On 13 June 2014 the Full Federal Court confirmed that a fundraising organisation, The Hunger Project Australia (HPA), can be endorsed as a public benevolent institution (PBI) even though it not directly provide benevolent relief.
The HPA decision confirms that fundraising is “activity” within the meaning of an “institution”, and is different to merely administering a trust or a fund. This affirms the High Court’s approach in Word Investments, where an organisation that fundraised through commercial activity was found to be an “institution” for PBI purposes.
In HPA (at paragraph 67) the Court found that:
“The ordinary contemporary meaning or understanding of a public benevolent institution is broad enough to encompass an institution, like HPA, which raises funds for provision to associated entities for use in programs for the relief of hunger in the developing world. The fact that such an institution does not itself directly give or provide that relief, but does so via related or associated entities, is no bar to it being a public benevolent institution. Such an institution is capable of being considered to be an institution organised or conducted for the relief of poverty, sickness, destitution and helplessness.” (emphasis added)
Assuming the Government does not seek to change the tax legislation to reverse the Court’s decision, new charities that engage in fundraising to support benevolent relief could apply (and organisations that previously applied and were rejected as PBIs could re-apply) to be endorsed as PBIs. Subject to endorsement, these organisations would then be able to access various tax concessions and exemptions including income tax exemption, fringe benefits tax exemption (vs the FBT rebate) and gift deductibility.
The Commissioner of Taxation previously took a narrow view that an entity who merely engaged in fundraising activities and did not materially perform charitable works directly for the benefit of the public is not a PBI. However, the Australian Taxation Office has confirmed it will not appeal the Full Court’s decision the HPA case.
Please contact us if you would like more information about endorsement as a PBI or how to your charitable organisation can access tax concessions, endorsements or gift deductibility.