Charitable tax concessions

Charity types

Charity

Charity has a special meaning under law. To be a charity, your organisation must:

  • be not-for-profit
  • have a charitable purpose
  • be for the public benefit (other than where the charitable purpose is the relief of poverty).

A charity may be a fund or an institution.

From 3 December 2012, charities must be registered with the Australian Charities and Not-for-profits Commission (ACNC) as a charity before they can be endorsed by the Australian Taxation Office (ATO) to access charity tax concessions. The ATO accepts the ACNC’s decision on charity status and decides which tax concessions your charity is entitled to, depending on your charity's registered charity type.

For more information please see Australian Charities and Not-for-profits Commission (ACNC).

Charitable Fund

A Charitable Fund is a fund established under an instrument of trust or a will for a charitable purpose. Charitable funds mainly manage trust property, and/or hold trust property to make distributions to other entities or persons.

As of 3 December 2012, a Charitable Fund is now known as Charity.

Please also see Charity above.

Charitable Institution

A Charitable Institution is an institution that is established and run to advance or promote a charitable purpose. Examples include:

  • religious groups
  • not-for-profit aged care homes
  • homeless shelters
  • disability service organisations
  • universities and colleges
  • animal welfare societies
  • artistic or cultural groups

Please also see Charity above.

Public Benevolent Institution (PBI)

A Public Benevolent Institution (PBI) is a non-profit institution organised for the direct relief of poverty, sickness, suffering, distress, misfortune, disability or helplessness. The characteristics of a PBI are:

  • it is set up for needs that require benevolent relief
  • it relieves those needs by directly providing services to people suffering them
  • it is carried on for the public benefit
  • it is non-profit
  • it is an institution
  • its dominant purpose is providing benevolent relief.

Examples of PBIs are organisations that:

  • provide hostel accommodation for the homeless
  • treat sufferers of disease
  • provide home help for the aged and the infirm
  • transport the sick or disabled
  • rescue people who are lost or stranded.

From 3 December 2012, PBIs must be registered with the ACNC as a charity and as a PBI before they can be endorsed by the ATO to access tax concessions available to PBIs.

For more information please see ACNC PBI factsheet External site on the ACNC website.

Health Promotion Charity (HPC)

A Health Promotion Charity is a non-profit charitable institution whose principal activity is promoting the prevention or control of diseases in human beings. The characteristics of a health promotion charity are that:

  • its principal activity is promoting the prevention or the control of diseases in human beings
  • it is a charity which is a charitable institution.

Examples of activities that can promote the prevention or control of disease include:

  • providing relevant information to sufferers of a disease, health professionals, carers and to the public
  • researching how to detect, prevent or treat diseases
  • developing or providing relevant aids and equipment to sufferers of a disease.

From 3 December 2012, HPCs must be registered with the ACNC as a charity and as an HPC before they can be endorsed by the ATO to access tax concessions available to HPCs.

For more information please see the ACNC HPC factsheet External site on the ACNC website.

Public Benevolent Institution (PBI) Employer

The characteristics of a Public Benevolent Institution (PBI) employer that an organisation operates are:

The FBT exemption for a PBI employer that an organisation operates does not apply in respect of the organisation's employees generally. It only applies in respect of the employees of the PBI employer itself and it is subject to a $30,000 cap per employee

From 3 December 2012, organisations cannot apply for endorsement to access FBT exemption for a PBI employer it operates.

The arrangements for those organisations endorsed by the ATO for the operation of a PBI employer as at 2 December 2012 have changed. For more information please see Entities endorsed for the operation of PBIs and HPC External site on the ATO website.

Fund types

Income Tax Exempt Fund

An Income Tax Exempt Fund (ITEF) is a non-charitable ancillary fund endorsed by the ATO to access income tax exemption before 1 January 2014.

From 1 January 2014, new arrangements apply. Funds endorsed as ITEFs at 31 December 2013 were transitioned into these arrangements by being:

  • registered with the Australian Charities and Not-for-profits Commission (ACNC) as charities
  • endorsed by the ATO to access income tax exemption as a registered charity.

For more information, see:

Tax concessions

Income Tax Exemption

Income tax exemption is an exemption from paying income tax, removing the need to lodge income tax returns. Entities that are endorsed as income tax exempt are entitled to a refund of franking credits on franked dividends they receive.

GST Concession

There are a range of goods and services tax (GST) concessions for transactions involving endorsed charities:

  • Gifts and GST credit adjustments – adjustments for GST credits are not required where an item acquired by a business is subsequently 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 – where the charity makes sales and the payment it receives in return is less than a certain amount, the sales are GST-free.
  • Donated second-hand goods – sales of donated second hand goods by the charity are GST-free.
  • 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 supplies it makes in connection with certain fundraising events as input taxed. The charity is not required to remit GST on supplies made in connection with the event. However, the charity is not entitled to claim GST credits for related purchases.
  • 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 the volunteer incurs that are directly related to their activities as a volunteer of the charity.

FBT Rebate

Fringe Benefits Tax (FBT) rebate is an entitlement to a rebate equal to 48% of the gross FBT payable, subject to a capping threshold. The maximum grossed-up value of benefits that can be provided to anyone employed by an FBT rebatable employer (without losing the concession) is $30,000. If the total grossed-up value of the 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.

FBT Exemption

Fringe Benefits Tax (FBT) exemption is an exemption from paying FBT subject to a capping threshold. Benefits provided to employees are FBT-free where the total grossed-up value of certain fringe benefits for each employee during the FBT year is $30,000 or less. If the total grossed-up value of the fringe benefits provided to an individual employee is more than $30,000, the employer will be liable for the FBT on the excess amount.