Since Governor Burke funded the construction of churches with The Church Act in 1836, religion in Australia has enjoyed historical privilege in the form of land grants, government subsidies and generous tax concessions. However, recent changes in the regulation and administration of charities has seen Australia's religious charities claim to be at risk of losing those tax concessions and with them, their capacity to survive as financial entities.

Despite the leading role in relief of poverty now being the responsibility of and funded by the secular state, religious charities have enjoyed the privileges established for them prior to the emergence of the welfare state and have continued to benefit financially through funding for employment, aged care and similar programs. The long history of land gifts for which they have never been taxed, income tax exemptions, deductible gift recipient status and more recently, fringe-benefits exemptions have enabled the churches in Australia to amass untold wealth.

The economic depressions of 1890s and 1920s saw the existing charity system struggle under the weight of the need with which it was faced. Upon the establishment of welfare during the war era, supporting the poor became a responsiblity of the state through which religious organisations continue to play a major role.

Making religious charities fully transparent to the secular state that funds so much of their work has proven notoriously difficult. A majority of charities are religious organisations who still enjoy full tax exemption despite repeated attempts to remove this historical privilege and the establishment of an industry specific regulator, the Australian Charities and Not-for-Profit Commission, in 2012.

The historical privileges have built the wealth and their role in benevolent works has provided the social licence for churches to influence public policy. The Royal Commission into Institutional Responses to Child Sexual Abuse, followed by the same-sex marriage plebiscite and more recently, the case against Cardinal George Pell has cooled public sentiment toward the privileges enjoyed by our religious institution, putting their social licence at risk.

It is when one considers the impact of religious belief on same-sex marriage in aged care, health care issues such as the recently passed Voluntary Assisted Dying legislation or abortion that it becomes obvious that while the churches have historically played a significant role in meeting basic human needs, in an increasingly secularised society this role is coming under question, particularly when these same organisations are only operating through their dependence on generous tax concessions which are not available to secular or for-profit organisations.

Thanks to the establishment of the Australian Charities and Not-for-Profit Commission and the reporting it requires, we now know that Australian charities maintain over $300 billion in assets annually. A large factor in this are that universities, schools, hospitals and aged care facilities are all registered charities. However, it is also the case that historical gifts of land, funding and tax concessions have concentrated enormous wealth in the hands of religious organisations and that religious charities dominate the government funded charities that continue to deliver government social and educational functions.

It must also be noted that the current legislation excludes many religious organisations from reporting requirements so the true wealth of the charity sector and within it, the wealth of Australian churches remains shrouded in mystery.

Charities declaring 'religious activities' as their main activity have always been and remain, the largest charity sub-type numbering over 14,000, approximately 20% of all registered charities. Closer to 30% or nearly 20,000 charities are registered with a charitable purpose of 'advancing religion'.

While the Australian Charities and Not-for-Profit Commission took over the registration of charities entitled to receive tax exemptions in 2013, the legislation administered by the ACNC was compromised in its power to hold religious charities to account as a direct result of influence from the churches. A status of Basic Religious Charity was added to the legislation which exempts religious charities from reporting to government, permitting religous charities to 'self-identify' as to their own eligibility for this status.

As asserted by Professor Ann O'Connell, who is 'Special Counsel at Allens, Solicitors, a member of the Advisory Panel to the Board of Taxation and a member of the Australian Tax Office Public Rulings Panel and GAAR Panel',

An example of how the BRC exemption (even when correctly applied) affects transparency and accountability is exemplified in some of our earliest established charities. The Anglican Church Property Trust of Sydney manages, invests and distributes assets of the Anglican Church in Australia yet is not required to provide financial statements to the ACNC.

In The Purple Economy: supernatural charities, tax and the state, Max Wallace argues that the failure of democracies to fully realise a distinction between church and state has resulted in churches becoming "immensely wealthy as a result of their centuries old tax-exempt status as charities that 'advance religion'".

Written prior to the establishment of the ACNC - and any requirement for charities to publicly disclose their finances- Wallace was reduced to searching newspapers for references to the purchase or sale of church properties.

More recent analysis using similar methodology was employed by Fairfax journalists journalists to estimate the value of properties owned by the Catholic church.

As is pointed out in the book, Wallace quotes Richard Lead that Section 23 of the Income Tax Assessment Act 1932 (since superseded by the 1997 Act) exempted "religious institutions from tax of every type of income, not just donations from their parishioners. Property rents, bank interest, dividends, capital gains, trading profits - you name the income, and section 23(e) renders it free of income tax." and quotes a former Tax Commissioner's intimate awareness of just how effectively churches in particular have been able to exploit their privileged tax exemptions: "The then Tax Commissioner, Mr Carmody, was quoted as saying that the exploitation of salary-sacrifice arrangements by non-profit organisations including 'churches' had gone too far". Wallace also quotes Treasurer Peter Costello in the Canberra Times (25 August 1998):

In a speech to Anglicare in the wake of scandals in the Anglican church reminiscent of those currently bestting the Catholic Church. Peter Costello went so far as to point out that:

Treasurer Peter Costello capped fringe-benefits exemptions in 2000 but with concessions as a result of the stance taken by the Democrats who were concerned with the implications for hospitals.

Despite Treasurer Costello's attempts to put a stop to the abuse of fringe-benefits, concessions were made for Public Benevolent Institutions, leaving religious employers to continue to use fringe benefit tax exemptions to obfuscate the incomes of their employees.

The generosity of PBI tax concessions entice religious charities to register with the ACNC for the tax benefits and a lax attitude toward holding religious charities to account has seen them rort the system. However, a recent clarification of the legislation now makes charities choose between the financial benefits of tax concessions or the ability to define themselves under law as religious organisations.

For the purposes of regulation, charities must declare a charitable 'purpose' and a 'main activity'. Charities must also not have a 'disqualifying purpose':" The ACNC Act sets out the 14 subtypes with which a charity can be registered. These include the 12 charitable purposes in the Charities Act 2013 (Cth), as well as Public Benevolent Institutions and Health Promotion Charities."

In 2016, the former Charities Commissioner, Susan Pascoe handed down an Interpretation Statement for how the ACNC would administer the awarding of the status of Public Benevolent Institutions, a status which plays a key role in either extending or limiting tax exemptions to religious charities.

This Statement held that Public Benevolent Institutions could not maintain that status and the tax exemptions which flow from that if their main activity is religious activities. This Statement has two main implications for religious charities: one financial and the other legal. If religious Public Benevolent Institutions do not drop advocating religion and religious activities from their registration applications with the ACNC, they are likely to lose PBI status and the generous tax concessions which flow from that.

However this lack of acknowledgment of their religious affiliation also has legal implications:

Furthermore, in light of the legalisation of same-sex marriage, religious charities are concerned that their continued prosetylisation of the traditional view of marriage might be seen as a 'disqualifying purpose' under the Charities Act which prohibits registration of charities that pursue a purpose which is against public policy. Such concerns prompted the 2018 Ruddock Review of Freedom of Religion to make the following recommendation:

Catholic commentators hope the forthcoming religious discrimination bill is set to tip the balance back in favour of religious institutions by squaring the circle on the issues raised by same sex mariage legislation.

It appears that every time the secular state gets close to removing the privileges bestowed in an earlier age from religious charities, the churches find a way to maintain the status quo. With the religious right now so embroiled in national politics, a truly secular state looks set to remain more an ideal than a reality for Australia.