To be registered as a charity, a not-for profit must have charitable purposes that ‘is for the public benefit’.
Benefit must be to the public
A charity’s purpose is for the public benefit if achieving this purpose would be of benefit to the public generally or a sufficient section of the public.
A sufficient section of the community may be, for example, a local community, followers of a particular religion, people with a particular disability, refugees or young people.
Types of benefit
There are many ways a charity’s purpose can benefit the public, for example, it can provide goods, services, education, counselling or spiritual guidance, or improve the environment.
Restrictive membership can still benefit the public
Restriction related to purpose
A charity may restrict its benefits to a particular class or group of people if the class is not closed, and the restriction advances its charitable purpose. For example, an organisation whose purpose is to provide assistance services to refugees can still be a charity if its services are available to all refugees (so the class is not closed) as the restriction advances its charitable purpose.
However, an organisation may not be a charity if it is too restrictive in who can receive benefits. For example, an organisation set up to provide scholarships to employees of a particular employer is unlikely to be a charity as it is a closed class of beneficiaries who are linked by ties to a single individual or company.
Restriction to manage services
A charity can also limit access to manage its services. For example, a school may require students to enrol, legal clinics may accept only certain types of cases, and libraries may impose borrowing rules.
When public benefit test is limited or does not apply
Traditional Indigenous land rights
The Charities Act makes it clear that organisations that receive, hold or manage benefits relating to native title or traditional Indigenous land rights are for the public benefit even though they may benefit people who are related to each other. This is a complex area of law. For more information, read the ACNC Commissioner Interpretation Statement: Indigenous charities.
Relief of necessitous circumstances
For organisations relieving the necessitous circumstances of Australian individuals (people in need), the benefit does not have to be directed to the general public.
Closed religious orders and self-help groups
The public benefit test does not apply for:
- closed or contemplative religious orders that regularly pray on request from members of the general public, and
- self-help groups that have an open and non-discriminatory membership and were established to help people affected by a particular disadvantage or discrimination, or unmet need, by people affected by that disadvantage or discrimination or need.