Charities and friendly societies duty exemption
The Duties Act 2000 (the Act) provides exemption from duty for the following transactions:
- A transfer of dutiable property to a corporation or body of persons established for a charitable purpose or a friendly society (s45)
- A declaration of trust over dutiable property to beheld on trust for a charitable purpose (s45)
- A declaration of trust over non-dutiable or non-identified property to beheld on trust for a charitable purpose (s38(3)), and
- Application for registration or transfer of registration of a vehicle in the name of a charitable institution used to convey incapacitated persons (s233D)
What does charitable mean?
The term charitable is not defined in the Act. The courts have decided that, for the purposes of the Act, charitable has a technical, legal meaning. Generally, this means two elements must be satisfied:
- The purpose must fall within one of the following four heads of charity:
- Relief of poverty,
- Advancement of education,
- Advancement of religion, or
- Other purposes beneficial to the community
- The purpose must be for the benefit of the public in general or an appreciable section of the public.
In determining whether an organisation satisfies these two elements, it is necessary to examine both its stated purposes, as set out in its constitution or memorandum of association, and its actual activities.
To qualify for charitable status, an organisation’s purposes must be predominantly charitable.
Additionally, the organisation must have been established and be maintained for that charitable purpose, without any possibility of distribution of its profit for the private benefit of its owners or members during its operation or at wind-up.
Accordingly, besides setting out its objects and activities, a charitable organisation’s constitution or memorandum of association should contain:
- A clause expressly prohibiting the distribution of any surplus funds, whether income or capital, to its members, and
- A wind-up clause which provides that in the event of a wind-up, surplus assets will be passed on to another charitable organisation and will not be distributed to any members of either the original or substitute charitable organisation