Looking to Start a Sports Charity: Is Sport a Charitable Purpose?
Charities provide great value to society because they recognise societal issues, identify solutions and gather resources and funds to help those effected.
However, as the sector continues to develop, charities outcomes are being scrutinised with many questioning if there is a more efficient method to allocate resources and to which causes. The follow up question: can those resources be allocated to a sports charity?
In an attempt to reflect the contemporary society’s attraction with health and wellbeing and address Australia’s major public health issues, a charitable cause that is the topic of much discussion is the inclusion of advancing amateur sports in the community.
How do you define a ‘charitable purpose’?
Prior to 2014, per the 1891 case of Commissioners for Special Purposes of Income Tax v Pemsel, to be considered a ‘charitable purpose’, a cause must have fallen within one of the four “heads” of charity, namely:
the relief of poverty;
the advancement of education;
the advancement of religion; or
other purposes beneficial to the community.
On 1 January 2014, the Charities Act 2013 (Cth) (‘the Act’) commenced. The Act introduced statutory definitions of ‘charity’ and ‘charitable purpose’ and, in doing so, provided a much needed modernised response to the outdated common law definition.
Under the Act, a charity means an entity:
(a) that is not-for profit;
(b) all of the purposes of which are charitable purposes for the ‘public benefit’ or incidental or ancillary to, and in furtherance or in aid of, such purposes;
(c) which does not have any ‘disqualifying purposes’; and
(d) which is not an individual, a political party or a government entity.
The meaning of a ‘charitable purpose’ expanded to mean any of the following:
(a) the purpose of advancing health;
(b) the purpose of advancing education;
(c) the purpose of advancing social or public welfare;
(d) the purpose of advancing religion;
(e) the purpose of advancing culture;
(f) the purpose of promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia;
(g) the purpose of promoting or protecting human rights;
(h) the purpose of advancing the security or safety of Australia or the Australian public;
(i) the purpose of preventing or relieving the suffering of animals;
(j) the purpose of advancing the natural environment;
(k) any other purpose beneficial to the general public that may reasonably be regarded; as analogous to, or within the spirit of, any of the purposes mentioned in paragraphs (a) to (j);
Will a sports charity fall into this list?
A common argument for the advancement of sport being a charitable purpose is that it leads to a happier, healthier community, takes pressure off of our healthcare system, and is therefore beneficial to the general public.
Despite this, the Explanatory Memorandum of the Bill that becomes the Act specifies that:
‘[a] purpose that is essentially… sporting is not charitable regardless of motivation or the benefits to the general public that can result’. However, if ‘sporting activities… are incidental to a charitable purpose and further or aid that purpose, such as health or education, [they] do not necessarily prevent that purpose from being charitable’. [emphasis added]
Therefore, sport, or specifically a ‘sports charity’, is explicitly excluded from falling within the definition of a charitable purpose. But all is not lost. A charitable purpose can include sporting activities without rendering that purpose non-charitable if such activities are utilised to achieve the broader charitable purpose. The Law Institute of Victoria provides the example that:
‘a club whose purpose is to support participation by people living with disability in sport to improve their quality of life may be a charity’.
It will be interesting to see how charities attempt to incorporate sport to satisfy the wants and needs of society. Interestingly, there is one sports charity that has been allowed as an exception to the rule: the Australian Sports Foundation (ASF). The ASF was established in 1986 alongside the Australian Sports Commission. The Foundation is privately funded and allows a number of sporting bookies to register with it to fundraise via its platform in exchange for a small administration fee.
Although it is helpful to have a dedicated organisation like the ASF, given the enormous benefits ongoing, exercise can deliver for any individual, in our opinion sports should certainly be able to enjoy a simpler fundraising and tax deductibility model than currently exists.
For any questions of further information, please contact a member of the Charities and Not-for-Profit Law Team.