Sunday January 2017

The ATO and ACNC are reminding charities and ancillary funds that the annual reporting period is fast approaching.

Charities

Charities registered with the ACNC (that have an annual year end of 30 June) have less than a week to submit their Annual Information Statement (AIS) to the ACNC. The AIS should be lodged via the online charity portal no later than 31 January 2017. We remind charities that the date their AIS is lodged will be displayed on the ACNC Register and a late AIS lodgement will be listed in red, to encourage charities to report on time.

Should you require any assistance with the preparation of your AIS or, if you would just like a review to double check the information that will be provided, please do not hesitate to contact us.

Ancillary Funds

Ancillary Funds registered with the ACNC

Charitable Ancillary funds were previously required to lodge annual reports with both the ATO and ACNC. However, recent changes to the reporting requirements of charitable ancillary funds have removed these dual reporting requirements. Accordingly, ancillary funds registered with the ACNC are now only required to lodge an AIS with the ACNC. This removes the separate reporting requirement to the ATO. Charitable Ancillary Funds have until 28 February 2017 to lodge their AIS with the ACNC.

Ancillary Funds not registered with the ACNC

Ancillary funds which are not registered with the ACNC must lodge an Annual Information Return with the ATO by 28 February 2017. Funds that are not able to lodge by the due date should contact the ATO on 1300 130 248 to seek an extension of time, as penalties will apply for applications lodged late without an extension.

Please do not hesitate to contact a member of our team if you require assistance with your charity or ancillary fund reporting.

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

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

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on the ACNC staff in making their determinations for endorsement of charitable organisations as PBIs and replaces the out of date, ATO tax ruling TR2003/5.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