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Financial Institution flow chart

Last updated 6 June 2018

NFPs could be a Financial Institution by either having managed investments or by conducting an investment business.

Part 1: Where an NFP has managed investments

To be a managed Financial Institution, 50% or more of an NFP’s gross income (including grants and donations) in the last three calendar years must be derived from investments (such as shares, money, portfolios) and at least some of the NFP’s assets are managed by an external investment manager. To determine this, add up your gross income for the relevant time period and calculate the proportion from investments.

An NFP is considered to be managed by an external investment manager if the external investment manager invests on behalf of the NFP and has discretionary authority over at least some of the NFP’s assets. An external investment manager will have discretionary authority if they can make decisions regarding the investment of at least some of the assets without seeking approval from the NFP.

Start of example

Example: NFP investment income

The Whitely Trust (the Trust) is a charity. Over the last three years its gross income was 30% from financial investments, and 70% from donations and grants.  The Trust’s financial investments are managed by a fund manager.

The Trust does not meet the definition of Financial Institution as less than 50% of its income is from financial investments.

End of example

Step 1 – Gross income from investments

In the past three calendar years or for the life of your NFP (whichever is shorter), has 50% or more of your gross income (including grants and donations) been from investments?

Note: Investment income includes interest, dividends and any other income from securities or commodities. If more than 50% of your income comes from investing, reinvesting or trading investments as a business then the answer to this question is no. Rental income is not included as investment income for the purposes of the CRS.

Yes

Go to Step 2

No

Go to Part 2

Step 2 – Another entity conducts certain activities or operations on your behalf

Does another entity conduct the following activities or operations on behalf of your NFP:

  • trading in money market instruments
  • trading in foreign exchange, exchange, interest rate and index instruments
  • trading in transferrable securities
  • commodities futures trading
  • individual and collective portfolio management
  • otherwise investing, administering or managing Financial Assets or money?

Note: The entity conducting the activities or operations on behalf of your NFP only needs to manage a portion of your NFP's Financial Assets. This portion can be any amount and does not need to be greater than 50% of the Financial Assets.

Financial Assets for the purposes of the CRS include the following assets or interests in those assets:

  • securities
  • commodities
  • swaps
  • insurance or annuity contracts.

Yes

Go to Step 3

No

Your NFP is not a Financial Institution. Go back to Step 1 of the Common Reporting Standard flow chart.

Step 3 – Investment management activities

Are all of the investment management activities described in the above question conducted by a sole trader or an individual not conducting a business?

Yes

Your NFP is not a Financial Institution. Go back to Step 1 of the Common Reporting Standard flow chart.

No

Go to Step 4

Step 4 – External investment manager

Does the external investment manager have discretionary authority over at least some your NFP’s assets?

Yes

Your NFP is a Financial Institution for CRS purposes. Go back to Step 1 of the Common Reporting Standards flow chart.

No

Your NFP is not a Financial Institution. Go back to Step 1 of the Common Reporting Standard flow chart.

Part 2: Where an NFP is conducting a business as a Financial Institution

For an NFP to be a Financial Institution by conducting an investment business, 50% or more of the NFP's gross income (including grants and donations) in the last three calendar years must be derived from conducting an investing, reinvesting or trading business. To determine this, add up your gross income for the relevant time period(s) and calculate the proportion from your investing, reinvesting or trading activities.

Start of example

Example 1

The Church Property Trust (the Trust) is a charity that was established in 1822. In the last three years, 55% of the Trusts gross income has come from carrying on a financial investment business for a church and 45% from rental income, donations and grants. The Trust is a Financial Institution as more than 50% of its income is from its financial investment activities.

Example 2

Larkham Limited (the Company) is a not-for-profit sporting organisation that was formed on 1 January 2016. In the 2016 calendar year 75% of the gross income of the company came from membership fees, donations and government grants. 25% of its income was derived from investments. The Company is not a Financial Institution as less than 50% of its income is from financial investments.

End of example

Step 5 – Conducting a business as a Financial Institution

Does your NFP conduct an investing, reinvesting or trading business undertaking any of the following activities or operations:

  • trading in money market instruments
  • trading in foreign exchange, exchange, interest rate and index instruments
  • trading in transferrable securities
  • commodities futures trading
  • individual and collective portfolio management
  • otherwise investing, administering or managing Financial Assets or money?

Note: Financial Assets for the purposes of the CRS include the following assets or interests in those assets:

  • securities
  • commodities
  • swaps
  • insurance or annuity contracts.

Yes

Go to Step 6

No

Your NFP is not a Financial Institution. Go back to Step 1 of the Common Reporting Standard flow chart.

Step 6 – Gross income from investments

In the past three calendar years or for the life of your NFP, whichever is shorter, has 50% or more of your gross income (including grants and donations) been from conducting its investing, reinvesting or trading business?

Yes

Your NFP is a Financial Institution for CRS purposes. Go back to Step 1 of the Common Reporting Standard flow chart.

No

Your NFP is not a Financial Institution. Go back to Step 1 of the Common Reporting Standard flow chart.

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