By Mark Friezer and Louisa Wu -
Snapshot
- The Full Federal Court has confirmed there is no requirement that a “public benevolent institution” must provide relief directly to those in need
- The expression “public benevolent institution” does not have a technical legal meaning and, in the absence of a statutory definition, must be given its ordinary meaning in accordance with the present current understanding of the expression
- The ordinary, contemporary understanding of a “public benevolent institution” is broad enough to encompass a not-for-profit organisation that engages in fundraising for provision to related or associated entities for use in programs for the relief of hunger in the developing world
- More not-for-profit organisations may now qualify as a “public benevolent institution” and be entitled to endorsement as a deductible gift recipient, or to obtain an exemption from fringe benefits tax
The Full Federal Court has unanimously accepted an interpretation of the term “public benevolent institution” that reflects contemporary methods of relieving poverty or distress: Commissioner of Taxation v The Hunger Project Australia [2014] FCAFC 69. On 13 June 2014, three judges supported a first-instance decision (The Hunger Project Australia v Commissioner of Taxation [2013] FCA 693) that an organisation does not need to directly give or provide relief of poverty, sickness, destitution and helplessness to be a public benevolent institution. An organisation can provide resources to its related or associated entities without materially performing charitable works directly, and still be organised or conducted for relief.
This is an important question for not-for-profit organisations, as public benevolent institutions may be entitled to be endorsed as a deductible gift recipient, and can gain an exemption from fringe benefits tax (Fringe Benefits Tax Assessment Act 1986 (Cth) s57A(1)).
Previously, the Australian Tax Office (ATO) was of the opinion that an entity cannot be a public benevolent institution unless it is involved in the direct provision of relief for those in need. To test this, the Commissioner funded both stages of this litigation under the ATO’s test case funding program.
The Commissioner did not apply for special leave to appeal to the High Court. On 8 August, the ATO also issued a decision impact statement indicating that the ATO would adopt the decision and reasoning of the Full Federal Court, and that it would also consider necessary amendments to Taxation Ruling TR 2003/5 relating to the Commissioner’s administration of public benevolent institutions.
