What is a charity?

ACNC Charity Chat

A discussion with Assistant Commissioner Murray Baird about the origins of charity, what it takes to be a charity today, and the difference between charities and not-for-profits.

acnc.gov.au

Transcript

Matt: Hello and welcome to Charity Chat – the ACNC’s podcast. In this episode, we’ll talk about the origins of charity, what it takes to be a charity today and the difference between a charity and a not-for-profit.

My name is Matt Crichton and I’m from the Education team here at the ACNC and joining me today to talk about these issues is the Assistant Commissioner of the Australian Charities and Not-for-Profits Commission – Murray Baird. Hello Murray.

Murray: Hello Matt.

Matt: Murray, I think a lot of people would have an idea of the concept of charity and generally know what it means to be a charity in the community. Can you give us an overview of your idea of the concept of charity, its origins, and what it means to be a charity today?

Murray: Yeah. Well it may come as a surprise to many in the community that the charity is much wider than we would normally expect. I think most people think of charities as organisations that help the community or assist people in need. But the idea of charity, go back about 400 years, is much wider than that. Originally, Queen Elizabeth I had to work out where people put money into charitable funds and whether it was being properly used. So she gave some ideas in an Act of Parliament as to what we meant by charity. And these were over time distilled into four categories. The first category was the popular meaning – that was caring for people in need who were ill or disadvantaged.

Matt: Right, what most people would associate with charity?

Murray: Yeah that’s right. But it does go further because the second category is advancement of education. So education is seen as good for the community and if it’s done on a not-for-profit basis, schools and universities also fall within the concept of charity.

Matt: OK and I think that one is probably one that doesn’t quite fit the regular conception of charity for many people. It’s one that probably sits off to the side a little bit.

Murray: Yeah, but I suppose if you think about it, a community is much better off if there is access to education and before the government was fully involved in education, clearly people who stepped up and offered it on a not-for-profit basis, were regarded as doing good works.

Matt: Yeah, right.

Murray: The third one is the idea of advancement of religion. So it was presumed that if you were involved in religion, you were giving people hope and security and moral improvements and that was good for the wider community. So advancement of religion came in and that covers all religious expressions.

And then there was a grab bag of things that we thought were good for the community and we recognised all to be charitable. And over the years, the big ones that emerged there, were that the safety and security of the community; the progress of the community and encouragement of, interestingly enough, agriculture and business; we have protection of the environment, and arts and culture were said to be good for the community. So they were just put in a fourth category of other things beneficial to the community.

Matt: Right, so there was recognition that there were plenty of other things that benefitted the community but just didn’t fit into those other three categories of charity that were available at the time?

Murray: That’s exactly right, yep.

Matt: And you mentioned that these categories came about over centuries, has there been any further sharpening of the concepts of charity or even a codification of these charitable purposes since?

Murray: Yeah I think that’s a good way of looking at what happened in 2013 when the Australian government, for Commonwealth purposes, set out in the Charities Act, 12 charitable purposes. And the traditional ones are there under Advancing Health and Advancing Social and Public Welfare – there’s Advancing Education and there’s Advancing Religion. But what it does in setting out 12 charitable purposes is tease out that fourth category that I talked about earlier. And so we also find on that list Advancing Culture; Reconciliation; Mutual Respect; Tolerance; Human Rights; Safety and Security; Animal Welfare; the Environment and Advocacy for charitable purposes. And they even put a grab bag in called Other Purposes that are similar to those ones set out.

Matt: Right, so even miscellaneous remains?

Murray: Yeah, miscellaneous is still in there.

Matt: OK and if we consider the charitable purpose or purposes as just one aspect of operations that an organisation must have if it’s to be considered a charity and registered with the ACNC as a charity, what are the other criteria that an organisation must meet?

Murray: Yeah, there are three hoops you have to jump through. The first is you’ve got to be not-for-profit and that doesn’t mean you can’t make a profit – in fact we encourage charities to be sustainable - to have a bit of surplus at the end of the year. What it means is your purpose is not to give private profit to individuals.

Matt: OK.

Murray: You can pay staff – that’s reasonable. You can of course give benefits to the people who are the objects of your charity, but you can’t set out with a purpose of creating wealth for people.

Matt: Right, so you can’t be distributing any surplus that the organisation may come across to any members or anything like that?

Murray: No paying dividends.

Matt: Of course not. And the third hoop, Murray?

Murray: Yeah. When I mentioned three hoops – not-for-profit – it’s got to come within that list of 12 charitable purposes. And it also should be able to show public benefit. Public benefit can be looked at a number of ways. One, is it’s the opposite of private benefit – so it’s not there for individuals to gain wealth.

Matt: Yep.

Murray: But also, it has to show that there’s something good happening in the wider community, and it’s got to be more than just a small group or a family group. It’s got to be public benefit. So public benefit has got lots of flavour to it, but it really means that when we look at it, we say “Yeah, that’s good for the community.” And it’s also the opposite of detriment to the community.

Matt: Of course.

Murray: So if a charity has a track record of doing really bad stuff, we might say “Well, that’s not for the public benefit. That’s for the public detriment. We’re not going to allow it in.”

They’re the three things. It’s got to be not-for-profit; got to have a charitable purpose; got to be for the public benefit.

Matt: And are there any things that would strike a line through an organisation that wants to be registered as a charity? Are there any restrictions on what they can and can’t do?

Murray: Yeah, there are a couple of things called “disqualifying purposes”. And those disqualifying purposes is to have a purpose of doing things that are illegal, and that makes sense. We don’t particularly want organisations to set up for illegality. And the other is not to cross the boundary into the political arena. Now, there’s a lot of debate about where that boundary is, but the Charities Act helps us by saying it’s the support or opposing of a political candidate or a political party. So that then makes you a political instrument instead of a charitable organisation.

Matt: OK, right.

Murray: That’s not to say you can’t be involved in the marketplace of ideas and express opinions as a charity on issues that will come up in the political process. But it’s when you actually say to people “Vote for this candidate. Vote for this party.” That’s what we’re on about. We’re on about the furtherance of this party or the opposition to that party, that really gets you into a different area.

Matt: And how about an individual then? Could I register myself as a charity?

Murray: You’ll recall that we talked of a public benefit – what we say is that an individual can’t be a charity. You have to at least have a group of people who come together for that charitable purpose.

Matt: Right, OK.

Murray: So we call it a “body of persons”. You could incorporate; become an association or a company – you don’t have to… as long as you’re an identifiable crowd and you could prove that you have a charitable purpose and you’re not-for-profit and for the public benefit, you can become a charity. Often, a constitution is the document in which you will express that purpose.

Matt: Right, OK.

And just touching on this concept of not-for-profit briefly, because we have talked about it in the context of how an organisation can become a charity, that I think there may be some confusion still in the public consciousness about the terms “charity” and “not-for-profit”. These terms don’t mean exactly the same thing but then again they’re not mutually exclusive, are they?

Murray: I think if you think of one large circle of not-for-profit organisations – that will include sporting clubs which are not charitable; that will include membership and social clubs that are not for the public benefit generally. They’re for the benefit for the people who joined them.

Matt: Right.

Murray: It might be in a Bridge club – that’s not-for-profit but it’s not charitable.

Matt: OK.

Murray: So it is said that there’s probably about 600,000 not-for-profit organisations in Australia, but there’s only about 55,000 registered charities. So charities are simply a subset of not-for-profits.

Matt: OK.

Murray: So you can be not-for-profit and not a charity, but you can’t be a charity without being not-for-profit.

Matt: OK, so we should think about charities as being – they’re not-for-profits that have a charitable purpose?

Murray: Exactly and are for the public benefit.

Matt: Yeah, of course.

What about the organisations, and there would be a few out there in the community, that have a mixture of purposes? So they are not-for-profit; they do have a charitable purpose, but then they also have other purposes that aren’t considered charitable according to those 12 categories that we spoke about just before?

Murray: Yep. We talk about having to have solely charitable purposes. Now, that needs a bit of unpacking because you can have purposes in support of your solely charitable purposes. So there can be other purposes, but they must be what we call “ancillary”. But if they’re an independent purpose, beside a charitable purpose and the other purpose is not charitable, that pollutes the idea of a charity.

Matt: OK, so that would prevent them from being able to register as a charity, because a charity needs to have solely charitable purposes?

Murray: Yeah, solely charitable but you can have some ancillary purposes or supportive purposes.

Matt: OK, well that may be a useful way to think of the phrase “ancillary purposes” actually. They are the supportive purposes – the ones that are there to support the charitable purposes of the charity?

Murray: Yeah that’s right. I think that if you had a charitable purpose and an independent non-charitable purpose, you might think of creating two separate organisations.

Matt: OK.

Murray: One which could register, and the other which could run in parallel as long as it wasn’t some form of device to be able to get around the system. But it would be possible to have cooperation between two organisations.

Matt: Well that’s just about all we have time for. Thank you very much for your time today, Murray. I think you’ve done a great job explaining the concept of charity, where it’s come from and also where it sits today, particularly that point about the difference between a charity and a not-for-profit.

Murray: It’s interesting that we’re called the Australian Charities and Not-for-Profits Commission. I think when we were first envisaged, we were starting with charities and perhaps we would move to not-for-profits as well, but there’s nothing on the horizon for that as far as I know at the moment.

Matt: Yes, well maybe at some point, sometime down the line.

Thanks again, Murray. We really appreciate you taking the time today to explain all things charity and not-for-profits to us.

Murray: Thanks very much, Matt.

Matt: Be sure to check out other episodes of ACNC Charity Chat and other resources including guides, facts sheets and webinars on our website at acnc.gov.au. And if you enjoyed this podcast and would like to hear more, subscribe on iTunes or wherever you happen to access it. Thanks for listening. We’ll see you next time.