The term 'necessitous circumstances' refers to financial necessity. 'Necessitous circumstances funds' can be endorsed by us as a deductible gift recipient (DGR).
There are certain requirements that must be satisfied for a necessitous circumstances fund to be endorsed. If you're eligible, you can apply for endorsement as a deductible gift recipient.
They have the following characteristics:
- the fund must be either:
- provides relief to persons who are in necessitous circumstances
- the fund does not provide other benefits
- the persons receiving relief must be in Australia.
The term 'necessitous circumstances' refers to financial necessity. It does not extend to needs generally. For example, being sick, incapacitated or aged are not necessitous circumstances on their own.
Being in necessitous circumstances:
- involves poverty, though it may not be abject poverty or destitution
- does not mean just being without luxuries.
A person is in necessitous circumstances where they don't have enough financial resources to have a modest standard of living in Australia.
An indicator of this would be where a person's level of income is such that they are eligible to receive income-tested government benefits. Other indicators are health needs (such as sickness or disability) and family responsibilities. Such non-financial needs can cause financial necessity.
Some needs (such as health needs) are non-financial but can cause financial need.
The death of a family member or the loss of an asset or business will not necessarily place a person in necessitous circumstances. You must consider other sources of income and assets, such as super, insurance and compensation.
The particular circumstances giving rise to financial necessity will not necessarily be permanent. For example, tropical cyclones, floods and other disasters can cause people to be in short-term financial need.
While on holidays interstate, Jennifer is seriously injured in a car accident. She is suffering from loneliness because she faces a long hospital stay before she can return home.
A local service club raises funds to fly Jennifer's mother interstate to comfort her.
Jennifer's needs are not financial. The fund is not a necessitous circumstances fund.
Geoff is 17 years old and was permanently incapacitated while playing football. He will need full time care for the rest of his life. He had no insurance and his parents cannot meet the costs.
The local community raises funds for Geoff. The money raised by the community pays for necessary modifications to his parents' home and for the services of a carer.
The fund is a necessitous circumstances fund.
During recent floods, three volunteer workers were killed while carrying out a rescue. None of the three volunteers had any financial dependants.
A public fund to give money to the volunteers' families is not a necessitous circumstances fund.End of example
The common method of relieving a person in necessitous circumstances is by giving money or goods directly to the person.
A necessitous circumstances fund can make distributions such as money or goods to other organisations, as long as those organisations provide care for persons in necessitous circumstances.
- If a public fund distributes for various purposes, only one of which is the care of persons in necessitous circumstances, it may be a public ancillary fund.
Not only must a fund be for persons in necessitous circumstances, it must also be for the relief of necessitous circumstances.
Not all funds directed towards people in necessitous circumstances are for the relief of necessitous circumstances.
A fund provides scholarships for students to attend a particular school. Preference is given to meritorious students who are in necessitous circumstances.
While persons in necessitous circumstances may benefit from the fund, the fund is not dedicated to providing relief of necessitous circumstances.End of example
Where a fund is maintained primarily to relieve one individual, family or similar group, its governing documents must make it clear that the fund is to relieve their particular necessitous circumstances. They must not just state that the fund is held on trust for the named individual or individuals.
A fund is set up to raise money for two families whose homes were badly damaged in a bushfire. The rules of the fund state that the money will go to 'food, clothing and emergency shelter'. It is clear that the fund is to relieve necessitous circumstances and not just for the personal benefit of the families.End of example
Normally, a necessitous circumstances fund will use an application form to obtain financial information from anyone seeking assistance. However, in some situations the financial need will be obvious. For example, immediately after a natural disaster, a fund's employees would not normally need to check on the financial resources of each beneficiary.
Smithfield has been devastated by a tropical cyclone. A mayoral fund is set up to provide short-term assistance to residents who were victims of flood and cyclone damage. In the immediate short-term, the circumstances of the disaster itself would indicate the need for relief. During this period, close consideration of the potential beneficiaries' finances would not be necessary.End of example
The fund must exclusively, or at least chiefly, relieve persons who are in necessitous circumstances. If the fund also provides benefits to persons who are not in necessitous circumstances, it is not a necessitous circumstances fund.
A fund has been set up to distribute money evenly for the following purposes: financial need, disaster relief, talented children and sporting achievement.
It is not a necessitous circumstances fund because it is not exclusively or chiefly for the relief of necessitous circumstances.End of example
The persons receiving relief from their necessitous circumstances must be in Australia.
A fund has been set up to provide money, food and clothing to victims of a plane crash in New Guinea.
It is not a necessitous circumstances fund because it is not for the relief of people in Australia.End of example
In exceptional circumstances, a fund established for the benefit of persons in Australia may actually provide relief to persons outside Australia. For example, a fund can provide money for an Australian person to have an operation overseas because the operation is not available in Australia.
Justin is a 10 year old Australian boy with cancer. The most appropriate treatment is available at a clinic in Germany. Justin's family cannot meet the costs. A necessitous circumstances fund can help pay for Justin's treatment.End of example
If you do not meet the requirements of this category and want to collect tax-deductible donations for people who are victims of disaster you may be able to under other DGR categories.A fund can be endorsed as a deductible gift recipient under the general DGR category 'necessitous circumstances fund'.