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Government review of the Charities Act

May 28, 2018


Partners Sally McKechnie, Hugh Lindo, Barney Cumberland
Senior Associates Nick Bland

Government reform and public policy Charities

Minister for the Community and Voluntary Sector, Peeni Henare, has recently announced the details of the long-awaited review of the Charities Act 2005. 

The review follows the Minister’s comments earlier this year that reviewing New Zealand’s 13-year-old Charities Act will be a top priority for the current parliamentary term.

Terms of Reference for the review have also been released.  These outline the scope, process and proposed timeframe for the review.

The review has been billed as a ‘comprehensive’ legislative review, but some key matters have been excluded – including the ‘charitable purpose’ definition and the charity tax exemptions associated with Charities Act registration. 

However, a number of other issues need to be addressed with the Charities Act regime, and the review provides an opportunity to deal with these. 

Charities Act registration matters up for review

The issues covered by the review are wide-ranging.  Key policy issues included within the scope of the review include:

  • the purposes of the Charities Act, and in particular whether additional purposes are necessary;
  • the role, function and funding of the charities regulator, ie the Charities Registration Board and the Department of Internal Affairs - Charities Services (DIA);
  • mechanisms to challenge or appeal the regulator’s decisions, including ‘charitable purpose’ decisions, and support the development of case law in this area;
  • registration of businesses that solely raise funds for registered charities;
  • the extent to which charities can advocate for their causes and points of view without impacting on their registration;
  • other registration and deregistration requirements;
  • registered charities’ reporting and other compliance obligations;
  • the obligations of charity board members and senior management, including possible governance standards for registered charities;
  • regulation of third party fundraisers; and
  • the interface between the Charities Act and other current and proposed legislation, including the Incorporated Societies Act 1908, the Charitable Trusts Act 1957, the Trusts Bill and the proposed Incorporated Societies Bill.

‘Charitable purposes’, tax exemptions and other matters excluded

The Terms of Reference specifically exclude from the review:

  • the ‘charitable purpose’ definition;
  • tax exemptions associated with registration under the Charities Act;
  • Charities Act operational issues;
  • regulation of the broader not-for-profit sector; and
  • contracting arrangements for government services.

Charity tax issues separately under review

Although tax exemptions associated with Charities Act registration have been excluded from the review, there is a separate review of the tax system that is already being undertaken by the Tax Working Group led by Sir Michael Cullen.  The Tax Working Group is expected to consider charity tax issues as part of its review. 

The Terms of Reference for the Charities Act review also note that any interim findings of the Tax Working Group relevant to charities will be fed into, and considered as part of, the Charities Act review.

The Government has also already signalled that the tax-exempt treatment of significant businesses associated with charities is to be reviewed.  The tax-exempt treatment of such businesses has very recently been added to the Government’s tax policy work programme. 

What next?

The Charities Act review is expected to take between two to three years, and will culminate in the development of draft legislation to amend the Act. The focus will be to ensure that the legislation is effective and “fit for purpose” moving forward.

The DIA is leading the review process, working closely with a Core Reference Group of representatives from the charities sector, the charities regulator and other government officials, and an options document will be issued for public consultation.  This will give interested parties the opportunity to provide feedback on what is working, and what is not, under the current regime.

Key aspects of indicative timeline for the review are:

  • August - December 2018: Release of options document and public consultation
  • Late 2018 to 2019: Policy decisions made, followed by the development of draft legislation
  • 2020: Passage through the House of a Bill to amend the Charities Act

We strongly encourage registered charities and other stakeholders to engage and provide feedback during the review process.  The options document will likely be extensive, and there will be limited time in which to respond, so stakeholders should be considering their position on the review now rather than waiting for the document to be released.

We will be monitoring the review and will report on this again as the review progresses. We are also formulating our views on aspects of the Charities Act that need to be prioritised and amended.

If you want to know more or think you might want to participate in the review, please get in touch. Our team has considerable expertise and experience with charities law and wider law reform processes and would be happy to assist.