Options in Establishing NZ Ratepayers Alliance

Discussion Paper

OPTIONS for consideration in establishing a NZ Ratepayers Alliance

INTRODUCTION

o An idea - some early steps (a Northland Alliance) o Convening a meeting in Nelson → Nelson RA hosting a Conference o A DRAFT Constitution emerges – for discussion purposes o Northland met to discuss that proposal... forum requested “back up” - is more time needed to share information, to be inclusive and to get buy-in for this fledgling alliance – 14th October, the Northland Alliance requests a “discussion paper” outlining choices (options) for consideration to discuss in Nelson.

CHOICES TO BE MADE

PRINCIPLES

What PRINCIPLES inform the establishment and operation of a national ratepayers’ body/entity?

• Consider likely membership by Ratepayers &R Asstns and/or individuals and/or corporate entities;

• Consider our approach to representation to “Governance” and/or by “Management” team(s);

• Consider mandate, responsibilities and delegated powers – or does this remain with member R&RAs;

• Consider what a NZRA will work on, how it will operate (e.g. its processes & procedures);

• Consider retained autonomy of existing R&R Asstns, and any regional alliances (networks) to support a national alliance or legal entity.

• Consider – this is not a ‘political’ party – but may well become a means of letting political parties know what a national alliance of Ratepayers (&R) Asstns position is on particular matters (if agreement can be reached) and what a NZRA would like to see done in relation to matters of interest vis a vie our purpose and objectives.

Examples (as discussion starters):-

• Activities of the NZRA to be informed by inclusive and participatory processes, whereby member Asstns are enabled to contribute to organisational planning, national policy, in prioritising a work programme and in the delivery of activities;

• Open and transparent - e.g. records of meetings, processes and policies are published (made public), or are made available only to members;

• Democratic – leadership of the organisation will be voted upon by member Asstns in accordance with a method reflecting the relative numbers of current members, or on a per person basis;

• Professionalism – in terms of any appointments of employees (i.e. to be based on quals and expertise, rather than by popular vote).

• Underpinned by civic mindedness – supportive of the concept of community (more than a collection of individual households and businesses) – in other words Ratepayers Alliance is not being established to undermine local authorities, but to support ratepayers (R&RA) to make them more... transparent, inclusive, participatory, efficient, effective, fiscally prudent and accountable to Ratepayers and to customers/consumers of L.A. goods and services;

• Acknowledge Ratepayers as the primary funders of locally authority provided public infrastructure and of local authority managed and/or provided services to local communities;

• Informed by the concepts of a ‘common good’ and/or the public interest;

• Inquiring - seek out the facts of matters under consideration;

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.• Evidential based analysis – undertake impartial, methodologically rigorous investigations, making use of robust research methods;

• Prudent fiscal management – concerned about $value and adding value; efficiency and effectiveness (in the work of local authorities), and avoiding wasting ($ and other finite resources);

• Environmentally conscious – concerned with minimising waste, avoiding adverse effects on environmental values and promoting effective and efficient actions to reduce impacts on the environment;

• Advancement of equal opportunities (conscious of potential for prejudice, bias, privilege and double standards);

• Respectful – treat each other respectively (consideration of human rights).

• Honesty – tell the truth about what we are finding

• The Principle of Charity – or charity of interpretation requires interpreting a speaker’s statement (or actions) in the most rational way possible, and in the case of any argument, considering its best or strongest possible interpretation

• Protect the integrity of the organisation

• Protect the interests of participating member associations

• Apply principles of natural justice when seeking to resolve any conflict (internally and with other parties)

• Seek to remedy any mistakes as quickly as possible – admit when get it wrong and make amends

• Acknowledge that differences will arise, as not all Ratepayers contexts are the same – so there may be a need to differentiate between different types of Ratepayer and/or Ratepayers Asstns. For example, between big city and small townships, between rural lifestyle and rural production, between retirees and working families, between impoverished communities and tourist resorts, between gated/private communities (e.g. retirement villages, apartment complexes, resorts) and open access communities.

CHARITABLE PURPOSES

The Charities Act 2005 5(1) states that ‘charitable purpose’ must fall under one or more categories:

1. The relief of poverty 2. The advancement of education 3. The advancement of religion 4. Other purposes beneficial to the community. This particular category requires that you show an

objective benefit to a sufficient section of the general public. We will evaluate whether the purpose and benefit in question is charitable or not – based on case law.

ACTIVITIES

1. What would a NZ Ratepayers Alliance work on? Consider ‘scope of work’ or brief(s)

Under “the Advancement of Education” – the NZRA could (for example):

• Prepare and disseminate information

o to property owners about their relationship with local authorities (councils) as Ratepayers; about their rights as Ratepayers (according to relevant legislation) and about the obligations of local authorities with regards to their dealings with Ratepayers;

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.o to tenants about their rights as residents and/or leaseholders - to participate in opportunities

presented by councils (or as required of them) when considering the services to provide the communities in which they live or operate, and on ‘fees and charges’ (as distinct to Rating Policies). o to other organisations, (for example, about their local Ratepayers Associations and/or on matters of

interest to Ratepayers, e.g. to IPENZ, NZPI, REINZ, Community Law, CAB etc); o to local authorities and organisations representing them (e.g. to LGNZ, to SOLGM) o about what Ratepayers expect from their council (having canvased perspectives, or analysed

interests), o to Members of Parliament, to Officials of Government and to Ministers. o to universities, training organisations, technical institutes and schools

• Prepare and make available “How to” guides for Resident and/or Ratepayers Associations. For example, to assist them to understand and to act effectively in the array of typical Ratepayers Asstn activities :-

o the processes and operations (required modus operandi) of local authorities; o the various planning frameworks associated with different functions (e.g. under the LGA, the RMA,

the Reserves Act, the [Public] Health Act, the Rating Act, etc), and; o about best practice methods promulgated by relevant professional disciplines working within local

authorities and on ways/means to evaluate performance and hold accountable for performance; o navigating working with or attempting to influence the work programmes (and services) provided by

local authorities, and; o on monitoring the performance of the organisation, the CEO, the Mayor/Chair and other elected

members; o on monitoring compliance with Standing Orders and on compliance with legislated requirements o on legal advice pertinent to the running of a local authority, including peer review (independent

legal opinions) on legal opinions of in-house legal counsel o interpreting required documents, analysing the work of local authorities; o on preparing submissions and delivering presentations in hearings held by local authorities; o on working with media; o filing an objection on a property assessment contained in a RID; o making an LGOIMA request; o taking a deputation to Council; o laying a complaint with the ombudsman’s office, etc.

• Prepare and distribute information for elected members and candidates on Ratepayers’ expectations of them, as representatives around the Governance table that is Council.

Under “the relief of poverty” – the NZRA could: (for example)

• Undertake research and share information on the causes and impact of Rates rises and on the implications of Rating Policies, and of fees and charges regimes on low-income households (i.e. the ability of citizens to access goods and services provided by local authorities and/or on engaging with local authorities and/or in civic affairs).

• Research questions around the ‘affordability of rates’ for different cohorts, and of compliance with local government regulations;

• Research the geography of core functions; the provision of goods and services by local authorities to different communities (e.g. to inform understanding on access to goods and services).

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.• Distribute the findings of research to various target audiences (e.g. those able to make use of such information to off-set or remedy unintended consequences, or able to review the systems that perpetuate the effects of poverty).

Under “other purposes beneficial to the community”. This particular category requires that you show an objective benefit to a sufficient section of the general public. The NZRA could:

• Undertake research, prepare information and distribute it – about poor practice(s) in the work of local authorities; as well as into what constitutes good and/or ‘best practice’ by the sector – from the perspective of Ratepayers (and Residents).

• Provide an advisory and/or support service to all who seek information and/or assistance in understanding the work of local authorities;

• Provide an advisory and/or support services to ratepayers (and/or residents) with some issue that has arisen for them in dealing with their local authority.

• Provide a co-operative, collaborate, alliance (framework) within which Ratepayers Asstns (and Ratepayers) can pool their efforts or share resources towards investigating matters of public interest vis a vie civic and/or community affairs, the work of local authorities and of Government (in delegating or devolving powers and functions to local authorities), and to disseminate information to various relevant audiences (e.g. media, local authorities, various agencies of Government with some relationship with the issues, etc).

• Provide a one-stop-shop – for information and advice to Ratepayers, to Ratepayer Asstns and to others who seek it, with regards to their interactions/relationships with local authorities and other agencies with some role over-seeing the work (functions and responsibilities) of local authorities.

• Provide a sounding board role on matters of interest to Ratepayers,

• Provide a facilitator role, to promote participatory approaches in forming a “Ratepayers Perspective” – at all levels where such a perspective would contribute meaningfully to considerations, deliberations (or debate) and decision-making by those in public office or Governance roles (including in CCOs or LATEs).

• Provide a communications role on behalf of Ratepayers Associations, in national (NZ wide) matters of relevance to Ratepayers and their tenants.

• Facilitate and enable a nation-wide network of Ratepayer (and resident) Associations, to support the work of each Asstn individually, and to establish a strong regional Ratepayer network and an over-arching national alliance, for the benefit of communities of Ratepayers (and residents)

2 How will it conduct its activities? Consider roles, functionality and/or structure

o Are there priorities among these activities? Consider one or many and how to rank o Can some activities be considered ancillary to others? Consider sequencing – what must be done first,

second, third on the road to undertaking X actions. For example, advocacy might be an ancillary activity arising out of informing others of findings of research, or about case studies (various potential audiences). o Can some activities be best undertaken within Regional Alliances? o Are there other alliances that need to be forged – for example, a Rural Sector, a Metro Sector, a

Provincial Sector (mirroring LNGZ’s structure) – to support research and information dissemination of most relevance to the different sectors – and aligning nationally only over activities of shared interest to all Ratepayers.

Funding of Activities (of a NZRA or RAoNZ)

o What are the likely ‘costs’ of these activities? Consider scaling - smaller to large o How could these activities be funded? Consider all potential sources of funding

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.o Are there identifiable income streams or could a ratepayers Org/Co/Inc. Soc stimulate income streams? Identify self-funding activities (cost-recovery) vs those able to generate income and those attracting cost o Who are the beneficiaries of these activities or where do the benefits fall? o Are there customers or potential clients? o Value adding opportunities?

OBJECTIVES or GOALS

o What are these activities intending to achieve (for Ratepayers and/or Ratepayer Asstns) o Identify possible goals (SMART goals)

For example – a NZRA may strive to achieve the following:-

• Act as an umbrella body;

• Act as a national resource centre – easily accessible by Ratepayers Associations (and Ratepayers wanting to establish a R&R Asstn)

• Prepare and disseminate Information, advice and resources to enable R&R Asstn to operate efficiently and effectively;

• Undertake research and prepare ‘information’ fit for various audiences;

• Make grants/loans to Ratepayer Asstns (e.g. travel to conventions – having fundraised for same);

• Make grants to organisations, advancing the purpose of the NZRA (e.g. to assist with preparing a case for judicial review, to set precedents);

• Provide advice, information and advocacy on matters of common interest;

• Provide a building/facility or venue to support the work of a NZRA;

• Provide Human Resources (e.g. staff) – to advance the work/activities of the NZRA, and to assist member R&R Asstns and/or start ups;

• Provide finances (e.g. invest in ?) – for discussion;

• Provide services to member R&R Asstns (e.g. mentoring, facilitation to establish, support in applying for funding and/or in undertaking their activities, research and investigations);

• Sponsorship (e.g. via undertaking research, in convening and hosting conferences – etc);

• Repository of examples of good practice and bad practice;

• Deliver training for would be candidates, and for R&R Officers;

• OTHER?

REFER back to the ACTIVITIES _ why doing them, what hope to achieve?

PURPOSE(s) - possible array of objectives, goals and principles informing modus operandi of NZRA. E.g.

• To provide a vehicle for Ratepayer Associations and ratepayers to forge understanding of common interests, to network, to build unity, to share resources, and to work together in support of Ratepayers common interests.

• The establishment of the NZ Ratepayers Alliance is an agreement to work together, for the mutual benefit of Ratepayers, and in our shared interest.

• To establish a national organisation to undertake research into, and provide oversight on/of the matters of shared interest to all Ratepayers of New Zealand.

MEMBERSHIP

Any Residents & Ratepayer Association (formalised with its own Constitution) can affiliate to the NZRA – and becomes an Asstn Member automatically upon payment of “Affiliate Member Association” fee.

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.Any individual resident or ratepayer who supports the objectives of NZ Ratepayers Alliance can become a member OR perhaps, an individual supporter (upon agreeing to ‘objectives’ and paying the fee).

Any organisation and/or corporate entity that supports the objectives of the NZRA can join as an org and/or corporate supporter (to be discussed?)

Councils and agencies of Government (including quango) are not eligible for membership (to be discussed)

ORGANISATION STRUCTURES (Refer to Appendix – from pg 7 – copied from Companies Office)

Characteristics of different structures

o Unincorporated group o Informal alliance o Incorporated Society (not for profit or registered as charitable) o Community Trust (not for profit or registered as charitable) o Company (for profit) o Provident Society

Considerations

o For Profit vs Not for profit vs Charitable? o Being political AND Charitable o Public benefit and charitable purpose(s) o Advocacy for causes

BUSINESS PLANNING - any advice or directives to be given to whomever is to lead/drive establishing, stabilising and growing a fledgling NZ Ratepayers Alliance?

E.G. Start small, but start as we mean to go on.

APPENDIX

(following pages 7-18incl)

All of the content below has been copied directly from the Societies Office or the Charities Commission websites.

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.Initial considerations for organisational structures

Initial considerations Before your group decides what sort of organisational structure will suit it best, you should have gone through the planning process and be clear about the group's role in the community, the nature of your project and how you intend to operate. Fitting the organisational structure around the group's activities is much better than trying to fit the group's activities around the organisational structure.

You need to be clear about:

• flexibility: how much flexibility do you need as the project or service develops?

• size: will there be any limit to the size of the group?

• what the desired culture and values of the group are

• what activities the group proposes to undertake (the various legal forms have different restrictions on their activities while an unincorporated group will have very few)

• who will make the decisions do you want to separate governance, management and ownership and have controls outside the group?

• funding: how much is needed, from whom and for what?

• accountability: how will the group's financial performance be monitored?

• liability: who will be liable if things go wrong?

• responsibilities: management, governance and operational.

When you have answers to these questions, you will be in a much better position to choose the right structure for your group.

Tip: The Community Law Manual has a very useful resources in Chapter 2 - Choosing the Right Legal Structure for your Group - http://communitylaw.org.nz/community-law-manual/chapter-27- community-organisations-and-the-law/choosing-the-right-legal-structure-for-your-group/

Formal organisational structures When a group chooses to formalise its organisational structure, it becomes a legal charitable (or not-for- profit) organisation. The two most common formal structures for New Zealand community groups are incorporated societies and charitable trusts. While the two formal set-ups have some differences, both of them establish a group as a legal entity that is separate from the people who formed or make up the group. There are two ways an organisation can be incorporated:

• a society may incorporate under the Incorporated Societies Act 1908

• a charitable society or trust may incorporate under the Charitable Trusts Act 1957.

Advantages -

There are many advantages to having a formal organisational structure, including:

• having a formal document (deed/constitution) setting out what the group does and how it will do it

• access to a wider range of grants, donations, contracts and loans

• better credibility and accountability

• the possibility of applying for charitable status, and so benefiting from exemptions from income tax, resident withholding tax and gift duty

• prevention of people being personally liable for the group's debts.

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.Benefits of incorporation

Separate legal identity -

As a separate legal entity, an incorporated group can:

• execute documents in its own name

• enter into contracts in its own name, subject to its own rules

• buy, sell, own, lease and rent property, subject to its own rules

• borrow money and give securities, subject to its own rules

• sue and be sued in its own name.

Perpetual succession An incorporated group has perpetual succession, which means the group continues to exist even if the membership of the group changes (as long as it complies with the law and is not wound up). This permanence gives the group further legal recognition and makes it more creditable, which will help when seeking grants or donations or entering into contracts.

Limited liability The members of an incorporated group benefit from gaining limited liability. This means that when the group incurs any debts or other legal liabilities, it can usually only be sued in its own name, and its members are not usually personally responsible. However, members can be held personally liable when, for instance, they don't make it clear to third parties that any liability the member incurs is actually for the group.

Choosing the right structure

If you are thinking about formalising the structure of your group, you will already have a clear purpose and vision for your organisation. You also need to take into account the type of project and the role the organisation plays in the community e.g. the organisation may want to act as a facilitator and develop local projects; it may support other groups and projects; or it may undertake trading activities, either for itself or for the community. Each type of structure has advantages and disadvantages that will suit some types of groups and projects better than others. The information here provides some general guidelines about the different organisational structures, but it's recommended that you look at more technical and legal information such as:

• Community Law Manual Chapter 2: Community Organisations and the Law http://communitylaw.org.nz/community-law-manual/chapter-27-community-organisations-and-the- law/what-this-chapter-covers-27/

• Societies and Trusts Online http://www.societies.govt.nz/cms/incorporated-societies/starting-an- incorporated-society

What are the differences between incorporated societies and charitable trusts?

This table provides a quick comparison of some of the key differences between incorporated societies and

charitable trusts.

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.Incorporated society Charitable trust Form CT1 Charitable trust Form CT2

Suited to...

Not for profit organisations with a charitable purpose (e.g. education, religion, relief of poverty and other purposes that benefit the community)

Not for profit organisations with a charitable purpose (e.g. education, religion, relief of poverty and other purposes that benefit the community)

Charitable purpose

Not for profit organisations where members have a common interest (eg sport, hobby and community interest)

Can have a charitable purpose Must have a charitable purpose Must have a charitable purpose

Size Minimum of 15 members One or more trustees Minimum of 5 members

Decision making

By members at general meetings and by the committee in accordance with the rules

By members at general meetings and by the committee in accordance with the rules

Members

By the trustees in accordance with the trust deed

Who can be a member is determined by the rules

No members – the trustees run the trust to benefit the beneficiaries

Who can be a member is determined by the rules

Accountability

Trustees are accountable to the Committee accountable to the

beneficiaries and must comply members

with the trust deed and the Trustee Act 1956

Committee board accountable to the members

Liability

Limited liability - unless members run the society for their own profit (pecuniary gain)

Trustees not liable unless they fail to comply with requirements of trust deed or the Trustee Act 1956

Committee board not liable unless they fail to comply with requirements of the rules

Audit

No – unless required by the rules*

No – unless required by the trust deed*

No – unless required by the rules*

Profits

Must be used to run the society to achieve its purpose. Profits cannot be distributed to members

Must be used to run the charitable trust to achieve its purpose

Must be used to run the charitable trust to achieve its purpose

How to incorporate

Send applications to the Registrar:

▪ an application form with

▪ one copy of the rules

▪ rules certification

▪ NZ$102.22

Send applications to the Registrar:

▪ application form CT1

▪ a copy of the trust deed or

rules

▪ statutory declaration

Send applications to the Registrar:

▪ application form CT2

▪ a copy of the trust deed or rules

▪ statutory declaration

Maintaining registration after incorporation

Send this information to the Registrar:

▪ annual financial statements

▪ rule changes (including

names)

Send this information to the Registrar:

▪ trust deed changes (including

names)

▪ change of contact details

Send this information to the Registrar:

▪ rule changes (including names)

▪ change of contact details

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.▪ change of contact details

Winding up

According to the rules – surplus assets can be distributed amongst members

According to the trust deed – surplus assets must be distributed to other charitable organisations

According to the trust deed – surplus assets must be distributed to other charitable organisations

Umbrella groups Another way for groups to work successfully in their communities without incorporating themselves is by going under the wing of an umbrella group. An umbrella group is usually a larger organisation that is an incorporated body and can provide resources and backing to smaller groups that work in similar areas and/or share similar goals.

Working with an umbrella organisation allows a smaller group to get on with projects without having to take on the costs and responsibilities of being incorporated. It can help with obtaining funding and the umbrella group may also receive and pass on any money to a group within its structure, possibly charging a handling or administration fee for its services.

Advantages -

By using an umbrella organisation:

• you can make use of the skills and resources of the umbrella group

• you have no long-term commitment

• you may save on administration costs

• as a new group you can secure a small amount of funding

• you are working in partnership in the community.

Limitations

• your eligibility for grants may be limited

• employment arrangements and responsibilities can be confusing when the group under the umbrella wants to employ someone

• the umbrella group requires full disclosure of financial information

• individual liability may not be limited, so individuals in your group may not be protected from being sued

• problems can arise with how assets are dealt with

Tip: Make sure the umbrella group is a legal entity and get a written agreement to ensure the relationship is clear. Both parties should seek legal advice before signing any agreement between them. For more information visit: http://communitylaw.org.nz/legal-information/browse-all-topics/

Benefits and obligations of being registered as a Charity

Being a Registered Charity brings with it a number of benefits, and some obligations.

Benefits -

Being a Registered Charity means:

1. You can call yourself a registered charitable entity. It is an offence to even imply that you are a registered

charitable entity if you are not registered under the Charities Act 2005.

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.2. You are eligible for exemptions from income tax on all or some of your income, as well as being entitled to

other tax benefits. You may also be eligible for donee organisation status* - contact Inland Revenue for more information on this. 3. You can apply to funders who only fund Registered Charities. 4. Supporters, stakeholders and funders can find detailed information about your organisation on the Charities

Register. 5. Your registration number can be displayed on promotional and identification material to provide proof of

your registered charitable status to prospective donors and funders. 6. You will enjoy improved public trust and confidence as information about your activities and the way you

use your resources is available on the Charities Register. 7. Your representatives can attend Charities Services’ annual meetings and access education and training

events and forums.

Obligations

- Being a Registered Charity brings with it some obligations. You must:

1. Operate in accordance with the Charities Act 2005. 2. Carry out activities to advance exclusively charitable purposes as per the legal definition (see the Charitable

purpose section of our website for more information).

3. Operate in accordance with your organisation’s rules. 4. Ensure your organisation provides only public (and not private) benefit. 5. If anyone collects funds for a charity by telephone or the internet, then they must provide the charity’s

registration number on request. 6. Report annually to Charities Services. This includes completing an Annual Return and providing non-financial and financial information through a performance report/financial statements that comply with reporting standards. A fee may apply for submitting your annual return.

7. Notify Charities Services of any changes to your organisation, such as a change in rules, officers, or address

(via 'Update Charity Details'). 8. Provide any information about your organisation requested by Charities Services (under Section 51 of the

Charities Act 2005). 9. Recognise that your organisation’s information will be made publicly available on the Charities Register,

unless Charities Services considers it is in the public interest not to include that information or document on the public Register. *People can claim a tax credit when donating to a donee organisation.

Charitable purpose and your rules

‘Rules’ are the documents that set out your purposes, what you do and how you operate. For example, they may be your trust deed, constitution or charter. When you apply for registration, we read your rules and consider your activities to identify whether you have a ‘charitable purpose’.

To be considered for registration as a charitable organisation, you must send us a copy of your signed rules, including any amendments, with your application form. While we don’t require any specific wording in your rules, we must be satisfied that your organisation:

• has a legal name that is not misleading or offensive and

• has exclusively charitable purposes that fall within one of the four purposes set out in section 5(1) of the Charities Act 2005 and which provide a public benefit and

• is not for the private benefit or profit of an individual and

• restricts distributions on winding up, so they only go to charitable purposes and

• is a trust, society or institution (i.e. one person acting in their personal capacity cannot be a Registered Charity).

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.You can find more information about rules and examples of wording in the Rules and the Charities Act 2005 section of our website.

Charitable purpose

If you decide to apply to register as a charity, you will hear a lot about a legal concept called ‘charitable purpose’. This is a complex legal concept embedded in section 5(1) of the Charities Act 2005. It has evolved through 400 years of case law, since the Statute of Charitable Uses came into force in England in 1601. Judges’ decisions continue to shape the meaning of ‘charitable purpose’ in New Zealand.

Many organisations have worthy goals but Charities Services can only register an organisation when we are confident that it has exclusively charitable purposes and is for the public benefit. The legal definition of ‘charitable purpose’ is quite different from what may be commonly understood by the public.

The charitable purposes set out in your rules or governing document, and the activities you intend to carry out, are extremely important to the registration process, and will always be assessed against the legal meaning of ‘charitable purpose’ in section 5(1) of the Charities Act 2005 and case law. It’s important you understand the categories of charitable purpose and what each of them mean.

The Charities Act 2005 says that ‘charitable purpose’ must fall under one or more categories:

1. The relief of poverty.

2. The advancement of education.

3. The advancement of religion.

4. Other purposes beneficial to the community.

This particular category requires that you firstly show an objective benefit to a sufficient section of the general public, and secondly that the purpose and benefit in question is charitable based on case law.

Activities

When assessing applications, Charities Services looks at the applicant’s current and proposed activities to determine whether the activities advance an exclusively charitable purpose. The Supreme Court recently confirmed that an organisation’s purposes may either be identified through its statement of objects, or inferred from the activities it undertakes. For this reason, Charities Services asks registration applicants to provide information about their activities.

Public benefit

A charity’s purpose and all its activities must provide benefits to the public or a sufficient section of the public, not just to an individual, organisation or closed group.

Ancillary or incidental objectives

A charity can have a non-charitable purpose—for example, running social events or running a business— as long as it is secondary or incidental to pursuing its main charitable purpose. In making a decision whether a non-charitable purpose is ancillary, we examine whether your non-charitable purposes and activities are necessary to carry out your charitable purpose, and how much of the non-charitable activity you are involved in. For example; a business may be registered as a charity if all its profits are directed to its charitable purposes and all the other registration requirements are met.

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.Political activities

Many not-for-profit organisations try to influence change by raising awareness of a societal issue or trying to change local or national laws. There is no general prohibition on political advocacy being a charitable purpose, but in a recent ruling the Supreme Court noted that it may be uncommon for political purposes to be charitable purposes. The Court noted that the advancement of causes will often be non-charitable as it is not possible to say whether the views promoted, and the means by which they are promoted, are of benefit in a way that the law regards as charitable.

In assessing whether a political or advocacy purpose is a charitable purpose, Charities Services must assess the intended result of the view that is being advocated, the means of achieving that result, and the manner in which the result is achieved.

Even where a political purpose is not charitable, it may not be a barrier to registration, as long as it is merely ancillary to an established charitable purpose. You can find more information on the Advocacy for causes page.

Some examples of particular types of organisations

Marae -A marae has a charitable purpose if:

• the physical structure of the marae is on Māori reservation land; and

• the funds of the marae are used only for administering and maintaining the land and the marae’s physical structure, or for other charitable purposes; and

• it advances benefits for the public.

Sporting clubs and groups Sporting organisations can qualify for registration as charities if the promotion of sport is the means by which a charitable purpose is pursued - for example the ‘advancement of education’ or ‘promotion of health’. They must also advance benefits for a significant section of the public, not primarily for an elite few sports people.

Not charitable – examples where applicants would not be registered.

1. A commercial orchard wanted to donate half their profits to a local children’s hospital and

give the other half to private shareholders. They would have to donate 100% of their profits or keep the remaining profit within the organisation for future charitable work. 2. A group that is set up to lobby for peace by ending all wars. Not charitable because the group

cannot establish a public benefit in “ending all wars”. 3. A school class want to set up a fund to help their classmate get cancer treatment in

America. They would have to help a substantial number of people, not just their classmate. 4. A professional sporting body wants to set up a fund to help it compete at the Olympics. A

professional sporting body is not charitable

TIP: You can see Decisions explaining why particular applicants have been declined registration. Reading the decisions can help you understand how your purposes must be charitable and provide for the public benefit.

How does my charitable organisation qualify for a tax exemption?

If an incorporated society or charitable trust benefits the community in a charitable way and meets certain

criteria outlined by Inland Revenue, they may be granted a non-profit tax exemption.

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.There are generally three main conditions that a charitable organisation must meet in order to qualify for an exemption:

▪ The organisation’s aims and activities must be exclusively charitable

▪ None of the organisation’s income or funds may be used (or be available for use) to benefit any of its members, trustees or associates

▪ From 1 July 2008 charitable organisations must be registered with Charities Services For more information on tax exemptions for charitable organisations visit the

Inland Revenue website.

Public benefit and charitable purpose

One of the most important things charities do is provide a public benefit, but not everything that benefits the public is “charitable.”

To qualify as a charity, an organisation has to provide a benefit to the public which is very similar to what has been accepted as charitable by the courts. Charities Services assesses applications on a case-by-case basis in light of those previous court rulings about charitable public benefit.

Many cases have discussed these matters, and it can be confusing to navigate. If you have questions, please don’t hesitate to ask us. Although each charitable purpose involves a specific set of considerations, there are some general principles that apply to all organisations:

1. The benefit must be very similar, but does not need to be identical to another charitable purpose

2. The benefit must be for the public or a sufficient section of the public

3. The benefit must be capable of being identified and defined

4. Illegal purposes or purposes that result in a harm to the community do not benefit the public

5. The benefit cannot be for the private profit of individuals

This page discusses each of these principles in more detail. For more information on how public benefit applies to each category of charitable purpose, see the specific pages on relief of poverty, advancement of education,advancement of religion and other matters beneficial to the community.

What is charitable public benefit? One of the most important historical laws discussing what it is to be charitable is the Preamble to the Statute of Charitable Uses 1601. To be charitable in modern times, charities still need to fit within the “spirit and intendment” of that document. This concept has developed over 400 years of social changes and is now accepted to mean purposes very similar to the charitable purposes that have been accepted by the New Zealand courts.

Identifying whether an organisation’s purpose is charitable can be difficult. It depends on the wording of an organisation’s stated purposes in their rules and their activities. We look at the key facts in previous court cases dealing with similar purposes and consider whether the organisation’s purposes are similar or analogous. We are always happy to help charities rewrite their stated purposes, or amend their activities, to meet requirements.

Although each purpose will involve a specific set of considerations, there are some general principles that are relevant to charitable public benefit.

Similar but not identical Charities Services does not seek to closely match purposes with those that have been previously accepted as charitable, however they must be sufficiently similar to reflect the previously accepted public benefit which has already been established in court decisions. This does not mean they need to be identical. Even

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.where they are not sufficiently similar, we will work with you if you wish to change your rules and activities to meet registration requirements.

The benefit must be public in character The benefit must be aimed at the general public or a sufficient section of the community. Most importantly, we look at who can benefit from the organisation’s purposes. In some situations, limiting who can benefit may be justified. If the organisation’s benefits are available to anyone within a group in need that chooses to take advantage of the benefits, the purposes will be considered to provide benefit to the public, even though in some cases the number that can benefit may be quite small. For example: a group seeking to provide support to individuals suffering from a rare disability might limit who can benefit from its activities, but it does so in a way that is necessary to relieve the disability. However, if this purpose was limited to only named individuals then this would usually not qualify.

Some further examples of how an organisation may limit who will benefit from its charity:

• Directly by making a rule about it (e.g. giving grants to those who live in Auckland);

• By providing a benefit that can only be accessed by members of a certain group (e.g. a scholarship for Māori students);

• By charging (e.g. a health clinic charging a fee).

Some principles that are important to consider:

• Imposing fees for a benefit can be acceptable if done reasonably. For example, unjustifiable fees that exclude many people would not be acceptable. The support of sports that require very expensive equipment would not usually qualify as a charity due to the prohibitive costs of playing the sport. However, if the purpose of the organisation is to give the wider community the opportunity to play an expensive but healthy sport, the organisation may be charitable.

• Limits on public access must be reasonable and appropriate. For example, when an organisation is set up to maintain a hall or protect a heritage site, restricting people from bringing animals may be a reasonable limitation whereas limiting access to a closed club of members may not be.

• When members of an organisation can also benefit, any limitations on membership must also be reasonable in the context of the benefit to the public. For example: a society of doctors set up to improve medical practice may reasonably limit its membership to doctors, because the real benefit is to the wider public from the improvement of public health.

• In New Zealand a purpose to help individuals that are related by blood may be charitable. For example: if a group is set up to educate a particular hapu, this may be acceptable even though the people in the group may be all related. The group still needs to be numerically significant: in the Nga Uri O Wharetakahia Waaka Whanau Land Trust decision, the Charities Registration Board found assisting a group composed of 20 people was not a sufficient enough section of the public to be charitable.

Defined and identified benefit

Some benefits can be seen to be directly for the public, for example, maintaining a public park. Some are less direct, for example, providing a student scholarship that leads to a more educated society for everyone. The key in both instances is that there is a benefit to the public that can be identified and defined, and it is sufficiently similar to a previous charitable purpose.

Where the benefit is remote or merely hoped for, it will not usually be sufficient. For example:

• Providing funding to businesses with the hope that they would employ more unemployed people and would relieve the needs associated with poverty was not enough to qualify. (See the Canterbury Development

Corporation High Court decision ).

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.• Providing support to elite athletes with the hope that others will be inspired to participate in sport is not sufficient to promote health for the wider public. (See the Swimming New Zealand decision ).

Illegal purposes or purposes that result in harm to the community will not be beneficial

If a purpose is illegal or there is a benefit outweighed by a greater harm to the community, then we won’t be able to determine a public benefit. For example:

• A purpose to promote or support an illegal activity such as the recreational smoking of marijuana will not provide a benefit to the public.

• The courts found an organisation seeking to ban testing on animals was not charitable. Purposes to protect animals can be charitable, but in the case of testing on animals, the benefit from protecting animals was outweighed by a greater harm to humans.*

• A purpose to attempt to cure homosexuality was seen to be non-charitable as homosexuality is not considered a disease in New Zealand, and attempting to cure homosexuality might have the impact of hurting individuals. [See the Exodus decision].

Some charities seek to change the law or policies to achieve their purposes. Deciding whether these types of purposes can be charitable is complex, and is discussed in the Advocacy for Causes page.

A purpose cannot be charitable if it is for the private profit of individuals

It is a key element of charities law that a charity must provide benefits to the public, and not to private individuals or groups. This is particularly important when charities fundraise through profit-making activities, support for-profit businesses or pay individuals for services.

A registered charity can carry out profit-making activities, as long as all of the profits created are used to further charitable purposes and are not used to further the private financial interest of individuals or other non-charitable organisations (known as ‘private benefits’). When a profit is made, payments or dividends must not be distributed to shareholders, as this would create private benefits which are not considered ancillary or incidental. The only exception is when the shareholders are themselves registered charities or the shareholders hold the money on trust for charitable purposes, which needs to be specified in the charity’s rules. Any profit created by a registered charity can only be used to further charitable purposes.

For example,

• If a foundation owns all of the shares in a charitable company, the company can make profits and distribute dividends to the foundation.

When a charity is providing support to for-profit businesses, charities need to be careful to weigh up any benefits to individual businesses with the public benefit they are seeking to achieve.

For example:

• Providing a ramp to a business to assist them to support those with disabilities will usually be charitable, even though this may support the for-profit business.

• Promoting the business of educational providers overseas to try to encourage more overseas students to study in New Zealand will usually not be charitable if a significant number of educational providers are for-profit businesses. For example: see the Re Education Trust High Court decision.

When a charity pays for goods or services, payments should be reasonable and based on ‘arms-length market rates’ or be lower than market rates. Arms-length means they must be made as if they were between two unrelated

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.individuals. The activities must also be to further their charitable purposes and not to benefit the individuals concerned. When making decisions in this area, the officers of the charity should be aware of conflicts of interest.

For example:

• A trust with two trustees may run a shop to raise funds for its charitable endeavours. If both trustees decided to hire themselves to run the shop, at higher than average wages, this may not qualify for registration. It may be an independent purpose to benefit the individuals and not the trust. For example: see Karmic Charity Trust decision.

More information on public benefit - The legal decisions available on our website deal with the issue of public benefit. Some important court decisions in this area include:

• Plumbers Gasfitters and Drainlayers Board : a group set up by legislation to register plumbers, gasfitters and drainlayers was considered charitable because although individual businesses may benefit from registration, the purpose of registration was public health and safety.

• Grand Lodge of Antient Free and Accepted Masons : a group that sought to advance education and other charitable purposes for the benefit of its members was not charitable because the membership requirements were too strict.

• Queenstown Lakes Community Housing Trust : a group provided various schemes to help individuals into home ownership or housing. Although finding that purposes directed towards social cohesion or the composition of communities are capable of being charitable, the court found in this case the private benefits to individuals from home ownership were too significant.

• Liberty Trust : an organisation that gave people the ability to buy homes consistent with their religious beliefs was found to be charitable for the advancement of religion. Although the organisation did provide private benefits, they also provided information on their religion, and the court found the public benefit of religion was the focus of the organisation’s activities.

• Travis Trust : a horse racing group closed to public subscription was not sufficiently open to the public.

NOTE: These summaries are only relevant to the question of public benefit. Each court decision also made comment on whether the purposes of the groups were charitable.

Charities Law in New Zealand is a book available for free on our website. There is a chapter on public benefit, which explains what may be acceptable. It is not an authoritative statement of the law.

If you have any questions about charitable purpose and public benefit, please emailinfo@charities.govt.nz, and one of our staff will be in contact with you.

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.Geared for success

Regardless of size, income, area of activity or background, there are some key characteristics that effective Registered Charities demonstrate:

Clear purpose and direction - Effective Registered Charities are clear about the characteristics and needs of their beneficiaries and their charitable purpose(s) and vision. They use this knowledge to guide decision making and activity. All such information should be included in a charity’s formal rules document.

Strong governance - Effective Registered Charities are run by a clearly identifiable group who make all the significant decisions for the charity. They have the right balance of skills and experience, and understand their own and their charity's responsibilities and obligations. This group is responsible for ensuring that the charity carries out its work to achieve its charitable purposes.

The right people for its activities - An effective charity ensures that its people have the right qualities and competence to manage and support the delivery of its services.

Sound and prudent - An effective charity clearly operates in line with its rules document and can identify the financial and other resources needed to achieve its purposes. It can obtain, control and manage those resources to achieve the best possible value from them.

Are you in a good position to register?

Check your readiness by answering yes or no to these questions.

1. Have you done research including searching the Charities Register to find examples of what similar

organisations look like?*

2. Can you answer what the benefits and obligations of becoming a registered charity mean for your

organisation?

3. Can you demonstrate that the purposes of your organisation fit with the legal definition of charitable

purpose?

4. Can you demonstrate how your activities advance your charitable purposes?

5. Does your rules document set out your organisation’s purposes, what you do, and how it operates?

6. Do you know who your officers are, or will be, and whether they are qualified to be an officer?

7. Are you able to ensure adequate financial management of your organisation to comply with filing

your Annual Return?

8. Does your organisation have the right people to ensure strong governance and management?*

9. Have you identified your organisation’s strengths and weaknesses online

at www.nznavigator.org.nz ?*

*Highly recommended, but not a requirement for registration. If you answered ‘yes’ to ALL of the questions above, then you’re in a good position to be taking the next steps to apply to become a Registered Charity

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