Final Report for WA Charities - Building Resilience: Utilising Restricted Reserves

The Western Australian charity sector plays a fundamental role in relation to almost every aspect of the lives of Western Australians. For instance, health support at the time of birth, education, religious and social services, cultural enrichment during our lives, aged care in our later years and protecting the environment for future generations. Crises such as COVID-19 – with its health and employment/organisational operation impacts – and the earlier Global Financial Crisis pose challenges for society and the charitable sector. One restraint on the way that the charity sector can respond arises from donor restrictions placed on gifts which may no longer be appropriate in the changed circumstances of crisis. There are good reasons for respecting donor intent. However, lack of clear expression of the legal rules applying to gift restrictions and of the legal mechanisms that permit amendment is not a good reason. Yet, this is the situation in which Western Australian charities, and charities around Australia, find themselves.

This report examines these legal rules and mechanisms so that Western Australian charities are better empowered to make informed choices about gift restrictions. The report presents the results of doctrinal and empirical legal research on the circumstances under which Western Australian charities might wish to access reserves (defined broadly to mean net assets), the difficulties they face in accessing reserves, the legal mechanisms that are available to address these difficulties and how such difficulties may be avoided in the first place. It:
• Identifies difficulties experienced by charities in seeking to access their reserves of restricted assets.
• Maps the legal effect of restrictions on donations that result in restricted assets.
• Based on the mapping of legal effects, outlines the legal avenues available to charities seeking to access their reserves of restricted assets.
• Provides guidance material for charities wishing to access historically restricted assets and considering how to approach future donations.

While crises were the impetus for considering the need to access reserves, the findings and research are relevant beyond that context. Further, while the report focuses on Western Australian charities, there are many similarities with the regulatory contexts in other Australian states and territories and hence the report is also relevant beyond Western Australia.