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on the ACNC staff in making their determinations for endorsement of charitable organisations as PBIs and replaces the out of date, ATO tax ruling TR2003/5.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

The Hunger ProjectEarlier today the Full Federal Court handed down its judgment regarding the Hunger Project Australia case and rejected the Commissioner of Taxation’s appeal (Commissioner of Taxation v Hunger Project Australia [2014] FCAFC 69). The court has unanimously held that Hunger Project Australia (HPA) does not need to directly give aid in order to be endorsed as a Public Benevolent Institution (PBI). Furthermore, the Court rejected all four arguments presented by the Commissioner and came to the following conclusion:

In our opinion, whilst there is no single or irrefutable test or definition, the ordinary meaning or common understanding of a public benevolent institution includes (to adapt the words of Starke and Dixon JJ in Perpetual Trustee) an institution which is organized, or conducted for, or promotes the relief of poverty or distress. To adapt the words of Priestly JJ in ACOSS, such an institution conducts itself in a public way towards those in need of benevolence, however that exercise of benevolence may be manifested” [para 66].

This finding provides important guidance regarding what is a PBI and is likely to provide comfort for many charities who were awaiting the outcome of this appeal.

Should you have any questions in relation to this judgment, whether you charity is eligible for endorsement as a PBI or any other matters please do not hesitate to contact Bill d’Apice or Anna Lewis in our office.

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. Continue Reading Are you a Public Benevolent Institution?