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CHARITIES (AMENDMENT) BILL 2006

                Charities (Amendment) Bill

                        Introduction Print

              EXPLANATORY MEMORANDUM


                                  General
This Bill will amend the Charities Act 1978 to make further provision for
charitable trusts and will amend the Religious Successory and Charitable
Trusts Act 1958 and the Property Law Act 1958.

                               Clause Notes
Clause 1   sets out the purposes of the Bill.

Clause 2   provides for the Bill to come into operation on the day on which
           it receives Royal Assent.

Clause 3   inserts a new "Part IB--Charitable Trusts" in the Charities Act
           1978.
           The clause inserts new sections 7J, 7K, 7L and 7M in the
           Charities Act 1978.
           New section 7J defines the terms "charitable trust" and "trust
           fund" for the purposes of Part 1B.
           New section 7K extends the powers of the trustees of a charitable
           trust to include the power to provide money, property or benefits
           to or for an eligible entity or for the establishment of an eligible
           entity that, but for its connection to government, would be a
           charity to or for which, or for the establishment of which the
           trustees could make that provision in accordance with the trust
           instrument.
           The clause will have the effect of overriding any contrary
           provision in a trust instrument only if the conditions set out in the
           new section 7K(1), are satisfied. The clause does not authorise
           the provision by trustees of money, property or benefits under the
           new section 7K(1) if this is contrary to a specific condition in the
           trust instrument. For example, the trust instrument of a particular
           trust may require the trust to distribute only to charities, but
           specifically prohibit the trust from distributing to public


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hospitals. In these circumstances, the clause would not authorise trustees to distribute to Government linked public hospitals, as such a distribution could not have been made in accordance with the trust instrument, as required by the new section 7K(1). In another example, a trust instrument might enable a trust to distribute to museums, but prohibit the trust from distributing to Museum A. In these circumstances, the clause would not override the express prohibition in the trust deed to allow the trust to distribute to Museum A, as such a distribution could not have been made in accordance with the trust instrument, as required by the new section 7K(1). The clause would, however, permit the trust to distribute to museums, other than Museum A, even though those museums have a connection to government. The clause defines "eligible entity" as a deductible gift recipient within the meaning of the Income Tax Assessment Act 1997 of the Commonwealth. The clause defines "government" to mean any government of any State or Territory, the government of any municipality of any State or Territory, or the Commonwealth Government. The clause provides a non-exhaustive list of factors that may be taken into account in determining whether an eligible entity may have a connection to government. The clause also provides that trustees will be able to exercise the extended distribution powers only where the trustees of a charitable trust have made a declaration in respect of the trust. The declaration must be in the form prescribed in the Schedule inserted into the Charities Act 1978 by clause 4 of the Bill. The clause expressly provides that the exercise by trustees of a charitable trust of the extended distribution power provided by this clause will not affect the status or validity of the trust as a charitable trust. The clause also validates retrospectively the provision before the commencement of the Bill by the trustees of a charitable trust of money, property or benefits to or for an eligible entity or for the establishment of an eligible entity that, but for its connection to government, would be a charity to or for which, or for the establishment of which, the trustees could make that provision in accordance with the trust instrument. New section 7L re-enacts section 63 of the Religious Successory and Charitable Trusts Act 1958 with amendments. 2

 


 

Section 63 was aimed at broadening the range of powers available to trustees of public charitable trusts to carry out the purposes of these trusts more effectively. The provision was developed to remedy problems arising when narrowly expressed trust deeds did not authorise trustees to apply trust funds for a further purpose to achieve the existing purposes of the trust. This limited trustees' capacity to carry out the purposes of the trust. Section 63(2) empowers the Supreme Court to grant leave to the trustees or the administrator of a public charitable trust to exercise their powers and apply trust funds (if required) to "such further purposes as are necessary or desirable to carry out the purposes of the trust or to make them fully effective or are incidental to the carrying out of such purposes". Section 63(3) requires the Attorney-General to be joined as a party to any such action. Section 63(1) narrowly defines "public charitable trust" to refer to trusts established to distribute funds for the benefit of public hospitals, libraries, scientific, and artistic institutions, and prisons. Section 63 was deliberately drafted narrowly to reflect the policy decision at the time that this avenue of access to the Supreme Court should only be available to the trustees of the larger, public charitable institutions. There is now a much larger range of charitable trusts that should benefit from the access to the Supreme Court provided by section 63. The section 63(1) definition excludes certain charitable trusts such as those established to distribute funds for the benefit of environmental organisations and certain cultural organisations. The Parliamentary Legal and Constitutional Committee of Parliament ("the Committee") released the Report on the Law Relating to Charitable Trusts ("the Report") in May 1989. This clause adopts Recommendation 26 of the Report that section 63 should be expanded to include all charitable trusts, not only "public charitable trusts". New section 7L will enable administrators and trustees of all charitable trusts to seek leave from the Supreme Court to apply trust funds for additional and incidental purposes that are complementary to trusts' existing purposes. 3

 


 

New section 7M re-enacts section 131 of the Property Law Act 1958, as recommended by Recommendation 31 of the Report. Section 131 deems that trusts should not be invalidated solely because trust funds are directed or allowed to be applied for a combination of charitable and non-charitable (and, thus, invalid) purposes. The effect of section 131 is that trust deeds are read down as if the trust did not direct or allow trust funds to be applied for any non-charitable and invalid purpose. Section 131 does not apply to trusts declared or deceased estates created before 26 October 1914. Clause 4 provides for a Schedule to be inserted after section 17 of the Charities Act 1978. This Schedule prescribes the form of the declaration to be made by trustees of a charitable trust so that trustees can exercise the power to provide money, property or benefits to or for, or for the establishment of, an "eligible entity" that would be a charity but for a connection to government. The clause provides that the declaration must be executed by the trustees of a charitable trust as a deed. The deed must also specify the name of the charitable trust and the date on which the declaration is made. It is intended that the trustees should otherwise make the resolution to make the declaration and execute the deed in a manner that accords with the requirements of their trust deed. Clause 5 changes the name of the "Religious Successory and Charitable Trusts Act 1958" to the "Religious and Successory Trusts Act 1958" as the provisions relating to charitable trusts are to be repealed by the Bill. Clause 6 substitutes Part III "Charitable Trusts" of the Religious Successory and Charitable Trusts Act 1958 with a new Part III "Transitional", and repeals sections 61 and 63 of that Act. The new Part III comprises a transitional provision--a new section 61--which deems any reference to the "Religious Successory and Charitable Trusts Act 1958" to be a reference to the "Religious and Successory Trusts Act 1958". The repeal of section 61 implements Recommendation 25 of the Report. Section 61 of the Religious Successory and Charitable Trusts Act 1958 enables the Supreme Court to make any appropriate orders for the administration of a charitable trust, and provides a summary procedure for remedying administrative abuses of a charitable trust. 4

 


 

The Report recommended the repeal of section 61 because it duplicates the powers of the Supreme Court under its general jurisdiction and more accessible provisions in other Acts. The Supreme Court has common law jurisdiction to hear and deal with allegations of breaches of trusts. Sections 63 and 63A of the Trustee Act 1958 also give the Supreme Court a broad statutory jurisdiction to vary trustees' powers and deal with trust property. Section 63 of the Religious Successory and Charitable Trusts Act 1958 is re-enacted by clause 3 of the Bill. Clause 7 amends references to the "Religious Successory and Charitable Trusts Act 1958" in the Schedules of that Act to the "Religious and Successory Trusts Act 1958". Clause 8 repeals section 131 of the Property Law Act 1958 which is re- enacted by clause 3 of the Bill. 5

 


 

 


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