The Blossoming of Public Benevolent Institutions -- From 'Direct' Providers to Global Networks

Abstract

Public benevolent institutions (‘PBIs’) form a class of not-for-profit (‘NFP’) entities that is entitled to various taxation concessions. The PBI concept was originally adopted in order to deliver selected tax benefits to a narrower group of NFPs than charities, given the wide legal meaning of ‘charitable’. As well as being eligible for income tax exemption like charities, PBIs can be deductible gift recipients (‘DGR’), which means that donors may be able to claim a tax deduction, and are entitled to fringe benefits tax (‘FBT’) exemptions, enabling more attractive employee remuneration packages. For decades, the Australian Taxation Office (‘ATO’) has insisted that PBIs must not only have purposes focused, narrowly, on the relief of poverty, sickness, destitution or helplessness, but that they must also directly provide relief to those suffering from such poverty, sickness, destitution or helplessness. The recent Full Federal Court decision of Commissioner of Taxation v Hunger Project Australia (‘Hunger Project’) clearly states that there is no such ‘direct’ requirement. The development is relevant for a range of state and federal taxes and is expected to have a large impact on federal revenue. This is due to the fact that the primary tax concessions relating to PBIs, the FBT exemption and DGR status, are currently in excess of $2 billion. The ‘cost’ of those concessions will likely increase with the broadening of the classes of entities that fall into the PBI category.