Expanding Possibilities for Tax Deductibility?

Date: May 4, 2016
Author: admin
Posted in: Insights

If you ever want tax deductibility for your organisation a ‘public benevolent institution’ (PBI) is the way to go. A PBI’s main purpose needs to be to provide benevolent relief to people in need. PBI’s are entitled to a vast array of tax benefits, generally wider than other types of charities.

However historically, in order to be considered a PBI, a charity’s purposes had to primarily benefit people in Australia and could only indirectly benefit people overseas. In a recent move by the Australian Taxation Office (the ATO), now being followed by the Australian Charities and Not-for-profit Commission (the ACNC), it now seems that PBI’s can include those organisations whose primary purpose is to benefit people overseas.

Among the potential benefits of a PBI is being endorsed as a Deductible Gift Recipient (DGR), essentially allowing organisations to offer tax-deductibility for donations made to them. In order to be endorsed as a DGR, an organisation must satisfy the ATO’s “in Australia” test. Historically, in order for this test to be satisfied, an organisation’s activities had to primarily benefit people in Australia and could not directly benefit people overseas.

In a significant move away from this, the ATO recently released an updated interpretation on the ‘in Australia’ condition. The test now only requires that a DGR be established and operated in Australia; the purposes and beneficiaries of the DGR no longer have to be located in Australia (except for limited types of public funds). This means a PBI could provide all of its funds to overseas people and entities and still be endorsed as a DGR.

The ACNC have seemingly followed suit in a draft interpretation statement recently released by the commission. According to the statement, an organisation can be registered as a PBI even if its main purpose is that of providing benevolent relief to people residing overseas. In a further extension to the definition of a PBI, the benevolent relief can be provided to people residing in all countries, even those nations that have not been declared as ‘developing’ by the Minister for Foreign Affairs.

This represents a significant change to the availability of PBI and DGR endorsement and presents exciting opportunities to charitable organisations assisting people overseas. For specialised advice in relation to PBI’s and DGR’s get in touch with our highly experienced Charities and Not-for-profit team today!

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