TRUSTEE (CHARITABLE TRUSTS) AMENDMENT BILL

Introduction and First Reading

Received from the House of Assembly and read a first time.

Second Reading

The Hon. G.E. GAGO (Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister for the City of Adelaide) (17:56): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

The Bill addresses a relatively simple matter, but one that is of considerable concern to the country communities of South Australia.

During the passage of the then Health Care Bill, the Government made a commitment to the Parliament that incorporated Health Advisory Councils established by that Bill would continue to hold and receive donations and bequests previously held by the local incorporated hospitals on trust for the local hospital. This commitment was reflected in the provisions of the Health Care Act 2008 which gave the necessary powers to incorporated Health Advisory Councils (HACs) to undertake these functions.

Donations and other gifts to an incorporated HAC will only be tax deductible if the HAC is endorsed by the Australian Taxation Office (ATO) as a deductible gift recipient (DGR) for the operation of its gift fund. The gift fund, in turn must be established and maintained by the HAC as a valid charitable trust. At the time the then Bill was being considered, the Department of Health advised the ATO of the proposed governance changes but had not received any advice that there may be an ATO concern about the DGR endorsement about the HACs and any gift funds they may establish.

Not long before the Act was to come into force, and as the Department of Health was preparing to progress the applications for DGR endorsement to the ATO, the ATO advised that incorporated HACs could not be DGR endorsed because they were not a public hospital or a charity. Further, a HAC could not be DGR endorsed for its gift fund because any trust established by the HAC solely for the purposes of distributing money, property or benefits to government institutions, namely public hospitals or public ambulance services, would not (in the ATO's view) be a valid charitable trust because of its connection to government. This view was based on statements in certain English and Australian cases that government entities could not be the objects of valid charitable trusts.

The ATO advice caused concern to the HACs, and the country community more generally, to whom the commitment was made that HACs would continue to be able to establish and manage gift funds, including any existing ones, in their community. This commitment is consistent with the decision of the Parliament at the time to pass the Health Care Act 2008.

As a possible solution to the problem, the ATO advised that a similar issue was addressed in New South Wales and Victoria by amendments to their respective Acts equivalent to the South Australia's Trustee Act 1936 and that South Australia may choose to look to a similar pathway to address this matter.

The Bill before the House makes amendments to the Trustee Act 1936 that will ensure that a trust does not fail simply because of its connection to Government. In effect, the Bill ensures that a gift fund established to hold donations or other gifts for the benefit of a government instrumentality, such as a public hospital or ambulance service, can hold the donations or gifts on trust without being at risk of becoming an invalid charitable trust from the perspective of the ATO A fund established by, for example a HAC, would therefore be considered charitable despite its connection to government. DGR endorsement could then be sought, in relation to the fund and the gifts and donations in the fund utilised for the benefit of the local operations of Country Health SA Hospital Inc and SA Ambulance Service Inc.

The Bill will enable a gift fund to operate in a way that is consistent with the ATO advice as well as meet community expectations about who should be responsible for their donations and bequests to a hospital.

The amendments before the House will therefore enable the incorporated HACs to hold and manage on trust the donations and bequests and to utilise them without risk to the validity of the trust.

The amendments will also address a more general risk to bodies or trusts that was identified as arising out of the original ATO. opinion. Although the ATO's views specifically related to HACs and their gift funds, in principle the advice may put at risk any gift fund that is established that provides benefits to a government instrumentality.

The Bill will have an impact outside of the health sector by ensuring that any existing or future trust does not fail because of its connection to Government. In effect, it ensures the charitable status of a body or a gift fund established by a body that holds, on trust, donations or other gifts for the benefit of a Government instrumentality such as a hospital, an educational institution, a museum or gallery.

Once the Bill is passed, SA Health will progress the applications to the ATO for DGR endorsement. It remains of course ultimately the decision of the ATO to grant the DGR endorsement to a body or gift fund.

The Bill, apart from addressing a concern for HACs, also addresses a previously unknown risk for all charitable trusts that are associated with Government. It is essential to ensure the community can have faith that a donation or bequest can be utilised as intended without jeopardising its charitable or taxable status.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Amendment provisions

These clauses are formal.

Part 2—Amendment of Trustee Act 1936

3—Insertion of section 69D

This clause inserts section 69D into the principal Act. The inserted clause deems a trust to be a charitable trust if the trust provides money, property or any other benefit to or for the purposes of an entity that would, but for the connection of the entity to government, be a charity. The clause effectively permits a charitable trust to exist in respect of an entity that is a charity despite the fact that—

(a) the entity receives government funding; or

(b) the entity is required to implement government policy; or

(c) the entity or the governing body of the entity is comprised of persons appointed by the Governor, a Minister or an agency or instrumentality of the Crown; or

(d) the entity or the governing body of the entity is subject to control or direction by a Minister.

Schedule 1—Transitional provisions

1—Interpretation

This clause defines principal Act as the Trustee Act 1936.

2—Validation of acts under trusts deemed charitable under section 69D

This clause validates acts done or purportedly done under a trust of a kind referred to in proposed section 69D before the commencement of that section.

Debate adjourned on motion of Hon. D.W. Ridgway.