3 February 2017
ACNC Statements on Public Benevolent Institutions & Health Promotion Charities
In this update:
- ACNC Statements on Public Benevolent Institutions & Health Promotion Charities;
- Ancillary Funds Reminder; and
- Mark Fowler's Presentation at the Second Annual Schools Law and Regulation Conference
1. ACNC Statements on Public Benevolent Institutions & Health Promotion Charities
The Australian Charities and Not-for-Profits Commissioner has recently released her interpretation statement on Public Benevolent Institutions (PBI) and her updated interpretation statement on Health Promotion Charities. This article sets out five key practical implications arising from these interpretation statements.
First, the Australian Charities and Not-for-Profits Commission (ACNC) has provided a checklist of factors for PBI’s to consider when assessing their entitlement to be registered as a charity subtype PBI. PBI’s would do well to allocate a board meeting to working systematically through the list to ensure that each of the 10 elements support entitlement to PBI status. The 10 indicators include the organisation's:
- governing documents;
- responsible persons (composition of board, committee of management or trustees);
- policies and procedures;
- operational, strategic or business plan;
- annual report (if any);
- financial statements (for an existing entity) or budget (for a new entity);
- relationship with other organisations and agreements which evidence this;
- mechanisms to address the risks of operating overseas, if relevant;
- website and other communications; and
Board members should be aware of their duty to notify the ACNC if they form the view that they are not entitled to PBI status.
Second, the ACNC sets out that the main purpose of a PBI must be to provide relief to people in need (paragraph 5.5.2 of the PBI CIS). Although this is very helpful, it must always be remembered that the ultimate enquiry is fundamentally whether or not the institution fits the description of being a ‘public benevolent’ institution. All other purpose enquiries are incidental to that.
There will be organisations, particularly religious organisations, where the religious purpose and the welfare purpose are deeply intertwined and significantly overlap. A religious purpose can be deeply embedded in a PBI. Many religious organisations provide benevolent relief as an expression of their religious purpose. The ACNC navigates this in issue the CIS by drawing a subtle distinction between the motive, which can be advancing religion, and the purpose which cannot be the advancing of religion – at least it cannot be the main purpose. Whilst it is difficult to predict how organisations in the sector will respond, some possibilities can be anticipated:
- The path of least resistance, which is likely to be followed by many religious and other organisations with overlapping purposes, will be to ensure that their constituent documents and other indicia of purpose make it clear that their main purpose is PBI with other ‘purposes’ being merely incidental or ancillary – or rather just the underlying motive.
- The second possibility is that it may be argued that there exists an overlap of purposes. The High Court made it clear in the Central Bayside Case that an entity could be pursing both government and charitable purposes. In the Central Bayside Case the Victorian Commissioner of State revenue argued that the Central Bayside General Practice Association Limited, which was an organisation that received 93% of its funding from the Commonwealth government, and which it was argued was ‘implementing government policy, even if its purposes ‘are consonant with or coincide with government policy’. Rejecting this argument, the majority held there was ‘a confusion’. The charity could be both discharging its purposes and also government purposes. If that is so, it seems arguable that a religious organisation can be pursuing religious purposes whilst being a PBI. This argument will most likely be tested when an entity is called upon to show cause as to why it should not be removed from the PBI subcategory. At a more fundamental level, it must always be remembered that an enquiry into whether an institution is a PBI is an enquiry into the nature of the institution of which purposes are only an indicia.
Third, an organisation that seeks to rely upon the exemptions to religious institutions in State and Commonwealth anti-discrimination law must maintain that it is a body established for religious purposes. The CIS provides that, for the purposes of charity law, a PBI may have a religious motive, but not a religious purpose. Whether this is an accurate statement of the law is likely to be contested on a series of judgements that a benevolent institution is a religious institution when inspired by religious concern. The application of the Commissioner’s interpretation of the law with the requirements of anti-discrimination law is an area that will no doubt receive some considerable attention.
Fourth, the ACNC makes it clear that in its view: ‘an organisation is not precluded from being registered as a PBI subtype of charity if it has a main purpose of providing benevolent relief to people residing overseas’ (paragraph 5.8.1 of the PBI CIS). This is contrary to the ATO’s official stated position set out in TR2003/5 which provides at paragraph 129 that:
- To be in Australia a public benevolent institution must be established, controlled, maintained and operated in Australia and its benevolent purposes must be in Australia. Because the purpose of public benevolent institutions is to provide direct relief to persons in need, this will mean that relief will be provided to people located in Australia.
That Ruling is stated to be under review by the ATO and has been that way for some years now. Many in the sector seem to be operating on the presumption that TR 2003/5 is not an accurate statement of the law and this may be so. It is not good for the rule of law nor for confidence in the Commonwealth government to have two government Commissioners making contrary statements as to the meaning of the law. This inconsistency should be rectified.
Fifth, there is an important distinction between the focus on the nature of the institution in the case of a ‘Public Benevolent Institution’ and the focus on the activity in the case of a Health Promotion Charity.
2. Ancillary Fund Reminder
We take this opportunity to remind you that all public and private ancillary funds must lodge their annual information returns by 28 February 2017.
See the Australian Tax Office website for more details on your reporting obligations.
3. Mark Fowler's Presentation at the Second Annual Schools Law and Regulation Conference
The Second Annual Schools Law and Regulation Conference is being held in Melbourne on Thursday and Friday, 27 to 28 April 2017.
Mark Fowler from Neumann and Turnour Lawyers will be presenting at the conference on 'Building Funds, Scholarships, Fundraising and Staff - Taxation Concerns in Schools'.
Mr Fowler's presentation will cover:
- The Foundation – purpose and function;
- Scholarships – tax deductible donations and capital works;
- Building funds – how should they be used?;
- Raffles, GST and fundraising;
- Deductible Gift Recipient (DGR) status – obtaining DGR status and obtaining DGR funds;
- Salary packaging for teachers and business managers;
- Fringe Benefits Tax (FBT) – what fringe benefits should be provided to school staff?; and
- Bequest funds.