this NFP exemption. These relate to the nature of the organisation (for example, it cannot be a “criminal organisation”) and to the past conduct of its executive officers (e.g. that they are not disqualified from holding liquor licences/permits or have not been breached particular sections of the Liquor Act or particular terms of any licence or permit).

Organisations seeking to rely on the NFP Exemption should further ensure that there is a high level of oversight over the sale of alcohol at the fundraising event. The exemption will not apply in a variety of situations contemplated by the Liquor Act, such as:

1. where alcohol is sold to minors or unduly intoxicated persons;
2. where the event encourages excessive or rapid consumption of alcohol; or,
3. where the sale of liquor occurs on licensed premises or premises over which a liquor permit is in force.

Alternative Licensing Arrangements

Where the NFP or its event do not meet the above criteria, or where the sale of alcohol will occur more frequently than just a one-off event, the NFP may need to consider obtaining a liquor permit or licence. When seeking to apply for the below licences/permits, NFPs should be aware of the unique eligibility requirements under each category, any additional restrictions to the area in which they can serve alcohol, and that some categories may require staff/volunteers to be appropriately trained in the Responsible Service of Alcohol (“RSA”).

1. Community Liquor Permits

An NFP might seek this permit if they are seeking to sell liquor on a one-off or temporary basis, and in circumstances where the sale is occurring on unlicensed premises. Such a permit will often be sought where the nature of the NFP or its planned event does not quite qualify for the NFP Exemption (for example, where the NFP seeks to undertake fundraising activities on a more regular and frequent basis – rather than through an isolated event).

2. Community Club Licence

Where the organisation meets the definition of a “community club” and seeks to sell alcohol to its members, their guests, members of a reciprocal club and visitors, it may seek to obtain a community club licence.

3. “Community – Other” Licences

Where the NFP operates in the form of an unincorporated or non-proprietary club, the NFP may be eligible for a “Community – Other” licence. Typically, these licences allow the club/association to sell liquor to its members and their guests for a total number of hours as specified by the Commissioner (up to 25 hours per week) and are more beneficial for clubs seeking to engage in more frequent fundraising activities involving the sale of liquor.

Office of Fair Trading Fundraising Licences

A reminder that organisations undertaking fundraising in Queensland (including through the sale of alcohol) for particular charitable or community purposes must hold a current fundraising licence issued by the Queensland Office of Fair Trading.

If you are seeking to organise a fundraising event for your not-for-profit organisation, the experienced team at Corney & Lind Lawyers can help you with the legal and regulatory requirements. Contact our friendly staff today on (07) 3252 0011 or send us your enquiry here.

NOTE: Vocare Law posts articles for general information purposes only. These articles are not intended as, and should not be taken as, being professional legal advice. If you have a query that is legal in nature, Vocare Law recommends that you seek professional legal advice tailored to your specific circumstances.

This article was written by Jackson Litzow & Simon Mason.

Leasing out real property can be an attractive value proposition for charitable and not-for-profit entities. Such arrangements can be a useful method of maximising the value of a charity’s assets and generating additional finances for the charity to use in pursuing its charitable purposes and objectives.

Typically, leases of property may be attractive to charitable entities as legal ownership over a leased asset remains vested in the charity – rather than ownership being transferred to the Buyer under a Contract of Sale. Additionally, charitable or not-for-profit entities often enjoy the following benefits from leasing arrangements:

• Steady income generation and diversification of revenue streams – charities who lease their property broaden their revenue sources and increase their capacities to pursue charitable purposes through additional rental income. This is especially useful in situations where charities seek to derive benefit out of land which is idle or unused.
• Taxation minimisation – where a property is used for charitable purposes, the property may be eligible to receive specific types of taxation concessions or exemptions (such as state-based land tax exemptions or local council general rates rebates/exemptions). A charity may seek to lease out its property to ensure that property owned by a charity is being used for charitable purposes (which may be necessary for it to qualify for state taxation benefits).
• Certainty of rights and obligations – Charities will often enter into leases to ensure they have certainty over the particular rights, responsibilities and potential liabilities of the parties to the agreement, which is particularly useful in solidifying and documenting tenancies which have previously existed as more informal arrangements (such as those which may occur between parties/entities related to the charity).
• Alignment with charitable purposes – some charities, such as those established to provide housing assistance or affordable housing schemes, might acquire and develop property to lease out at reduced rates to persons experiencing hardship or disadvantage. Accordingly, entering into leases may form part of the charity’s charitable mission.

What should a charity consider before leasing its property?

A decision by a charity or not-for-profit entity as to whether to lease out its property should never be made rashly or hastily – there are a multitude of factors which should carefully considered before entering into such a lease. Generally, laws governing leases of property differ across different States and Territories, but some general considerations to which a charity or not-for-profit entity should turn its mind include:

• Lessee – who is the lessee in relation to the Charity? If the proposed lessee is a related party to the charity, then you should seek legal advice to ensure that you are not breaching your charitable purpose and that the lease is at market rates (or rates more beneficial to the charity).

• Term – when will the lease commence? When will the lease expire? Will there be any options for the Tenant to extend the term? Charities should be very careful in ensuring that the term for which property will be leased out is reasonable, and that the term’s length does not bring about any unintended consequences (for example, Queensland’s deemed subdivision laws for leases over a part of a parcel of land where the lease extends for a term beyond 10 years).

• Type and Description of Property – is the lease for residential property, commercial property or for personal property? If commercial, will the lease be for a retail shop, or will it be for some other kind of commercial space? Is the lease for the whole or part of the property, and in what state or territory is the property located, Specificity in the description of leased property is essential, and depending on the nature of the property being leased the lease agreement may be governed by different rules and laws.

• Rent and Outgoings – how much rent will the Tenant pay, and how will this be calculated? Will usage costs for critical services such as water, electricity and air-conditioning be included in the rent, or will the Tenant pay for these separately? Typically, charities should ensure that the rent and outgoings amounts are set high enough to cover its costs for maintaining the property (plus some), but not so high as to be uncommercial. This is especially important for charities registered with the Australian Charities and Not-for-profits Commission (“ACNC”), given requirements of Directors of registered charities to act in the best interests of the charity. This means that generally any lease terms should be on market terms or on terms more favourable to the charity. Consider taking specialised financial advice on these aspects.

• Rent Review – How will the rent increase in each year – will it be annual increases in accordance with CPI? Will it be fixed percentage increases every period of time? Charities should ensure that rental increases maintain the value of the rent and keep up with the rising costs of living. A charity should seek financial advice to determine an appropriate figure.

• Permitted Use – for what purposes is the Tenant intending to use the premises? Can the property be lawfully used for that purpose? Does the charity wish to restrict the Tenant’s use of the property for particular purposes? For leases of commercial land, also consider whether the Tenant is to receive Exclusive Use – i.e. will the Charity guarantee to the Tenant that it will not lease another part of the property to a business similar in nature to the Tenant’s.

• Privacy – if a charity leases its property, the Tenant will often require quiet enjoyment of the property free from unreasonable interference from the Lessor. How much will these privacy conditions impact upon the charity’s operations if the charity cannot access/use the property?

• Retail Shop Leases – are the premises caught by your state’s respective retail shop lease legislation? If so, there are implications for the form of the lease and the disclosures you must make to the lessee. You should seek legal advice to determine whether these rules apply and how to comply with them.

• Insurances, Maintenance and Damage to Property – who is responsible for rectifying damage to a property and ensuring the property is maintained to an appropriate standard? Who will revert the property to its original condition at the end of the lease? Who bears the costs of taking out insurances over the property? Clarity on the answers to these questions are important to ensure each party understands its rights and obligations under the lease.

• Prior Encumbrances – are there any encumbrances (such as mortgages, security interests or caveats) on the property title which may act as a barrier to the charity leasing out its property? These may need to be resolved prior to a lease agreement being signed.

• Implication for State Land Tax exemptions – If you are currently recipient of state land tax exemptions as a charity, then you should seek legal advice to ensure that the proposed lease does not jeopardise any ongoing entitlement to such an exemption.

• Termination Rights – In what circumstances does the charity wish to be able to terminate the lease with the Tenant? Are there any actions of the Tenant which would justify immediate termination by the charity? Are these terms fair and reasonable?

• Security – How will the charity ensure that the obligations of the Tenant will be fulfilled? Will a bank guarantee, a security bond, or a personal guarantee be required from the Tenant as collateral?

• Sub-letting and Assignment – will the Tenant be permitted to assign or sublease their rights under the lease to a third party? Must the third party be approved by the charity prior to the Tenant entering into an agreement to sublet/assign.

• NSW Schools and Education Act considerations – Before looking to lease a property owned by a school in NSW, careful consideration will need to be given to compliance with the Education Act and, relevantly, compliance with the section 83C components of the Act.

Before you sign any form of leasing arrangement, it is always prudent (and, in some cases, necessary) to obtain specialised legal advice from a qualified professional. The experienced team at Vocare Law can assist you with preparing a lease agreement that is tailored to suit your charity’s needs. Contact us today on 1300 862 529 or send us your enquiry here. We look forward to meeting with you.

This article was written by Jackson Litzow & Simon Mason.

The Not-for-profit and charity legal landscape has many associated buzzwords; one of the most prevalent phrases being “DGR status”. DGR status is a concept that is particularly attractive to charities that rely solely or partly on donations from organisations or members of the public to fund its operations, but not every charity is eligible to obtain DGR status. This article will identify what DGR status is, different types of DGR status, the eligibility requirements for obtaining DGR status, and the benefits of a charity obtaining DGR status.

What is “Deductible Gift Recipient Status”?

Deductible Gift Recipient (‘DGR’) status describes the Australian Taxation Office’s (‘ATO’) endorsement of a particular entity as a Deductible Gift Recipient. The primary benefit of being endorsed as a DGR is that DGR status enables donors who make donations to the DGR to claim those donations against their income tax, which often incentivises donors to make larger or more frequent donations to the entity.

Entities that are applying for DGR status can either apply for:

1. Whole-entity DGR status (where the entity in its entirety and all its operations fit within a specified DGR category); or

• Partial-entity DGR status (where the entity in its entirety does not fit into a specified DGR category, but a distinct fund, authority or institution that it operates does).

Donors can only claim income tax deductions on donations they have made to a DGR, or the DGR-endorsed fund/authority/institution operated by the entity. For example, if a non-DGR charity operates a DGR-endorsed building fund, any donations made to the charity in general will not be tax-deductible; however, any donations made specifically to the building fund will be tax-deductible.

At the time of writing, there are approximately 52 different types of DGR categories endorsed by the ATO for which an entity may register, each classified into the below groups:

• Health
• Education
• Research
• Welfare and Rights
• Defence
• Environment
• The family
• International affairs
• Sports and recreation
• Cultural organisations
• Fire and emergency services
• Ancillary funds

An additional four categories are regulated and granted endorsement by other governmental departments. These include:

• Cultural Organisations
• Environmental organisations
• Harm prevention charities
• Overseas aid funds

Eligibility Requirements for Deductible Gift Recipient Status

Any entity applying for DGR status must comply with the eligibility requirements of the particular category under which it is seeking DGR status. Furthermore, as of December 2021, funds, authorities or institutions seeking DGR status must also satisfy the broad eligibility requirements by being either:[i]

• A charity registered with the ACNC (read more about ACNC charity registration here )
• An Australian Government agency; or
• Operated by a registered charity or an Australian government agency.

NB: This does not extend to ancillary funds or entities listed specifically as DGRs under taxation law.

DGRs must be operated and established in Australia, although its purposes and beneficiaries can lie internationally for some categories. However, some DGRs, such as public funds for providing religious instruction in government schools or an Australian war memorial fund, must have purposes and beneficiaries contained exclusively within Australia.

Some DGR categories will also require an entity, as a prerequisite to being granted DGR status under that category, to obtain pre-approval from particular government departments (e.g. overseas aid funds require pre-approval from the Department of Foreign Affairs and Trade).

Gift Funds

Where an entity does not have full-entity DGR status but instead seeks to obtain DGR status for a particular fund, authority or institution it operates, the entity must maintain a gift fund to be used only for that fund’s/authority’s/institution’s primary purpose. All money or gifts donated to the entity for the purposes anticipated by the gift fund must be made to that gift fund, and no other types of money or property can be held by the gift fund.

Furthermore, upon the DGR fund/authority/institution winding up or having its DGR status revoked, the entity will be compelled to transfer all remaining assets to another DGR fund/authority/institution. If the DGR fund/entity was a registered charity, the remaining assets held by the fund/entity may need to be transferred to another charity (DGR fund, authority or institution) with similar charitable purposes.[ii]

Revocation of Deductible Gift Recipient Status

The ATO may revoke DGR status of an entity if:

• The fund/entity no longer has entitlement to be endorsed as a DGR;
• The fund/entity fails to provide documents or information as requested by the ATO; or
• The fund/entity fails to provide specified information on its receipts for tax-deductible gifts and contributions.[iii]

If a change in the structure or operations of the DGR will have the effect of making the DGR ineligible for DGR status, the DGR bears the responsibility to report its ineligibility to the ATO. Failure to do so may result in the ATO taking legal action against the DGR. If you are seeking advice regarding applying for DGR status or reviewing your entity to ensure it complies with its DGR obligations, the NFP and Charity team at Corney & Lind Lawyers can help. Our experienced lawyers will assess your entity’s circumstances and help guide you through the process. Contact our friendly team on (07) 3252 0011 or email us at enquiry@corneyandlind.com.au

This article was written by Jackson Litzow 

[i] Australian Charities and Not-for-profits Commission, ‘Deductible Gift Recipients and the ACNC’, Deductible Gift Recipients and the ACNC (Webpage, 3 November 2022) <https://www.acnc.gov.au/tools/factsheets/deductible-gift-recipients-and-acnc>.

[ii] Australian Taxation Office, ‘Deductible gift recipient eligibility’, Rules and tests for DGR endorsement (Webpage, 13 October 2021) <https://www.ato.gov.au/Non-profit/Getting-started/Getting-endorsed-for-tax-concessions-or-as-a-DGR/Is-my-organisation-eligible-for-DGR-endorsement-/Rules-and-tests-for-DGR-endorsement/#Endorsementfortheoperationofafundauthori>.

[iii] Australian Taxation Office, ‘Revoking endorsement’, Revoking endorsement (Webpage, 04 August 2022) <https://www.ato.gov.au/non-profit/getting-started/in-detail/types-of-dgrs/public-ancillary-funds/?page=6#:~:text=We%20can%20revoke%20a%20DGR’s,specified%20information%20on%20its%20receipts.>.

Humanity’s intrinsic sense of benevolence is often the primary motivator that inspires people to donate to, or even start up, Charities and Not-for-Profit organisations (‘NFPs’). There are many structuring options for entities seeking to provide benefit to the public – each differing in its reporting and regulatory obligations and eligibility for tax exemptions.

The bullseye model (below) is a useful conceptual tool when considering the regulatory requirements and taxation exemptions of particular types of not-for-profit entities. As one moves towards the centre of the bullseye, reporting obligations on the entity become more extensive – but as a tradeoff, the entity is eligible for greater tax concessions.

Those looking to set up a not-for-profit entity will inevitably arrive at the decision as to whether they wish to register their organisation as a charity with the Australian Charities and Not-for-Profits Commission (‘ACNC’). This article outlines what charitable status is, and some of the benefits obtainable by an entity if they are successful in registering their charity with the ACNC.

What is a “Charity Status”?

An organisation is colloquially said to obtain “charity status” upon its registration with the ACNC as a “charity”. The ACNC will apply the definition provided in section 5 of the Charities Act 2013 (Cth) (the ‘Charities Act’) in determining whether the entity seeking registration is in fact a “charity”.

An entity will be a “charity” and registrable with the ACNC if:

1. It is a not-for-profit entity;
2. All its purposes are “charitable purposes” that are for the public benefit – or are purposes that are incidental or ancillary to, and in furtherance or in aid of, the “charitable purposes” of the entity;
3. The entity has no “disqualifying purposes”; and
4. The entity is not an individual, political party or government entity.

1.Not for Profit

An entity will be not-for-profit where the organisation does not operate for profit, personal gain or other benefit to particular people – such as members or shareholders.[i] Whilst there are limited situations where the entity can provide benefit to a member, this must only occur in circumstances where the benefit is provided whilst the organisation is genuinely carrying out its purposes. A general prohibition on operating for the profit of members should be reflected in the charity’s governing document (such as its constitution or rules).

2. Charitable Purposes and “Public Benefit”

The entity must have exclusively charitable purposes or purposes that are incidental to the carrying out of charitable purposes. Such as the different types of relief that charities provide is highly diverse, so too are the different types of charitable purposes recognized by the ACNC and Charities Act. Overall, there are 14 different types of recognized charitable purposes, some of which include:

• Advancing education;
• Advancing religion;
• Advancing health;
• Promoting/protecting human rights;
• Advancing human rights;
• Advancing culture.

These purposes must also be of public benefit, and the purpose must direct a benefit to the general public or a sufficient section of the general public.[ii] It is unlikely that an organisation that passes on a benefit to a very small portion and demographic of the public will be registrable as a “charity”.

3. No “Disqualifying Purposes”

The organisation cannot be founded for a “disqualifying purpose” as defined by the Charities Act. This means it cannot operate for the purpose(s) of:

• Engaging/promoting unlawful activities or activities against public policy; or
• Promoting/opposing a political party or candidate.

Benefits of ACNC Registration

In most circumstances, ACNC registration is highly desirable for charities due to the abundance of benefits it provides. The types of benefits available to a charity will depend on the charity’s designated “subtype”, and might include:[iii]

1) Taxation Benefits:

• The ability to apply to the Australian Taxation Office (‘ATO’) for tax concessions/exemptions (such as income tax exemptions and GST concessions) and particular kinds of deductible gift recipient (‘DGR’) status available only to ACNC-registered charities;
• For Public Benevolent Institutions, Health Promotion Charities or charities for the advancement of religion – further tax benefits available only to these types of institutions;
• Potential eligibility for further financial benefits and tax exemptions provided under Commonwealth law, such as:
  • Mobility allowances;
  • Family tax benefits or double orphan pensions;
  • Fringe benefit tax exemptions.

2) Regulatory benefits (where the entity is also registered with the Australian Securities and Investments Commission (‘ASIC’) and is a Company Limited by Guarantee):

• Reporting is required only to the ACNC instead of both the ACNC and ASIC, meaning that ASIC filing and annual review fees are not payable and the need for a directors’ report to be prepared (which can reduce costs in the event of an audit) is no longer applicable;
• The ACNC also assesses reporting size thresholds based upon revenue only (without consideration of DGR status), meaning an entity that may have been classified as a “medium” sized entity under the Corporations Act 2001 (Cth) and would have hence required audit and review might instead be classified as “small” under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) and therefore not required to undertake audit or review.

3) Other benefits

The ability to publicly display registration publicly and provide your details on the ACNC website, which can assist in attracting potential partners and donations for the charity.

If you are looking to register your not-for-profit entity with the ACNC and to maximise the taxation and other benefits available to your organisation, the Not-for-Profit and Charity team at Corney & Lind Lawyers can help. Our experienced lawyers can assist you in all aspects of the process – from structuring and setting up your entity through to ACNC registration and preparation of taxation concession applications. Give our team a call on (07) 3252 0011 or email us at enquiry@corneyandlind.com.au

This article was written by Jackson Litzow 

[i] Australian Charities and Not-for-profits Commission, ‘Benefits of Registration’, Why Register (Webpage, 7 September 2022) <https://www.acnc.gov.au/for-charities/start-charity/you-start-charity/why-register>.

[ii] Australian Charities and Not-for-profits Commission, ‘What is ‘public benefit’’, Public Benefit (Webpage, 3 November 2022) <https://www.acnc.gov.au/for-charities/start-charity/public-benefit

[iii] Australian Charities and Not-for-profits Commission, ‘What is a not-for-profit’, NOT-FOR-PROFIT (Webpage, 7 September 2022)