Third Dimension: Legal Definition of a Government Entity

February, 2014

The Charities (Definition of Government Entity) Instrument 2013 (Instrument) commenced on 20 December 2013.

The purpose of the Instrument is to clarify which Government entities will be excluded from the definition of charity in s 4(2) of the Charities Act 2013 (Clth) (Act).  A core element of the definition of charity is that a Government entity cannot be a charity.

The Instrument reflects the concepts underlying the Act’s definition.  It provides that an entity is a Government entity if:

(a)     it is a local Government body (within the meaning of the Income Tax Assessment Act 1997); or

(b)     an entity that has the privileges and immunities of the Crown; or

(c)     an entity  where an individual occupying a position within the entity holds an office of profit under the Crown; or

(d)     an entity that, in pursing its objectives, is not independent of the Crown, having regard

(i)     the degree of control the Crown can exercise over the entity’s governance and operations;

(ii)    whether the entity was established with the objective of fulfilling a function or responsibility of the Crown; and

(iii)   any other relevant matter.

The Charities (Definition of Government Entity) Instrument Explanatory Statement provides some further guidance on the classification of entities as either Government entities or non Government entities.  The key components of the Explanatory Statement are as follows:

(a)   Local governing body  

An entity that is a local governing body established under a State or Territory law will be prescribed as a Government entity.

(b)   An entity that has all the privileges and immunities of the Crown

In determining whether an entity has the privileges and immunities of the Crown, consideration may be given to the establishing statute, its governing rules or the character and functions of the entity.

There are ten bodies politic in Australia that enjoy the ‘privileges and immunities of the Crown’.  They are the Commonwealth, the six States, the Northern Territory, the Australian Capital Territory and the Territory of Norfolk Island.  In each of these jurisdictions, the privileges and immunities of the Crown extend to the Cabinet, the Ministry, the public service and some statutory bodies.

(c)    Individuals occupy an office of profit under the Crown

In determining whether individuals who occupy a position within the entity hold an office of profit under the Crown, consideration must be given to the nature of the employee/office holder and the type of work undertaken by the individual in the performance of their duties.  If the Crown itself has the power of appointment and dismissal over the individual, this would indicate Crown control, and that the office is one under the Crown.

(d)   Non-independent in pursuing objectives

Where an entity is not clearly a Government entity, then consideration must be given to the degree of Government control and the functions of the entity.  Control may be expressed:

(i)     under statute;

(ii)    in the entity’s governing rules;

(iii)   through membership or at board level; or

(iv)    through the ability of a Minister to control activities, finances or operations.

If the function of a charity in independently carrying out its own purpose has the effect of helping to achieve Government policy, this is, in itself, unlikely to constitute Government control.

It has been well established that an entity substantially funded by Government may still be independent if its governance, its objectives, and its activities and functions undertaken in carrying out its purposes are discharged independent of Government.

Many charities undertake activities or deliver services on behalf of the Government under a contract or grant arrangement.  This relationship does not mean that the entity is carrying out its activities to purely achieve a Government policy for or on behalf of the Government.

In addition, the Act does in fact recognise that Government entities do carry out works which are no less charitable simply because the entity is a Government entity.  Section 13 of the Act provides that, for the purpose of determining whether a fund has a charitable purpose, any entity to which that fund contributes which is a Government entity should not be treated as being a Government entity.  Section 13 provides that:

(1)     This section applies to a purpose that a fund (the contributing fund) has, if:

(a)     the purpose includes the purpose of providing money, property or benefits:

(i)     to a Government entity; or

(ii)     for the establishment of a Government entity; and

(b)     the Government entity would be a charity were it not a Government entity.

(2)     For the purpose of determining whether the purpose that the contributing fund has is a charitable purpose, treat the Government entity as not being a Government entity.

This is a very clear statement from Government that as long as the entity itself (i.e. the fund) is not a Government entity, it does not matter if the recipient of any funds or benefit is Government, so long as that entity would be charitable if not for its Government entity status.

This article originally appeared in Third Dimension – Summer 2014

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