ACNC’s Draft Definition of PBIs – Risk or Opportunity?

A move on the definition of Public Benefit Institutions (PBI) has consequences of both risk and opportunities and needs careful consideration, writes Professor Myles McGregor-Lowndes from QUT Business School.

The charity regulator, the Australian Charities and Not-for-profits Commission (ACNC), has released an exposure draft of the Commissioner’s Interpretation Statement on public benevolent institutions (PBIs). ACNC now determines PBI status for Commonwealth tax purposes which is a threshold for income tax deductibility and fringe benefits tax (FBT) exemptions.

For many organisations, having PBI status is the “holy grail” of taxation status. It opens the door to FBT salary packaging, gift deductions, grants from foundations and a slew of state tax exemptions and concessions.

Any movement in the definition may spell either financial risk or opportunity depending on which side of the definitional fence you fall.

For this reason, the ACNC’s draft Commissioner’s Interpretation Statement about PBIs should be a carefully considered document for its risks and opportunities.

The ATO in its previous tax rulings said that: “A public benevolent institution is a Not for Profit institution organised for the direct relief of such poverty, sickness, suffering, distress, misfortune, disability, destitution, or helplessness as arouses compassion in the community.”

A further 15,000 words on 40 pages explains the case decisions and their application. But as the ACNC is now the definitional gatekeeper for the PBI definition, it is proposing its own statement about PBIs. It includes the 2014 Hunger Project case that gave the courts the chance to review the meaning of the phrase “public benevolent institution” and diminished the ATO’s “direct” relief requirement. The ATO will then retire its tax ruling.

The Hunger Project’s case judgment included the following explicit direction about how to assess an organisation’s “public benevolent institution” status, being:  “When the question is whether a particular institution is a public benevolent institution, the answer depends on the common or ordinary understanding of the expression at the relevant time. The question is not to be approached as a legal question to be dealt with by the mechanical application of past authority, irrespective of the present current understanding of the expression in the currently spoken English language.”

So how does the ACNC’s draft explanation measure up?

The ACNC Commissioner’s draft Interpretation Statement of PBI’s comes in at under 5,000 words and just 16 pages. It is currently being scrutinised for any movement either side of the ATO’s definitional fence.

The Australian Centre for Philanthropy and Nonprofit Studies at QUT has gathered a panel to discuss these issues in front of a Brisbane audience with Murray Baird, assistant commissioner

general counsel ACNC,  Andrew Lind, director of Corney and Lind Lawyers and QLD Law Society deputy chair and Suhanya Mendes, legal counsel for the ACNC

The event will be held on 9.30 to 11.30am on Thursday 28 April in Brisbane. For those outside of Brisbane live streaming will be available via Web Link and will begin at 9.30 AEST. To attend in person email acpns@qut.edu.au

Access the draft Commissioner’s Interpretation Statement here.  

About the Author: Myles McGregor-Lowndes is with the QUT Business School and is the former director of The Australian Centre for Philanthropy and Nonprofit Studies at QUT. He is a member of the Australian Charities and Not-for-profits Commission Advisory Board and ATO‘s Not for Profit Advisory Group.