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Edited version of private ruling
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Ruling
Subject: Public Benevolent Institution
Issue 1
Question 1
There is no specific prohibition preventing a public benevolent institution from allowing staff to work for any other entity. The question therefore is whether there is a point where such activity would infringe the entities endorsement as a public benevolent institution. The following paragraphs of Taxation Ruling TR 2003/5 provide some guidance:
Predominantly for benevolent relief
22. The organisation must be at least predominantly for the direct relief of poverty, sickness, destitution or helplessness. Any other purposes and operations must be incidental to the public benevolence or of minor extent and importance.
Question of fact and degree
23. Whether a particular organisation is a public benevolent institution is a matter of fact and degree. It is an objective question in which all relevant factors must be considered. In particular, both the organisation's constitution and its activities will be relevant. Features to consider include:
the objects, powers and membership criteria set out in the organisation's constituent documents;
· legislation affecting its rules, powers, etc;
· the policies and procedures which guide its operations;
· the activities and operations that it actually performs, including:
o the uses and sources of funds and property;
o the activities of the executive body;
o the duties and tasks of employees and volunteers.
Because the answer to this question involves a question of fact and degree dependant on the specific situation, it is not possible to provide a definitive response that will cover all contingencies. However, the money raised by contracting out the two employees would certainly assist Newleaf in achieving its purpose.
We consider that the current arrangement whereby employees are contracted out to another entity for approximately 40% of their time are not yet of sufficient scale to constitute a separate purpose.
Question 2
Entitlement to income tax exemption under section 50-105 of the Income Tax Assessment Act 1997 (ITAA 1997) is dependant on an entity being a charitable institution (public benevolent institution) as per item 1.1 of the table in section 50-5 of the Income Tax Assessment Act 1997. For as long as an entity remains endorsed under this provision it will maintain its entitlement to the concession.
A charitable institution must be endorsed by the Commissioner under division 426 of schedule 1 of the Taxation Administration Act 1953 to be eligible for the FBT and GST concessions.
Subsection 123C(1) of the Fringe Benefits Tax Assessment Act 1986 provides that an entity can be endorsed for FBT exemption as a public benevolent institution if the entity:
· Is a public benevolent institution
· Has an ABN
Section 176-1 of the A New Tax System (Good and Service Tax) Act 1999 provides than an entity can be endorsed for GST concessions as a charitable institution if the entity:
· Is a charitable institution
· Has an ABN
Entitlement to FBT, GST and Income tax concessions currently enjoyed by Newleaf are solely dependant on its endorsement as a charitable institution - public benevolent institution. As long as Newleal retains its endorsement as a public benevolent institution it will remain entitled to these concessions.
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