Towards solutions, pressing issues in charity law

Key takeaways

Gilbert + Tobin’s Sydney offices hosted the Charity Law Association of Australia and New Zealand (CLAANZ) 2026 Annual Conference in July, with the theme of Towards Solutions: Pressing Issues in Charity Law. A clear message emerged throughout the conference – purpose is under pressure. This is not because it is disappearing, but because the forces bearing down on charities are testing whether purpose genuinely drives decision-making or merely serves as a guiding principle.

Across two days, the conference tackled commerciality, capital, mergers, bequests, AI, charity taxation, regulatory priorities, volunteering, governance and more. A consistent theme emerged: purpose functions as both compass and anchor. It guides organisations forward while holding them steady when commercial pressures mount.

Commercial activity and the master, not servant test

Gilbert + Tobin Partner Darren Fittler’s keynote framed commercial activity not as a threat to charitable purpose, but as a servant of it. Organisations may pursue commercial activity provided it furthers charitable purpose. However, the moment it becomes a non-charitable purpose of its own, governance and regulatory concerns arise.

The G+T Charities team applies a five-part stress test:

• finance (what is the cost?)
• resource allocation (what resources are being committed?)
• quantum (what proportion of activity is commercial versus mission-aligned?)
• distraction (is the board and management losing focus on purpose?)
• exit plan (can the organisation scale back or exit if the activity is not working?)

Documentation is critical. Boards should maintain ongoing records explaining how commercial activities serve the charitable purpose.

Wholly owned subsidiaries can help quarantine commercial risk, particularly for public benevolent institutions. However, structure alone will not achieve compliance. Furtherance of charitable purpose is the core, not the number of entities in the corporate group.

Debt as a tool for mission

Charities cannot generally distribute profits to shareholders or members. Debt is therefore the primary mechanism for raising capital at scale.

Boards must distinguish between mission debt and survival debt.

• Mission debt is intentional, disciplined and directed at growth. The organisation understands the risk profile, knows the consequences of default, and can explain to stakeholders why it is pursuing the strategy
• Survival debt, by contrast, keeps the doors open and postpones difficult decisions

The community housing sector is leading innovation in this area, with 15-year plus debt facilities and profit participation-like loans that begin to resemble equity while remaining technically debt.

Mergers, restructures and the ego problem

G+T Partner Elizabeth Wighton featured on a panel on mergers, alongside Simon Miller from the Brotherhood of St Laurence and New Zealand charity law practitioner Steven Moe, chaired by Darren Fittler.

Elizabeth is observing a mix of strategic growth mergers and distress-driven acquisitions. In both cases, purpose alignment is a fundamental driver. However, a common temptation exists: because parties want to ‘do the right thing’, they can assume due diligence is optional. It is not. Directors’ duties do not disappear because a transaction is purpose-driven. Due diligence is critical to ensure regulatory compliance, purpose alignment and to identify any hidden liabilities that may threaten future activities, compliance or even viability.

Steven Moe identified ego as a significant barrier to mergers, whether founder ego, organisational ego, or brand ego. Yet when ego is set aside, powerful outcomes become possible. He shared an example of an ageing religious group (average age 85) that chose to transfer its debt-free hall and property to a thriving younger organisation in the same town with the same charitable purpose. For Steven Moe, this exemplifies charity merger at its most purposeful: one organisation enabling another to grow in perpetuity, with both benefiting from the unity.

Simon Miller reinforced this point from an in-house perspective. The current economic environment is seeing some long-standing organisations facing deficits. The window for consolidation is open.

Bequests and the bottom line: practical tips for charities

Charitable bequests are a vital source of funding for many not-for-profits, G+T Special Counsel Kaushalya Mataraaratchi joined a panel with Katrina Williams and Morgan Koegel (chaired by  Associate Professor, Natalie Silver) exploring the practical issues facing charities navigating bequests.

The statistics discussed tell a striking story: only 6.5% of Australian wills include a charitable bequest, and of those, a significant amount never reaches the intended charity. An estimated $40 million in charitable bequests goes unnotified or unpaid every year, often because charities are not named by their correct legal name, estates lack family beneficiaries, or executors fail to distribute fully.

Family provision claims present a significant risk: where a family member challenges a will, they succeed against charitable beneficiaries around 78% of the time. The key message for charities is not to sit on the sidelines. At minimum, stay involved in settlement negotiations. Better still, band together with other charities named in the estate as a united front is often more persuasive and cost-effective.

Sometimes a charitable gift cannot be carried out as intended, for example if the charity no longer exists. Courts can apply the cy-près doctrine to redirect the gift. The message for charities: encourage donors to express bequest intentions in broad terms, as overly specific conditions become harder to administer as circumstances evolve.

Tax considerations also matter. Executors do not always maximise estate value by taking advantage of a charity’s deductible gift recipient (DGR) status. Handled correctly, a charity’s DGR status may eliminate capital gains tax on shares or property, benefiting all estate beneficiaries.

The overarching message: charities need to advocate for themselves by seeking information from executors early, obtaining specialist advice where estates are contested, identifying tax-saving opportunities, and joining forces with other charities named in the same estate.

Taxation, regulation and volunteering

Beyond these sessions, the conference dedicated substantial time to three topics that affect almost every charity: regulatory compliance, taxation and volunteering.

Regulatory insights and priorities

Practitioner Murray Baird chaired the session that addressed regulation from different angles. The first featured Australian Charities and Not-for-profits Commission (ACNC) Commissioner Sue Woodward AM alongside Tom Wheeler, Assistant Commissioner at the ATO, Charlotte Stanley from Charities Services New Zealand and Stewart Donaldson from Inland Revenue New Zealand. The regulators shared their compliance priorities and indicated a preference for education over punitive action where organisations are genuinely engaging with their obligations.

Jennifer Batrouney AM KC chaired a companion session that examined regulatory compliance from the practitioner’s perspective. Practitioners Sam Burnett, Vera Visevic, Jessica Lipsett and Anna Young shared practical observations on where charities are struggling with compliance obligations and where advisers can add the most value. The consistent theme: proactive engagement with regulators produces better outcomes than reactive responses to enforcement action.

Taxation

Victorian Barrister Angela Lee chaired a panel that brought together practitioner Alice Macdougall, New Zealand tax adviser Nick Bland and Melinda Knight from the ATO. The discussion covered the tax challenges that charities’ increasing commercial sophistication creates. As organisations take on debt, establish subsidiaries and enter into complex revenue-generating arrangements, managing the interaction between income tax exemptions, DGR endorsement and section 50-50 compliance becomes increasingly difficult.

The panel also explored cross-border tax issues. The New Zealand perspective highlighted how similar jurisdictions nevertheless vary when it comes to taxation and public policy decisions.

Volunteering

Sari Baird, Governance, Legal and Risk Leader, chaired a panel featuring charity law practitioner Matthew Turnour, Michelle Kitney from Volunteering New Zealand and Nancy Campisi from Lifeline. The sector relies significantly on volunteers, yet organisations often poorly understand the legal framework surrounding volunteer engagement.

The discussion covered duty of care obligations, insurance requirements, work health and safety considerations and the changing expectations of volunteers themselves. Younger volunteers in particular are seeking more structured, time-limited and skills-based engagement rather than open-ended commitments. Charities that fail to adapt their volunteer programs risk losing access to a workforce on which many depend for service delivery.

The legal obligations attaching to volunteer programs deserve more attention than they typically receive. Boards should treat volunteer governance with the same rigour applied to employment arrangements.

Governance and the road ahead

Three governance challenges surfaced across both days. On the question of paying directors, the arguments for payment are compelling, particularly regarding inclusion and the increasing complexity of board work. However, if an organisation chooses to pay, it should pay properly by reference to independent benchmarking (which can be ascertained through helpful tools like the AICD Director Remuneration Report), and it must be aware of the legal implications of moving to a remunerated model.

On AI, the technology is impacting every sector, and charities are no exception. Organisations are adopting AI rapidly to maximise the impact of limited resources. However, governance is not keeping pace with use. Judgment, experience and wisdom remain difficult to replicate.

The sector is becoming more complex. Debt markets, M&A transactions, AI governance and multi-million-dollar estate disputes all demand sophisticated legal and financial capability. Yet the sector’s ethos remains grounded in service and mission. As Darren Fittler observed: ‘Purpose is under pressure because we forget it.’ Holding both realities together is the defining challenge for charity leaders in 2026 and beyond.