Charities Act 2013

The Act has a broad but indirect reach. It directly affects any entity that seeks to be recognised as a charity for Commonwealth purposes. This includes:

• Not-for-profit companies limited by guarantee, incorporated associations (where the ACNC is the regulator), trusts, and unincorporated associations that wish to register with the Australian Charities and Not-for-profits Commission (ACNC).
• Organisations applying for or maintaining deductible gift recipient (DGR) status under the Income Tax Assessment Act 1997 (Cth), because “charitable” is now interpreted through this Act.
• Entities that receive government grants, exemptions from fringe-benefits tax, goods-and-services tax concessions, or other federal advantages conditioned on charitable status.
• Private ancillary funds and public ancillary funds, whose governing rules routinely require them to operate exclusively for charitable purposes.
• Donors and professional advisers (lawyers, accountants, fundraisers) who must advise on whether a proposed recipient satisfies the statutory definition.
• Government entities themselves are expressly excluded from being charities (s 5(d)), but s 13 permits funds that contribute to “charity-like” government entities to treat those entities as though they were charities for the purpose of assessing the fund’s own status.
• Indigenous land councils, native-title prescribed body corporates and traditional-owner corporations that manage native-title benefits; s 9 prevents them from being disqualified on the basis of the relational nature of the beneficiary class.
• Closed contemplative religious orders that engage in public intercessory prayer (s 10(2)) and open, non-discriminatory self-help groups formed to assist people sharing a particular disadvantage (s 10(1)).

Because the definition applies “in any Act” (ss 5 and 12), the Act also indirectly affects every Commonwealth department or agency that administers a statute containing the word “charitable” or “charity”. The ACNC, the Australian Taxation Office, the Office of the Registrar of Indigenous Corporations and federal courts applying the definition in ancillary relief or cy-près applications are the most frequent users.

The Act does not bind State or Territory regulators directly, but the uniform adoption of the same definition by all States for their own charitable-trusts and fundraising legislation has produced a de-facto national standard.

The Act itself creates few standalone duties. Its primary function is definitional. However, the rights and obligations that flow from charitable status are significant.

Rights conferred by charitable status (via other statutes that now reference this Act) include:

• entitlement to register as a charity with the ACNC (Australian Charities and Not-for-profits Commission Act 2012, s 25-5);
• access to income-tax exemption (Income Tax Assessment Act 1997, s 50-5);
• ability to receive tax-deductible gifts if also endorsed as a DGR;
• concessional treatment under fringe-benefits tax, GST and land-tax legislation in various jurisdictions.

The Act also confers a right to engage in limited political advocacy. Section 12(1)(l), read with the note to s 11, makes clear that charities may promote or oppose changes to law, policy or practice provided the change is in furtherance or aid of (or opposition to) another charitable purpose. This codifies and expands the common-law position reached in Aid/Watch Inc v Commissioner of Taxation (2010) 241 CLR 539.

Key obligations arising from the statutory definition include:

• maintaining all purposes as charitable or ancillary (s 5(b)). A single disqualifying purpose is fatal.
• ensuring that activities do not cause a purpose to become disqualifying under s 11. The ACNC Governance Standards (made under the ACNC Act) reinforce this by requiring charities to remain independent of political parties.
• for trusts, ensuring that any variation or cy-près scheme is taken into account under s 18.
• for entities relying on the s 7 presumptions, being prepared to rebut “evidence to the contrary” if challenged by the ACNC or the Commissioner of Taxation.
• for self-help groups and contemplative orders, satisfying the strict membership-control and public-prayer conditions in s 10 if they wish to dispense with the public-benefit test.

The Act also implicitly imposes a duty on entities to consider the factors in s 6(2)–(4) when self-assessing or when preparing ACNC annual statements that address public-benefit compliance.

The Charities Act 2013 itself contains no offence provisions or civil penalties. Enforcement occurs through three main channels:

1. ACNC regulatory powers. The ACNC may refuse registration, revoke registration, or issue warnings or directions where it forms the view that an entity no longer meets the definition of charity. Revocation carries significant collateral consequences because loss of charitable status usually triggers loss of tax concessions.

2. Taxation consequences. The Commissioner of Taxation may revoke income-tax exemption or DGR endorsement. Such decisions are reviewable by the Administrative Appeals Tribunal and, on questions of law, by the Federal Court. The leading post-Act authorities (Commissioner of Taxation v The Hunger Project Australia (2017) 250 FCR 331; Aid/Watch remains relevant) demonstrate that courts will closely examine activities as evidence of purpose (see Note 1 to s 5(b)).

3. Cy-près and trust litigation. State and Territory Supreme Courts retain jurisdiction over charitable trusts. Section 18 requires those courts to have regard to any existing cy-près scheme when determining whether the trust’s purposes remain charitable. Failure to comply with trust terms can lead to removal of trustees or orders for account of profits.

The Act’s disqualification of political parties and government entities is absolute; no penalty is needed because the entity simply cannot be a charity. The note to s 11(1)(a) clarifies that activities contrary to government policy are not automatically contrary to public policy, reducing the risk of politically motivated enforcement.

The Act is designed to be read with the Australian Charities and Not-for-profits Commission Act 2012 (which supplies the registration framework and the definition of “not-for-profit”), the Income Tax Assessment Act 1997 (especially Division 50 and the DGR tables), and the Income Tax Assessment Act 1936 (s 318 associates test). The Charities (Consequential Amendments and Transitional Provisions) Act 2013 amended more than 30 Commonwealth statutes to replace previous references to the common-law concept with references to this Act.

Section 4’s definition of “government entity” cross-references the A New Tax System (Australian Business Number) Act 1999 and permits the Minister to prescribe additional State and Territory entities by legislative instrument. Section 9 cross-references the Native Title Act 1993. The human-rights head in s 12(1)(g) takes its meaning from the Human Rights (Parliamentary Scrutiny) Act 2011.

At State level, the uniform charities legislation (e.g. Charitable Trusts Act 1993 (NSW) as amended) and the introduction of statutory definitions in Victoria, South Australia and elsewhere have produced substantial harmony, although minor differences remain in the treatment of mixed-purpose trusts and the precise wording of the political-advocacy limb.

The Act also interacts with the common law of charitable trusts. Section 18 expressly preserves equity’s cy-près jurisdiction and State/Territory statutory schemes. Courts have held that the statutory list in s 12 is not exhaustive of the old “spirit and intendment” doctrine because of the analogous-purposes paragraph (k).

In constitutional terms, the Act relies on the Commonwealth’s taxation, corporations, and external-affairs powers. Its application to overseas charitable purposes (s 12(3)) is supported by the external-affairs power, consistent with Aid/Watch.

The text reproduced in the query is the original 2013 Act. However, two sets of amendments are material for practitioners.

First, the Treasury Laws Amendment (2018 Measures No. 2) Act 2019 inserted s 15(4), the post-disaster asset-rebuilding head. This was a direct legislative response to the 2017–2019 bushfire and cyclone events. The provision is tightly drafted: the disaster must have developed rapidly, caused death, injury or widespread damage, the rebuilding must be in furtherance of exempt entities’ purposes, and commercial or private benefits must be only incidental. It reflects a policy judgment that rapid-onset disasters justify a temporary relaxation of the “public” character of the benefit.

Second, the Charities Amendment (2020 Measures No. 1) Regulations 2020 and subsequent ACNC guidance clarified the application of the public-benefit test to advocacy during the COVID-19 emergency. Although the Act itself was not amended, the Explanatory Statement to the 2020 Regulations reiterated that advocacy for law reform directed at relieving poverty or advancing health remains charitable even when it is critical of government.

No fundamental re-write of the 2013 definitions has occurred. The statutory language has proved sufficiently flexible to accommodate contemporary issues such as climate-change litigation (falling under advancing the natural environment or analogous purposes) and Indigenous land-rights management (expressly protected by s 9).

The leading case remains Aid/Watch Inc v Commissioner of Taxation (2010) 241 CLR 539, which established that political advocacy in furtherance of charitable purposes is not disqualifying. The High Court’s reasoning directly informed the drafting of s 12(1)(l) and the note to s 11.

Post-Act litigation has tested the boundaries of “purpose”. In The Hunger Project Australia (2017) 250 FCR 331 the Full Federal Court emphasised that the tribunal must examine the entity’s governing rules, activities and “any other relevant matter” (Note 1 to s 5). The Court upheld charitable status for an organisation that partnered with overseas entities, confirming that s 12(3) permits overseas activities.

Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204 (pre-Act but still cited) established that commercial activities do not prevent charitable status if the profits are applied exclusively to charitable purposes. That principle survives under the new Act provided the commercial activity remains incidental or ancillary (s 5(b)(ii)).

Controversies have arisen around:

• the breadth of “advancing religion” in a secular society;
• whether environmental advocacy groups that engage in civil disobedience cross into “unlawful” purposes under s 11;
• the sufficiency of the beneficiary class in scholarship trusts limited to descendants of a particular ethnic group (the s 6(4) numerical-comparison test is critical);
• the precise scope of the s 10(1) self-help-group exemption, particularly whether membership criteria that indirectly exclude certain groups satisfy the “open and non-discriminatory” requirement.

To date the Federal Court has shown deference to the statutory language rather than reverting to pre-2014 common-law authorities except where the statute expressly preserves them.

Most practitioners still under-estimate the forensic importance of the “all of the purposes” requirement in s 5(b). A single ancillary purpose that is not “in furtherance or in aid of” a charitable purpose will disqualify the entire entity. The ACNC has revoked registration on this basis where governing rules contained an unnoticed power to make grants to non-charitable entities.

The interaction between s 7 presumptions and “evidence to the contrary” is another trap. An entity that relies on the presumption of advancing religion but whose activities are found to be predominantly evangelistic marketing rather than religious observance may lose the presumption and fail the full s 6 test if the benefited class is predominantly its own donors.

Section 11’s “contrary to public policy” ground is wider than many realise. The example in the section lists “the constitutional system of government of the Commonwealth” and “national security”. Advocacy that seeks to overthrow the Constitution by unconstitutional means has been held (in obiter) to fall within this head. Conversely, the note makes clear that mere opposition to current government policy is not enough.

The disaster-rebuilding head in s 15(4) is deceptively narrow. The disaster must have “developed rapidly”. Slow-onset events such as drought or creeping sea-level rise do not qualify. The assets must belong to non-government entities or charity-like government entities, and any commercial benefit must be “incidental and ancillary only”. Many bushfire-recovery funds have had to restructure to satisfy these cumulative conditions.

Finally, s 18 is routinely overlooked. When advising on a charitable trust that contains an outdated purpose, practitioners must first check whether a cy-près scheme has already been approved by a State Attorney-General or court. If it has, that scheme must be taken into account before concluding that the trust is no longer charitable. Failure to do so can lead to unnecessary and expensive Supreme Court applications.

Compliance begins with a structured governing-rules audit. Every constitution, trust deed or objects clause should be redrafted to mirror the language of s 12(1) and to contain an express prohibition on disqualifying purposes. A standard clause might read: “The objects of the entity are confined to charitable purposes within the meaning of the Charities Act 2013 (Cth) that are for the public benefit, together with ancillary purposes in furtherance of those objects. The entity must not pursue any disqualifying purpose within the meaning of s 11 of that Act.”

Organisations should maintain a purposes-and-activities matrix that maps each activity to a specific paragraph of s 12(1) and records the reasoning why the activity is either a charitable purpose or ancillary to one. This matrix becomes critical evidence if the ACNC or ATO issues a notice to produce under their respective Acts.

Public-benefit analysis should be documented annually. For entities relying on a s 7 presumption, the governing body should minute why it believes no evidence to the contrary exists. For entities that cannot rely on a presumption (for example, those advancing culture or human rights), a formal s 6 assessment addressing benefits, detriments, private-benefit risk and sufficiency of the section of the public benefited should be prepared and reviewed by external counsel every three years or upon material change in activities.

Political advocacy policies must be drafted with care. The policy should require all advocacy to be tied by reasoned analysis to one or more of the heads in s 12(1)(a)–(k). Records should demonstrate that the quantum of resources devoted to advocacy remains subordinate to direct charitable delivery.

Entities that operate overseas must ensure their governing rules permit this (s 12(3)) and that they can satisfy the ACNC’s overseas-activities guidance, including anti-terrorism and anti-money-laundering due diligence.

Self-help groups and contemplative orders seeking to rely on s 10 should obtain formal legal opinions confirming that their membership rules satisfy the open-and-non-discriminatory test or the regular-public-prayer test, as the case may be. These opinions should be refreshed whenever membership criteria change.

Finally, trustees and directors should receive annual training on the distinction between “purpose” and “activity”. The ACNC and courts look at activities only as evidence of the underlying purpose (Note 1 to s 5). A charity whose constitution is impeccably drafted can still lose status if its activities demonstrate a dominant non-charitable purpose.

Organisations that follow this structured compliance pathway—governing-rules alignment, documented public-benefit analysis, mapped activity registers, and periodic external review—substantially reduce the risk of revocation or tax-dispute litigation. In an environment where charitable status is both economically valuable and closely scrutinised, rigorous documentation is not optional; it is the minimum standard of prudent stewardship.