The charity and not-for-profit sector is a minefield of terminology. The terminology which is used colloquially is not the same as that which is used in a legal context. There are often difficulties translating how a charity operates into terminology and categories which are utilised by government regulators such as the Australian Charities and Not-for-Profits Commission (ACNC) and the Australian Taxation Office (ATO).
Colloquially, a charity may be any organisation which tries to help people in need. In Australian tax law we call these Public Benevolent Institutions (PBIs). At law, a charity has a broader meaning. A charity must be established for one of the categories of charitable purpose set out in the Charities Act 2012 (Cth). These are as follows:
(a) the purpose of advancing health;
(b) the purpose of advancing education;
(c) the purpose of advancing social or public welfare;
(d) the purpose of advancing religion;
(e) the purpose of advancing culture;
(f) the purpose of promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia;
(g) the purpose of promoting or protecting human rights;
(h) the purpose of advancing the security or safety of Australia or the Australian public;
(i) the purpose of preventing or relieving the suffering of animals;
(j) the purpose of advancing the natural environment;
(k) any other purpose beneficial to the general public that may reasonably be regarded as analogous to, or within the spirit of, any of the purposes mentioned in paragraphs (a) to (j); and
(l) the purpose of promoting or opposing a change to any matter established by law, policy or practice in the Commonwealth, a State, a Territory or another country, if:
(i) in the case of promoting a change—the change is in furtherance or in aid of one or more of the purposes mentioned in paragraphs (a) to (k); or
(ii) in the case of opposing a change—the change is in opposition to, or in hindrance of, one or more of the purposes mentioned in those paragraphs.
Further, to be a charity and entitled to income tax exemption, the entity must be registered with the ACNC. Once registered with the ACNC, income tax exemption is generally granted by the ATO as a matter of course.
However, just because an entity is registered as a charity, does not mean that it is entitled to receive income tax deductible donations. To be entitled to do so, it must be endorsed with the ATO on the basis that it falls within one of the categories of deductible gift recipients (DGR). The table of categories of DGRs is too extensive to set out here but can be found on the Australian Taxation Office's website.
Some prominent examples are:
* public benevolent institutions (PBIs);
* necessitous circumstances funds;
* health promotion charities;
* school building funds; and
* public and/or private ancillary funds.
Each of these categories has its own set of requirements which must be satisfied. In addition to endorsement with the ATO, some categories of DGR require that the organisation first be registered or endorsed by another government department. This is true of, for example, environmental and cultural organisations.
If you are seeking further advice as to whether your organisation falls within one of the designated categories, please contact our office and we would be pleased to make a time for you to come in and discuss this further. Neumann & Turnour Lawyers has extensive experience in helping navigate these difficulties and working with regulators.