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Are you a charity that is registered or seeking to be registered as a Public Benevolent Institution (PBI)?
Unsure what a PBI is or how they work?
Read on to learn all the ins and outs of PBI’s.
What Is A Public Benevolent Institution?
According to the Australian Charities and Not-for-profits Commission (ACNC), a PBI is a type of charity whose main purpose is to relieve poverty or distress.
For a charity to be recognised as a PBI it needs to meet two requirements:
- It must fit the definition of a charity in accordance with the Charities Act 2013 (Cth) and;
- It must be an institution that has benevolent relief as its main purpose and that relief is provided to people in need.
Let’s break down these legal definitions.
Breaking Down Legal Definitions
What Is A Charity?
In accordance with the Charities Act 2013 (Cth), an entity is a charity if:
- Is a not-for-profit entity,
- Its purpose is linked to a charitable purpose that is for public benefit
- Its propose is not a disqualifying purpose and;
- It is not an individual, political party or government entity.
What Is A Charitable Purpose?
In section 12 of the Charities Act 2013 (Cth), your charity has a ‘charitable purpose’ if it is for the purpose of:
- Advancing health
- Advancing education
- Advancing social or public welfare
- Advancing religion
- Advancing culture
- Promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia
- Promoting or protecting human rights
- Advancing the security or safety of Australia or the Australian public
- Preventing or relieving the suffering of animals
- Advancing the natural environment; or
- Any other purpose beneficial to the general public that may reasonably be regarded as analogous to, or within the spirit of any of the above purposes.
If your charity exists for the purposes of any of the above, it will be deemed to have a ‘charitable purpose.’
What Is A Public Benefit?
Your charity’s charitable purpose should be for public benefit.
In accordance with the Charities Act 2013 (Cth), your charity will be of public benefit if it benefits:
- The general public or;
- A sufficient section of the general public such as a religious organisation, people experiencing difficulties or people with financial hardship.
Disqualifying Purposes
Under the Charities Act 2013 (Cth) there are two ‘disqualifying purposes’:
- Where a charity’s purpose is to engage in, or promote, activities that are unlawful or contrary to public policy, it will be considered as having a disqualifying purpose.
Contrary to public policy means:
- Engaging in activity that is against the rule of law, the constitutional system of government or the safety of the general public and national security.
An example of this disqualifying purpose would be if a charity’s purpose was to raise funds for an identified terrorist group.
Reasons for this is because:
- Terrorism goes against the law
- The charity’s purpose would be contrary to the safety of the general public and national security.
- Where a charity’s purpose is to promote or oppose a political party or a candidate for political office.
More on charities and whether they can engage in political activities can be found here.
What Is An Institution?
The ACNC defines an institution as an establishment, organisation or association that exists to promote an religious, charitable, public utility or educational purpose.
To be an institution the ACNC requires that your charity is not merely a fund. Rather, it must actively engage in coordinating and undertaking activities for benevolent relief.
What Is Benevolent Relief?
Benevolent relief specifically relates to work that relieves poverty or distress. Benevolent relief often relates to:
- Sickness
- Disability
- Destitution
- Suffering
- Misfortune
- Helplessness
For work to be considered benevolent relief, it must meet a need that:
- Is significant enough to ignite compassion in people in the community
- Extends beyond suffering experiences as part of ordinary life and;
- Is clearly requiring benevolent relief.
Is My Charity A Public Benevolent Institution?
For you charity to be recognised as a PBI, it must:
- Fit the definition of a charity in accordance with the Charities Act 2013 (Cth) and;
- It is an institution that has benevolent relief as its main purpose and that relief is provided to people in need.
As such, if you want your charity to be recognised as a PBI, it is vital that you understand the legal definitions fleshed out above.
For example, you must ensure that your charity meets the definition of a charity under the Charities Act 2013 (Cth) by clearly demonstrating that your charity has a charitable purpose.
Further, you must ensure that your charity is recognised as an institution whose main purpose is to provide benevolent relief to the sick, disabled and alike.
Does My Charity Have To Provide Benevolent Relief Directly?
Although your charity’s main purpose has to be to provide benevolent relief to be recognised as a PBI, it does not necessarily have to do so directly.
Let’s consider the following two examples:
| Example 1: Your charity is called ‘Big X.’ Big X’ main purpose is to continuously raise funds that are used to provide a benevolent relief. However, in raising these funds, Big X does not directly provide the benevolent relief itself. Instead, Big X collaborates with other charities and related organisations whose objects are similar to Big X’. Big X often engages these other charities and related organisations to organise, conduct or promote benevolent relief on its behalf. |
The scenario above is an example of how a charity (Big X) can still be a PBI, even though it does not provide benevolent relief directly. This is because its main purpose is still to raise funds to provide benevolent relief.
| Example 2: Your charity Big X raises funds for a range of different purposes and charities. From time to time, Big X funds other charities who happen to have purposes of providing benevolent relief. |
The scenario above presents an instance where your charity would not likely be recognised as a PBI. This is due to the fact that Big X’ main purpose is not sufficiently connected to providing benevolent relief.
How To Become A Public Benevolent Institution
To become a PBI, you must register your charity with the ACNC.
The ACNC provides a helpful checklist to help with registering your PBI. Let’s break it down.
| Australian Business Number (ABN) | To register your charity, it must have an ABN. You can apply for an ABN here. |
| Organisation Name | You will have to pick a name for your charity! Make sure that your charity’s name is the same across all of your important documents such as your charities ABN and governing documents. Note, however, that you can also provide other names that your charity might go by. For example, a different trading name or an acronym. |
| Contact Details | This includes your charity’s: • Address for service • Business address • Primary contact person |
| Legal Structure | You must detail what type of legal structure your charity will be. For example: • A incorporated association • Company limited by guarantee • Trust More information on your charity’s legal structure can be found here. |
| Governing Document | This is your charity’s formal document that sets out the organisation’s name, its charitable purposes and the rules it operates under. This could also be called your charity’s constitution or rules. This must be provided in the application process. |
| Date of Establishment | You must provide what date your charity was established. |
| Charitable Purposes | Your charity’s charitable purposes must be clearly detailed. |
| Charity Subtypes | This is where you detail that your charity wishes to be categorised as a PBI. As your charity is seeking to be registered as a PBI, there may be a few extra questions around the planned activities of your organisation. You will be required to fill in a table that asks you to estimate the time and money spent on your charity’s activities. Don’t stress, this is only to ensure that your charity’s main purpose is to provide benevolent relief. |
| Activities | Here you will detail how your charity’s activities work towards the main purpose of providing benevolent relief. |
| Beneficiaries | As your charity is seeking to be a PBI, you will likely state that the beneficiaries of your PBI will be those requiring benevolent relief. |
| Responsible Persons | This relates to a full list of the people responsible for governing your charity. You must provide their: • Name • Date of birth • Contact details • Position within your charity. |
| Operating Locations | Where will your charity operate? You must list all of the places that your charity will carry out its activities. |
| Governance | Your charity must meet the ACNC’s Governance Standards to be registered with the ACNC. Make sure you are across all of these! You will be asked to confirm that your organisation complies with the relevant standards that can be found here. |
| Financial Information | You must provide details of your charity’s finances, including: • Its financial year-end date • Information about its current financial situation • Estimated future revenue and; • Fundraising plans. |
| Tax Concessions | Here you must detail which tax concessions your charity wants to apply for. The ACNC will pass this information onto the ATO for assessment. |
Example Of Public Benevolent Institutions
Some examples of PBI’s may include some:
- Crisis accommodation for women and children fleeing family violence
- Aged care facilities
- Community legal services for individuals experiencing poverty or helplessness
- Disability services
- Organisations who teach religion in Government schools
- Disaster relief organisations
Remember, each of these examples must:
- Fit the definition of a charity in accordance with the Charities Act 2013 (Cth) and;
- Be an institution that has benevolent relief as its main purpose and that relief is provided to people in need to be considered a PBI.
Public Benevolent Institution Tax Benefits
PBI’s are eligible for tax concessions and deductible gift receipt (DGR) status.
Having tax concessions can be extremely helpful when running your charity and ensuring its maximum operation.
A DGR status allows for supporters of your charity to make tax-deductible donations.
However, to obtain a DGR status you must:
- Have an ABN
- Operate in Australia
- Have a deductible gift receipt winding up clause in your company rules (AKA your constitution or rules).
Are There Any Disadvantages Associated With Public Benevolent Institutions?
There is a significant process associated with registering your charity as a PBI, as outlined above.
You must ensure that you understand all of the requirements of being a PBI and make sure that your PBI maintains these requirements.
While a significant process is involved with becoming a PBI, one can confidently say that the advantages far outweigh the hassle.
As a PBI, your charity’s main purpose is to help those in need and there are significant tax benefits associated with this.
Need More Help?
If you are seeking to register your charity as a PBI, it can be a lengthy process, however, there are many advantages involved.
If you have any further questions or require advice in regard to PBI’s we are here to help!
Reach out to our team for a free, no-obligations chat at team@sprintlaw.com.au or 1800 730 61.
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