Following the Federal Court's decision confirming that the Hunger Project Australia (HPA) is a public benevolent institution (PBI), the Australian Charities and Not-for-profits Commission (ACNC) has released a Commissioner's Interpretation Statement to provide guidance on the law as it now stands.
In July 2014, we reported that the Full Court of the Federal Court had dismissed an appeal by the Commissioner of Taxation, classifying HPA as a PBI. This decision eliminated the 'directness' requirement for PBIs where there is a significant link to another PBI that does directly contribute to providing benevolent relief.
As the decision represented a significant development in the law and is now legally binding, the Commissioner has sought to provide guidance to ACNC staff, charities and the public by issuing the Statement, which is a reflection of how it will assess applications for PBIs with similar factual scenarios.
The ACNC maintains the case has not changed the definition of 'institution', in that an institution still requires structure, permanence and activities. However, fundraising can now constitute 'activities' for the purpose of satisfying the definition of institution, when it previously could not. It should be noted that active fundraising is still distinct from merely administering a trust or a fund.
Further, there is no 'directness' requirement for PBIs (compared with the previous ATO Taxation Ruling 2003/5) where a charity also has a concrete object of benevolence (as previously reported). Therefore, a charity can provide relief via related or associated entities, such as the Hunger Project, and still be classified as a PBI.
While the case refrained from forming a single test or definition for PBI, it found that a PBI is an institution that is organised, or conducted, for promoting the relief of poverty or distress that has:
- concrete objects of benevolent relief;
- clear mechanisms for delivering the benevolent relief; and
- a relationship of collaboration and a common public benevolent purpose.
With the ACNC's interpretation of the Hunger Project Australia decision, endorsement as a PBI in Australia may now be available to more charities.
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