A new era for Public Benevolent Institutions?

On 17 September 2021 the Administrative Appeals Tribunal handed down its decision in Global Citizen Ltd and Commissioner of the Australian Charities and Not-for-profits Commission [2021] AATA 3313. This case concerns a charity, Global Citizen, appealing a decision by the Commissioner of the ACNC refusing to grant it Public Benevolent Institution (PBI) registration.

Global Citizen is a registered charity, formerly under the subtype of ‘advancing education’. It is part of a global network of entities that in 2015 embraced the United Nation’s Sustainable Development Goals and collectively adopted a mission to end extreme poverty by 2030. Global Citizen gave evidence to the Tribunal of its education and advocacy involvement in a number of campaigns that were run in collaboration with other individuals and organisations.

The Commissioner argued that Global Citizen was not eligible to be registered as a PBI for the following reasons:

1. it had an independent purpose, or purposes, of education and/or advocacy that prevented it from being a PBI; and
2. it did not provide relief directly, or through related entities, to those in need, preventing it from being a PBI.

Ultimately, the Tribunal was satisfied that Global Citizen is organised for the purpose of relieving poverty. In reaching this decision, the Tribunal made a number of important statements about the meaning of PBI in the current context.

‘Main’ benevolent purpose

The Tribunal confirmed the position in Federal Commissioner of Taxation v The Hunger Project Australia [2014] FCAFC 69; (2014) 221 FCR 302 that it is not appropriate for the term PBI to be fixed in time. In that case the Court explained that: “When the question is whether a particular institution is a public benevolent institution, the answer depends on the common or ordinary understanding of the expression at the relevant time.”

As expressed in the Interpretation Statement on PBIs and relied on in the Global Citizen case, it is presently the Commissioner’s view that the provision of benevolent relief must be a PBI’s main purpose, however, it may have non-benevolent activities provided they are incidental or ancillary to its main purpose. An activity is not considered incidental or ancillary if it is entirely independent of the main benevolent purpose – that is, if it is an end in itself; of substance in its own right; or is not intended to further benevolent relief. The Commissioner is of the view that an organisation cannot be “part PBI” – its purpose is either to provide benevolent relief, or it is not. The existence of independent activities that are not of a benevolent nature (or are not ancillary to the charity’s main benevolent purpose) will operate to deny it status as a PBI.

Contrary to this view, the Tribunal expressed the position that the ordinary meaning of ‘main’ in relation to an object or purpose does not preclude an entity from having other objects or purposes, provided the benevolent purpose is predominant. In considering the relevant case law, the Tribunal determined that the Commissioner’s current conception of ‘main’ purpose is derived from previous cases involving the determination of charitable status rather than PBI registration, and that these were two different considerations. The Tribunal said that just because a charity must have exclusively charitable purposes does not mean a PBI must have exclusively benevolent purposes. The Tribunal indicated its analysis of the authorities suggests an ‘exclusivity of purpose’ test should not apply in relation to PBIs.

Despite these comments, unfortunately the Tribunal did not reach a concluded view on the meaning of the term ‘main’ purposes as it determined that GCL had only one purpose, so it was not necessary to do so.

Purposes vs activities

The Tribunal also reminded us that when determining a charity’s eligibility for PBI, we need to be careful not to treat their activities as their purposes.

The Tribunal highlighted that the difference between purposes and activities is not always clear. A purpose or object is something that one strives toward or the reason that something exists. Whereas, for a charity, an activity is what the entity actually does day-to-day and over time. In addition to considering an entity’s purposes as expressed in its constitution or elsewhere, the Commissioner will take into account its actual activities when determining the entity’s ‘main’ purpose.

In the Global Citizen case, the Tribunal was satisfied that the educational and advocacy activities of Global Citizen are what the organisation does to achieve its purpose of relieving poverty. In that sense, the Tribunal was satisfied Global Citizen has only one purpose – the relief of global poverty – and that it engages in educational and advocacy activities to achieve that purpose. However, the Tribunal said that even if education/advocacy were to be viewed as purposes, it was satisfied that they are incidental and ancillary to Global Citizen’s main purpose being the relief of poverty.

Importantly for charities providing humanitarian aid or development assistance, the Tribunal also indicated that advocacy, awareness-raising and educational activities appeared to be common methods employed by entities tackling the issue of global poverty (and other global issues).

Difficulties for charities providing indirect relief

The Tribunal agreed with Justice Thawley’s comments in Australians for Indigenous Constitutional Recognition Ltd v Commissioner of the Australian Charities and Not-for-profits Commission [2021] FCA 435 that: “The more abstract and less direct an institution’s activities are to the relief of poverty, sickness, destitution, helplessness or distress, the less likely the entity is to be regarded as a PBI”.

While this was not a concern for the Tribunal in the Global Citizen case, the Tribunal said that in circumstances where an entity does not provide relief directly but relies on providing relief indirectly, there is likely to be a spectrum and it is possible the activities of the entity will be such that it is not possible to say the entity is ‘organised’ for, or ‘concerned in’ or ‘promoting’ the relief of poverty etc.

What does this mean for charities?

The ACNC has until 15 October 2021 to appeal the Tribunal’s decision. Unless the decision is appealed, we anticipate there will be changes to the Commissioner’s Interpretation Statement for PBIs. This could open the door for more registered charities to apply for PBI registration and for existing PBIs to have non-benevolent purposes (not limited to those incidental or ancillary to their main purpose).

This is significant because a PBI is one of the categories of deductible gift recipients (DGR) in the Income Tax Assessment Act 1997 (Cth). DGR endorsement can be an important tool for charities in raising the funds they need to provide their charitable services as it entitles donors to a tax deduction for eligible donations and allows a charity to receive funds from public ancillary funds that can only distribute their income and/or capital to certain DGRs, including PBIs.

This case is also a timely reminder for charities about the factors the Commissioner (and a Court) will consider when determining an organisation’s eligibility for PBI, including the additional (but not impassable) difficulties obtaining PBI registration in circumstances where the organisation does not provide relief directly.

This publication was authored by Hannah Rose and is ©For Purpose Advisory. It is for general guidance only and any opinions expressed are the opinions of the author. The content and any links are current as at the date it was published and For Purpose Advisory takes no responsibility for any changes to the links or accuracy of the content. Legal advice should be sought before taking action in relation to any specific issues mentioned in this publication.