Traditionally, non-profit organisations that promote the change of government law or policy have struggled to qualify for charitable tax concessions. That may be set to change with the High Court of Australia’s grant of special leave to appeal in the case of Aid/Watch Incorporated v Commissioner of Taxation  HCATrans 58.
To qualify for tax concessions, non-profit organisations need to establish that they are charitable. The test for whether an organisation is “charitable” comes from a law passed over 400 years ago in the United Kingdom called the Statute of Elizabeth. Under that test, organisations are generally required to show that they are established for the relief of poverty, the advancement of education, the advancement of religion or the advancement of some other purpose beneficial to the community.
It has for many years been understood that organisations which promote political change are excluded from the above test. However, this so called political exclusion has proved difficult to apply. Over 70 years ago, a judge of the High Court said that the case law dealing with the distinction between charitable objects and political objects was in an “unsatisfactory condition”. It seems little has changed since then.
In particular, the cases have found it difficult to distinguish between advancement of education and promoting political change. This is because one of the main ways to bring about political change is to educate the public about an issue. The dividing line is often blurred.
The Aid/Watch case has the potential to deal with a number of the difficulties posed by the so-called political exclusion, including:
- Is there a political exclusion at all?
- Does the political exclusion apply to an organisation which has “charitable” objects but seeks to achieve them by political methods?
- Does the political exclusion include influencing executive policy as distinct from legislation?
- Does an organisation breach the political exclusion if its activities are directed mainly to confirming, rather than changing, government policy?
- How close does the connection need to be between the activities of the organisation and the ultimate charitable purpose?
- Does the exclusion apply only to direct lobbying of government, or does it also exclude trying to influence public opinion more generally (which may in turn influence government)?
On the special leave application, Justice Gummow made the point that political purposes were arguably included within some of the specific items mentioned in the Statute of Elizabeth. His Honour also noted that the role of government in the traditional charitable areas (such as relief of poverty and advancement of education) had increased since the time that statute was passed, and so the pursuit of those purposes would increasingly intersect with government activity.
It will be interesting to see whether the High Court decides to do away with the so-called political exclusion. If it does, the case could significantly increase the types of activities that not-for-profit organisations can engage in, and may even result in political parties being classified as charitable.