Introduction
For any Australian charity, establishing and maintaining a clear charitable purpose is a fundamental legal requirement. This purpose, defined under the Charities Act 2013 (Cth), is not just a mission statement; it is the core of your organisation’s identity and is essential for registration with the Australian Charities and Not-for-profits Commission (ACNC) and for ensuring ongoing compliance.
Adhering to this purpose ensures a charity directs its resources and activities appropriately, whether its mission is to advance education or to promote and protect human rights. This guide will explore why a clearly defined purpose is critical for ACNC compliance and how to ensure your charity’s activities consistently further its stated mission.
Understanding the Core of Your Charity: A Charitable Purpose
Defining Your Mission Under the Charities Act 2013 (Cth)
A charitable purpose is defined as the fundamental reason your organisation exists and what its activities are designed to achieve. Moreover, to be registered as a charity in Australia, your objectives must align with the legal definition set out in the Charities Act 2013 (Cth).
The Act provides a specific list of twelve recognised categories:
| Charitable Purpose Category | Description / Examples |
|---|---|
| Advancing health | Activities aimed at preventing and relieving sickness, disease or human suffering. |
| Advancing education | Furthers knowledge and skills through means such as operating schools, universities or public museums. |
| Advancing social or public welfare | Relieving poverty, caring for the aged or disabled, and providing child care services. |
| Advancing religion | Promoting spiritual beliefs and practices, including establishing places of worship or providing religious instruction. |
| Advancing culture | Promoting or fostering culture, preserving Australian heritage and supporting the arts. |
| Promoting reconciliation, mutual respect and tolerance | Fostering harmony between diverse groups within Australia. |
| Promoting or protecting human rights | Upholding rights recognised in international conventions or Australian law. |
| Advancing the security or safety of Australia or the Australian public | Supporting emergency services or public safety initiatives. |
| Preventing or relieving the suffering of animals | Activities directed towards animal welfare, rescue and care. |
| Advancing the natural environment | Protecting, preserving and improving the natural world. |
| Promoting or opposing a change to law, policy or practice | Valid only if the change furthers or hinders one of the other eleven purposes, thus contributing to public debate. |
| Any other purpose beneficial to the general public | Covers additional purposes that courts have deemed charitable, ensuring the law evolves with society. |
The Role of Your Organisation’s Governing Document
Your charity’s purpose must be clearly stated in its governing document, as this is the primary evidence the ACNC examines to determine your organisation’s mission.
This formal document serves as the foundation for all operations and guides your charity’s activities. The governing document can take several forms, including:
- Constitution
- Set of rules
- Trust deed
Furthermore, while the governing document is the main point of reference, the ACNC also considers other evidence to understand your charity’s true purpose. This may include your organisation’s activities, annual reports and financial statements. Ultimately, there must be a clear and consistent link between the purpose outlined in your governing document and the work your charity actually performs.
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The Critical Link Between Your Charitable Purpose & Australian Charities and Not-for-profits Commission Compliance
Meeting Australian Charities and Not-for-profits Commission Governance Standard 1
A charity’s purposes are critically important as they are directly linked to compliance with ACNC Governance Standard 1. This standard is fundamental to maintaining your status as a registered Australian charity.
This standard requires your charity to:
- Be set up and operate as a not-for-profit entity
- Actively work towards its stated charitable purpose on a daily basis
- Apply all funds and assets solely towards furthering its charitable purpose or purposes
Essentially, your charitable purpose dictates your organisation’s actions. If the ACNC finds that your activities do not actively pursue your registered purpose, your charity could be found in breach of this key governance standard.
How the Australian Charities and Not-for-profits Commission Assesses Your Charity’s Compliance
The ACNC assesses compliance by looking for a clear and consistent connection between what your charity aims to achieve and what it actually does. To determine your organisation’s true purpose and whether it is being upheld, the ACNC examines several key pieces of evidence.
The ACNC will generally review the following to understand your purposes:
| Evidence Examined by ACNC | Description |
|---|---|
| Your governing document | This includes your constitution, rules, or trust deed, which typically sets out the organisation’s formal objects or purpose. |
| Your charity’s activities | The ACNC looks at your day-to-day operations to see if they align with your mission. |
| Reports and statements | Other evidence, such as annual reports and financial statements, are also considered to verify that your resources are being used to advance your charitable purpose. |
Aligning Your Charity’s Activities & Finances With Its Purpose
Ensuring Daily Operations & Fundraising Further Your Mission
For an Australian charity to maintain compliance, there must be a clear and direct connection between its stated charitable purpose and its daily activities. This principle ensures the organisation operates genuinely for its mission, with all actions and funds contributing to its core objectives.
Even activities that are primarily for fundraising must ultimately support the charity’s main goals. Some operations may not appear charitable on the surface but are permissible if they help to advance a charitable purpose.
For example, a charity that provides accommodation for homeless youth might run a recycled clothing shop. The profits from this shop are then used to fund the housing services, directly linking the fundraising activity to the organisation’s mission.
Managing Finances & Commercial Ventures Profitably But Purposefully
A common misconception is that charities cannot make a profit. In reality, a charity can generate a surplus, provided it is used to further its charitable purposes.
Good financial management often involves creating a surplus to ensure the organisation’s long-term viability and to cover future expenses, whether planned or unexpected.
Similarly, a charity is permitted to engage in commercial activities, but these ventures must be conducted with the aim of advancing its charitable purpose. There are several ways a charity can undertake commercial activities appropriately:
| Method of Commercial Activity | Explanation & Example |
|---|---|
| Generating profit to fund its work | A charity can run a commercial operation purely to raise funds for its charitable activities. For instance, an organisation providing free health services could hire out an unused meeting room to local businesses, with all profits funding its primary mission. |
| Contributing directly to its purpose | The commercial activity itself can be a direct part of achieving the charitable purpose. A charity with the purpose of providing employment for people with disabilities could operate a retail store that offers jobs and training to them. |
| Being incidental to its purpose | A commercial activity may be secondary to the charity’s main work. Consider a charity that rescues native animals and finds itself with a byproduct like organic fertiliser. Selling this fertiliser is an acceptable commercial activity that is incidental to its primary purpose of animal welfare. |
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Consequences of Your Organisation Failing to Uphold Its Charitable Purpose
Breaching Governance Standard 1
A charity’s purposes are critically important as they are directly linked to compliance with ACNC Governance Standard 1. This standard is fundamental to maintaining your status as a registered Australian charity.
If the ACNC discovers that a charity’s activities have not been pursued to further its registered charitable purpose, the organisation could be found in breach of this key governance standard. This is because Governance Standard 1 explicitly requires:
- A charity to be run as a not-for-profit entity
- An organisation to work towards its charitable purpose
Essentially, your organisation’s stated mission dictates its actions, and any deviation can lead to non-compliance.
Facing Regulatory Action & Potential Deregistration
Failing to align activities with your stated charitable purpose can lead to serious consequences beyond a simple warning. A breach of Governance Standard 1 may result in the ACNC taking regulatory action to address the non-compliance.
The severity of this action varies depending on the nature of the breach. In the most serious cases, where a charity is found to be consistently operating outside the scope of its purpose, the ACNC has the power to revoke its registration.
This loss of charity status, or deregistration, is a significant outcome that underscores the importance of adhering to your organisation’s core mission.
Maintaining Compliance When Your Australian Charity’s Mission Evolves
The Importance of Reviewing Your Purpose Before Registration
If you are in the process of registering your Australian charity with the ACNC for the first time, it is vital to thoroughly review your intended purposes. You must ensure they are:
- Charitable under the Charities Act 2013 (Cth)
- Accurately reflective of the activities your organisation will pursue on a daily basis
To ensure legal compliance from the outset, you should only select charitable purposes that represent your organisation’s current mission. It is important not to include purposes that reflect a potential future goal for the charity, as this can lead to non-compliance if those activities are not yet being undertaken.
Amending Your Governing Document to Reflect Changes
For an already registered charity, maintaining alignment between your purpose and activities is an ongoing obligation. If your organisation changes its activities, mission, or objectives, you must immediately amend your governing document to reflect this shift.
This requirement also applies if your charity is already performing work that falls outside the scope of its original charitable purpose. Ensuring your governing document is always up-to-date is crucial for demonstrating compliance and accurately representing the work your charity does.
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Conclusion
A clear charitable purpose, as defined by the Charities Act 2013 (Cth), is essential for ACNC registration and must guide all of your organisation’s activities and governing documents. Failing to adhere to this purpose or amend it as your mission evolves can lead to significant compliance breaches, including the risk of deregistration.
To ensure your charity remains compliant and effectively pursues its mission, contact the experienced team at LawBridge today for trusted not-for-profit legal guidance on defining and maintaining your charitable purpose.
