The More Things Change the More Things Stay the Same – A Definition of Charity

In June we brought you news of the proposed changes for Not-For-Profit Organisations, the proposed establishment of a new regulator, the Australian Charities and Not-For-Profit Commission (ACNC), and a new statutory definition of charity.

More details have now been released in the Australian government consultation paper – A Definition of Charity. Principally this consultation paper seeks submissions on possible approaches to implement a statutory definition of charity.  Such a definition is needed because the current legal definition was developed on a case by case basis over a period of 400 years, and reflects the community’s attitudes to religion and charity over that period. It can be confusing when applied in the current legal and social environment.

At law there are four categories for charity: the relief of poverty, the advancement of religion, the advancement of education and purposes which are beneficial to the public. Currently, if your organisation falls into one or more of those categories of charity and certain other requirements are met, your organisation is able to obtain the tax benefits of being a charity.

A statutory definition of charity will allow parliament to alter the definition over time reflect modern society and community needs. Some further issues canvassed in the consultation paper are:

1. how closely the new definition of charity should follow the definition proposed by the government in 2003 under the Charities Bill 2003 (Cth);
2. what role the ACNC should have in assisting entities to demonstrate  their charitable purpose;
3. whether to remove the presumption that an entity with the purpose of advancement of religion or education is by its nature charitable; and
4. whether to clarify the types of entities that are entitled to operate a charity.

Submissions on the consultation paper close on 9 December 2011 and it is expected that the exposure draft legislation on a new statutory definition of charity will be released in the first half of 2012 for industry comment.

For further information on any of the material contained in this article please contact Johanna Churchill on 8210 1236 or jchurchill@normans.com.au or Tom Walrut on 8210 1218 or twalrut@normans.com.au.

Security of Payment – Here it Comes

It has been almost two years since our February 2010 Briefly brought you the news that the Building and Construction Industry Security of Payment Act 2009 had passed through parliament and received assent, and we outlined how the Act will operate.

The Act provides a mechanism to address what is commonly known in the building and construction industry as the 'security of payment problem'.  This problem arises when subcontractors and suppliers in the building and construction industry are unable to secure, in a timely fashion or at all, payment for work performed or goods and services supplied, despite having a contractual right to such payments.  This is because the failure of any one party in the contractual chain to honour its payment obligations can have a flow-on effect on subcontractors and suppliers.  The Act addresses this problem by giving subcontractors a statutory right to payment despite any contractual provision to the contrary, for example, pay when paid provisions.

Two years on and the Act will commence by default on 10 December 2011.  The information that we have to date in relation to the progress of regulations to be made under the Act is that the regulations are still some way off.  This will have an impact on the effectiveness of the operation of the Act.  For example, the eligibility of Adjudicators for appointment under the Act is reliant on criteria set by regulation.  The regulations are an important ingredient to the proper functionality of the Act.  We will continue to keep you updated on the progress of the Regulations as news comes to hand.

While our Act has remained inoperative for the past two years, similar schemes of legislation in other jurisdictions in Australia, and particularly in New South Wales on which our Act is modelled, have been in operation.  What this means is that a body of case law has already started to emerge which will provide us with valuable guidance on how our Act is to be interpreted and applied.

To get ready for the Act’s impending commencement:

• For principals engaging construction contractors for works or services, it is important that you have systems in place to ensure that you comply with the procedures and timeframes set by the Act in respect of payment claims by your contractors and suppliers.  The first of these timeframes is the initial period of 15 days in which a principal must respond to any payment claim received.  It is also important to understand that the pay when paid principle system can no longer apply.
• For subcontractors and suppliers who provide works, services or goods to the construction industry, you should make sure that you understand your rights to be paid for works and services completed and how you may suspend the carrying out of construction works or the supply of associated goods and services under the Act.

For further information on any of the material contained in this article please contact Mark Henderson on 8210 1220 or mhenderson@normans.com.au.