Another case, another ‘broader’ view of what is a Public Benevolent Institution?

In a recent AAT case the Australian Charities and Not-for-Profits Commission (‘ACNC’) was unsuccessful in arguing that ‘Global Citizen Ltd’ was not eligible to be registered under the charity sub-type ‘public benevolent institution’ (‘PBI’).

Global Citizen Ltd is a very active and interesting organisation and part of the international Global Citizen network. You can getter a better sense of what they do by taking a look at their website (click here).The AAT summarised it as “Based on this largely uncontested evidence, we find the activities of GCL, together with other entities in the GC Network and in collaboration with other non-governmental organisations (NGOs), are directed to securing commitments, primarily financial commitments, from governments and wealthy philanthropists, to international organisations that carry out the projects to relieve poverty“.

In considering the purposes and activities of Global Citizen Ltd the AAT decision (click here) continues a string of decisions that broaden the concept of what may be a PBI.

We will monitor whether the decision gets appealed but in the meantime let’s take a look at the decision. Before we do though …

So why does it matter?

The ACNC charity sub-type ‘public benevolent institution’ is particularly significant as it potentially allows an organisation to access various Federal tax exemptions and concessions (including Fringe Benefits Tax exemption subject to per employee capping rules), deductible gift recipient status and various State tax and other exemptions and concessions.

About Global Citizen Ltd

The constitution of Global Citizen Ltd (GCL) provides:

Clause 2.3: The principal object of the company is to provide benevolent relief of poverty, sickness, destitution, distress, suffering and helplessness to persons in need with a particular emphasis on bringing an end to extreme poverty globally by 2030, in particular by:
a) providing funding for, cooperating and collaborating with other bodies and organisations both in Australia and globally having objects in whole or in part similar to the objects of the company; and
b) educating and empowering communities to help effect change to international policies and systems and raise global awareness of the issues and matters affecting persons living in extreme poverty;
c) helping members inform themselves on global and domestic poverty issues and their solutions, human rights and helping members build skills to communicate effectively with decision makers and members of the public;
d) mobilising resources for research and development;
e) providing grants and scholarships to individuals who are working to end extreme poverty;
f) providing financial support and facilitating youth advocate programs, symposiums, workshops and conferences which train young people to take action in their communities to relieve extreme poverty;
g) advocating for development assistance for programs that promote the end of global poverty; and
h) conducting and funding strategic media and public awareness raising activities to educate members of the broader community.

The sole purpose of GCL, as it argued, is to provide relief of poverty which is reflected in its stated purpose being to “…provide benevolent relief of poverty, sickness, destitution, distress, suffering and helplessness to persons in need with a particular emphasis on bringing an end to extreme poverty globally by 2030″. Clause 2.3 a) to h) were the activities by which GCL viewed that it pursues that purpose.

What is interesting about the case?

The AAT reasoned there were two issues to consider:

  • what were GCLs purposes and were they benevolent; and
  • does the fact that GCL does not provide relief of poverty directly (or through related entities) matter.

The AAT accepted GCL as having a sole benevolent purpose of relieving poverty (as argued by GCL) and accepted Clause 2.3 a) to h) reflected the activities by which GCL would pursue that purpose. Much discussion in the decision centred on whether education and advocacy were objects of GCL or activities (and how/why that mattered). For example, how does the conduct of a live music event relate to a purpose of relieving poverty?. Despite the AAT accepting education and advocacy as activities by which GCL pursued its purpose it found that even if they were independent purposes they were ancillary or incidental to main benevolent purpose.

There may be a bit more water to go under the bridge on this issue so we will save it for another day, needless to say the ACNC may decide to have another look at the Commissioner’s Interpretation Statement  CIS 2016/03 as to what is a PBI (click here to view CIS 2016/03).

The AAT decision though reinforces and arguably expands earlier decisions in this area by confirming:

  • directly dispensing relief is not a requirement to be a PBI (it can be done in collaboration/conjunction with others, for example, with related entities or other organisations sharing common benevolent purposes);
  • what matters is that the entity should be organised, or conducted for the relief of poverty, sickness, destitution and helplessness; and
  • what it means to deliver relief has changed over time, and there is a need to adopt a contemporary definition of what it means to deliver relief. The evidence in the GCL case established that it was unlikely that any one organisation could provide relief for the large-scale world problems that an organisation such as GCL sought to combat (like global poverty, world hunger etc). It was increasingly likely that relief will be provided by a variety of entities working with government and non-government organisations to achieve positive results, using advocacy and awareness-raising as an integral part of that process to achieve their goals.

However there is always a point where having purposes that are expressly stated as being benevolent will not, when considered along side the actual activities undertaken, confer PBI status. The decision included the following observation, “In the case where the entity does not provide relief directly but relies on providing relief indirectly, there is likely to be a spectrum and it is possible the activities of an applicant will be such that it is not possible to say the entity is ‘organised’ for, or ‘concerned in’ or ‘promoting’ the relief of poverty etc. But we are satisfied that is not the case here”.

So where does this leave us?

Where this decision takes us remains to be seen.

It may be appealed, and depending on how that goes, Governments may need to consider whether the evolving (and broader) scope of what is a PBI sits comfortably against the level of support intended to be provided through taxpayer funded exemptions and concessions.

Obviously organisations that have unsuccessfully sought PBI status (or decided not to try) may need to have another think about things.

 

This article provides a general summary of the subject covered and cannot be relied upon in relation to any specific instance. It is not intended to be, nor should it be relied upon as, a substitute for professional advice. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use.