Not-for-profits - charitable trusts

Legal clarity for purpose-led giving.

What is a charity?

Some not-for-profit organisations qualify as charities, but in Australia all charities must be not-for-profit., charities are a specific type of not-for-profit entity that reinvests all profits into furthering its charitable purpose.

At the federal level, charities are defined under the Charities Act 2013 (Cth) as not-for-profit organisations that exist for a charitable purpose and provide a public benefit.

The Charities Act 2013 (Cth) recognises the following purposes as charitable and for the public benefit:

● Preventing or relieving sickness, disease, or human suffering
● Advancing education
● Relieving poverty, distress, or disadvantage
● Caring for and supporting the aged or individuals with disabilities
● Advancing religion
● Advancing health
● Advancing social or public welfare
● Advancing culture
● Promoting reconciliation, mutual respect and tolerance among groups in Australia
● Promoting or protecting human rights
● Enhancing the security or safety of Australia or the public
● Preventing or relieving animal suffering
● Protecting or advancing the natural environment
● Any other purpose beneficial to the public analogous to the above
● Advancing public debate

To qualify as a charity, a trust must have one or more of these purposes and operate for the public benefit.

Organisations that engage in unlawful activities, breach public policy or promote or oppose political parties or candidates may be disqualified from charitable status.

Charities can take many forms, including charitable trusts, companies limited by guarantee, incorporated associations or co-operatives, provided they meet the requirements of the Charities Act 2013 (Cth).

What is a charitable trust?

Historically, charitable trusts were the most common legal structure for charities in Australia. However, many charities now use incorporated associations or companies limited by guarantee due to their flexible governance structures.

A charitable trust is established to hold and distribute funds to other organisations or causes in alignment with its charitable purpose.

Unlike other not-for-profits that operate programs directly, a charitable trust primarily supports other entities fulfilling charitable objectives.

How to establish a charitable trust.

Creating a charitable trust requires a carefully drafted trust deed that complies with legal standards. This deed:

● Sets out the charitable purpose of the trust
● Specifies how beneficiaries and supported causes are determined
● Defines the powers and duties of the trustees
● Includes procedures for trust management and dissolution

Legal advice is essential to ensure your trust deed complies with trust law, the requirements of the Australian Charities and Not-for-profits Commission (ACNC) and the Australian Taxation Office (ATO).
Trustees agree to hold and manage trust assets exclusively for the charitable purpose outlined in the deed. Because charitable trust law can be complex, professional guidance is critical to properly establish and maintain this structure.

If you are considering setting up a charitable trust or want to ensure your existing trust complies with all legal obligations, contact GLG Legal for expert advice tailored to your organisation’s needs.

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