A glance in legislation, case law, and beyond.
When registering your charity, it is important to be aware of the various different legal issues you may encounter.
A common and highly beneficial charity sub-type is a Public Benevolent Institution (PBI), which offers significant tax advantages. However, not every charity qualifies as a PBI; it must meet specific criteria set by the Australian Charities and Not-for-profits Commission (ACNC), the body that regulates the charities industry. Therefore, it is crucial that charities know and understand the elements behind what constitutes a PBI.
The legal definition plays a large role in what is considered to be a PBI. To qualify as a PBI, you must be a charitable organisation primarily focused on relieving poverty, sickness, suffering, or disability. To be considered “benevolent,” a PBI must address significant distress that goes beyond the everyday challenges of life, and the relief provided must be concrete and focused on alleviating real hardship. Provided a charity’s main purpose is benevolent, it can also have other non-benevolent purposes that are incidental. Additionally, the institution must be “public,” meaning it benefits a broad section of the community and is publicly accountable.
However, case law also plays a vital role in interpreting and determining PBI status. Let’s explore what some cases have recently said about what qualifies as a PBI.
Equality Australia Ltd v Commissioner of the Australian Charities and Not-for-profits Commission [2024] FCAFC 115
Having fought for a few years to be recognised as a PBI, the Full Federal Court ruled in May 2024 that Equality Australia cannot be considered one.
Equality Australia’s main activities focus on advocacy and policy development for the LGBTIQ+ community. While their efforts aim to support individuals experiencing distress, the court found that these activities were not sufficiently connected to the direct relief of that distress, which is essential for PBI status. The concept of “sufficiency of connection” was pivotal in the ruling, and the court ruled that the link between Equality Australia’s advocacy work and tangible relief to the LQBTIQ+ community was too indirect to meet the PBI criteria. Advocacy and policy work, though valuable, historically do not qualify organizations for PBI status under Australian law, as they do not provide immediate relief to those in distress, such as people experiencing poverty or helplessness.
Included in the ruling was a dissenting opinion that acknowledged the distress faced by the LGBTIQ+ community and the role Equality Australia plays in addressing it.
Takeaway
When applying for Public Benevolent Institution (PBI) status, charities must ensure their activities are directly linked to providing immediate relief to those in distress, such as through poverty or suffering. Therefore, advocacy and policy reform, even if aimed at long-term social change, may not meet the legal requirements for PBI status due to the lack of a direct connection to immediate benevolent relief. Charities need to be mindful of this “sufficiency of connection” requirement when seeking PBI classification.
Global Citizen Ltd and Commissioner of the Australian Charities and Not-for-profits Commission [2021] AATA 3313
The ACNC argued that GCL had independent purposes beyond relieving poverty, specifically in education and advocacy, and that its activities were too remote from providing direct aid. However, the Administrative Appeals Tribunal (AAT) ruled in favor of GCL. It determined that while GCL engaged in education and advocacy, these were incidental to its primary benevolent purpose of relieving poverty. The ruling broadened the contemporary interpretation of “benevolent,” allowing that a PBI does not need to provide direct relief but can be part of a collaborative process involving multiple entities.
This principle was an expansion of a previous case, Commissioner of Taxation v The Hunger Project Australia [2014] FCAFC 69 (13 June 2014), which clarified that a PBI does not need to provide direct relief but can facilitate it through relationships with other related entities that do the actual distribution of benevolent aid.
Takeaway
These two cases are crucial for understanding what a PBI charity is. As the AAT acknowledged, charity efforts of advocacy and awareness are crucial in achieving benevolent outcomes, however, a charity must be aware that this cannot be their main activity and only incidental to their main objective of providing benevolent relief. Charities should also be mindful of how their aid is delivered, understanding that it doesn’t have to be provided directly by them. Instead, they can collaborate with other entities to facilitate the distribution of benevolent relief.
Other tips on applying for PBI status
With expertise in facilitating and advising charities, we have a few more tips that may be beneficial for you when considering applying to become a PBI.
Benevolent Need
The charity’s purpose must address a significant level of distress or need, going beyond ordinary day-to-day suffering and focused on aiding those in severe hardship;
Ensure Your Charitable Objects are Clear
Your organization’s constitution or governing documents should clearly state that its main purpose is providing benevolent relief. Avoid vague or multiple purposes that might dilute the focus on benevolence;
Documentation
Ensure proper documentation of your organization’s purposes, activities, and how they align with the requirements for PBI status. This may include impact reports, partnerships with aid organizations, or government endorsements;
Consistency of Purpose
Any advocacy, education, or other activities undertaken by the charity must clearly support the benevolent purpose, not diverge from it.
To understand more about the ACNC and what a PBI is, click here to visit the ACNC’s information page, or click here for the commissioner’s interpretation of what a PBI is.
If you have any questions, please get in touch with Warlows Legal using the contact information below.
