There is often confusion about what charitable purposes are and the four categories that they come under. This article provides an overview of those categories and discusses their origins. 05 Mar 2017 Post by: Ken Lord , Steven Moe
The definition of charitable purposes in New Zealand charity law derives from English common law.
The foundations for the legal definition of charitable purposes and charity law owe their inception to the Preamble of the Statute of Charitable Uses Act 1601, commonly known as the Statute of Elizabeth. It is remarkable to think that a document written more than 400 years ago would have had such influence on the development of this area of law.
After various legal changes and evolutions charitable purposes in New Zealand are now included in section 5(1) of the Charities Act 2005. They still retain the four ‘heads’ of charity from the case of Pemsel which was an English case decided in 1891. These four heads of charity are as follows:
- The relief of poverty.
- The advancement of education.
- The advancement of religion.
- Any other purposes beneficial to the community, not falling under the preceding heads.
Of importance is the fact that the Charities Act 2005 and case law require that a charitable purpose must have a public benefit to qualify as being charitable.
The New Zealand courts have exercised a presumption when they look at the first three heads of charity that a public benefit exists (unless a contrary intention is shown). The presumption is not a conclusive determination and the question for the court as to whether a purpose operates for the public benefit will depend very much on the full range of evidence presented to the court.
By way of contrast, a presumption of public benefit does not exist in relation to the fourth head of charity ie “any other purposes beneficial to the community”. For a purpose to be deemed charitable under this arm, a public benefit must be specifically shown. To be deemed charitable under this arm, showing a particular need to be alleviated can qualify.
In New Zealand, charitable purposes are assessed by Charities Services as to whether or not an organisation’s purposes are indeed charitable and therefore worthy of being tax exempt. One of the key criteria will be to examine the statement of purposes of the charity. For example a Trust would include those in its founding document, the Trust Deed. A company might include the purposes in its constitution. To aid practitioners and those seeking to set up a charitable trust, Charities Services include on their website examples of how these charitable purposes clauses can be worded in a founding document.
The reason this is important is that you may have a “good idea” which you think will help others but it actually needs to qualify as a charitable purpose as defined in law. So it needs to fit within one of the four categories set out above. Sometimes people get confused about this and try to describe the good that they are going to do but don’t relate it to the strict legal categories of charitable purpose. They are therefore unlikely to get across the line and qualify as a charity.
We thought it would be helpful to simply link to the Charities Services website descriptions of some of the wording that they recommend. Please see the links below for guidance.
The relief of poverty
The advancement of education
The advancement of religion
Any other purposes beneficial to the community
If you are seeking to set up a charitable trust and have questions about charitable purposes then we would be happy to have a discussion with you.