New Interpretation Statement – Could Your Organisation Be a PBI?

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By John Vaughan-Williams, Lawyer

Following updates from the Australian Taxation Office (ATO) in 2016 regarding the ability of Public Benevolent Institutions (PBIs) to operate overseas, the Australian Charities and Not-for-profits Commission (ACNC) Commissioner has released an Interpretation Statement on PBIs (the Interpretation Statement).


A PBI is a subtype of charity, which has the relief of suffering and helplessness as its main object. Endorsement as a PBI is sought after by many organisations, due to the valuable taxation benefits that are attached. In particular, PBIs are entitled to be deductible gift recipients, which means that donations to a PBI can generally be claimed back on an income tax return by the donor.

Status of Interpretation Statement

The Interpretation Statement is binding on the ACNC, and can be used to guide applicants (and existing PBIs) on how the ACNC will apply the law to their organisations.

Before the release of the Interpretation Statement, the main piece of guidance on PBIs was contained in the ATO Taxation Ruling 2003/5 (TR2003/5). However, TR2003/5 was released well before the establishment of the ACNC, which now determines PBI applications.

The most relevant previous ACNC guidance was contained in a statement regarding the Hunger Project case. This particular statement focused on the level of directness that is required in the relief provided by a PBI, rather than providing a general summary of the law on PBIs.

Important Points of new Interpretation Statement

The Interpretation Statement is timely, given the developments that have occurred in the law since TR2003/5 was issued.

Some of the most salient points of the new Interpretation Statement are set out below.

  1. Multiple Sub-types

The Interpretation Statement clarifies that there is nothing preventing a PBI from also being registered with the ACNC under other charitable sub-types.

In fact, a large portion of PBIs will also be eligible to be registered under the sub-type of ‘advancing social or public welfare’.

Applicants may have previously not selected other sub-types based on a mistaken belief that doing so would dilute their PBI application.

  1. Prevention and Relief

The previous law on PBIs focuses on providing relief of distress, but the position was less clear as to whether activities that only prevent distress could satisfy the requirements of a PBI.

The Interpretation Statement clarifies that while preventative activities could be PBI activities, it will only be the case in certain circumstances.

In order to satisfy the ACNC’s requirements for PBIs, activities of a preventative nature must still be targeted at a group of individuals which is in need, and which would require benevolent relief if the preventative activities were not carried out. If the activities are targeted at the community as a whole, rather than towards an appreciably needy class, then they may not be PBI activities.

The Interpretation Statement provides examples of when organisations which conduct preventative activities would be eligible to be endorsed as PBIs. An organisation which strives to prevent homelessness in an underprivileged area is likely to qualify as a PBI, since that community is in particular need of relief. Alternatively, an organisation which attempts to prevent school non-attendance generally is unlikely to be a PBI, as the activity is targeted at the community at large.

  1. Institution

One of the requirements of PBI endorsement is to meet the legal definition of an ‘institution’, and the Interpretation Statement provides useful guidance on this definition.

The Interpretation Statement sets out that an organisation which is yet to commence operating may still be eligible for endorsement as a PBI. This clarification may allow organisations which previously believed they were ineligible for endorsements to now submit successful applications.

Such applications, however, will not be straightforward, as evidence will need to be provided as to the structures and plans that have been created to ensure that the organisation will provide benevolent relief in the future.

The Interpretation Statement mentions that policies, strategic plans, and contracts with other organisations will all be helpful for such applications.

We recommend that any organisations which have not yet commenced operating, but are seeking to submit a PBI application, first obtain legal advice.

The Interpretation Statement also clarifies that an entity that merely manages trust property will generally not be an institution. Trusts may, in some cases, be considered institutions, but they must have unique identities. Applications for endorsement of trusts as PBIs are also not straightforward.

  1. Operating Overseas

The Interpretation Statement has reiterated the position announced by the ATO in 2016 that operating primarily overseas will not preclude PBI endorsement.

Given the ACNC’s recent focus on counter-terrorism financing, applications for organisations that primarily operate overseas will need to be particularly detailed on the processes that are in place to track how the organisation’s funds are used overseas.

While the overseas activities of a PBI do not necessarily need to be conducted in a developing country, the activities do need to be focused towards a demonstrably needy class in that country, and not to the community at large.


In light of the Interpretation Statement, organisations which have either previously been unsuccessful in an application for PBI endorsement, or which have assumed that they were ineligible, should reconsider.

If you require advice on any of the aspects of the Interpretation Statement, we strongly suggest you obtain legal advice.

For further information, please do not hesitate to contact us.

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