• Charity types and concessions

    What are the charity types?

    Charities include public benevolent institutions (PBIs) and health promotion charities (HPCs). PBIs and HPCs receive wider tax concessions than other charities.

    Charities must be registered with the Australian Charities and Not-for-profits Commission (ACNC) before we can endorse them to access any charity tax concessions. If a charity wants to access PBI or HPC charity tax concessions, it must also be registered with the ACNC as that particular subtype of charity.

    Next steps:

    What are charity tax concessions?

    Different tax concessions are available depending on the type of charity. Charities that are endorsed to access one or more charity tax concessions are referred to as tax concession charities (TCCs).

    Charity tax concessions are:

    • income tax exemption
    • goods and services tax (GST) charity concessions
    • fringe benefits tax (FBT) rebate
    • FBT exemption.

    Endorsement under the various laws provides charities with access to the tax concessions listed below.

    Table 1: Charity tax concessions

    Concession

    Explanation

    Eligible charity types

    Income tax exemption

    Exemption from paying income tax, removing the need to lodge tax returns.

    Condition for entitlement to:

    • the FBT rebate
    • refunds of franking credits on franked dividends.

     

    Charities (including PBIs and HPCs)

    GST charity concessions

    There are a range of GST concessions for transactions involving endorsed charities that are registered for GST.

    Gifts and GST credit adjustments – adjustments for GST credits are not needed if an item acquired by a business is then gifted to the charity.

    Accounting on a cash basis – the charity may choose to account on a cash basis regardless of its annual turnover.

    Non-commercial activities – if the charity makes sales and the payment it receives in return for the things it sold is less than a specified amount, the sales are GST-free.

    Donated second-hand goods – sales of donated second-hand goods by the charity are usually GST-free provided there is no change in the original character of the goods.

    Raffles and bingo – tickets to raffles and bingo sold by the charity are GST-free provided the holding of the raffle or bingo event does not contravene a state or territory law.

    Fundraising events – the charity may choose to treat all sales it makes for certain fundraising events as input taxed. The charity is not required to remit GST on sales made for the event. However, the charity cannot claim GST credits for related purchases.

    However, if the charity holds the same type of fundraising event more than 15 times in a year, they cannot treat the sales made in connection with any of the events as input taxed.

    Non-profit sub-entities – the charity has the option of treating any of its separately identifiable branches as separate entities for GST purposes. Provided that the annual turnover of the non-profit sub-entity is less than $150,000, the sub-entity is not required to register for GST. An unregistered non-profit sub-entity does not remit GST on sales and does not claim GST credits for purchases.

    Reimbursement of volunteer expenses – the charity can claim GST credits for reimbursements made to volunteers for expenses of taxable supplies that the volunteer incurs that are directly related to their activities as a volunteer of the charity. The expense must be for a creditable purpose and not be listed as non-deductible.

    Charitable retirement villages – the charity can make GST-free supplies to residents of the retirement village. Supplies made to visitors and staff of the retirement village do not qualify for GST-free treatment unless the activities are non-commercial activities of the charity.

    Charities (including PBIs and HPCs) 

    FBT rebate up to a $30,000 cap per employee for certain benefits * – except for the period 1 April 2015 to 31 March 2017, which has a FBT rebate up to a $31,177 cap per employee.

     

    *Benefits that constitute the provision of meal entertainment, car parking benefits or whose taxable values are wholly or partly attributable to entertainment facility leasing expenses are not included. This means that the value of the benefits that are not car parking, meal entertainment, entertainment facility leasing expenses must not be more than $30,000.

    Entitlement to a rebate equal to 48% for the period 1 April 2014 to 31 March 2015, 49% for the period 1 April 2015 to 31 March 2017, and 47% from 1 April 2017 of the gross FBT payable, subject to a capping threshold.

    Other than the period 1 April 2015 to 31 March 2017, the maximum grossed-up value of benefits that can be provided to anyone employed by the charity (without losing the concession) is $30,000. If the total grossed-up value of certain fringe benefits provided to an individual employee is more than $30,000, a rebate cannot be claimed for the FBT liability on the excess amount. For the period 1 April 2015 to 31 March 2017, the cap is $31,177 per employee.

    Charities that are institutions and income tax exempt

    Does not apply to:

    • charities that are not institutions**
    • charities that are institutions of the Australian Government, a state or a territory**
    • PBIs and HPCs.  
     

    FBT exemption up to a $30,000 cap per employee for certain benefits *– except for the period 1 April 2015 to 31 March 2017, which has a FBT rebate up to a $31,177 cap per employee.

    *Benefits that constitute the provision of meal entertainment, car parking benefits or whose taxable values are wholly or partly attributable to entertainment facility leasing expenses are not included. This means that the value of the benefits that are not car parking, meal entertainment, entertainment facility leasing expenses must not be more than $30,000.

    Exemption from paying FBT subject to a capping threshold. Benefits provided to employees are FBT exempt if the total grossed-up value of certain fringe benefits for each employee during the:

    - FBT year, other than 2016 and 2017, is $30,000 or less

    - 2016 and 2017 FBT year is $31,177 or less

    If the total grossed-up value of certain fringe benefits provided to an individual employee is more than $30,000 (or $31,177 for the period 1 April 2015 to 31 March 2017), the employer will be liable for the FBT on the excess amount.

    PBIs and HPCs

    Does not apply to hospitals.

    Hospitals may be entitled to a reduced capping amount.

    Endorsement to access charity tax concessions does not entitle your organisation to receive income tax deductible gifts. There is a separate endorsement process for deductible gift recipients (DGRs).

    See also:

    Can you be endorsed as a DGR?

    Last modified: 20 Jul 2015QC 46206