While many Australian charities have apparent political purposes, the Federal Court’s decision this week to revoke the charitable status of Aid/Watch, a charity that monitors Australia’s international aid programs, has prompted many to consider: ‘how much is too much?’

The Federal Court found that “Aid/Watch’s attempt to persuade the government (however indirectly) to its point of view necessarily involves criticism of, and an attempt to bring about change in, government activity and, in some cases, government policy. There can be little doubt that this is political activity… Moreover the activity is Aid/Watch’s main activity and the political purpose is its main purpose.

“The natural and probable consequence of Aid/Watch’s activities is an effect on public opinion and then on government opinion.”

A spokesperson from Aid/Watch, Dr James Goodman said: “The Federal Court ruled that, despite having a clear charitable purpose to alleviate poverty, Aid/Watch does not meet the definition of charitable because the organisation takes a ‘view’ on the government’s aid program and tries to influence government decision-making.”

Greens NSW Senate candidate, Lee Rhiannon was a co-founder of Aid/Watch and former director of the organisation. In 1994 she worked with Aid/Watch colleagues to win tax deductibility status for the organisation. Commenting on the court ruling, she has called on the Federal Government to define charity in law so community groups are not penalised for their political activities.

“The outcome of this court case threatens the ability of many groups to attract funding and that will put limits on public debate and political action,” she said.

In the same vein, Goodman said: “Charities are involved in the broad array of social life, and address causes as well symptoms of social problems. To do so they must be able to speak up without fear of penalty – they must be able to advocate.”

“The restrictive definition of charitable organisation applied by the Federal Court will send shockwaves through the charitable sector.”

Whether this proves true or not, the Aid/Watch case reminds all charitable organisations that good governance and transparency are vital to successful operation.

The court ruling found that because political purposes were Aid/Watch’s main purpose, rather than ancillary to a charitable purpose, it did not qualify to receive charitable status. This is the important distinction for other charities with political agendas concerned about the security of their own charitable status in light of the Aid/Watch case.

The ATO also recently released a bulletin showing that results of a recent survey indicated some questionable arrangements for a number of charitable funds, further emphasising the need for charities to maintain true to their causes.

According to the ATO, to be endorsed, a charitable fund must be applied for the purposes for which it was established.

Case Study: things for your charitable organisation to consider

A recent ATO review of a charitable fund found that the trustee of the fund:
• Didn’t make any distributions to charities for the period of the review.
• Made substantial loans to entities associated with the founder and the trustee, including borrowing funds which were on-loaned to these entities.
• Didn’t call on substantial amounts of unpaid trust distributions from trusts associated with the founder and the trustee.
• Didn’t seek interest on these unpaid distributions.

What you need to do
• Review your organisation’s entitlement to endorsement.
• Tell us in writing if you stop being entitled to endorsement.
• Avoid tax problems through good governance.