To be registered as a charity, a not-for-profit must have charitable purposes that are ‘for the public benefit’.
A charity's purpose is considered to be for the public benefit if achieving that purpose would be of benefit to the general public, or to a 'sufficient section of the general public'.
A 'sufficient section of the general public' could be a local community, followers of a particular religion, people with a particular disability, refugees or young people.
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.
In some cases, organisations with a restrictive membership may still benefit the public, and there are also instances where the public benefit test is limited or does not apply.
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 as long as:
- the class is not closed, and
- the restriction advances its charitable purpose.
For example, an organisation whose purpose is to provide assistance to refugees can make its services specifically available to all refugees and not to the general public.
It can do this and still be a charity because its services are available to all refugees (so the class is not closed), and the restriction advances its charitable purpose.
However, an organisation may not be a charity if it is too restrictive on who can receive benefits.
For example, an organisation established to provide scholarships to employees of a particular company is unlikely to be a charity. This is because the class of beneficiaries is closed as they are linked by ties to a single individual or company.
Restriction to manage services
A charity can also limit access in order to manage its services.
For example, a school may require students to enrol, a community legal centre may accept only certain types of cases, and a library may impose borrowing rules.
When the public benefit test is limited or does not apply
Traditional Indigenous land rights
The Charities Act 2013 (Cth) 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 related to each other.
This is a complex area of law. For more information, read our Commissioner's Interpretation Statement: Indigenous charities.
Relief of necessitous circumstances
For organisations relieving the 'necessitous circumstances of Australian individuals' (more commonly called '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 at the request of members of the general public, and
- self-help groups (if they 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).