Charities Commission

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Charitable purpose and sports and recreation bodies

Published November 2007

Download the information sheet (PDF, 69KB) to print this document.

Sport and recreation bodies can qualify for registration as charitable entities under the Charities Act 2005 if their purposes are charitable in accordance with New Zealand law.

Summary

Sport and recreation bodies can qualify for registration as charitable entities under the Charities Act 2005 if their purposes are charitable in accordance with New Zealand law.

This means that the purposes must be recognised through case law as being for one of the following: relief of poverty, advancement of religion, advancement of education or other purposes beneficial to the community.

In addition, the Charitable Trusts Act 1957 provides that it is charitable to provide community recreation facilities in the interests of social welfare.

The law has recognised sport as being charitable where it is considered to be advancing education and also in terms of the Charitable Trusts Act.

In addition, sport and recreation bodies may be charitable where their purposes fall within the fourth head of charity “purposes otherwise beneficial to the community”. An example could be where an organisation’s purposes are to promote health through activity.

In all cases, to be charitable, the purpose must be available to the public or an appreciably important section of the public and the organisation must not be carried on for private pecuniary profit.

Matters that the Commission will look at in determining whether sport and recreation bodies have charitable purposes are whether:

  • the entity has purposes that are charitable, for example purposes that aim to advance education or promote health (including through promoting healthy activity);
  • the entity is providing recreation facilities for the community in the interests of social welfare (in terms of the Charitable Trusts Act);
  • the entity is established or maintained only for charitable purposes. For example, any associated purposes (e.g. providing bar and social facilities) are not a main purpose of the group but are provided in support of the main purpose which is to promote healthy sporting activity;
  • the entity is not carried on for private pecuniary profit. That is, officers, club members and other people are not paid or given private benefits, beyond reasonable (“arms length”) payment for goods or services provided to the group which contribute to the group achieving its purpose;
  • there is sufficient public benefit:
    • membership is open to anyone who wishes to join, regardless of ability (although it is OK to have a restriction in membership numbers because of the facilities as long as the criteria to go on the waiting list is open to the general public or an appreciable section of the public);
    • the fees and costs of participation are affordable and do not limit the people who can participate only to the well-off;
    • more and less skilled participants are treated even-handedly and able to reasonably access the facilities and equipment;

Factors that would count against finding a public benefit include high fees, restrictive membership criteria, or unreasonable levels of danger associated with the activity in question.

Purpose

The purpose of this paper is to set out the Charities Commission’s view on the charitable status of sport and recreation bodies.

Organisations that promote sporting and recreational activities (including providing land, buildings, equipment and organising sporting activity), can be eligible for registration as a charitable entity if they have purposes that are accepted as charitable in accordance with New Zealand law.

Background

The Charities Act 2005 (the Act) establishes three essential requirements for registration as a charitable entity. The organisation’s name and officers must meet the requirements set out in the Act, and the organisation must have a “charitable purpose”.

Under the Act, a “charitable purpose” “includes every charitable purpose, whether it relates to the relief of poverty, the advancement of education or religion or any other matter beneficial to the community”.

The purpose must also provide a public benefit. This means that there must be a benefit to the general public, or an appreciably important section of the public, that outweighs any harm and the organisation must not be established for the purpose of providing private pecuniary (financial) profit.

The legal interpretation of the term “charitable purpose” has been developed through the courts and in some legislation. The Commission’s information sheet Charitable purpose summarises the overall position with regard to charitable purpose.

Bodies whose main purpose is to promote amateur sport are currently eligible for a tax exemption under the Income Tax Act 2004. They do not need to register under the Charities Act to qualify for or keep that tax exemption. However, the Commission is aware that some amateur sporting groups may wish to apply for registration as a charity.

Is sport and recreation charitable?

Over the years, the Courts and Parliament have considered whether sporting bodies have charitable purposes.

The courts traditionally viewed that gifts for sporting purposes were not of themselves charitable, because the main purpose was the promotion of sports for entertainment or amusement or for competitive reasons (usually for an individual or group) and not to advance some other recognised charitable object.

However, the courts have recognised that sport can be a way of achieving a charitable purpose.
This can be the case where the purpose is to provide community recreational facilities “in the interests of social welfare”; where the purpose is considered to be to relieve poverty or to advance education; and where the purpose is considered to be “otherwise beneficial to the community” – for example promoting health through participation in sport and recreation to the community.

In all cases, the bodies must be providing a public benefit and the organisation must not be carried on for private financial profit. This is discussed in more detail below.

Legal position on sport and charitable purpose

Advancement of education

If sporting purposes are in connection with young people, schools or universities, the courts have decided that they are charitable as advancement of education even where the sporting activities are separate from school or university terms or premises.

In addition, like the UK Charity Commission, the Commission considers that it is reasonable to recognise as charitable “the advancement of the physical education of young people not undergoing formal education”.

This is an extension of the position that the physical education of young people in formal education is charitable.

Other purposes beneficial to the community
The Commission also considers that organising sport and recreation or providing sport and recreation facilities could be charitable under the fourth head of charity – benefit to the community.
To be charitable under this category, a purpose must be:

  • beneficial to the community and
  • be within the spirit of the matters listed as charitable in the Preamble to the Charitable Uses Act 1601.

Using the approach outlined above, the Charities Commission has considered the current law, including decisions made by the courts and the provisions of the Charities Act and other legislation that declares purposes to be charitable.

It has also considered the modern environment and the underlying spirit and intention of the matters considered to be charitable in the Statute of Elizabeth 1601. In particular, the Commission has considered the links between participation in healthy activity and physical and mental health.

The Commission has also considered the approach taken by the UK Charity Commission in recent years with regard to sport and to groups that they describe as Community Amateur Sporting Clubs (CASCs).

The Commission has recognised the links between participation in healthy activity and improved public health and the resulting general community support for measures designed to promote sport and recreational activity for this reason (for example SPARC’s “push play” campaign).

In addition, the Commission considers that the purpose of promoting participation in healthy activity is within the spirit of the 1601 legislation in terms of the links with very similar purposes previously considered as charitable by the Courts.

In all cases, for a purpose to be charitable it must provide a public benefit, that is, it must be available to the public or a sufficient section of the public, and must not be for private financial gain.

Promoting health through activity
Sport and recreation bodies may have a charitable purpose where they exist to promote health through activity. Participation in sport and recreational activity can be linked with improved physical and mental health (and reduced adverse health) for the individuals participating in the activity.

There are also potential benefits for the broader community in terms of reduced health care costs. There is even an argument that there are significant indirect benefits in terms of the flow-on effects, for example a potential reduction in youth crime and violence where young people are involved in healthy activity; and benefits for elderly in the increased social contact arising out of community activity.

The promotion of health is considered to be charitable based on a line of cases finding hospitals and health-related bodies to be charitable. It is within this spirit and intendment that bodies that have the purpose of promoting healthy activity and therefore preventing illness and promoting good health can also be said to be charitable.

This is similar to the approach whereby bodies set up to assist people into employment or becoming self-supporting are charitable in terms of relieving, and also preventing, poverty.
Where an entity wishes to establish that its purpose is to promote good health, the link between the activity and health must be clearly demonstrated.

The factors that the Commission will take into account will include the nature of the activity involved and whether it can reasonably be linked with health, for example through physical or mental activity.

This will be assessed on a case-by-case basis. However, it will mean that some activities (i.e. those not considered to reasonably involve health-promoting activity) may not qualify on this basis. Although the purposes could be charitable on another basis – for example through advancing education or by promoting recreation in the interest of “social welfare”.

The Commission will also consider whether the activity in question involves an unreasonable risk of injury or harm and therefore could not be considered to promote health. Again, this would need to be assessed on a case-by-case basis.

Public benefit

In order for a purpose to be charitable, it must confer a public benefit. This means that the benefits must be available to the public or a sufficient section of the public.

The Commission will consider whether the organisation or club offers benefits to the public or a sufficient section of the public.

Where organisations have requirements that operate in an exclusive way this will count against the Commission finding the required public benefit.

The specific issues that the Commission will look at are as follows:

  • how people may become involved in the sport or activity or join the club: a limitation on numbers may be required for practical reasons but, provided the criteria are sufficiently open (for example on a “first in, first served basis”), this will not prevent an organisation from providing a public benefit. It is also likely to be acceptable if the benefit is provided to people living in a particular town or suburb as this is likely to be based on practical and administrative reasons;
  • participation should be open to people of all skill levels and abilities. It is acceptable that the participants are involved in competition, provided that the emphasis on competition is not so great that participation is limited to those selected solely on their ability, excluding those of more average ability;
  • any benefits should generally be open to all members (for example coaching opportunities, use of facilities and other benefits of membership);
  • any fees charged and other costs must be reasonable – this includes the cost of uniforms and equipment. Activities that involve expensive equipment that must be supplied by participants or that have very high participation costs may not be considered to be accessible to the general public if the cost of participation would exclude the less well-off;
  • the organisation’s rules should not exclude participation by people with disabilities, bearing in mind, however, that the nature of some sports will make them unsuitable for some people to participate and that safety considerations will also apply.

Requirement to be exclusively charitable

To be registered under the Charities Act, an entity must be exclusively charitable. In the case of a trust, this is because the law requires that charitable trusts are for purposes that are only charitable.

In the case of societies and institutions, the Act is clear that these must be established and maintained exclusively for charitable purposes.

This requirement will apply equally to sport and recreation groups, wishing to be registered as charitable.

This means that the entity’s rules need to clearly limit the purposes to charitable purposes. In addition, the entity cannot carry out non-charitable activities to such an extent that it could create doubt as to whether their purposes are in fact charitable or mean that they are acting outside their rules.

This will always be a question of degree.

An example would be a sport and recreation club that provides social facilities (such as a bar).

Where this is a secondary focus of the club and any profits from running the bar are used by the club for its charitable purposes, this is likely to be acceptable. Difficulties could arise, however, if running the bar was effectively a main focus for the entity (as this would not be charitable).

The entity must not be carried on for private pecuniary profit

To meet the requirements for registration under the Charities Act, the society or institution must not be carried on for the private pecuniary profit of any individual.

As with all charitable entities, this means that the purpose cannot include private profit making. Any payment to trustees or officers needs to be authorised under the organisation’s rules.

Payments can be made for goods and services needed to carry out an organisation’s charitable purposes (for example coaching, sports supplies, venue hire, administration costs etc), however all payments must be reasonable and based on “arms length commercial rates”.

A charity may carry out profit-making activities so long as the profits are applied to its charitable purposes.

An example is a community sports club selling merchandise, such as T-shirts, calendars or sports equipment, at a profit. In such a case, the club would need to use any profit made to further its charitable purposes.

Further information

For more information about the Charities Commission or registration under the Charities Act, please browse this website.

You can also call the Charities Commission on our free information line 0508 242 748.

To get updates by email, please send your name, organisation and contact details to info@charities.govt.nz.