More Court guidance on public benevolent institutions - the sufficient connection test

In the recent case of Equality Australia Ltd v Commissioner of the ACNC [2024] FCAFC 115 (Equality Australia case), the Federal Court considered the term ‘public benevolent institution’ (PBI) as used in the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (ACNC Act) and found that for a charity to be a PBI, there must be a clear and sufficient connection between its objects and activities and the relief of distress of its target group. Equality Australia is a charity with an ongoing history of advocacy and campaigning for legislative change with regards to promoting marriage equality, eliminating discrimination on the grounds of sexual orientation, and more broadly, to improving the wellbeing and lives of LGBTIQ+ people. The Court found that these objects and advocacy activities were too general, and the connection between them and the relief of distress of LGBTIQ+ people was not sufficient to allow them to qualify as a PBI.

What is a PBI?

The term ‘public benevolent institution’ is not defined in the ACNC Act and takes its meaning from the common law. The ACNC’s definition, in the Commissioner’s Interpretation Statement on PBIs, is ‘an institution that is organised, conducted, or promoted to relieve sickness, destitution, helplessness, suffering, misfortune, disability, or distress.’¹

The main advantage of being a PBI is eligibility for the highest level of Commonwealth tax exemptions available to charities, being endorsement as a deductible gift recipient and for the fringe benefits tax exemption. However, to be eligible for those endorsements, an entity must be registered by the Australian Charities and Not-for-profits Commission (ACNC) as a charity with the subtype of PBI.

Currently, deductible gift recipient status is not open to all types of charitable subtypes but could potentially be expanded in the future to more subtypes if the recommendations of the Productivity Commission’s final report for philanthropic giving are implemented. However, substantial reform is not likely in the near future.

The Equality Australia decision

Equality Australia is a charity with an ongoing history of advocacy and campaigning for legislative change with regard to promoting marriage equality, eliminating discrimination on the grounds of sexual orientation, and more broadly, to improving the wellbeing and lives of LGBTIQ+ people. Equality Australia’s application to the ACNC for registration as a PBI was refused and the ACNC’s decision was upheld by the Administrative Appeals Tribunal (AAT).

The Equality Australia case was an appeal from the AAT’s decision. The AAT applied a ‘sufficient connection’ test to determine that Equality Australia is not a PBI. The Court accepted the sufficient connection test and held that in determining whether the objects of Equality Australia are benevolent, it is necessary to consider how its work aids LGBTIQ+ people and whether a clear line can be drawn between the aims and the provision of relief. The Court found that Equality Australia’s objects and advocacy activities were too general, and the connection between them and the relief of distress of LGBTIQ+ people was not sufficient to qualify as a PBI.

While there might be a logical connection between the aims of a charity and the relief of people in distress, this does not mean the connection is sufficient for qualification as a PBI. The Court found that it was open to the AAT to find that while it is logical to conclude that pushing for legislative reform may improve the lives of LGBTIQ+ people, the connection is too abstract and general to be considered a link from ‘point A’ to ‘point B’. This could be contrasted with entities which, for example, provide food or accommodation to the needy, where a clear and therefore sufficient connection can be identified between the provision of food/accommodation (point A) and the relief of hunger/homelessness (point B).

The Court stated that while there must be a clear chain of connection, it is not necessary for a PBI to be ‘on the ground’ in order to achieve its benevolent purpose. Relief can be provided indirectly by a charity, but they may still qualify for PBI status. An example of such an organisation is a charity whose achieves the object of the alleviation of poverty and chronic hunger by providing funds to other organisations that conduct aid projects for the same purpose (as in the case of The Hunger Project Australia v Federal Commissioner of Taxation (2013) 94 ATR 855). While the funding is not directly going to those in need, the benevolence still directly reaches them through the funded projects. The Court considered that such indirectness is not the same as an insufficient connection.

Do advocacy, education, and preventative activities make an organisation ineligible for PBI status?

The ACNC made submissions on this question in the Equality Australia case, but the Court was able to decide the case without considering them. The Commissioner’s Interpretation Statement on PBIs discusses the circumstances in which advocacy, education, and preventative activities may be considered benevolent. For example, while campaigning directed toward law reform for the benefit of a class of people generally is insufficiently connected (as in the Equality Australia case), by contrast, advocacy that is directed to securing funding and commitments to specific projects was accepted as sufficient and benevolent in the case of Global Citizen Ltd v Commissioner of the ACNC [2021] AATA 3313. Therefore, advocacy, education, and preventative activities are not automatically disqualified as benevolent activities – an important factor is how abstracted the objects are from the benevolence of the activities and whether a logical and sufficient connection can be drawn between them.

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¹ PBIs may also be eligible for tax and duty exemptions or concessions under the laws of a State or Territory. The meaning of the term ‘PBI’ in those laws will depend on the relevant legislation.

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