To be recognised as a charity under the Charities Act 2013, a charity’s governing documents must set out that the organisation is not-for-profit, in that it does not operate for the personal gain or other benefit of particular people, but instead applies any surplus to the organisation’s charitable purpose (ACNC, 2015d; Knight and Gilchrist, 2014; Lyons, 2001). Charities must also have only charitable purposes (or purposes that are incidental or ancillary to a charitable purpose), such as protecting human rights, promoting reconciliation and tolerance, or advancing education.
Some purposes of other not-for-profits may benefit the community, but not fit the legal meaning of charitable purpose, including social clubs, some sport and recreation organisations, and professional or trade groups not focused on advancing education. These organisations may still be not-for-profits and exempt from income tax, or qualify as charities under state or territory laws, but they are not defined as charities by the ACNC and would therefore not be included in the register, or required to complete the AIS. Some purposes are explicitly disqualified in the legislation from being charitable, such as:
- the purpose of engaging in or promoting activities that are unlawful or against public policy; and
- the purpose of promoting or opposing a political party or a candidate for political office.
Unlawful activities would include being engaged in tax evasion, people or drug trafficking, or dealing in weapons or illegal goods. In some cases, a charity may be set up for charitable purposes but be used to hide or transfer money that has been gained illegally. In these cases, the organisation is not a charity because its activities show that its true purpose is to engage in unlawful activities.