The ACNC has announced they it will begin reviewing charities to check their entitlement to charity registration and for deductible gift recipient (DGR) status. The reviews will commence in July 2020, with approximately 500 charities to be reviewed each year.
Public Benevolent Institutions
The initial review will focus on Public Benevolent Institutions (PBIs). Most PBIs are endorsed as DGRs. They are also entitled to the FBT exemption on the first $30,000 of grossed up fringe benefits per employee. Because of the additional tax benefits available to PBIs and the fact that they represent the largest section of the DGR population, they are considered to have the highest risk profile. Currently there are around 11,000 PBIs that are DGRs.
The initial review of a charity by the ACNC will be an internal review. The ACNC will only contact a charity if an issue is identified.
In determining which PBIs to review, the ACNC will consider a range of factors including:
- Registered as a charity and PBI prior to the commencement of the ACNC on 3 December 2010. The registration of these charities was simply transferred to the ACNC from the ATO’s data base and therefore they have not previously been reviewed by the ACNC.
- Not regulated by the Office of the Registrar of Indigenous Corporations (ORIC)
Have no, or only one, Responsible Person listed on the ACNC portal
- The governing document has not been uploaded to the ACNC portal
Some areas where we often see compliance issues are:
- There is no governing document on the ACNC portal or the document that has been loaded is incorrect or incomplete
- The governing document does not contain the required winding up and DGR clauses
- The purposes listed in the governing document are out of date and no longer reflect what the organisation actually does
- The organisation conducts activities that are not consistent with its charity sub-type and website or other externally available information describes activities that are not clearly benevolent
- Responsible persons have not been updated
- The organisation has overseas activities but is not complying with the external conduct standards
- The organisation is providing private benefits to its responsible persons or members
For a PBI, the issue of purpose is particularly relevant. A PBI’s main purpose must be the relief of poverty or distress. Any other purpose must be incidental or ancillary to this main purpose. The activities the PBI undertakes should be primarily working towards fulfilling this benevolent purpose. We do see situations where over time a PBI has unwittingly strayed from its benevolent purpose and is now undertaking activities that are not consistent with its PBI status or other activities have commenced that may not be benevolent.
Action Required – Status review
All charities should undertake regular reviews of their entitlement to ACNC registration and to the tax concessions. The ACNC is encouraging PBIs in particular to undertake their own internal review prior to July 2020.
The ACNC has a self-assessment tool that charities can use. There is a separate section specifically for PBIs. The tool can be found at https://www.acnc.gov.au/for-charities/charity-tax-concessions/deductible-gift-recipients-dgrs-and-acnc/deductible-gift.
Saward Dawson is also well able to assist your charity in undertaking a review. We audit a range of charities and we regularly obtain charity registration for new charities, including PBIs. We are well aware of what the ACNC requires.
If your charity is operating outside Australia, we can also provide advice, templates and assistance in meeting the external conduct standards. These standards govern how a charity must manage its activities and resources outside Australia. Operating outside Australia can include simply sending money offshore, working with organisation located overseas or buying goods from overseas. The standards commenced in July 2019. Although the ACNC was effectively providing a period of time for existing registered charities to meet the standards, it is likely the ACNC will soon be expecting full compliance.