Women With Disabilities Australia (WWDA): Submission to the Board of Taxation on the Draft Charities Bill 2003



In early 2000, the Australian Government launched the Public Inquiry into the Definition of Charities and Related Organisations. Women With Disabilities Australia (WWDA) made a submission to this Inquiry. The Australian Government is now consulting upon the Exposure Draft of the Charities Bill 2003 that was developed after the Inquiry made its findings. Women With Disabilities Australia (WWDA) is a not-for-profit organisation that would be directly affected by this Bill, if it were passed into law. This Submission explains the probable ramifications this enactment would have for Women With Disabilities Australia (WWDA) as well as many significantly similar organisations. The Submission approaches these likely impacts by recommending that the Bill’s provisions be preserved or replaced with practicable alternatives. These alternative provisions are clearly delineated in the recommendations. Copyright WWDA 2003.


Contents

Recommendations

Introduction

Background

Overview of WWDA positions on the Exposure Draft of the Charities Bill 2003

Details of WWDA positions on the Draft Charities Bill 2003

References


Recommendations

Recommendation 1: That if the existing wording is inclusive of self-help groups with appropriate anti-discrimination law exemptions, then wording should be included which makes this abundantly clear to applicant groups and administrators alike. If however, the current wording excludes such groups, then Section 4 should be amended to include such groups.

Recommendation 2: That the expanded wording used in the Explanatory Memoranda – Benefits are not restricted to material benefits, but includes social, mental and spiritual benefits – be incorporated in s.7(1)(b) of the Bill.

Recommendation 3: That the wording of s.7(1)(c) be amended so that it has the meaning that the purpose can be directed to the benefit of the general community or a section of it. The Explanatory Memoranda should be amended to support this premise.

Recommendation 4: That the test established in s.7(2) be fundamentally reviewed. As it stands, it is extremely difficult and potentially costly to substantiate. This will result in subjective judgements and inconsistency. The test needs to be changed so that it provides certainty and protection to disadvantaged minorities who are attempting to establish their claims to the Australian Taxation Office.

Recommendation 5: The wording of s.7(3) should be amended so that it clearly connotes: Circumstances where the benefactor and beneficiary have a family or employment relationship precludes an entity from claiming that activity as for the public good.

Recommendation 6: To avoid these potential problems, it seems sensible for the drafters to:

  • predicate the definition of ‘altruism’ on a weak psychological egoism, which admits that actions may be altruistic, even if it maintains, all the while, that a person chooses to act benevolently, only if she wants to do that action.
  • make the decision a question of degrees of altruism and self-interest, turning on an objective test.

Hence, the decision that the actions were ‘more altruistic than not’ could be three-part. The decision-maker would be required by the Bill to:

  • decide whether altruism was more present than not in the actions in question; and
  • decide this by using tests comprising of empirical indicators that verify or negate whether altruism was more present than not;
  • there could be elements that amount to a prima facie presumption that the actions were more altruistic than not, which must then be rebutted. One of these elements could be, for instance, that a reasonable person could have expected that the actions would have positive and unharmful effects on the recipients;
  • the onus of proof for bearing out that the actions were ‘not more altruistic than not’ falls on the rebutter; and
  • the standard of proof that an action was more altruistic or not, is the balance of probabilities.

Recommendation 7: That s.8 (2)(a) and s.8 (2)(c) be removed as disqualifying purposes.

Recommendation 8: That advocating for a political party, or supporting a candidate for political office, in a manner that is more than ancillary or incidental to the charitable purpose, is a valid reason for disqualification from charitable status.

Recommendation 9: Section 9 should be amended to include self-help groups that have an exemption under anti-discrimination legislation regarding membership eg. women’s groups.

Recommendation 10: That a subset of charity be defined within the Draft Charities Bill which defines PBI. That the definition of PBI be modernised to reflect progressive social values. This modernisation should be wrought to ensure a PBI includes any altruistic entity that directly or indirectly relieves poverty or benefits the community through the advancement of social welfare.


Introduction

Women With Disabilities Australia Inc. is very pleased to make this Submission to the Board of Taxation on the Charities Bill 2003 Exposure Draft. WWDA applauds parts of the Bill. However, after much consideration, we regard many of its provisions to be problematic. Accordingly, we offer suggestions on alternative, viable ones.


Background

The following is a summary of the nature of Women With Disabilities Australia Inc. (WWDA) and its views on the outcomes of the Inquiry into the Definition of Charitable and Related Organisations.

2.1 Women With Disabilities Australia Inc.

Women With Disabilities Australia (WWDA) is the peak organisation for women living with disabilities in Australia. It both:

  • serves individuals and groups who are women with disabilities throughout Australia; and
  • advocates for wider recognition of their human rights.

In these ways, WWDA advances non-discrimination towards women with disabilities in Australia and the world.

WWDA is managed and staffed by women with disabilities, on behalf of, and for Australian women with disabilities. Further, its membership is entirely open and undiscriminating in terms of the nature of women’s disabilities experienced by current and prospective members.

The organisation’s suite of communication channels also mean that the Executive Officer, Committee of Management, staff and members are in daily contact with:

  • the women who are its large and diverse membership base.
  • the non-members who are women with disabilities in Australia or abroad and networks and organisations that serve or aim to serve women with disabilities.

Government also requests and receives WWDA expertise on matters on which WWDA is rigorously informed because it conducts research and policy advocacy that is grounded in analyses of primary and secondary evidence. It has achieved privileged access to both via its strong ties to members, women with disabilities who are not members and their networks.

In these ways, WWDA is a highly unique organisation in Australia and throughout the world. It is the Australian organisation and one of the few in the world through which women with disabilities reclaim their human rights.

2.2 WWDA and the Inquiry on the Definition of Charities

WWDA is a registered charitable organisation with Public Benevolent Institution (PBI) status under Australian taxation law. It experienced considerable difficulties establishing its eligibility for registration as a charitable organisation with PBI status. These difficulties derived from many of the same common law limitations that inspired the Inquiry into the Definition of Charities and Related Organisations.

Accordingly, WWDA welcomed the Government’s initiative to clarify the meaning of charitable purposes, so that it could be enshrined in statute law.

WWDA commends the Committee of the Inquiry into the Definition of Charities and Related Organisations for establishing a robust framework for the establishment of enduring, equitable charities legislation.

The Inquiry made compelling assessments of the components of a sustainable and fair definition of charitable activities. More specifically, WWDA lauds the Inquiry’s conclusions that:

  • in the twentieth and twenty-first centuries, the phrase charitable purpose is popularly understood as something that is beyond its narrow definition in common law, and these principal components should be set out in legislation.
  • communities’ self-help structures, like non-profit advocacy and service groups, empower people to create their own viable solutions to their shared experiences of oppression.
  • so-called not-for-profit organisation fundamentally and effectively contribute to the development of government policies and programs.
  • these organisations, particularly peak bodies, perform a critically important role in relaying information to their constituencies – members and other people and groups that the organisation serves – and informing Government of the concerns of those citizens who comprise these constituencies.

Overview of WWDA positions on the Exposure Draft of the Charities Bill 2003

The Exposure Draft of the Charities Bill 2003 (the Bill) positively responds to many of the points that were presented, by WWDA and other organisations, to the Public Inquiry into the Definition of Charities and Related Organisations. Most importantly, it recognises that many such organisations, like WWDA, do not pursue one dominant charitable purpose, as is envisaged in common law. It accounts for how it is proper that their work is animated by many integrated purposes.

However, WWDA finds it highly problematic that the Bill is silent on PBI status. This silence makes it unclear whether the Government intends PBI to continue to be exclusively and narrowly defined by the common law or whether PBI will be a tax exemption category that is eclipsed by the Bill’s definition of charities.

The Committee of Inquiry recommended that PBI be incorporated as a subset of the definition of charity. Further, it recommended that organisations in this subset should be called benevolent charities. The drafters of the Charities Bill 2003 have not adopted this recommendation.

Moreover, the Bill contains provisions, which make organisations that advocate for systemic changes ineligible for charitable status. These provisions are completely contrary to the recommendation of the Report of the Charities Definition Inquiry that ……..charities should be permitted to engage in advocacy on behalf of those they benefit. Conduct of this kind should not deny them charitable status even if it involves advocating for a change in law or policy.

The Bill fails to indicate that such advocacy is a means for the advancement of a charitable purpose. Moreover, it clearly identifies that activities such as advocating a cause in S.8(2)(a) and attempting to change the law or government policy in S.8(2)(c), will disqualify an organisation from attaining the status of a charitable organisation in Australia.

Advocacy is a fundamental role that WWDA must perform to dismantle the systemic, socio-economic barriers to women with disabilities enjoying their full rights as citizens in Australian communities.

The economic viability of WWDA would be severely compromised if it were to lose its charitable status because of the Bill’s disqualification provisions or its PBI status, due to the narrowness of the definition of PBI in common law.

Thus, WWDA’s survival is jeopardised by the Bill’s disqualification provisions and occlusion of a wider definition of PBI than that presently prescribed by case law. Without charitable and PBI status, WWDA and many other not-for-profit organisations will no longer be able to attract philanthropic funding and minimise its costs via tax exemptions.


Details of WWDA Positions on the Draft Charities Bill 2003

WWDA considers the Bill would be significantly improved with some significant amendments.

In some instances, these amendments would eliminate and/or alter unworkable clauses. In others, the amendments would provide clear, plain English wording like that used in the Explanatory Memoranda. This would ensure the Bill provided the clarity and flexibility considered so important by the Committee of Inquiry into the Definition of Charities and Related Organisations.

As a consequence WWDA has chosen to comment by exception on those provisions that are problematic. These comments are proposed from the viewpoint of:

  • making the legislation easily understood in its application by organisations, such as WWDA, that do not have access to legal advice because of its prohibitive costs.
  • reinforcing the intended flexibility of the legislation, whilst providing clarity of interpretation to both applicants and administrators.
  • changing the meaning when it is unreasonably limits the actions of altruistic organisations and self help groups, in their work for the rights of the disadvantaged.

4.1 PART 2 – Charities, Section 4 Core Definition

S.4(2)(a): The descriptor – an open and non-discriminatory self-help group – appears, on the face of it, to exclude groups, which legally discriminate in membership, but meet and/or have been exempted under the relevant exemption provision of anti-discrimination law.

In addition, this section fuels confusion as, at s.9(a), it requires open and non- discriminatory membership, but at s.9(d) and (e) prescribes that there be membership criteria.

The Explanatory Memoranda gives recognition to the value and benefits of self-help groups, but also fails to address the issue of lawful discrimination. It provides no answers to the conundrum of what are the bounds of an open and non discriminatory self-help group that also has membership criteria?

Given that groups may wish to have exclusive membership on the basis of, for example gender, their eligibility for charity status is unclear.

Recommendation 1: That if the existing wording is inclusive of self-help groups with appropriate anti-discrimination law exemptions, then wording should be included which makes this abundantly clear to applicant groups and administrators alike. If however, the current wording excludes such groups, then Section 4 should be amended to include such groups.

A failure to do this will potentially exclude women’s and other self-help groups from access to charity status; thereby undermining legal mechanisms established to advance the civil rights of disadvantaged social groups.

4.2 Section 7 Public Benefit

The wording of S.7(1)(b) has practical utility connotes physically useful, of material value, a possession. On referring to the Explanatory Memoranda this meaning is expanded Benefits are not restricted to material benefits, but includes social, mental and spiritual benefits. As drafted, the Bill gives no indication that the term practical utility has such an appropriately broad interpretation.

Given the wording of S.7(1)(b) would not immediately be considered ambiguous, to leave the clear and broad intention of the legislation in a reference document that has little weight at law other than to serve as a reference for intention; and that can only be introduced should the meaning of the legislation not be clear, would serve to produce extremely limiting prescriptive legislation.

To ensure that the section is not interpreted narrowly by administrators, it is important to ensure that the Bill to provide direction as to the proposed broad and flexible meaning intended at the time of drafting. To provide this clarity within the Bill will also be of benefit to lay people making application for charity status.

The wording of s.7(1)(c) sufficient section of the general community is derived from the current common law. WWDA as a matter of principle, however, objects strongly with this term on the basis that the nature of being marginalised is such that the judgement of the general community is often either ill-formed or uninformed as to the existence and needs of marginalised people, together with the benefits to be gained for all through treating marginalised in an inclusive manner.

On seeking further guidance from the Explanatory Memoranda as to sufficient section of the general community, the clarification offered is the entity must not have a numerically negligible group as potential beneficiaries and this is reiterated in s.7(2). Quite frankly this is of little assistance, given that benefit can be both direct and indirect. As a consequence, how is the breadth of a benefit to be numerically quantified for the purpose of passing a legislative test for eligibility?

This is a vagary that anticipates the capacity to make an informed judgement upon volume and distribution of benefit as provided through the altruistic behaviour of entities, and received by identifiable persons. This data is clearly not readily available, or even readily measurable given the fact that a benefit is not necessary material in nature but can include social, spiritual or mental benefits that serve the common good.

WWDA appreciates that limitations or tests need to apply in awarding charity status in order to: protect the Australian Government revenue base which provides taxation relief to such organisations; and to ensure the integrity of charity status and how it is perceived in the community as serving the interests of the common good or universal benefit of our society. However it is pointless to create a legislative test which at best for the applicant, is highly difficult to quantify; and in practice is not able to be tested for compliance by administrators.

The wording of s.7(3) is a catch all designed to capture any circumstance which is not numerically negligible but is still deemed not to be of public benefit. The wording of this subsection is poor and offers no guidance as to what circumstance administrators of the law might consider fit this scenario. On referring to the Explanatory Memoranda it is not absolutely clear but the assumption is made that paragraph 1.39 relates, the public benefit does not exist where there is a relationship between the donor and the beneficiaries (including either a family or an employment relationship).

And an example is provided to further explain this. The intention and clarity of s.7(3) would be greatly improved by rewording this sub-section to make it clear that circumstances such as a family or employment relationship precluded an entity from meeting the public benefit test. This would benefit applicants and administrators particularly because it elucidates and emphasises an important compliance issue.

Recommendation 2: That the expanded wording used in the Explanatory Memoranda – Benefits are not restricted to material benefits, but includes social, mental and spiritual benefits – be incorporated in s.7(1)(b) of the Bill.

Recommendation 3: That the wording of s.7(1)(c) be amended so that it has the meaning that the purpose can be directed to the benefit of the general community or a section of it. The Explanatory Memoranda should be amended to support this premise.

Recommendation 4: That the test established in s.7(2) be fundamentally reviewed. As it stands, it is extremely difficult and potentially costly to substantiate. This will result in subjective judgements and inconsistency. The test needs to be changed so that it provides certainty and protection to disadvantaged minorities who are attempting to establish their claims to the Australian Taxation Office.

Recommendation 5: The wording of s.7(3) should be amended so that it clearly connotes: Circumstances where the benefactor and beneficiary have a family or employment relationship precludes an entity from claiming that activity as for the public good.

The Board has been tasked to seek comments on whether the Bill should base the definition of the dominant purpose of a charity on whether the organisation is an altruistic one.

The Inquiry Report asserts that there is no need for the Bill to define ‘altruism’, as its meaning is self-evident. WWDA doubts whether this is a sustainable position, given that people have long debated how the word altruism should be interpreted.

Most famously, Thomas Hobbes – the seventeenth century British philosopher – argues that many, if not all, human deeds are motivated by selfish desires. He explicitly subsumed seemingly selfless actions under this argument. His perspective has come to be known as psychological egoism. The classical example used to illustrate it is that even people’s donations to charity spring from selfish wishes, such as the wish to feel powerful.

Similarly, the eighteenth century British philosopher Joseph Butler, propounds a view that is referred to as psychological hedonism. This posits that pleasure is the generator of all human actions. Yet, Butler also advanced the important qualification that humans possess an inherent psychological capacity to be benevolent towards others. This latter line of thought is known as psychological altruism. It maintains that at least some human actions are motivated by instinctive benevolence.

In the same vein, David Hume, the Scottish Enlightenment philosopher advances six rebuttals of psychological egoism. These include that psychological egoism falsely contends that human motivation can be reduced to a single cause. To wit, a good act can only flow from self-interest or altruism, not both.

Given these competing interpretations of altruism, if the Bill fails to define it, there is a risk that the Australian Taxation Office and judiciary could or could be seen to interpret altruism as completely exclusive of self-interest or in other highly controversial ways. Further, leaving the definition wide open allows the decision-makers to define, or be seen to define, altruism according to how predisposed they are to the entity that is seeking charitable status.

For example, an entity could adduce evidence that it supports certain classes of persons because it is altruistic. The Australian Taxation Officer or the judicial officer, however, could easily refute this argument by pointing to some plausible, self-serving motives for these actions. For instance, it may be logical and persuasive for someone to suggest that the entity stands to ingratiate itself to the Government and, therefore, win more government funding.

The decision-maker could rule that an entity fails to meet the public benefit test, because its seemingly altruistic behaviour has a self-interested component. People who disagree with this reasoning may exploit counter-factual evidence, which demonstrates that the ultimate motive of the activity was benevolence towards those to whom it was directed. However, because motivation is an inherently private and invisible phenomenon, there is no telling whether an entity is deceiving itself or others about being motivated by altruism.

Consequently, to avoid real and perceived biases, and large disparities in definition, altruism must be defined in the legislation and as part of an objective test. Otherwise, the opaque relations between the entity’s activities and motives will render altruism a highly contested concept that could be interpreted in vastly different ways.

Some of these ways may be significantly inconsistent with Parliament’s intentions and/or give rise to controversy and/or suspicions or accusations of decision-maker bias. It seems sensible that the objective test rely on empirical indicators of the presence of ‘altruism’ or the decision-maker’s reasoning will inevitably be non-verifiable and non-falsifiable, and, therefore, impossible to justify as logical and unbiased.

Recommendation 6: To avoid these potential problems, it seems sensible for the drafters to:

  • predicate the definition of ‘altruism’ on a weak psychological egoism, which admits that actions may be altruistic, even if it maintains, all the while, that a person chooses to act benevolently, only if she wants to do that action.
  • make the decision a question of degrees of altruism and self-interest, turning on an objective test.

Hence, the decision that the actions were ‘more altruistic than not’ could be three-part. The decision-maker would be required by the Bill to:

  • decide whether altruism was more present than not in the actions in question; and
  • decide this by using tests comprising of empirical indicators that verify or negate whether altruism was more present than not;
  • there could be elements that amount to a prima facie presumption that the actions were more altruistic than not, which must then be rebutted. One of these elements could be, for instance, that a reasonable person could have expected that the actions would have positive and unharmful effects on the recipients;
  • the onus of proof for bearing out that the actions were ‘not more altruistic than not’ falls on the rebutter; and
  • the standard of proof that an action was more altruistic or not, is the balance of probabilities.

4.3 Section 8 Disqualifying Purposes

WWDA considers section s.8(2) is tantamount to gagging organisations that must perform advocacy, as a core activity, to represent the interests of marginalised people. The role that organisations like WWDA play is a fundamental one in our pluralistic democracy and is vital to the effective functioning of government.

It is anachronistic to legislate to restrict the act of advocating for government policy change, or the support a cause that is inherently linked to organisational objectives and the common good.

The capacity for interest groups to advocate is a crucial element of a democratic society (David Held 1993). WWDA must both work with Governments but also, when necessary, criticise government policies which disproportionately disadvantage women with disabilities. This advocacy role performed by WWDA and other pressure groups within our democracy is, indeed, a critical element in the development of good public policies.

WWDA, as a member of the policy community, not only advocates from outside government, but is also an active participant of group-bureaucracy relations through representation on various key government advisory bodies (Davis, Wanna, Warhurst, Weller 1993). Organisations such as WWDA provide feedback to the Government on the efficiency and effectiveness of their public policies and act as a gauge on community opinion (Davis, Wanna, Warhurst, Weller 1993).

WWDA proficiently fulfils this role for communities of women with disabilities. It carries out this advocacy in a mature and constructive manner through working with government. For instance, it is a representative at government consultation forums advising on how to remove social, economic, political and psychological discrimination against women with disabilities.

The words ancillary or incidental to, carry a meaning of being of lesser importance or, being an add-on. The Explanatory Memorandum clarifies that it is permissible for an organisation to have purposes such as those listed in s.8(2), they must however still be ancillary or incidental to the dominant purpose of an entity.

WWDA strongly disagrees with this section on the basis that advocacy and activism are core strategies in influencing government and communities to redress unfair and/or unlawful inequities.

Recommendation 7: That s.8 (2)(a) and s.8 (2)(c) be removed as disqualifying purposes.

Recommendation 8: That advocating for a political party, or supporting a candidate for political office, in a manner that is more than ancillary or incidental to the charitable purpose, is a valid reason for disqualification from charitable status.

4.4 Section 9 Open and non-discriminatory self-help groups.

In respect of s.9(a) WWDA repeats the concerns it raised in regard to s.4(2)(a).

Recommendation 9:Section 9 should be amended to include self-help groups that have an exemption under anti-discrimination legislation regarding membership eg. women’s groups.

4.5 Codification of PBI Law

The failure to address the issue of Public Benevolent Institution (PBI), within the draft Charities Bill 2003 is a serious oversight. The Bill appears silent on the issue, though this is a matter that should not be omitted nor neglected.

The issue of PBI and the definition of charity are intrinsically interconnected, both at law and in the eyes of the community. It is clear from the report of the Inquiry into the Definition of Charities and Related Organisations that the community and a great percentage of organisations do not appreciate that PBI and charitable organisation are separate legal terms. These terms were and are often used interchangeably. These facts highlight there is a demonstrated need to provide a clear and modern codified explanation of both of these terms.

In addition to this, whether administrators have considered it or not, the requirements established in the definition of charity imposed in the Draft Charities Bill have a significant potential impact upon the existing subset of charitable organisations with PBI status. For these reasons of linkage it is important to clearly codify PBI as a subset of charity, hereby modernising the common law meaning of activities, which qualify a charity for special dispensation under tax and other law.

Within the Draft Charities Bill the activity of advancement of social or community welfare has been given specific focus within s.11. It is unclear as to why this activity has been singled out but if it is the intention of administrators to use this section as a PBI qualifier, then it should be expanded to encompass a number of additional and varied examples from the Explanatory Memoranda, in order to clearly spell out the range of activity which can constitute the advancement of social or community welfare.

In addition if it is the intention to utilise s.11 as a qualifier for PBI (a supposition inferred by WWDA) then it is critical that this be made clear within the Draft Charities Bill itself.

Recommendation 10: That a subset of charity be defined within the Draft Charities Bill which defines PBI. That the definition of PBI be modernised to reflect progressive social values. This modernisation should be wrought to ensure a PBI includes any altruistic entity that directly or indirectly relieves poverty or benefits the community through the advancement of social welfare.


References

Butler, Joseph, Analogy of Religion, Natural and Revealed, to the Constitution and Nature. London: Knapton, 1736.

Davis, Glyn, Wanna, John, Warhurst, John, Weller, Patrick, Public Policy in Australia. St Leonard’s, NSW: Allen and Unwin.

Held, David, Models Of Democracy. Cambridge (UK): Polity Press, 1993.

Hobbes, Thomas, Leviathan, ed., E. Curley, (Chicago, IL: Hackett Publishing Company, 1994).

Hume, David, Enquiry Concerning the Principles of Morals (Appendix II-Of Self Love), (Chicago, IL: Hackett Publishing Company, 1994).