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28 Jun 13
Charities beware - do your governing documents need review?

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With the introduction of the Australian Charities and Not-for-profits Commission (ACNC), and the relationship between that Commission and the ATO, charities and other deductible gift recipients must focus on whether they are compliant with criteria for endorsement for tax concessions.  Partner Heather Watson and Consultant Lesleigh Mayes warn charities of the dangers of non-compliance.

Recent cases highlight the need to review governing documents to ensure compliance.

In Bodalla Aboriginal Housing Company Ltd v Eurobodalla Shire (2012) NSWCA 408, the housing company was a public company limited by guarantee and its constitution contained numerous clauses under the heading of ‘objects’ which were powers not purposes.  It was held that the objects were not all charitable and that it therefore was not entitled to local council rates concessions available to charities.  The case highlights the importance of ensuring that a charity has appropriately drafted objects reflecting its charitable purposes.

In Cancer and Bowel Research Association Incorporated as trustee for Cancer and Bowel Research Trust and Commissioner of Taxation (2013) AATA 336, the trust had its Deductible Gift Recipient (DGR) status revoked retrospectively from 1 July 2000.  Effectively, the reason for the courts decision to revoke the endorsement was that the trust deed did not comply as it did not contain the appropriate winding up clause.

Not-for- profits also need also to be aware that the ACNC has now signed a Memorandum of Understanding with ASIC under which they agree to collaborate to ‘monitor/enforce compliance with legislation, including information on potential breaches of legislation’ administered by either agency (in paragraph 8.1.1).  Similarly each agency agrees to refer certain matters to the other, and that once a complaint is received or an initial investigation conducted, it is to be referred to the other agency.

It is essential charities and other not for profits ensure they review governing documents such as their constitution or trust deed and their administrative processes to ensure ongoing compliance with ASIC and ACNC requirements. Failure to do so could potentially impact on existing tax exemptions or concessions. 


Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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