Commissioner's Interpretation Statement: Indigenous charities

^{Document last reviewed on 5/02/2019.[3]}

1. There are legal issues unique to Indigenous charities and to Indigenous organisations that want to be registered as charities. In this paper the ACNC is providing information and guidance on its interpretation of the application of charity law to Indigenous charities.^[4]
2. The legal issues are:
   1. The recognition of Indigenous disadvantage;
   2. The application of the public benefit test to an Indigenous organisation (where the membership and / or beneficiaries are described in terms of their family relationships or descent from named apical ancestors); and
   3. The effect of the introduction of the Charities Act 2013 (Charities Act), on the two issues above.
3. Consistent with the ACNC’s function to provide education and guidance under s.110-10 of the Australian Charities and Not-for-profits Commission Act 2012 (ACNC Act), the purpose of this paper is to give the legal analysis and reasoning for the Commissioner’s Interpretation Statement. While this does not have the statutory basis of an ATO Tax Ruling, it is a public statement binding on ACNC officers, on how the ACNC interprets the law on the topic. Other targeted guidance materials based on the Statement will be developed.
4. For the purposes of the Commissioner’s Interpretation Statement and this paper, Indigenous peoples means Aboriginal peoples and Torres Strait Islanders and relies on the definitions in section 253 of the Native Title Act 1993 (Cth), namely: Aboriginal peoples means peoples of the Aboriginal race of Australia and defines Torres Strait Islander as meaning a descendant of an indigenous inhabitant of the Torres Strait Islands.
5. Consistent with that definition, Indigenous charities or Indigenous organisations are those established for the purposes of Indigenous peoples.

6. In this context, the archaic term impotence is considered to now include ‘…beyond sickness and disability, the underprivileged, the vulnerable, the dependent and those without family come under this head of charity.'^[5]
7. The Commissioner’s reasoning for this recognition is based on widespread public acknowledgement of Indigenous disadvantage in Australia by governments, parliament, the courts and international organisations. The evidence of this acknowledgement includes, for example:
   1. The National Indigenous Reform Agreement, agreed by the Council of Australian Governments in November 2008, which commits all jurisdictions to achieving the targets in the Closing the Gap strategy. The targets relate to Indigenous life expectancy, infant mortality, early childhood development, education and employment. Data from the Australian Bureau of Statistics shows a significant gap in these critical areas between the Indigenous and non-Indigenous population.^[6]
   2. The Preamble to the Native Title Act 1993 (Cth) states
      ‘[A]s a consequence [of dispossession of their lands], Aboriginal peoples and Torres Strait Islanders have become, as a group, the most disadvantaged in Australian society.’
   3. The position of the Aboriginal and Torres Strait Islander Social Justice Commissioner was created by the Federal Parliament in December 1992 in response to the extreme social and economic disadvantage faced by Indigenous Australians. The Commissioner’s role includes reviewing the impact of laws and policies on Indigenous peoples, providing annual reports on Indigenous social justice and native title issues, promoting an Indigenous perspective on issues and monitoring the enjoyment and exercise of human rights for Indigenous Australians.
   4. The courts have long recognised the particular disadvantage suffered, including systemic disadvantage.^[7] One example of a court finding is in the Indigenous Barristers’ case^[8] when the Federal Court accepted as a public fund for the relief of persons in necessitous circumstances, a trust which had the purposes of ‘the relief of such poverty, suffering, helplessness, misfortune or other disability of indigenous persons as may constitute an obstacle in the way of their being able to practise at the New South Wales Bar.’ This decision explicitly did not rely on poverty as an element of the disadvantage it found to be suffered by Indigenous Australians.^[9]
   5. Australia has ratified various international human rights instruments which have particular application to Indigenous Australians, including the International Convention of the Elimination of all forms of Racial Discrimination (CERD); and the United Nations Declaration on the Rights of Indigenous Peoples (DRIP) which Australia affirmed on 3 April 2009 – several of its articles are relevant to the functions of the ACNC.^[10]
   6. The United Nations Special Rapporteur on the situation of human rights and fundamental freedoms of Indigenous people, Professor James Anaya, visited Australia between 17 and 28 August 2009 to report on the situation of Indigenous people in Australia. In his report, Professor Anaya states “[h]aving suffered a history of oppression and racial discrimination… Aboriginal and Torres Strait Islander peoples today endure severe disadvantage compared with non-indigenous Australians.”^[11]
8. The Commissioner’s recognition of Indigenous disadvantage is relevant to establishing a charitable purpose. In order to be registered as a charity by the ACNC an organisation must still meet all the other entitlement criteria in s.25-5 of the ACNC Act, including the conditions set out in subsection (3):
   1. the entity is a not-for-profit entity;
   2. the entity is in compliance with the governance standards and external conduct standards (see Part 3-1);
   3. the entity has an ABN;
   4. the entity is not covered by a decision in writing made by an Australian government agency (including a judicial officer) under an Australian law that provides for entities to be characterised on the basis of them engaging in, or supporting, terrorist or other criminal activities.
9. At least since the Pemsel^[12] case in 1891, there have been considered to be four heads of charity. The first head of charity is for the relief of the needs of the aged, impotent and poor. Gino Dal Pont describes the archaic term ‘impotent’ as referring to the physically weak, the disabled or the helpless but that it has a different meaning in its modern use.^[13] Dal Pont goes on ‘…beyond sickness and disability, the underprivileged, the vulnerable, the dependent and those without family come under this head of charity.^[14]
10. The concept of ‘poverty’ also evolves with changes in society and is therefore a question of degree. Dal Pont discusses the welfare state in Australia, where the government plays a significant role in alleviating destitution, as requiring a different concept of poverty than elsewhere.^[15] Relief of poverty has been accepted by the courts as not equating ‘to destitution or even on the borderline of destitution. Instead it connotes the notion of “going short” – an inability “to obtain all that is necessary, not only for bare existence, but for a modest standard of living”, or to achieve the status of being “self-supporting”'^[16]. There is also recognition by courts that the relief of poverty is not merely about financial support, but a more holistic approach to assistance.^[17]
11. It is clear that certain types of disadvantage either cause or are caused by poverty, and would come within the ‘relieving poverty’ component of the first head of charity. Relevantly, there have been cases where courts were willing to infer ‘poverty’ upon Aboriginal people as a class of disadvantaged people in need of financial support, even where the stated purpose was not explicitly phrased in terms of poverty.^[18]
12. Other types of disadvantage fit within the category of ‘impotence’.
13. It is necessary to distinguish whether the disadvantage fits within the ‘relief of poverty’ or the ‘impotence’ components of the first head of charity as this determines whether the public benefit test needs to be applied. As for all charities, where the charitable purpose is addressing poverty, there is no need for the organisation to meet the public benefit test. This applies to a charity addressing Indigenous disadvantage based upon poverty too.
14. The disadvantage suffered by most Indigenous people is caused by or linked to ‘poverty’ as defined by Dal Pont (see paragraph 10 above). This has consequences in most spheres of Indigenous lives such as access to education, health services, housing and those areas of disadvantage identified in the Closing the Gap strategy. The disadvantage makes it more difficult to access services even where they are available, but for people living in remote communities, many services that most Australians take for granted are not available. For example, an Indigenous organisation may address Indigenous disadvantage by providing services such as a health service with a dialysis centre in a remote community or education in the form of a bi-lingual school.
15. Therefore the purpose of addressing Indigenous disadvantage comes within either the relief of poverty or impotence depending on the circumstances. In most cases, by working to relieve Indigenous disadvantage an organisation will be working to relieve the associated poverty.
16. Consistently with decisions on poverty which make clear it is not essential for a charity to explicitly use the term ‘poverty’, it is not necessary to use the phrase ‘Indigenous disadvantage’, to find that the purpose of the charity is addressing Indigenous disadvantage; it can be inferred from the whole circumstances.^[19]

The public benefit test

18. Public benefit lies at the core of the legal concept of charity.^[20] The public benefit test is often referred to as the Compton-Oppenheim test, based on the name of the two most commonly referred to legal authorities on public benefit. Re Compton is a decision of the UK Court of Appeal in 1945 and Oppenheim of the House of Lords in 1951.^[21] The public benefit test is generally considered to exclude a group of beneficiaries related by descent or blood or that is a closed group. Sometimes this exclusion from charitable status is expressed as a ‘private benefit’ inconsistent with the concept of ‘not for profit’.
19. In the Re Compton case, a testamentary trust established to educate the descendants of three named persons failed to meet the public benefit test as it was based on ‘a purely personal element and such gift was, therefore, to be regarded as a family trust and not as one for the benefit of a section of the community.’^[22] The court’s refusal to accept the education of the descendant beneficiaries of each of these three named ancestors as being a charitable purpose was in part based on the concept of a British family of the time.

20. In his decision Lord Greene wrote:
    ‘No doubt in deciding whether a gift which in its nature is not a mere private or family benefaction or is not for the benefit of a section of the community so as to make it a good charitable gift the question of the number of potential beneficiaries is a relevant one. But if a gift is in its nature a private or family benefaction it cannot be regarded as charitable merely because the number is or may at some future date become considerable.
    The fundamental requirement of a charitable gift is, in my opinion, correctly stated in the following passage in Tudor On Charities, 5th ed at p.11:
    In the first place it may be laid down as a universal rule that the law recognises no purpose as charitable unless it is of a public character. That is to say, a purpose must, in order to be charitable, be directed to the benefit of the community or a section of the community.’…^[23]

21. In the Oppenheim case, a trust that was established to educate the children of 110,000 employees of a company failed the public benefit test. Lord Simonds in the leading judgment wrote: ‘A group of persons may be numerous, but, if the nexus between them is their personal relationship to a single propositus^[24] or several^[25] propositi, they are neither the community nor a section of the community for charitable purposes’.^[26]

Native title and traditional ownership

22. Native title is a form of title recognised in Australian common law since the Mabo^[27] decision of the High Court in 1992 and led to the passage of the Native Title Act 1993 (Cth) (NTA). It is a form of property that recognises Indigenous rights and interests in land and waters of the inhabitants of a particular area before European settlement and may recognise ongoing rights and interests of their descendants. ‘The source of native title rights and interests is the system of traditional laws and customs of the native title holders themselves.’^[28]
23. Under section 62(2) of the NTA a native title application must include:
    1. a general description of the factual basis on which it is asserted that the native title rights and interests claimed exist and in particular that:
       1. the native title claim group have, and the predecessors of those persons had, an association with the area; and
       2. there exist traditional laws and customs that give rise to the claimed native title; and
       3. the native title claim group have continued to hold the native title in accordance with those traditional laws and customs;…(emphasis added).
24. Indigenous organisations established for a native title claim group or recognised native title holders usually describe the membership or beneficiaries as the descendants of named apical ancestors who had an association with a particular geographical area. Apical ancestors are identified as a result of extensive historical and anthropological research. They will always be several generations back and cover all the known inhabitants of the particular geographical area prior to European settlement, thus making them a significant section of the public then.^[29] The description of the native title group is of the descendants of the apical ancestors and intends to cover all living Indigenous people with native title rights and interests in the defined area.
25. A native title group is described in these terms for the purpose of seeking recognition of its native title rights and interests under the NTA. There is similar State and Territory land rights legislation based on traditional ownership of land. For example, a traditional Aboriginal owner group in the Northern Territory will be described in terms that are consistent with the definition of a local descent group under the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth). Importantly, the definitions used under the various pieces of land rights legislation are consistent with the Aboriginal traditional law and custom for the groups, so other Indigenous organisations (not set up to seek recognition of native title) may also use this type of group description. While the legal issues for native title and traditional owner organisations are similar, this paper focuses on native title group organisations under the NTA as these more commonly seek registration as a charity by the ACNC. It is expected that the same reasoning will apply to organisations established for traditional owner groups.

Statutory regime

26. While native title was originally recognised at common law, a regime for its determination and management are set out in the NTA. Therefore, the common law definition must be considered in relation to the native title regime and all associated activities (including the types of organisations and entities that may be established as a result of native title) set up by the statute. In order to properly take into account the NTA for the purposes of making a decision on charitable status, the context and purpose of the legislation must be considered.
27. Therefore where the membership and/or beneficiaries of an organisation or trust are described by reference to the system of law established by the NTA, the requirements of the NTA should be taken into account as a relevant factor when assessing eligibility for registration as a charity by a native title group organisation. While not all of the native title claim group may choose to become members of the applicant organisation, they would be entitled to do so and to be beneficiaries of income or benefits received and of services or activities.
28. The NTA and Regulations sets out the requirements of a prescribed body corporate (PBC) which must hold the determined native title on behalf of the native title holders.^[30] There are statutory requirements on the type of incorporation and its functions. Many PBCs seek registration as a charity and seek to carry out charitable purposes consistent with their NTA obligations, for example to apply money as directed by the native title holders for specific community purposes.

Society and kinship

29. The NTA establishes a legal procedure to enable a native title claim group to seek a determination by the courts recognising the native title holders if they can establish continuing acknowledgement and observance of traditional laws and customs which give them common or group rights and interests in the land or waters. Native title rights are generally transmitted by descent from the original inhabitants of the land.^[31]
30. In the judgment of the High Court in the native title claim by the Yorta Yorta people in 2002, the relationship between the continuity of laws and customs, and the native title rights to land or water and the society is clear.
    To speak of rights and interests possessed under an identified body of laws and customs, is, therefore, to speak of rights and interests that are the creatures of the laws and customs of a particular society that exists as a group which acknowledges and observes those laws and customs.^[32]
31. Dr Lisa Strelein has written on this issue saying the concept of ‘society’ is used because it serves to emphasise ‘this close relationship between the identification of the group and the identification of the laws and customs of that group’^[33]. There would be no native title group to form an organisation unless there is a society acknowledging their traditional laws and customs. The description of the native title group comes directly from those traditional laws and customs.
32. In Aboriginal culture, kinship and society are virtually the same thing. Social relations were constituted as relations between kin and sets of kin. Kinship classification systems operate designating categories of close kin. The complexity and diversity of these systems is in large part attributable to the regulation of marriage by kinship.^[34]
33. For example in Arrernte culture in central Australia, everyone is described as a relation of some kind, even if they are not directly related through blood or marriage. Meye is the Arrernte word for your actual mother, as well as for her sisters and some more distant relations. It can also refer to certain people who are not actually related to you at all through blood or marriage. Each relation word applies to a whole range of people with different connections. Anthropologists and linguists call these classificatory relationships and the relation words are ‘kin terms’.^[35]
34. It is noteworthy that while some apical ancestors will be related, they are not necessarily related to each other. The descendants of apical ancestors are likely to have classificatory relationships but many will not have an actual blood relationship, especially many generations later. It is clear that this can be distinguished from a descent line or blood ties in a British or Australian family as considered by various courts over time.
35. In a decision considering whether a trust was charitable with a ‘purpose beneficial to the community’, Holland J wrote:
    ‘…whether a particular purpose is for the benefit of the community is necessarily a question of the time at which it has to be answered, because it is the knowledge, ideas, hopes, pleasures, needs, burdens and woes of a given society which determine where the welfare of its members lies and these things change over the years, sometimes with remarkable rapidity.^[36]
36. Hence whether an Indigenous native title organisation can meet the public benefit test should be considered on a different basis from the common law authorities that were considering a charitable trust for the descendants of an individual or individuals in a western family.
37. Moreover in interpreting the common law, when there is relevant legislation passed by the Australian parliament subsequently, the common law authorities cannot be viewed in isolation. As discussed above, the system of law and legal requirements of the NTA need to be taken into account. By extension, this would mean that an application of the public benefit test to the facts of an Indigenous organisation or trust for a native title group should be by reference to the NTA.
38. Where an organisation that defines its membership and /or beneficiaries by direct reference to the claim group description in the native title application or court determination applies to the ACNC for registration, the ACNC should interpret the common law on charity in relation to this applicant in light of the requirements of NTA.
39. It is possible to distinguish the decisions in Re Compton and Oppenheim, from an organisation where the description of the membership and beneficiaries is based on a native title claim group description consistent with the NTA: namely the descendants of named apical ancestors who had an association with an area at the time of the arrival of non-Indigenous Australians in the area. The common law authorities in charity law relate to different circumstances, which may be relevant to some aspects of Australian society today, but cannot reasonably be applied to the circumstances of an Indigenous native title group seeking to apply native title rights or benefits for charitable purposes. The derivation, purpose and description of such a group means it can be a sufficient section of the public for the public benefit test and is appropriately distinguished from the common law authorities on public benefit.
40. The same reasoning applies to an organisation for a traditional owner group which describes itself in similar terms based on similar legislative requirements to describe the group.

41. After considerable public consultation over many years, in 2013 the Australian Parliament passed the Charities Act 2013 (Cth) (Charities Act). It contains a list of 12 charitable purposes and eligibility for registration by the ACNC from that date will require addressing at least one of these purposes.

Indigenous Disadvantage

42. The Charities Act, while generally restating the current common law, does include some variations. The current four traditional heads of charity are now contained within the 12 charitable purposes set out in s.12(1). The current first head of charity for the relief of poverty, the needs of the aged and impotent is reflected within s.12(1)(a) ‘advancing health’ and s.12(1)(c) ‘advancing social or public welfare’.
43. Section 14 elaborates that the purpose of ‘advancing health’ includes the purpose of preventing sickness, disease or human suffering. There is a presumption of public benefit for this charitable purpose (s.7(a)).
44. Section 15 sets out four inclusive elements of the definition of ‘advancing social or public welfare’. Relevant for the purpose of addressing Indigenous disadvantage include the purposes of:
    • Relieving the poverty, distress or disadvantage of individuals or families;
    • Caring for and supporting:
      • The aged; or
      • Individuals with disabilities.

      There is a presumption of public benefit for these elements of this charitable purpose (s.7(c)-(d)).

45. So in the Commissioner’s Interpretation Statement, for the same reasons as set out in paragraphs 10-13 above, after the commencement of the Charities Act an organisation with the purpose addressing Indigenous disadvantage, will come within the charitable purpose of advancing social or public welfare, and/or advancing health or may come within one of the other listed charitable purposes.
46. Under the common law, there is no public benefit test for a charity with the purpose of addressing poverty. Section 8 of the Charities Act states that a charity with ‘the purpose of relieving the necessitous circumstances for people in Australia’ does not need to meet the public benefit requirement (in s.6(1)(b)) of being ‘available to members of the general public, or a sufficient section of the general public’. In considering the meaning of necessitous circumstances for this purpose, it is relevant to note that for tax purposes a fund is accepted as being for necessitous circumstances when it addresses poverty, but need not be only for the destitute. For the same reasons as set out in paragraph 13 above, relieving necessitous circumstances is very similar or identical to addressing poverty. So the effect of s.8 of the Charities Act is not to require a charity to meet the public benefit test if the purpose is addressing poverty. An organisation addressing Indigenous disadvantage will most commonly come within the ‘necessitous circumstances’ exception.
47. The Charities Act contains a public benefit presumption, which applies in the absence of evidence to the contrary where the charity is relieving the poverty, distress or disadvantage of individuals or families. There is no explicit presumption that would apply to a charitable purpose of addressing Indigenous disadvantage in a community, locality or region. However in the Commissioner’s Interpretation, such a purpose would meet the public benefit test regardless.
48. However it would appear that a charity addressing poverty or disadvantage in the community (and not only for individuals or families) would still need to address the first part of the public benefit test set out in s.6(1)(a) that achievement of the purpose would be for the public benefit. Section 6(2) contains some matters to be had regard to in assessing this, including that benefits can be tangible or intangible and any possible identifiable detriment from the achievement of the purpose to members of the general public or a section of the general public.
49. It is difficult to imagine circumstances in which a charity with the purpose of addressing poverty or disadvantage for a wider group of beneficiaries than individuals or families could not meet the public benefit test.

Specific provisions for the application of the public benefit test for Indigenous native title or traditional owner organisations

50. Section 9 of the Charities Act contains specific provisions for organisations whose purpose is for the benefit of Indigenous people where the purpose would not otherwise be for the public benefit only because of the relationships between the Indigenous beneficiaries. In these circumstances the purpose is ‘treated as being for the public benefit’ if the organisation ‘receives, holds or manages’ benefits related to native title or traditional Indigenous ownership rights in land.

51. In our view the phrase ‘receives, holds or manages’ benefits received by such an Indigenous organisation enables the application of those funds for charitable purposes and activities in accordance with the instructions of the native title or traditional owner group, such as for a medical centre in a remote location or a language centre or bilingual school. However, in case there is any doubt at all, the Commissioner’s Interpretation Statement includes a paragraph to ensure that an organisation which did not fall within section 9 would still be viewed as a sufficient section of the public for the purpose of the public benefit test.

52. Finally, the introduction of the Charities Act may inform the interpretation of the existing common law. In his second reading speech to the parliament, the then Minister, Assistant Treasurer David Bradbury said:
    ‘The definition aims to preserve common law principles, with some minor variations. …
    One departure from common law principles relates to entities with native title or other traditional rights in connection with the land. These entities, which might fail a public benefit test because they provide benefits only to indigenous individuals who are related, or have some other special relationship with the other potential benefit recipients, are treated as being for the public benefit in particular circumstances.’^[37]

53. The Explanatory Memorandum for the Charities Act is consistent with the Second Reading Speech on this issue that this part of the Act is to address the current situation where some organisations that provide benefits to Indigenous Australians may fail a public benefit test solely because benefits are limited to persons who have family or other traditional relationships.’^[38] It goes on to confirm that the Act ensures that a native title organisation will not fail the public benefit test solely because the beneficiaries are Indigenous people who are related.^[39]
54. In considering the legal issues in this discussion paper, the Minister’s speech and explanatory material suggest that such organisations ‘might fail’ the common law public benefit test due to benefits being directed to individuals who are related. The Charities Act therefore explicitly addresses any ambiguity on the issue to ensure that the law can be applied flexibly to changing circumstances. It is accepted that a conservative application of some of the older court decisions could result in an Indigenous organisation being unable to meet the public benefit test. However as set out above, it is appropriate to distinguish the cases from the unique facts of a native title (or traditional owner) group described by descent from named apical ancestors under the NTA, who have received benefits from a native title decision and want to establish a registered charity that can apply those benefits for charitable purposes for the benefit of the members of the native title group.