A Public Benevolent Institution (PBI) seeking deductible gift recipient (DGR) status is required to be registered with the Australian Charities and Not-for-profits Commission (ACNC) under the charity subtype, PBI prior to seeking DRG endorsement with the ATO.
In assessing whether an organisation is a PBI, most Federal, State and Territory regulatory bodies including the ACNC apply an interpretation accepted by the courts, namely a charitable institution organised for the direct relief of such poverty, sickness, suffering, distress, misfortune, disability, destitution, or helplessness as would arouse compassion in the community.
The recent case of Women’s Life Centre Inc and Commissioner of the Australian Charities and Not-for-profits Commissioner (Taxation) [2021] AATA 500 (WLC) is a timely reminder that not all organisations that perform socially worthwhile activities, or which are ‘charitable’ for legal purpose are PBIs. In fact, the case is a reminder that some organisations which are already registered as a ACNC charity with a PBI subtype and endorsed by the ATO as a DGR may in fact not be a PBI at all!
Facts
In this particular case, the ACNC accepted that WLC was an institution and provided services to a sufficient section of the ‘public’. WLC had applied to the ACNC for registration under three different charity subtypes: for the purpose of advancing health, for the purpose of advancing social or public welfare and as a PBI.
The ACNC decided that WLC was eligible for registration as a charity under the first two subtypes but declined registration as a PBI. WLC sought review of the ACNC’s decision.
In determining whether WLC was a PBI, the Tribunal focused specifically on the benevolence aspect. To establish the true character of WLC, the Tribunal considered WLC’s main purpose having regard to its governing documents and the nature of activities undertaken.
WLC’s constitution stated that its principal object was to “…provide relief of poverty, suffering, distress, misfortune, destitution, misfortune [sic] or helplessness for pregnant women and mothers of all sections of the public irrespective of race, colour or creed”. Other objectives included providing counselling for women facing a crisis pregnancy, offering support to women in need during pregnancy and after childbirth; and, other related purposes.
The evidence showed that WLC did not have any eligibility criteria when determining whether a person would be supported , meaning the services provided by WLC were arguably not sufficiently targeted towards providing benevolent relief to individuals in need (as opposed to pregnant women in general). The profile of women who attended WLC arguably was arguably not that of persons experiencing the unmet need that is, poverty, distress, suffering and/or misfortune. There was also evidence of an additional purpose, namely, persuading women not to have an abortion.
The Tribunal affirmed the ACNC objection decision.
Key takeaways
The decision reaffirms that attaining PBI status requires more than just including a benevolent purpose in an organisation’s governing documents. The ACNC and other regulatory bodies generally adopt a holistic approach and consider an organisation’s overall activities and objectives to work out whether its main purpose is one of benevolence ( and if there are other purposes that these are ancillary or incidental to the charitable benevolent purposes).
An organisation’s benevolence must be targeted (or directed) at people in need and not the broader community. The degree of need experienced by the people it assists must be of such seriousness as to arouse the community’s compassion (and support). In other words, the needs to be met must be more than just ‘ordinary human experiences’.
In addition, the benevolent services must be directed towards relieving the poverty, distress, suffering and/or misfortune experienced by the people it assists.
Where to from here
It is worth noting that the ACNC has provided guidance in the form of a Commissioner’s interpretation statement CIS 2016/03 (Guideline) setting out its view as to the scope of the charity subtype, PBI. The Guideline also sets out the factors taken into account by the ACNC when determining whether an entity is a PBI and includes useful examples of organisations that may be PBIs, as well as some hypothetical scenarios of how the ACNC will apply the Guideline in practice.
The ATO has also stated in its online factsheet Is your organisation a PBI? that the ACNC is responsible for determining PBI status, and that the ATO accepts that an organisation is a PBI if it is registered by the ACNC as a PBI.
It is good governance for existing ACNC charities registered under PBI subtype and endorsed by the ATO as DGR to periodically review the organisation’s purposes and activities having regard to the aforementioned Guideline.
This will provide greater comfort as to an organisation’s continued entitlement to registration as a charity subtype PBI (and on-going DGR status).