EXPOSURE DRAFT
CHARITIES BILL 2003
EXPLANATORY MATERIAL
(Circulated by authority of the
Treasurer, the Hon Peter Costello, MP)
This is
a submission in response to the Charities Bill 2003. The submission was endorsed
by the board of the Co-operative Federation of Victoria Ltd at a meeting
on
21 August
2003.
The essence
of the submission is that there are co-operatives in Australia that will fulfill
all the necessary requirements under the Charities Bill 2003 and that this
recognition by the Government is welcome and consistent with R 93 of the
International Labour Office (ILO) for the Promotion
of Co-operatives that was adopted in 2002. R 93 requires member States of the
ILO, including Australia, should recognise and
accommodate the co-operative difference in legislation, policies and programs.
The
Explanatory Material released with the Charities Bill 2003 has been reproduced
with CFV's comments throughout the text in
boxes.
David Griffiths
Secretary
21 August 2003
Table of contents
General outline and
financial impact....................................................... 1
Chapter 1 Definition of a
charity..................................................... 3
Index
.....................................................................................19
1
General outline and financial impact
Definition of a charity
The Charities Bill 2003 introduces a
legislative definition of both a
charity
and a charitable purpose. The legislative definition replaces the
current
interpretation of the term charity, which has been based on over
400 years of common law. The legislative
definition is intended to
provide
clarity to entities within the charitable sector.
Date of effect:
The new definition will apply from 1 July 2004.
Proposal announced:
The intention to introduce a definition was
announced
in Treasurer’s Press Release No 49 of 29 August 2002, as part
of
the Government’s response to the Report
of the Inquiry into the
Definition
of Charities and Related Organisations.
Financial impact:
The estimated cost to revenue of the legislative
definition
of a charity is $3 million per year from 2005-2006.
Compliance cost impact:
Compliance costs should be reduced as the new
definition
of a charity should clarify issues for the charitable sector and
remove
uncertainties and inconsistencies.
3
Chapter 1
Definition of a charity
Outline of chapter
1.1 The Charities Bill 2003 introduces a
legislative definition of
both
a charity and a charitable purpose. The intention to introduce a
legislative
definition was announced in Treasurer’s Press Release No 49
of
29 August 2002, as part of the Government’s response to the Report of
the Inquiry into the Definition of Charities and Related
Organisations.
1.2 The definition will apply to all Commonwealth
legislation,
replacing
the previous common law interpretation. In particular, the
definition
will apply to taxation law, providing a clear framework within
which
to assess the eligibility of entities for certain tax concessions.
Comment: The Co-operative
Federation of Victoria Ltd supports the application of the definition to all
Commonwealth legislation.
Context of amendments
1.3 The definition of a charity has been
developed as part of the
Government’s response to the Report of the Inquiry into the Definition of
Charities
and Related Organisations.
1.4 The definition essentially codifies the
existing common law
interpretation
of the meaning of a charity. The common law interpretation
has
been based on over 400 years of common law, largely based upon the
Preamble to the Statute of
Charitable Uses, enacted by the English
Parliament in 1601 (the Statute has since
been repealed).
1.5 The legislative definition is intended
to provide clarity to entities
within
the charitable sector, by codifying the definition.
Summary of new law
1.6 The legislative definition of a charity
is largely similar to the
previous
common law interpretation. The definition is, however,
somewhat
broader, explicitly including:
• not-for-profit
child care available to the public;
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2003
4
• self-help
bodies with open and non-discriminatory
membership;
and
• closed
or contemplative religious orders that offer prayerful
intervention
for the public,
subject
to the additional requirements of the definition.
1.7 These additional inclusions resolve
ambiguities and
inconsistencies
within the current common law definition.
1.8 With the exception of the above
extensions, the definition is
based
upon the previous common law definition. The definition requires
that
an entity must be not-for-profit, have a dominant purpose or purposes
that
are charitable and for the public benefit.
1.9 In addition, this bill includes a
definition of a charitable purpose,
also
to apply to all Commonwealth legislation.
Comment:
The Co-operative Federation of
Victoria Ltd supports the additional inclusions and the intention of resolving
inconsistencies and ambiguities.
Comparison of key features of new law and
current law
New law Current law
This bill contains a legislative
definition
for both a charity and a
charitable
purpose. This definition
will
apply to all Commonwealth
legislation
and is broadly consistent
with
the previous common law
interpretation.
No legislative definition for a charity
currently
exists. Instead, the common
law
interpretation of a charity is
used.
Detailed explanation of new law
1.10 The Charities Bill 2003 contains
definitions of both a charity,
and
a charitable purpose.
Definition of a charity, charitable
institution or other charitable body
What is a charity?
1.11 Part 2 of this bill consists of the
core definition, followed by
more
detailed explanations of the requirements to satisfy the definition of
a
charity. [Part 2, section 4]
Definition of a charity
5
1.12 The core definition identifies a
charity, a charitable institution or
any
other kind of charitable body, and requires that the entity be not-for
profit,
with a dominant charitable purpose that is, with some exceptions,
for
the public benefit. The entity must not have a disqualifying purpose.
Comment:
This is supported.
1.13 The term ‘entity’ has the meaning
given by section 960-100 of
the
Income Tax Assessment Act 1997.
[Part 1, subsection 3(1)]
1.14 The concepts of not-for-profit,
dominant purpose, charitable
purpose,
public benefit and disqualifying purpose are discussed in further
detail
in paragraphs 1.25 to 1.84.
1.15 In addition, any activities in which
the charity engages must
further,
or be in aid of, its charitable purpose. This requirement ensures
that
the entity must give effect to its charitable purpose. The activities of
the
entity, when considered with the dominant purpose of the entity, form
an
overall picture as to the charitable character of the entity. Activities are
not
considered in order to determine the best way for the entity to achieve
its
purpose; but simply that the entity gives effect to that purpose by
furthering
it.
1.16 The activities of the charity must
also be legal. An entity will
not
be a charity if it engages in, or has engaged in, conduct (or omitting to
engage
in conduct) constituting a serious offence. For these purposes, a
serious
offence is an offence against the law of the Commonwealth, of a
State or of a Territory that may be dealt
with as an indictable offence,
even
if it may also be dealt with as a summary offence. [Part 1, subsection
3(1)]
What type of entity can be a
charity?
1.17 There is some restriction on the type
of entity that will be
considered
a charity. Individuals, partnerships, political parties,
superannuation
funds and government bodies will not meet the definition.
Entities that will meet the definition
include, without restriction, a body
corporate,
a corporation sole, an association or body of persons whether
incorporated
or not and a trust.
Comment:
It is apparent that co-operatives
will meet the definition but this could be clarified by specifying
co-operatives in the entities stated as meeting the definition.
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2003
6
What is a Government body?
1.18 The term ‘Government body’ has been
defined to include a body
controlled
by the Commonwealth, a State or a Territory, as well as a body
controlled
by the government of a foreign country [Part
1, subsection 3(1)].
The issue of what establishes government
control has been the subject of
much
case law.
1.19 Government funding and/or government
regulation will not
generally,
of itself, be considered sufficient to establish that an entity is
controlled
by the government. In the normal course of events, many
charitable
entities are funded as a means of government support for the
work
of that entity. Charitable entities are also regulated, usually to ensure
that
the services they provide meet a minimum standard. In the absence of
other
relevant factors, neither of these circumstances will necessarily
indicate
that the body is controlled by government.
1.20 In certain circumstances, however,
both government funding and
government
regulation may be considered to be factors that are relevant in
determining
the existence of government control. For example, if the
entity
is funded through a government-imposed levy or tax of some kind,
or
if the entity is regulated to the extent that it is merely carrying on its
activities
at the government’s instruction or on the government’s behalf it
may
be considered to be a government body.
1.21 More usually, government control
involves the ability of the
government
(often a Minister) to exercise control over the operations and
activities
of the entity.
1.22 The following indications of
government control of an entity can
be
extrapolated from recent cases, including Metropolitan
Fire Brigades
Board v FC of T 91
ATC 4052 and Mines Rescue Board of New South
Wales v Commissioner of Taxation 2000
FCA 1162:
• powers
invested in a Minister to approve appointments to a
management
board;
• powers
invested in a Minister to remove appointments from
the
management board (or to dissolve the board);
• powers
invested in a Minister to overturn decisions of the
management
board, or to instruct the management board;
• powers
invested in a Minister to approve the work program
of
the entity; and
Definition of a charity
7
• the
ability of a management board to exercise the powers of
government,
such as the power to make by-laws and to
impose
penalties for breaches of those by-laws.
1.23 While the idea of ‘Government
function’ has previously been
held
to be a relevant factor in determining that a body was a government
body,
this is no longer necessarily the case. Should the function of an
entity
be considered to be a government function, this may assist in
reaching
a conclusion that the entity is a government entity.
1.24 In Metropolitan
Fire Brigades Board v FC of T 91 ATC 4052, it
was
held that the provision of metropolitan fire brigades was a
government
function. In Mines Rescue Board of New South
Wales v
Commissioner of Taxation 2000
FCA 1162, however, while the mines
rescue
function was not found to be a government function, it was held
that
this did not differentiate the two cases.
What is a not-for-profit
entity?
1.25 An entity is a not-for-profit entity
if it is not carried on for the
purpose
of profit or gain to its individual members and does not distribute
its
profits or assets to its owners or members, or to any other person,
either
while it is operating or upon winding up. [Part
2, section 5]
Comment: Many
co-operatives throughout Australia do not distribute profits or assets to the
owner members or to any other person either while it is operating or upon
winding up. Rules 53 and 55 of the
Co-operative Federation of Victoria Ltd are consistent with this requirement. Rule
53 (4) provides that there must be no return or distribution on surplus or
share capital to members other than any entitlement they have to the nominal
value of shares at winding up. Rule 55 (2) provides that upon winding up or
dissolution any property that remains will not be distributed among members or
individuals. The Victorian Government’s Co-operatives Act 1996 provides in Part
2 Formation Division 1 Types of Co-operatives (15) (1) that a non-trading
co-operative must not give returns or distributions on surplus or share capital
to members other than the nominal value of shares (if any) at winding up. Indeed, in 15 (4) it is specified that the
Co-operative Federation of Victoria Ltd is a non-trading co-operative.
1.26 The term not-for-profit does not imply
that a charitable entity
will
not generate a profit. Activities, such as commercial activities, may
be
undertaken with the purpose of generating a profit, without this
effecting
the charitable status of the entity, provided that the profits are
directed
towards the charitable purpose of the entity. In this circumstance,
however,
any purposes that are not charitable and for the public benefit
would
need to further or be in aid of, and be ancillary or incidental to the
dominant
purpose, as discussed in paragraph 1.30.
1.27 The reasonable payment of wages or
allowances to employees,
the
reimbursement of expenses, payment for services and similar
payments
would not normally be considered the distribution of profits or
assets.
Comment:
By reasonable it is assumed that it
is consistent with appropriate legislative provisions.
How is the dominant purpose
determined?
1.28 For the dominant purpose of an entity
to be charitable, the entity
must
have a purpose or purposes that are charitable. [Part 2, section 6]
1.29 Similarly, for the dominant purpose of
an entity to be for the
public
benefit, the entity must have a purpose or purposes that are for the
public
benefit.
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2003
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1.30 Further, for the purpose or purposes
of an entity to be dominant,
any
other purposes of the entity must further or be in aid of, and be
ancillary
or incidental to the dominant purpose.
1.31 It may be that multiple charitable
purposes for the public
benefit,
when taken together, form a dominant charitable purpose for the
public
benefit. Therefore, it is not necessary for an entity to show that a
single
purpose is their dominant purpose.
1.32 In determining the dominant purpose of
an entity, items that
may
be considered include, but are not limited to:
• the
constituent documents of the entity, if the entity has such
documents;
and
• the
activities of the entity.
Example 1.1
An organisation operates a community centre
providing care for the
homeless.
The centre provides food, accommodation and health care.
In addition, the centre organises
sporting activities for recreational
purposes
on an occasional basis for their clients. This organisation is
funded
through the sale of donated clothing.
This organisation would be considered to
have a dominant charitable
purpose.
The dominant purpose includes both the advancement of
social
and community welfare, and the advancement of health. Both
the
sporting activities and the fundraising activities of the organisation
would
not be considered charitable when viewed in isolation. They
are,
however, both incidental and in aid of the dominant purpose as
they
are conducted on a small scale to assist with the wider purpose of
the
entity.
What is the public benefit
1.33 With some exceptions [Part 2, subsection 4(2)],
the dominant
purpose
of an entity must be for the public benefit if that entity is to fulfil
the
definition of a charity.
1.34 An entity has a purpose for the public
benefit if it:
• is aimed at
achieving a universal or common good;
• has practical
utility; and
• is directed to
the benefit of the general community or to a
sufficient
section of the general community.
Definition of a charity
9
[Part 2, subsection 7(1)]
1.35 A purpose is aimed at achieving a
universal or common good
where
it is beneficial. A purpose that is harmful cannot, therefore, be
aimed
at achieving a universal or common good.
1.36 A benefit must have a practical
utility. Benefits are not restricted
to
material benefits, but include social, mental and spiritual benefits.
1.37 A purpose directed to the benefit of
the general community or to
a
sufficient section of the general community will not have a numerically
negligible
group as its potential beneficiaries. [Part
2, subsection 7(2)]
1.38 Any private benefits to the members of
the charitable entity
must
be incidental to carrying out the charitable purpose. This does not
preclude
the provision of private benefits to members, but restricts this
provision
to the point where it is incidental to the overall purpose of the
entity.
1.39 Further to this, the public benefit
does not exist where there is a
relationship
between the donor and the beneficiaries (including either a
family
or an employment relationship).
Example 1.2
A company establishes a program whereby the
employees are given
regular
health checks and health care advice. The company established
the
program for the benevolent purpose of improving the health and
wellbeing
of employees.
While the program has a dominant charitable
purpose of the
advancement
of health, it would not meet the public benefit test, as
there
is a relationship between the donor (the company) and the
beneficiaries
(the employees).
Exclusion from the public
benefit test
1.40 Open and non-discriminatory self-help
groups and closed or
contemplative
religious orders that regularly undertake prayerful
intervention
at the request of members of the public are specifically
excluded
from the requirement to be for the public benefit. [Part 2,
subsection 4(2)]
Comment: Co-operatives
are open and non-discriminatory self-help groups.
1.41 Open and non-discriminatory self-help
groups are often
organised
and managed by the same group of people that benefit from the
group.
Where the self-help group meets the requirements of openness and
non-discrimination,
the benefit accruing to members would not exclude
the
group from meeting the definition of a charity on the basis that the
Exposure Draft: Charities Bill
2003
10
private
benefit to members would not meet the public benefit test. They
would,
however, need to meet the remaining criteria of the definition,
including
being not-for-profit with a dominant charitable purpose.
Comment:
The very nature of co-operatives is
that they are organized and managed by the same group that benefit from the
co-operative. It is this member ownership, control and use that differentiates co-operatives from other forms of business enterprise.
Example 1.3
An asthma sufferer forms a support group
for asthma sufferers in her
geographical
area. The group is formed to provide a forum for
discussing
the difficulties in being an asthma sufferer and to share
experiences
and ideas related to being an asthma sufferer. In order to
join
the group, a person must be an asthma sufferer. Aside from this
requirement,
there is no other membership criteria.
This group would be considered an open and
non-discriminatory
self-help
group.
1.42 Closed or contemplative religious
orders are excluded from the
public
benefit test as they differ from churches, which seek to spread their
religious
belief. Where the religious order keeps their observances to
themselves,
but does undertake prayer at the request of the members of
the
public, it is not necessary to meet the public benefit test.
Open and non-discriminatory
self-help groups
1.43 A self-help group is an association of
individuals that is
established
for the purpose of assisting individuals affected by a particular
disadvantage
or discrimination, or by a need that is not being met.
Purpose for which a group may be
established include providing support
to
victims of crime, to those effected by a particular illness, or to those
who
have been discriminated against for a particular reason.
Comment: Co-operatives are formed by individuals to meet a
need that is not being met. The examples
of the purpose for which a group may be established could be enhanced to
demonstrate this need.
[Part 2, section
9]
1.44 Open and non-discriminatory self-help
groups are not required
to
meet the public benefit test. This is because the benefits from these
groups
are usually aimed at the members of the group, thereby suggesting
that
the private benefit derived by members is greater than would be
considered
appropriate under the public benefit test.
1.45 The exemption of these groups from the
public benefit test
recognises
the valuable role of self-empowerment in addressing
disadvantage,
discrimination and need, as well as the role of members in
these
groups in assisting other persons suffering from the same problem.
Self–help groups harness the experience of
members to assist the group as
a
whole in dealing with the relevant disadvantage, discrimination and
need.
Comment: The recognition of the valuable role of
self-empowerment is a recognition that members form
co-operatives to meet their own needs – rather than expecting others to meet
these needs.
1.46 In order to determine if a self-help
group is open and
non-discriminatory,
the membership criteria of the group are of great
Definition of a charity
11
importance.
The members of the group, including those who control the
group,
should be individuals who are affected by the disadvantage,
discrimination
or need that the group is established to address.
1.47 The criteria for membership will
relate to the purpose of the
group,
with membership open to any individuals who satisfy those
criteria.
Membership should not, therefore, be based upon any additional
criteria,
such as election by existing members.
Comment: Co-operatives follow seven principles. The last time
these principles were developed by the ICA were in
1995. The 1st Principle is voluntary and open membership.
Co-operatives are voluntary organizations, open to all persons able to use
their services and willing to accept the responsibilities of membership,
without gender, social, racial, political or religious discrimination.
1.48 It is, therefore, the model of
management of these groups that
sets
them apart from other charitable groups. The membership criteria
ensures
that the benefits provided by the group are open to the public or to
a
class of the public. The benefits of the group, however, are provided
through
the involvement of members, who help not only themselves, but
the
group generally.
Comment: In stating that it is the model of management of
self-help groups that sets them apart from other charitable groups it is also
the model of management that sets co-operatives apart. In both co-operatives
and self-help groups the membership criteria ensures that the benefits provided
by the group are open to the public or to a class of the public and the
benefits of the group are provided through the involvement of members who help
not only themselves but the group generally.
What is a disqualifying
purpose?
1.49 There are some purposes that are not
considered to be consistent
with
the overall charitable character of an entity. These purposes are
called
disqualifying purposes. [Part
2, section 8]
1.50 The following are disqualifying
purposes:
• illegal
activities;
• advocating a
political party or cause;
• supporting a
candidate for political office; and
• attempting to
change the law or government policy.
With the exception of illegal activities,
the purpose will be a disqualifying
purpose
if it, either by itself, or when taken together with one or both of
the
other of these purposes, is more than ancillary or incidental to the
other
purposes of the entity concerned.
Comment: the disqualifying purposes are fundamentally
different and these need to be recognised.
The first disqualifying purpose is illegal activities and this is
understandable. The remaining three are political but insufficient
consideration is given on the impact of these on co-operatives. The membership
of co-operatives is open and voluntary and co-operative are independent and autonomous
organisations. It is inappropriate for any Government to attempt to constrain
democratic choices and participation by co-operatives and, in particular, when
legislation and policies are ant-co-operative and are inconsistent with R 93
of the International Labour Office.
1.51 Any purpose of engaging in illegal
activities is a disqualifying
purpose.
1.52 The disqualifying purpose of engaging
in illegal activities
parallels
the requirement that a charity does not engage in activities
constituting
a serious offence.
1.53 Purposes, as shown in paragraph 1.50,
with the exception of
illegal
purposes, are only disqualifying purposes where they are more than
ancillary
or incidental to the other purposes of the entity concerned. It is
Exposure Draft: Charities Bill
2003
12
possible,
therefore, for the entity to have purposes of these types, though
they
must further or be in aid of, and be ancillary or incidental to the
dominant
purpose of the entity.
Comment: This depends
on what is deemed to be incidental and ancillary and this requires further
clarification.
1.54 Ordinarily, representing to
Government, from time to time, the
interests
of those the entity seeks to benefit would be seen as incidental
and
in aid of the dominant purpose of the charity.
Comment: The mission
of the Co-operative Federation of Victoria Ltd is to develop and promote the
co-operative movement as a means of satisfying the economic and social needs
of
people. This is an educational
objective. One of six complementary
objectives is to make representations to government on legislation and policies
to facilitate the development of co-operatives.
It is assumed that this would be regarded as incidental and in aid of
the dominant purpose of the CFV. It is inappropriate,
however, that a Government seeks to define and determine what is incidentall
and ancillary. The
4th
co-operative principle adopted by the ICA is autonomy and independence.
Co-operatives are autonomous, self-help organizations controlled by their
members. If they enter into arrangements with other organizations, including
governments, or raise capital from external sources, they do so on terms that
ensure democratic control by their members and maintain their autonomy.
1.55 However, the independence of charities
from Government and
from
political processes is an important component of their role in serving
the
public benefit.
Definition of a charitable purpose
1.56 Part 3 of this bill defines a
charitable purpose. The requirement
of
a dominant charitable purpose is a key feature of the core definition of
a
charity in Part 2 of this bill. [Part
3, section 10]
1.57 In addition, the definition of a
charitable purpose stands alone,
applying
to all Commonwealth legislation, in the same manner as the
definition
of a charity.
Advancement
1.58 The term ‘advancement’ includes
protection, maintenance,
support,
research and improvement. [Part
3, subsection 10(2)]
Advancement of health
1.59 The advancement of health has
previously been accepted by the
courts
as a charitable purpose. The advancement of health is accepted as
being
charitable, without the restriction of health services being provided
to
the poor. [Part 3, paragraph 10(1)(a)]
1.60 The advancement of health includes
both curative and
preventative
purposes and, without limitation, includes the following
activities:
• the
care, treatment and rehabilitation of sickness, disease and
suffering
in humans, including the care provided by acute
care
hospitals, acute care institutions such as alcohol and
drug
treatment centres, mental health institutions and
community
health services such as home nursing, alcohol and
drug
rehabilitation and patient transport services;
Definition of a charity
13
• the
provision of public health services aimed at advancing
the
health of the general community or sections of the
general
community, including health promotion, nutrition
services,
immunisation and screening for diseases; and
• research
related to the nature, prevention, diagnosis treatment
and
incidence of disease and other health problems, research
into
health services, nutritional problems, pharmacology and
so
on.
Advancement of education
1.61 The advancement of education has also
been accepted by the
courts
as a charitable purpose and the Government considers that this
interpretation
should continue to apply.
Comment: The
5th principle adopted by the ICA Education, Training and Information
Co-operatives provide education and training for their members, elected
representatives, managers and employees so they can contribute effectively to
the development of their co-operatives. They inform the general public –
particularly young people and opinion leaders – about the nature and benefits
of co-operation. The advancement of
education is basic to the work of the Co-operative Federation of Victoria Ltd. The
Mission of the CFV is educational – to develop and promote the co-operative
movement as a means of satisfying the economic and social needs of people. In
addition, one of the CFV’s objectives is to educate
co-operative members and the community at large in co-operative principles and
practices.
[Part 3, paragraph 10(1)(b)]
1.62 The advancement of education can occur
irrespective of the age
of
the beneficiaries.
1.63 The advancement of education includes,
without limitation, the
following
activities:
• the
provision of formal education through preschools,
schools
and tertiary education institutions, including the
provision
of building and related educational facilities;
• research
directed towards expanding human knowledge;
• informal
education aimed at the development of citizenship
and
life skills;
• the
support of education, such as through the provision of
prizes
and scholarships; and
• the
provision and support of facilities and services integrally
associated
with the operation of education institutions, such
as
sporting facilities, student unions and parent organisations.
Comment: It is noted that the examples of education
activities are not exhaustive and that co-operative education could be
described as aimed at the development of citizenship and life skills.
Advancement of social and
community welfare
1.64 The relief of poverty has always been
considered a significant
area
of charitable activity. The advancement of social and community
welfare,
while encompassing the relief of poverty, recognises
that the
services
and benefits provided by charities in this area are far more broad.
[Part 3, paragraph 10(1)(c) and section 11]
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2003
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1.65 The advancement of social and
community welfare includes
material,
psychological, social and relational needs, and recognises
relief,
prevention
and intervention.
1.66 While assistance to individuals is
well recognised as charitable,
‘community’ has
been specifically included in the title to recognise
the
role
of charities in promoting the welfare of whole communities. Included
here
is promotion of social cohesion, inclusiveness, diversity, the
productive
functioning of groups within the broader community and the
fostering
of community capacity building.
1.67 The advancement of social and
community welfare includes,
without
limitation:
• the
prevention and relief of poverty, distress or disadvantage
of
individuals or families;
• the
care, support and protection of the aged and people with a
disability,
including the provision of residential and
non-residential
care;
• the
care, support and protection of children and young people
and,
in particular, the provision of child care services;
• the
provisions of services to support families;
• the
provisions of assistance and support for indigenous
people,
refugees and immigrants and prisoners and their
relatives;
• the
provisions of assistance and support for people who are
disadvantaged
in the labour market;
• the
relief of distress caused by natural disasters and sudden
catastrophes;
• the
promotion of community development to enhance social
and
economic participation;
• the
care and support of members or former members of the
armed
forces and their families; and
• the
care and support of members of the civil defence
forces
and
their families during a time of emergency (civil defence
forces
includes emergency service and crews of merchant
Definition of a charity
15
ships
or other private vessels or aircraft used in times of
emergency).
Comment: The promotion
of community development to enhance social and economic participation is
central to co-operatives.
Advancement of religion
1.68 The advancement of religion has been
considered a charitable
purpose
throughout the history of charity law. [Part
3, paragraph 10(1)(d) and
section 12]
1.69 In the major High Court case regarding
the meaning of religion,
The Church of New Faith v
Commissioner of Pay-Roll Tax (1983) 154
CLR 120, Wilson
and Deane JJ. held that the
following principles could
be
used as indications in determining whether a collection of ideas and
practices
constitute a religion.
• The ideas and
practices involve belief in the supernatural.
• The ideas relate
to people’s nature and place in the universe
and
their relation to things supernatural.
• The ideas are
accepted by adherents as requiring or
encouraging
them to observe particular standards or codes of
conduct
or to participate in specific practices having
supernatural
significance.
• However loosely
knit and varying in beliefs and practices
adherents
may be, they constitute an identifiable group or
identifiable
groups.
• The adherents
themselves see the collection of ideas and
practices
as constituting a religion.
1.70 In the same case, Mason ACJ. and Brennan J. held, similarly,
that
a religion involves:
• belief
in a supernatural Being, Thing or Principle; and
• the
acceptance of cannons of conduct in order to give effect
to
that belief.
1.71 In addition, the courts have also
found1 that
organisations
working
against religions or the idea of religion cannot in itself be a
religion.
1 Bowman
v Secular Society Ltd 1917 AC 406 and Re Jones 1907 SALR 1990
(Incorporated
Body of
Freethinkers of Australia).
Exposure Draft: Charities Bill
2003
16
1.72 The current interpretation
demonstrates the current broad
understanding
of what constitutes a religion. As this understanding of
religion
continues to develop, so will the meaning of the charitable
purpose
of the advancement of religion. The courts will continue to be the
best
guide as to the current meaning.
Advancement of culture
1.73 The advancement of culture has not
previously been recognised
as
a distinct area of charitable endeavour. Instead, the
purposes that might
have
been considered for the advancement of culture were required to fit
within
the advancement of education.
1.74 As such, the courts have, in the past,
accepted that purposes
directed
towards increasing the public appreciation of art, music or
literature
were charitable. This demonstrates the general understanding of
the
educational purpose of culture. It did, however, require that for a
cultural
purpose to be considered charitable, it must have had
demonstrable
educational merit.
1.75 A separate category specifically for
the advancement of culture
will
overcome this, with cultural purposes assessed only on their cultural
merit.
[Part 3, paragraph 10(1)(e)]
1.76 The establishment of a separate
cultural category recognises the
important
role of culture in determining a national identity and in
enriching
the lives of individuals and of society as a whole.
1.77 The advancement of culture includes,
without limitation:
• the
promotion of and participation in the arts, including
literature,
music, the performing arts and visual arts
(including the
various art forms currently recognised on the
Register of Cultural Organisations under
Subdivision 30-F of
the
Income Tax Assessment Act 1997);
• the
establishment and maintenance of public museums,
libraries
and art galleries, and moveable cultural heritage;
• the
promotion of Australian indigenous culture and customs;
• the
promotion of the culture and customs of various language
and
ethnic groups; and
• the
protection and preservation of national monuments, areas
of
national interest and national heritage sites and buildings.
Definition of a charity
17
Advancement of the natural
environment
1.78 The establishment of a specific
category for the advancement of
the
natural environment recognises the increased value
society places on
the
natural environment. In particular, this category recognises
the unique
value
of Australia’s native natural environment. [Part 3, paragraph 10(1)(f)]
1.79 In the case of many environmental
purposes, the public benefit
is
clearly demonstrated. Given the status of many environmental assets as
public
goods, any benefit to one, is a benefit freely available to all.
Other purposes beneficial to
the community
1.80 Of key importance in the legislation
of a definition of a charity
is
the need for flexibility, to allow the meaning of a charity and a
charitable
purpose to adapt to the ongoing changes in society.
1.81 This flexibility is provided by the
inclusion of an ‘other’
category
in the definition of a charitable purpose. [Part
3, paragraph 10(1)(g)]
1.82 In addition, the category also
includes a number of charitable
purposes
that do not readily lend themselves to being grouped. Two
examples
of these types of purposes are the advancement of animal
welfare
and of public safety – both purposes clearly understood both by
the
courts and by the community to be important charitable purposes.
1.83 In determining the purposes that will
fall under this category, the
term
‘beneficial to the community’ is given prime importance. The other
six
categories of charitable purposes have been included on the basis that
they
represent a significant benefit to the community. Consistent with
that,
should any other purposes be considered to similarly have a
significant
benefit to the community, then they should be included within
this
category.
1.84 The following are examples of some of
the types of purposes
that
will fall under ‘other purposes beneficial to the community’:
• the
promotion and protection of civil and human rights;
• the
promotion of reconciliation, mutual respect and tolerance
between
various groups of people within Australia;
• the
protection and safety of the general public; and
• the
prevention and relief of suffering of animals.
Exposure Draft: Charities Bill
2003
18
Application and transitional provisions
1.85 The definition will apply from 1 July
2004. [Part 1, section 2]
19
Index
Part 1: Preliminary
Bill reference Paragraph number
Section 2 1.85
Subsection 3(1) 1.13, 1.16, 1.18
Part 2: Charities
Bill reference Paragraph
number
Section 4 1.11
Subsection 4(2) 1.33, 1.40
Section 5 1.25
Section 6 1.28
Subsection 7(1) 1.34
Subsection 7(2) 1.37
Section 8 1.49
Section 9 1.43
Part 3: Charitable purpose
Bill reference Paragraph
number
Section 10 1.56
Paragraph 10(1)(a)
1.59
Paragraph 10(1)(b)
1.61
Paragraph 10(1)(c)
and section 10 1.64
Paragraph 10(1)(d)
and section 11 1.68
Paragraph 10(1)(e)
1.75
Paragraph 10(1)(f)
1.78
Paragraph 10(1)(g)
1.81
Subsection 10(2) 1.58
20
The General Conference
of the International Labour Organization,
Having been convened
at Geneva by the Governing Body of the International Labour Office, and having met in its 90th Session on 3
June 2002, and
Recognizing the
importance of cooperatives in job creation, mobilizing resources, generating
investment and their contribution to the economy, and
Recognizing that
cooperatives in their various forms promote the fullest participation in
the economic and social development of all people, and
Recognizing that
globalization has created new and different pressures, problems, challenges
and opportunities for cooperatives, and that stronger forms of human solidarity
at national and international levels are required to facilitate a more equitable
distribution of the benefits of globalization, and Noting the ILO Declaration
on Fundamental Principles and Rights at Work, adopted by the International Labour Conference
at its 86th Session (1998), and Noting the rights and principles embodied
in international labour Conventions and Recommendations,
in particular the Forced Labour Convention, 1930;
the Freedom of Association and Protection of the Right to Organise Convention, 1948; the Right to Organise and Collective Bargaining Convention, 1949; the
Equal Remuneration Convention, 1951; the Social Security (Minimum Standards)
Convention, 1952; the Abolition of Forced Labour Convention,
1957; the Discrimination (Employment and Occupation) Convention, 1958; the
Employment Policy Convention, 1964; the Minimum Age Convention, 1973; the
Rural Workers' Organisations Convention and Recommendation, 1975; the Human
Resources Development Convention and Recommendation, 1975; the Employment
Policy (Supplementary Provisions) Recommendation, 1984; the Job Creation
in Small and Medium-Sized Enterprises Recommendation, 1998; and the Worst
Forms of Child Labour Convention, 1999, and
Recalling the principle
embodied in the Declaration of Philadelphia that "labour is not a commodity", and
Recalling that
the realization of decent work for workers everywhere is a primary objective
of the International Labour Organization, and
Having decided
upon the adoption of certain proposals with regard to the promotion of cooperatives,
which is the fourth item on the agenda of the session, and
Having determined
that these proposals shall take the form of a Recommendation;
adopts this twentieth
day of June of the year two thousand and two the following Recommendation,
which may be cited as the Promotion of Cooperatives Recommendation, 2002.
I. SCOPE, DEFINITION
AND OBJECTIVES
1. It is recognized
that cooperatives operate in all sectors of the economy. This Recommendation
applies to all types and forms of cooperatives.
2. For the purposes
of this Recommendation, the term "cooperative" means an autonomous
association of persons united voluntarily to meet their common economic,
social and cultural needs and aspirations through a jointly owned and democratically
controlled enterprise.
3. The promotion
and strengthening of the identity of cooperatives should be encouraged on
the basis of:
(a) cooperative
values of self-help, self-responsibility,
democracy, equality, equity and solidarity; as well as ethical values of
honesty, openness, social responsibility and caring for others; and
(b) cooperative
principles as developed by the international cooperative movement and as
referred to in the Annex hereto. These principles are: voluntary and open
membership; democratic member control; member economic participation; autonomy
and independence; education, training and information; cooperation among
cooperatives; and concern for community.
4. Measures should
be adopted to promote the potential of cooperatives in all countries, irrespective
of their level of development, in order to assist them and their membership
to:
(a) create and
develop income-generating activities and sustainable decent employment;
(b) develop human
resource capacities and knowledge of the values, advantages and benefits
of the cooperative movement through education and training;
(c) develop their
business potential, including entrepreneurial and managerial capacities;
(d) strengthen
their competitiveness as well as gain access to markets and to institutional
finance;
(e) increase savings
and investment;
(f) improve social
and economic well-being, taking into
account the need to eliminate all forms of discrimination;
(g) contribute
to sustainable human development; and
(h) establish and
expand a viable and dynamic distinctive sector of the economy, which includes
cooperatives, that responds to the social and economic needs of the community.
5. The adoption
of special measures should be encouraged to enable cooperatives, as enterprises
and organizations inspired by solidarity, to respond to their members' needs
and the needs of society, including those of disadvantaged groups in order
to achieve their social inclusion.
II. POLICY FRAMEWORK
AND ROLE OF GOVERNMENTS
6. A balanced society
necessitates the existence of strong public and private sectors, as well
as a strong cooperative, mutual and the other social and non-governmental
sector. It is in this context that Governments should provide a supportive
policy and legal framework consistent with the nature and function of cooperatives
and guided by the cooperative values and principles set out in Paragraph
3, which would:
(a) establish an
institutional framework with the purpose of allowing for the registration
of cooperatives in as rapid, simple, affordable and efficient a manner as
possible;
(b) promote policies
aimed at allowing the creation of appropriate reserves, part of which at
least could be indivisible, and solidarity funds within cooperatives;
(c) provide for
the adoption of measures for the oversight of cooperatives, on terms appropriate
to their nature and functions, which respect their autonomy, and are in accordance
with national law and practice, and which are no less favourable than those applicable to other forms of enterprise
and social organization;
(d) facilitate
the membership of cooperatives in cooperative structures responding to the
needs of cooperative members; and
(e) encourage the
development of cooperatives as autonomous and self-managed enterprises, particularly
in areas where cooperatives have an important role to play or provide services
that are not otherwise provided.
7. (1) The promotion
of cooperatives guided by the values and principles set out in Paragraph
3 should be considered as one of the pillars of national and international
economic and social development.
(2) Cooperatives
should be treated in accordance with national law and practice and on terms
no less favourable than those accorded to other
forms of enterprise and social organization. Governments should introduce
support measures, where appropriate, for the activities of cooperatives that
meet specific social and public policy outcomes, such as employment promotion
or the development of activities benefiting disadvantaged groups or regions.
Such measures could include, among others and in so far as possible, tax
benefits, loans, grants, access to public works programmes,
and special procurement provisions.
(3) Special consideration
should be given to increasing women's participation in the cooperative movement
at all levels, particularly at management and leadership levels.
8. (1) National
policies should notably:
(a) promote the
ILO fundamental labour standards and the ILO Declaration
on Fundamental Principles and Rights at Work, for all workers in cooperatives
without distinction whatsoever;
(b) ensure that
cooperatives are not set up for, or used for, non-compliance with labour law or used to establish disguised employment relationships,
and combat pseudo cooperatives violating workers' rights, by ensuring that labour legislation
is applied in all enterprises;
(c) promote gender
equality in cooperatives and in their work;
(d) promote measures
to ensure that best labour practices are followed
in cooperatives, including access to relevant information;
(e) develop the
technical and vocational skills, entrepreneurial and managerial abilities,
knowledge of business potential, and general economic and social policy skills,
of members, workers and managers, and improve their access to information
and communication technologies;
(f) promote education
and training in cooperative principles and practices, at all appropriate
levels of the national education and training systems, and in the wider society;
(g) promote the
adoption of measures that provide for safety and health in the workplace;
(h) provide for
training and other forms of assistance to improve the level of productivity
and competitiveness of cooperatives and the quality of goods and services
they produce;
(i) facilitate access of cooperatives to credit;
(j) facilitate
access of cooperatives to markets;
(k) promote the
dissemination of information on cooperatives; and
(l) seek to improve
national statistics on cooperatives with a view to the formulation and implementation
of development policies.
(2) Such policies
should:
(a) decentralize
to the regional and local levels, where appropriate, the formulation and
implementation of policies and regulations regarding cooperatives;
(b) define legal
obligations of cooperatives in areas such as registration, financial and
social audits, and the obtaining of licences; and
(c) promote best
practice on corporate governance in cooperatives.
9. Governments
should promote the important role of cooperatives in transforming what are
often marginal survival activities (sometimes referred to as the "informal
economy") into legally protected work, fully integrated into mainstream
economic life.
III. IMPLEMENTATION
OF PUBLIC POLICIES FOR THE PROMOTION OF COOPERATIVES
10. (1) Member
States should adopt specific legislation and regulations on cooperatives,
which are guided by the cooperative values and principles set out in Paragraph
3, and revise such legislation and regulations when appropriate.
(2) Governments
should consult cooperative organizations, as well as the employers' and workers'
organizations concerned, in the formulation and revision of legislation,
policies and regulations applicable to cooperatives.
11. (1) Governments
should facilitate access of cooperatives to support services in order to
strengthen them, their business viability and their capacity to create employment
and income.
(2) These services
should include, wherever possible:
(a) human resource
development programmes;
(b) research and
management consultancy services;
(c) access to finance
and investment;
(d) accountancy
and audit services;
(e) management
information services;
(f) information
and public relations services;
(g) consultancy
services on technology and innovation;
(h) legal and taxation
services;
(i) support services for marketing; and
(j) other support
services where appropriate.
(3) Governments
should facilitate the establishment of these support services. Cooperatives
and their organizations should be encouraged to participate in the organization
and management of these services and, wherever feasible and appropriate,
to finance them.
(4) Governments
should recognize the role of cooperatives and their organizations by developing
appropriate instruments aimed at creating and strengthening cooperatives
at national and local levels.
12. Governments
should, where appropriate, adopt measures to facilitate the access of cooperatives
to investment finance and credit. Such measures should notably:
(a) allow loans
and other financial facilities to be offered;
(b) simplify administrative
procedures, remedy any inadequate level of cooperative assets, and reduce
the cost of loan transactions;
(c) facilitate
an autonomous system of finance for cooperatives, including savings and credit,
banking and insurance cooperatives; and
(d) include special
provisions for disadvantaged groups.
13. For the promotion
of the cooperative movement, governments should encourage conditions favouring the
development of technical, commercial and financial linkages among all forms
of cooperatives so as to facilitate an exchange of experience and the sharing
of risks and benefits.
IV. ROLE OF EMPLOYERS'
AND WORKERS' ORGANIZATIONS AND COOPERATIVE ORGANIZATIONS, AND RELATIONSHIPS
BETWEEN THEM
14. Employers'
and workers' organizations, recognizing the significance of cooperatives
for the attainment of sustainable development goals, should seek, together
with cooperative organizations, ways and means of cooperative promotion.
15. Employers'
organizations should consider, where appropriate, the extension of membership
to cooperatives wishing to join them and provide appropriate support services
on the same terms and conditions applying to other members.
16. Workers' organizations
should be encouraged to:
(a) advise and
assist workers in cooperatives to join workers' organizations;
(b) assist their
members to establish cooperatives, including with the aim of facilitating
access to basic goods and services;
(c) participate
in committees and working groups at the local, national and international
levels that consider economic and social issues having an impact on cooperatives;
(d) assist and
participate in the setting up of new cooperatives with a view to the creation
or maintenance of employment, including in cases of proposed closures of
enterprises;
(e) assist and
participate in programmes for cooperatives aimed
at improving their productivity;
(f) promote equality
of opportunity in cooperatives;
(g) promote the
exercise of the rights of worker-members of cooperatives; and
(h) undertake any
other activities for the promotion of cooperatives, including education and
training.
17. Cooperatives
and organizations representing them should be encouraged to:
(a) establish an
active relationship with employers' and workers' organizations and concerned
governmental and non-governmental agencies with a view to creating a favourable climate
for the development of cooperatives;
(b) manage their
own support services and contribute to their financing;
(c) provide commercial
and financial services to affiliated cooperatives;
(d) invest in,
and further, human resource development of their members, workers and managers;
(e) further the
development of and affiliation with national and international cooperative
organizations;
(f) represent the
national cooperative movement at the international level; and
(g) undertake any
other activities for the promotion of cooperatives.
V. INTERNATIONAL
COOPERATION
18. International
cooperation should be facilitated through:
(a) exchanging
information on policies and programmes that have
proved to be effective in employment creation and income generation for members
of cooperatives;
(b) encouraging
and promoting relationships between national and international bodies and
institutions involved in the development of cooperatives in order to permit:
(i) the exchange of personnel and ideas, of educational
and training materials, methodologies and reference materials;
(ii) the compilation
and utilization of research material and other data on cooperatives and their
development;
(iii) the establishment
of alliances and international partnerships between cooperatives;
(iv) the promotion
and protection of cooperative values and principles; and
(v) the establishment
of commercial relations between cooperatives;
(c) access of cooperatives
to national and international data, such as market information, legislation,
training methods and techniques, technology and product standards; and
(d) developing,
where it is warranted and possible, and in consultation with cooperatives,
employers' and workers' organizations concerned, common regional and international
guidelines and legislation to support cooperatives.
VI. FINAL PROVISION
19. The present
Recommendation revises and replaces the Co-operatives (Developing Countries)
Recommendation, 1966.
ANNEX
EXTRACT FROM THE
STATEMENT ON THE COOPERATIVE IDENTITY, ADOPTED BY THE GENERAL ASSEMBLY OF
THE INTERNATIONAL CO-OPERATIVE ALLIANCE IN 1995
The cooperative
principles are guidelines by which cooperatives put their values into practice.
Voluntary and open
membership
Cooperatives are
voluntary organizations, open to all persons able to use their services and
willing to accept the responsibilities of membership, without gender, social,
racial, political or religious discrimination.
Democratic member
control
Cooperatives are
democratic organizations controlled by their members, who actively participate
in setting their policies and making decisions. Men and women serving as
elected representatives are accountable to the membership. In primary cooperatives
members have equal voting rights (one member, one vote) and cooperatives
at other levels are also organized in a democratic manner.
Member economic
participation
Members contribute
equitably to, and democratically control, the capital of their cooperative.
At least part of that capital is usually the common property of the cooperative.
Members usually
receive limited compensation, if any, on capital subscribed as a condition
of membership. Members allocate surpluses for any or all of the following
purposes: developing their cooperative, possibly by setting up reserves,
part of which at least would be indivisible; benefiting members in proportion
to their transactions with the cooperative; and supporting other activities
approved by the membership.
Autonomy and independence
Cooperatives are
autonomous, self-help organizations controlled by their members. If they
enter into agreements with other organizations, including governments, or
raise capital from external sources, they do so on terms that ensure democratic
control by their members and maintain their cooperative autonomy.
Education, training
and information
Cooperatives provide
education and training for their members, elected representatives, managers,
and employees so they can contribute effectively to the development of their
cooperatives. They inform the general public - particularly young people
and opinion leaders - about the nature and benefits of cooperation.
Cooperation among
cooperatives
Cooperatives serve
their members most effectively and strengthen the cooperative movement by
working together through local, national, regional and international structures.
Concern for community
Cooperatives work
for the sustainable development of their communities through policies approved
by their members.