The commentary contained in this section is general. It is not intended to be legal advice or applied uncritically to your specific circumstances. You should seek specific advice that relates to your particular facts and circumstances or the particular facts and circumstances relating to your claim group or PBC.
This page was authored by:
Tim Wishart Principal Legal Officer Queensland South Native Title Services Ltd.
Maximising taxation benefits
To maximise benefits for a PBC it should be considered whether the PBC is entitled to:
- Registration as a charity;
- Registration as a public benevolent institution (PBI);
- Tax concession charity status including income tax exempt status; or
- Deductible gift recipient (DGR) status.
The PBC should be registered with the Australian Charities and Not-for-profits Commission (ACNC) as a charity. The Charities Act 2013 (Cth) clarifies that to be a recognised as a charity, an organisation must:
- Be not-for-profit;
- Have only charitable purposes that are for the public benefit'
- Not have a disqualifying purpose;
- Not be an individual, a political party or a government agency.
Section 9(2) of the Charities Act states that an entity’s (the PBC) purpose is to be treated as being for the public benefit if the entity receives, holds or manages an amount, or non-cash benefit (within the meaning of the Income Tax Assessment Act 1997 (ITAA)), that relates to:
- Native title (within the meaning of the NTA); or
- Traditional Indigenous rights of ownership, occupation, use or enjoyment of land.
Income tax exempt status
To be exempt from income tax, and other taxation concessions including GST exemptions, and fringe benefit tax (FBT) exempt status, the PBC must seek endorsement from the Taxation Commissioner as a charitable entity (ITAA97 s 50-105).
A PBC will be considered to be a registered charity if it meets one of the following relevant requirements:
- The PBC is an organisation physically present in Australia, that incurs its expenditure and pursues its objectives principally in Australia (ITAA 97 s 50-50(1)(a)); or
- The PBC is an institution eligible for deductible gift recipient (DGR) status;
- The charity complies with the basic requirements in its governing rules (ITAA 97 s 50-50(2)(a)); and
- The PBC uses its income and assets only for the charitable purposes for which it was established (ITAA 97 s 50-50(2)(b)).
In order to receive tax concessions the PBC will also need to have an Australian Business Number (ABN). Information on applying for an ABN online ca be found here.
The constitution of a PBC may adopt the wording required for a Public Benevolent Institution (PBI) as a result of the wording approved in the Northern Land Council v Commissioner of Taxes (NT) 2002 ATC 5117.
In that case, the court held that a corporation negotiating land rights in the Northern Territory was a PBI, largely due to the state of disadvantage experienced by the Aboriginal groups in the relevant region.
To be a 'registered public benevolent institution', a PBC would need to satisfy two requirements:
- It is registered with the Australian Charities and Not-for-profits Commission (ACNC) as a charity; and
- It is registered as a PBI, which means it must satisfy the legal requirements for being a PBI.
There is no hard and fast legal definition of a public benevolent institution. However, the cases that have considered what it means, and the Australian Taxation Office's (ATO's) guidance on its meaning (called a 'Taxation Ruling', TR 2003/5), set out the following requirements:
- The entity (PBC) seeking registration is an 'institution';
- The purpose of the institution and the things it does are to help satisfy needs that raise pity or compassion in the community, like poverty and other kinds of helplessness and suffering;
- The things the institution does are directed towards people with those needs, not to the community as a whole;
- The institution helps those people directly (including through its employees and volunteers), not through some other organisation; and
- The institution is 'public', which means:
- It does not do things just to make a profit for its members or any other particular individuals;
- It does things for the benefit of the public or a section of the public (in this case the native title holders), not just for the benefit of people who are members of the organisation or funds, relatives or employees of the members or the people running the organisation; and
- It helps people just on the basis of their needs, rather than discriminating between the people who it helps on some basis other than their needs.
In order to obtain DGR status a PBC must be:
- Endorsed by the Australian Tax Office (ATO); or
- Listed by name in the tax law.
To be endorsed as a DGR, an organisation must fall within a general DGR category as set out in the tax law and meet the other conditions that relate to the category.
There are more than 30 general DGR categories under the ITAA (Item 1.1.6 of the ITAA 97). If an organisation falls within one of the categories, it may have to meet some or all of the following conditions to be a DGR:
- Be in Australia;
- be endorsed by the ATO;
- if it issues receipts, include certain information on the receipt; and
- tell the ATO if it ceases to be entitled to the endorsement.
To be included in the list of DGRs listed by name in the Act, it is necessary to make application to the local member of Parliament to have her/him table the insertion in Parliament. There is no requirement to make an application to the ATO.
The ITAA may state that a PBC must establish a gift fund in order to receive tax deductible donations. To do this, the PBC must establish a separate gift fund account to which such donations must be deposited.
The gift fund account must only be used or applied for purposes that are consistent with the aims and objectives of the PBC and separate records must be maintained to receive and spend moneys from that account.