Many have an opinion about which charitable causes are more worthy of government support than others. However, the Australian Tax Office (ATO) has issued definite guidelines about which charities qualify as Public Benevolent Institutions (PBIs) and “deductible gift recipients” (DGRs) and can therefore grant tax deductible receipts to their donors. This is a critical endorsement for charities to obtain and the applicable principles which are applied must be carefully considered.

Example: The Bayside Leader article ATO must be dreaming by Jenny Ling (15 September 2011) raised the question “What kind of poverty, sickness, suffering, distress, misfortune, disability, destitution or helplessness arouses compassion in the community?”.

To be classified as a Public Benevolent Institution it is important to be clear as to the applicable principles

What type of DGR is involved?

One can only assume that the applicant applied for an endorsement of her organisation as a public benevolent institution.  There would be no other DGR category that would apply.  According to the ATO’s tax ruling on public benevolent institutions, such an organisation must direct its activities towards persons in need of relief.  The test for the acceptance of an organisation into the category of public benevolent institution depends on the suffering in question arousing compassion in the community.

Are these children suffering?

It seems certain that the plight of the siblings of sick children, in some circumstances, may arouse compassion in the community.  Certainly if the needs of the sick child led to the neglect or interrupted upbringing of the sibling that could arguably lead to a need for relief.  However, it is generally not sufficient that an organisation’s operations be directed towards categories of people who could be in need of relief; such people would need to definitely be experiencing suffering and distress.

The solution

If the applicant in the above example really wanted to have her charity endorsed as a DGR the following steps are suggested for consideration to achieve this end:

  • provide counselling for siblings of sick children who need attention;
  • provide tutoring services for sick children who cannot obtain the guidance of a parent in their school subjects due to the parent’s concentration on their sick child;
  • offer babysitting services to care for siblings while parents have to be in hospital with the sick child;
  • then reapply to the ATO, putting forward the new activities and the body of evidence which suggests that there is a real social need in this area.

Contest between causes?

The ATO is right if it is suggesting that it is the sick children and not the siblings who most arouse the compassion of the community.  However these applications to the ATO are not usually a contest between causes and if the applicant can establish that the siblings have a need that has to be fulfilled too that the community sympathises with, I can see no reason why her application shouldn’t be accepted.  It seems that the ATO is right…but if the applicant changes her “relief” activities and pursues a case of suffering siblings with the ATO, the ATO could just as easily be proven wrong.