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Public benevolent institution (PBIs) are one type of not-for-profit structure that are eligible for significant tax benefits. In this Insight, we look at what a PBI is: how it is defined, what it must do to be registered as such and examples of PBIs that operate in the community


A public benevolent institution (PBI) is a type of charitable institution, and one of the ‘subtypes’ which a charity can register with the ACNC. For the ACNC’s purposes, a PBI is a charitable institution with a main purpose of providing benevolent relief to people in need.

To register a PBI charity, your entity must first be eligible for registration as a ‘charity’ under the Australian Charities and Not-for-profits Commission Act 2012 (the ACNC Act) and must satisfy the legal meaning of a charity. You can read more on what this entails in our earlier insight, accessed here.

To be approved for registration under the PBI sub-type the charity must be:

  1. ‘public’
  2. ‘benevolent’; and
  3. an ‘institution’

What each of these terms mean is explored further below.

‘public’

The term ‘public’ is directed towards the extensiveness of the class of individuals that the charity benefits. ACNC has expressed the view that generally, it requires:

  1. the receipt of public funds
  2. public control and accountability
  3. connection with government

It has indicated that an entity with less than 3 responsible persons, who are related (close family or friends) who have little responsibility in the community is less likely to demonstrate public accountability and control, unless it can show it receives public funds, is connected with government, and benefits an extensive class of individuals.

‘benevolent’

To be considered ‘benevolent’ the charity’s:

  1. main purpose must be benevolent relief
  2. the relief must be specifically targeted at people in need, and
  3. the relief must be provided to the relieve the needs of those people

It is not enough to be concerned in an abstract sense with the relief of poverty and distress and promote social welfare in the community generally.

The charity will need to demonstrate that the need being relieved is of such seriousness that it will arouse community compassion and engender the provision of relief. ACNC distinguishes ‘ordinary human experiences’ from those which people do not recover by themselves with the passage of time. Merely providing education and training will not be benevolent unless it targets those with particular needs warranting relief – for example people with disabilities or the long-term unemployed, and the programs are directed to relieving their need.

The need for relief must be:

  1. Beyond the suffering experienced in daily life;
  2. Concrete; and
  3. Significant.

There is no requirement that the charity must itself directly give or provide benevolent relief to those in need. Rather, a charity can provide relief by engaging with others to undertake activities on its behalf or be part of a relationship of collaboration (such as within a structure of related organisations with shared objects) that is organised, conducted for or promotes benevolent relief.

The charity’s services (whether delivered directly or via its partners) must be actually directed towards relieving the poverty or the distress experienced by the people it assists.

‘Institution’

ACNC has indicated that for a new charity to prove it is an institution it must demonstrate it has concrete plans to operate within one year of establishment, to bring its founders’ plans in to being.

Tax concessions

A PBI charity may be eligible to receive significant tax benefits owing to the fact that it is eligible for both charity tax concessions and deductible gift recipient status (DGR) from the Australian Tax Office (ATO).

A registered PBI can apply for the following Commonwealth tax concessions which are available to registered charities:

  1. Income tax exemptions and franking credits;
  2. Goods and services tax concessions; and
  3. Fringe benefits tax rebates.

When you apply as a PBI charity, the ATO automatically assesses your organisation for DGR endorsement (provided you meet a few small requirements). If your charity obtains DGR status, this would allow donors to make tax-deductible donations. That is, a donor can deduct the amount of their donation from their own taxable income when they lodge their tax return.

Examples of PBI organisations

  1. Organisations providing crisis accommodation to the homeless or women and children experiencing family violence
  2. Not-for-profit aged care facilities.
  3. Not-for-profit community legal services targeted at relieving needs such as poverty, distress or helplessness.
  4. Not-for-profit bodies assisting refugees and asylum seekers
  5. Disability services organisations.

Conclusions

An institution is an establishment, organisation or association, that exists to promote some object, especially objects of public utility, or religious, charitable or educational objects.

For a new organisation to evidence that it is eligible for registration as a PBI, it is required to demonstrate that it has concrete plans to operate in the foreseeable future. This can be shown by:

  1. The provision of an operational, strategic or business plan (two or more pages) outlining what it proposes to do, the resources it requires and how it will obtain them, the personnel it will engage, its financial projections and the third parties it may involve; and/or
  2. The provision of agreements with other organisations setting out how the organisations intend to work together to provide benevolent relief.

These plans are likely to be reviewed by the ACNC within 12 months and if they have not been realised then the ACNC may review the charity’s registration as a PBI charity.

Birchgrove Legal is a boutique Sydney law firm that specialises in the not-for-practice sector. Its market-leading practice is at the cutting edge of innovative approaches to serving NFP sector organisations across the spectrum of entity types. Get in touch with one of our authors to discuss your needs further.

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