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Charities & Not-For-Profits Law in Australia

ACNC Releases Commissioner’s Interpretation Statement on Public Benevolent Institutions

Posted in Compliance, Fundraising, General, Governance, Tax Exemptions & DGR Status

The ACNC Commissioner has just released the ACNC’s Interpretation Statement on Public Benevolent Institutions. The Interpretation Statement provides guidance on the ACNC’s interpretation of the law pertaining to Public Benevolent Institutions (PBI) and insight into how the ACNC and its staff will assess a charitable organisation’s entitlement for endorsement as a PBI. The Interpretation Statement will be binding on the ACNC staff in making their determinations for endorsement of charitable organisations as PBIs and replaces the out of date, ATO tax ruling TR2003/5.

What is a PBI?

A PBI is a non-profit institution organised for the relief of poverty, sickness, suffering, distress, misfortune, disability, destitution or helplessness that arouses compassion in the community. Charitable organisations which are endorsed as PBIs, and continue to remain entitled to endorsement, enjoy endorsement as a Deductible Gift Recipient (DGR). DGR status is highly sought because it allows donors of the charity to receive a tax deduction for their donation. As a result of DGR status and the other tax concessions available to PBIs (such as FBT exemption), a PBI is a sought after registration for subtype charities.

Not for Profit, for the Public Benefit, and Providing Benevolent Relief

A PBI must be able to demonstrate to the ACNC that it is an institution established and carried on for public benefit, is subject to accountability and public control, and provides benevolent relief to persons afflicted by certain types of hardship recognised at law. The ACNC will consider the breadth of individuals the charity provides with benevolent relief within the identified areas of need. A charity which is broadly understood to assist the community (rather than persons in need) will not meet the threshold for endorsement as a PBI.

The ACNC will also consider whether the charity is accountable and subject to public control.  In its determination the ACNC will consider the number of unrelated responsible persons overseeing the charity’s activities. Whilst the Interpretation Statement is not prescriptive as to how many unrelated responsible persons  are required to satisfy the ‘public control’ element, the guidance provided indicates 3 or more responsible persons can often help substantiate compliance with the public control requirement of a PBI.

The Interpretation Statement indicates that a charity must also provide ‘benevolent relief’ to persons afflicted by hardship, however the charity need not itself directly give or provide the relief. The Commissioner’s Interpretation in this way, confirms the application of law in Commissioner of Taxation v Hunger Project Australia [2014] FCAFC 69 that organisations that provide relief via or in consultation with other organisations or associated entities (which also meet the PBI threshold), including organisations that primarily fundraise for other entities, may qualify for endorsement as a PBI. The provision of benevolent relief must, however, be the dominant objective of the charity. At law, ‘benevolent relief’ is considered relief to persons that would engender community compassion and support for the relief of the hardship or distress. A charity seeking PBI endorsement must be able to demonstrate a causal link between the activities of the charity for providing or coordinating the actual relief of the hardship (e.g. poverty) to the persons assisted by the charity. For more information regarding the Hunger Project case click here.

The ACNC further draws a distinction between PBIs and other charitable organisations which may provide meaningful support to persons who are suffering from ‘ordinary human experiences’.  Appendix A to the Interpretation Statement provides a number of practical examples of charitable activities of organisations, and may assist a number of charities seeking PBI endorsement understand why their meaningful work in the not for profit sector may not meet the specific threshold for PBI endorsement.

If you have any questions about this news item or need assistance with determining whether your charity should seek endorsement as a PBI please do not hesitate to contact a member of our team.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au

Anna Lewis, Associate | +61 2 9233 9031 | alewis@makdap.com.au