The new Charitable Trusts Act 2022 (WA) promises greater transparency for charitable trusts in Western Australia in a long overdue reform.
What does the Act apply to?
The Act affects all charitable trusts or other property held for charitable purposes in Western Australia. The Act will repeal and replace entirely the existing Charitable Trusts Act 1962 (WA), apart from some savings provisions related to certain actions which are ongoing under the 1962 Act when the new Act comes into force.
What are main differences between the 1962 Act and the new Act?
The new Act changes the law with respect to charitable trusts in WA in a number of ways including:
- Aligning the Act with processes and definitions contained in the Commonwealth Charities Act 2013 and recognising the effect of decisions taken by other regulators by:
- integrating charitable purposes defined in the Charities Act as relevant charitable purposes
- recognising circumstances of disqualification and investigation by the ACNC, ORIC, ASIC and the courts, among others, in an effort to reduce duplication and ensure findings by courts and other regulators can be used to seek appropriate orders from the Supreme Court in relation to persons administering trusts
- recognising the ability of charitable trusts in Western Australia to make tax deductible gifts to eligible recipients following the introduction of the Charities Act.
- Expanding investigative powers and mechanisms, including by:
- establishing a new statutory body, the WA Charitable Trusts Commission, which will have powers equivalent to a Royal Commission to investigate trusts and require evidence and information to be produced
- enabling the investigator to issue a report to the Attorney General and directions for corrective action to the trustee, whereby if any directions are not complied with, the Attorney General can seek to have the trustee removed
- penalising those who fail to respond to or mislead an investigator, with penalties applying of up to $50,000
- preventing persons from claiming confidentiality, legal professional privilege or the privilege against self-incrimination as grounds for refusing to produce information to an investigator
- protecting those who disclose information to investigators from enforcement and disciplinary action arising from the disclosure (e.g. breach of codes of ethics, confidentiality obligations, etc.)
- enabling investigation costs to be recovered against the property of the trust, against a trustee or, where a complaint is vexatious, against a complainant
- Increasing the capacity to receive and deal with complaints by:
- ensuring both the Attorney General and the Commission can receive and deal with complaints
- ensuring complaints can cover conduct dating prior to the commencement of the Act and charitable trusts established prior to the commencement of the Act
- ensuring complaints can be dismissed where an investigator considers they are vexatious, frivolous, unjustifiable, unnecessary, otherwise dealt with by another regulator, or the subject of insufficient evidence
- ensuring the rights to seek orders from the courts are available to ‘any person’ albeit this is likely to be constrained to those with an interest in the trust (e.g. a potential beneficiary) or a regulator (e.g. the ACNC), where orders are not otherwise sought the Attorney General.
- Expanding the Supreme Court’s powers to make orders in relation to trusts and the persons involved in their administration by:
- providing for orders to be made in respect of the property of a trust
- expanding powers to make orders in relation to persons involved in administering the trust (includes any person ‘employed, engaged or otherwise concerned (including as trustee) in the administration of the charitable trust or property’) including orders to prevent a person from being involved in administering a trust. The grounds for such orders include prior misconduct/mismanagement of a trust, the need to protect current and future trust property, a person not being a fit and proper person to administer a trust, and a person failing to comply with the Act or comply with a request that triggers the right to seek their removal (e.g. failure to respond to a request to produce documents, or failure to take corrective action arising out of an investigation)
- automatically excluding certain persons from being involved in the administration of a trust (e.g. those who are disqualified under other laws, those who are convicted of offences of dishonesty).
- Significantly increasing penalties:
- Contravention of certain provisions of the Act constitutes an offence, particularly those provisions which involve a failure to act in accordance with an investigatory process or court order
- In most cases, penalties are increased to a maximum of $50,000 per offence, however where the contravention involves the breach of a court order, this can also include a maximum term of imprisonment of 1 year.
- Clarifying provisions relating to schemes to deal with trust property to ensure that trust property does not languish or erode over time, trustees act promptly in proposing, seeking approval of and administering schemes, and circumstances which might frustrate the application or administration of trust funds can be overcome.
- Note that a trustee’s failure to act as soon as ‘reasonably practical’ in seeking the approval of a scheme where one is warranted or to notify the Attorney General of circumstances that may have frustrated the original charitable purpose can be grounds for removal of a trustee.
When does it apply?
Part 1 of the Act received Royal Assent on 1 November 2022. The remainder of the Act will come into force on a date fixed by proclamation, particularly given the likely need to establish regulations and a new Western Australian Charitable Trusts Commission.
Want to know more?
To find out more about how these changes may affect you, whether you are a potential beneficiary of a charitable trust or involved in administering one, contact us today.