CharityPack (current to 19 June 2003)

Appendices

This document has been archived. It is current only to 19 June 2003.

Appendix 1 - Are you a charity?

This appendix helps you work out if you are a charity. If you are a charity, it will help you with:

• income tax endorsement as an income tax exempt charity (ITEC)
• goods and services tax (GST) whether supplies are GST- free
• Australian Business Number (ABN) entitlement to an ABN, and
• fringe benefits tax (FBT) rebate to reduce FBT payable.

The appendix has the following structure:

• the characteristics of charities What is a charity?
• purposes that are not charitable Organisations that are not charities
• key points to work through Checklist am I a charity?, and
• lists of descriptions and examples of charities and non-charities Types of organisation listing.

The checklist helps you relate these elements to your circumstances by drawing together the characteristics, purposes and examples. Before concluding that you are or are not a charity you should use the checklist.

What is a charity?

A charity is an entity established for altruistic purposes that the law regards as charitable. The ATO does not set the criteria to decide whether or not an organisation is a charity. The criteria are established in the law by case judgements. Charitable purposes are the relief of poverty, the relief of the needs of the aged, the relief of sickness or distress, the advancement of religion, the advancement of education and other purposes beneficial to the community.

Charities include most religious institutions, aged persons homes, homeless hostels, organisations relieving the special needs of people with disabilities and societies that promote the fine arts.

The characteristics of a charity are:

• it is an entity which is also a trust fund or an institution
• it exists for the public benefit or the relief of poverty
• its purposes are charitable within the legal sense of that term
• it is non-profit, and
• its sole or dominant purpose is charitable.

Entity

An entity for these purposes includes a corporation, unincorporated association, trust or partnership. A charity must be an entity. A part of an entity like a branch, division or account is not treated as a charity.

The entity must be a trust fund or an institution. Whether an entity has the character of an institution will depend on a range of features including its activities, size, permanence, purposes and recognition. Incorporation is not enough, on its own, to show an entity is an institution. A charitable institution would not usually include an entity that is established, controlled and operated by family members and friends.

Charities are for the public

Charities are altruistic and exist for the benefit of the community or the relief of poverty. If an entity places limits on those who can benefit from its activities, it may still be a charity if those limits are only to enable it to better carry out its charitable purposes.

Charities sometimes limit their activities to a particular segment of the community. Such groups include residents of a particular geographic area, the adherents of a particular religion, or sufferers of a particular disability or condition. If the nature of the benefits provided by an organisation are compatible with such a limit, the purpose can be charitable.

Limiting access to a library to residents of a particular town could be for the public benefit, but limiting the use of a bridge to followers of a particular religion would not.

Charities often limit access so as to better provide their services to the community. Examples can include the enrolment procedures of schools, the membership procedures of a police and citizens youth club, referral policies of medical clinics, and the borrowing rules of libraries. The continuation and efficient administration of a charity can make such limits necessary.

A religious school only educates children who go through its enrolment procedure. If this is merely a means of enabling the school to provide its services to the community, the enrolment process does not disentitle the school from being a charity.

If an entity limits benefits on the basis of family ties, employment with a particular employer or membership of a particular association, it will not be a charity unless its purpose is solely to relieve poverty.

A fund is set up to provide scholarships for children of employees of a particular company. The fund is not charitable. A business association is set up to advance the common interests of its members. It is not a charity because its purpose is to benefit its members and not the public. This is the case even though it funds research.

Charitable purposes

Not all entities which are of benefit to the community are charitable. The entity must be set up for purposes that the law regards as charitable. These purposes are not limited to a finite list. As new community needs arise, particular purposes may be recognised by the courts as charitable. We have provided examples of charities under the following headings:

• aged persons
• animals
• culture
• defence and public order
• disaster relief
• education
• environment
• health
• indigenous persons
• industry, commerce, agriculture
• locality or neighbourhood
• moral improvement
• people with disabilities
• poverty
• public works and utilities
• religion
• research
• science
• unemployment, and
• young persons.

The listing introduces the characteristics of charities under each heading and gives examples of charities and non-charities.

Charities are non-profit

An entity is not charitable if it is carried on for the purposes of profit or gain to particular persons including its owners or members. This is the case irrespective of the number of owners or members, or whether charitable consequences flow from the entity's activities.

A hospital is operated to distribute dividends to private shareholders. The hospital is not a charity even though it cares for the sick.

Entities can satisfy the non-profit requirement if their constituent or governing documents prevent them from distributing profits or assets for the benefit of particular persons both while they are operating and on winding up. The entity's actions must be consistent with this requirement. This is so for both direct and indirect gains.

A company limited by guarantee with the following clauses in its constitution would meet the non-profit requirement, providing its actions were consistent with them. Non-profit clause

'The assets and income of the organisation shall be applied solely in furtherance of the above- mentioned objects and no portion shall be distributed directly or indirectly to the members of the organisation except as bona fide compensation for services rendered or expenses incurred on behalf of the organisation.' Dissolution clause

'In the event of the organisation being wound up, any surplus assets remaining after the payment of the organisation's liabilities shall be transferred to another organisation with similar purposes and is not carried on for the purposes of profit or gain to its individual members.'

A charity can be non-profit and still make a profit. However, any profits it makes must be used for charitable purposes. The profits must not be distributed to owners, members or other private persons.

A charity makes a $40 000 profit for the year. It uses the profit to reduce its debts and provide for next year's charitable activities.

Sole or dominant purpose

The sole or dominant purpose of the entity must be charitable. For a mere trust fund to be charitable it must be established solely for charitable purposes. If the entity has purposes which, when viewed in isolation would not be charitable, they must be incidental or ancillary to the charitable purpose.

A religious congregation holds occasional sporting activities among members. These activities are designed to advance and foster religion among the group. The religious congregation is a charity. The sporting activities are incidental to its religious purpose.

If an entity has purposes that are not part of or incidental to its charitable purpose, it is not a charity. This is the case even if those purposes are secondary.

An association has been set up to be a social club and to look after injured animals. It is not a charity even though it mainly cares for animals, with lesser attention given to the social club.

The characteristics of each entity will determine whether it is a charity. An entity's governing or constituent documents (constitution, memorandum and articles of association, trust deed, rules, charter etc) must show that it is a charity. For entities that are not merely trust funds, their activities must also show they are charities.

A corporation limited by guarantee has the object of operating a volunteer disaster relief service for the public. Its activities are consistent with its object. The corporation is a charity. A trust fund's object is to provide scholarships to disadvantaged Aboriginal school students. The trust fund is a charity.

Organisations that are not charities

Many community organisations are not charities. An entity is not a charity if:

• it is primarily for sporting, recreational or social purposes, or
• it is primarily for political, lobbying or promotional purposes.

Government departments and instrumentalities carrying out the ordinary functions of government are unlikely to be charities.

Charities are not sporting, recreational or social

Sporting and recreational entities established for sporting or recreational purposes are not charities.

Organisations that are not charities include rowing clubs, football clubs, dancing clubs, bridge clubs, card clubs, athletic clubs, horse racing clubs, model train societies, gem clubs, boating and fishing clubs, snooker centres, boxing clubs, callisthenic clubs, golf clubs, ski clubs, car clubs, scuba-diving clubs and motor-racing clubs.

Entities which are primarily for social or entertainment purposes are not charitable.

Organisations that are not charities include social clubs run by religious institutions, ethnic cultural associations, cinema clubs, nudist clubs, singles clubs, friendship clubs, wine societies and fan clubs.

Sporting, recreational or social activities can be carried out by a charity if they are merely a means used to achieve charitable purposes.

A rehabilitation service organises swimming sessions to help its clients regain full use of their limbs. It is a charity as its swimming activities are a means of carrying out its dominant purpose of helping people recover from their injuries. An organisation has been set up to facilitate sporting programs run by universities in Queensland. The organisation is a charity if the sporting programs are a means of advancing education among the universities' students.

Charities are not political, lobbying or promotional

An entity is not charitable if its dominant purpose is advocating a political party or cause, attempting to change the law or government policy, or promoting a particular point of view.

However, if an entity's purpose is otherwise charitable, the presence of political, lobbying or promotional activity that is incidental to the charitable aims will not prevent it being a charity.

An animal shelter's main purpose is looking after sick, stray and unwanted animals. Around budget time it sometimes lobbies politicians for funding. As long as the lobbying remains no more than incidental to the charitable purpose, the animal shelter will continue to be a charity. A group of State-based health charities form a national peak body having the same objects. The activities of the peak body are various means of coordinating and supporting the State charities' activities, including by lobbying. As long as the lobbying is incidental to its charitable health purposes, the peak body can be a charity.

Political parties and organisations promoting political parties or their policies are not charitable.

An institute formed to educate people in the platform of a political party is not a charity.

An entity whose dominant purpose is to change the law or government policies is not charitable. This is so even if the subject matter of the change may be beneficial to the community or is of great concern to the community.

A residents action group is formed to lobby against a proposed rubbish dump near a suburb. It is not a charity.

An entity seeking to maintain existing law or government policy is also considered not charitable.

An entity which aims to promote a particular point of view or endeavours to convince the public of the correctness of such a view is not charitable. This is irrespective of whether the view seeks to change law or government policy, or uses educational means to achieve its aims.

An organisation is set up to convince the public that pornography is a detriment to society. It is not a charity. An organisation has been established to promote a 40 letter alphabet to be used by the community. It believes that the alphabet will result in a great benefit to the community because it will be cheaper and easier to use. The organisation is not a charity.

Governmental

Government departments and instrumentalities are unlikely to be charitable institutions. They are simply carrying on the ordinary activities of a government department. This is so even if the activities are such that if carried on by private persons they would be charitable.

A State welfare department helps homeless people. The department is not a charity.

However, charities frequently receive government funding. This does not stop them being charities.

A migrant resource centre receives government funding and has a service agreement with a government department. The centre is still a charity despite having been funded by a government department. To be a charity you must:

• be an entity (corporation, unincorporated association, trust or partnership etc)
• be a trust fund or an institution
• be able to demonstrate from your constituent or governing documents and your activities (if applicable) that you are carried on for the public benefit or the relief of poverty
• be non-profit. This means you are not carried on for the profit or gain of your owners, members or other private persons
• not be:
  • carried on for sporting, recreational or social purposes
  • carried on for political, lobbying or promotional purposes, or
  • a government instrumentality carrying out the ordinary functions of government
• from the listing that applies to you (Types of organisation listing) have a sole or dominant purpose:
  • within the characteristics in the Description
  • the same as, or equivalent to, that of any organisation in the Charities examples , and
  • not the same as, and not equivalent to, any in the Non-charities examples .

If you are a charity, chapter 1 gives an explanation of your income tax status. Charities are not automatically exempt from income tax and must be endorsed by the ATO.

As explained earlier, if you are not a charity this guide does not apply to you. The income tax status of clubs, societies and associations that are not charities is explained in ClubPack which is available from the ATO by phoning 13 24 78.

Types of organisation listing

For each group of charities, the following listing gives a description of the characteristics of organisations that are charities. It then gives examples of typical charities and non-charities in alphabetical order. You should check both examples. These lists are intended to be illustrative of the guidelines and principles set out in this chapter and are not exceptions to them.

The list of examples of charities and non-charities in this chapter is not exhaustive.

Your organisation could fall into more than one group of charity. You should check other groups.

Use the Checklist am I a charity? to confirm whether you are a charity.

Group	Group
Aged persons	Locality or neighbourhood
Animals	Moral improvement
Culture	People with disabilities
Defence and public order	Poverty
Disaster relief	Public works and utilities
Education	Religion
Environment	Research
Health	Science
Indigenous persons	Unemployment
Industry, commerce, agriculture	Young persons

Aged persons

Description

Non-profit entities that operate for the public benefit to relieve needs arising from old age are charities. Needs can involve accommodation, nursing and health care, security, isolation and loneliness.

Social, recreational and lobbying groups are not charities. Organisations that are primarily for the benefit of members are not charitable.

Charities examples

• Alzheimer's associations
• arthritis foundations
• community services that provide food, home visits and assistance with shopping for the elderly and infirm
• home maintenance services for the elderly and frail
• respite services
• senior citizen organisations if they are not lobbying or merely social or recreational
• trust funds distributing solely to charities that relieve the needs of the aged

Non-charities examples

• lobbying bodies including lobbying of government on social security benefits and entitlements
• political bodies
• social, sporting and recreational bodies even where the majority of participants are aged people

(Note: some organisations will be charitable where the social, sporting and recreational purpose is ancillary to a charitable purpose of alleviating the needs of the elderly in terms of health, isolation and loneliness. Each case will depend on the circumstances.)

Animals

Description

Non-profit entities that operate for the public benefit to protect, care for, preserve, or study animals, or improve the community's moral feelings towards them, are charities.

Recreational, sporting, lobbying and private bodies are not charities. Organisations that are primarily for the benefit of members are not charitable.

Charities examples

• animal protection societies
• animal refuges and shelters which help lost, sick or injured animals including organisations that care for unwanted and deserted pets
• cat protection societies involved in caring and finding homes for unwanted kittens and cats and promoting the de-sexing of animals
• endangered species organisations whose purpose is to conserve particular animal species and look after their well-being, for example koala preservation societies
• guide dog associations
• scientific bodies studying animal behaviour and disseminating information to the public
• wildlife hospitals which provide care and sanctuary for injured wildlife
• wildlife protection societies involved in protecting and preserving wildlife and organising wildlife rescues

Non-charities examples

• animal rights bodies that are lobbying in nature
• animal racing organisations , for example horse racing, greyhound racing and pigeon racing
• anti-vivisection societies
• breeders associations that represent the interests of breeders and help members in their breeding activities
• fanciers and owners associations , for example canary clubs and beekeepers associations
• fishing and angling clubs
• funds for particular animals , for example a trust under a will for a deceased person's cat
• lobbying and political bodies

Culture

Description

Non-profit entities that operate for the public benefit to advance the arts or educate the public in the arts are charities.

Recreational, entertainment, lobbying and private bodies are not charities. Organisations that are primarily for the benefit of members are not charities.

Charities examples

• arts societies which encourage and promote the cultivation and appreciation of the fine arts
• ballet foundations to promote and encourage interest in ballet
• bodies promoting culture and the arts in schools
• choral and orchestral societies
• friends of public museums and art galleries
• opera companies that are non-profit
• public art galleries
• public libraries
• public museums
• trust funds distributing solely to charities that promote the arts

Non-charities examples

• antique or vintage car clubs
• bridge and other card clubs
• camera clubs
• cinema clubs
• doll clubs
• ethnic social and cultural associations
• historical re-enactment clubs
• professional associations of artists, dancers, musicians, curators, educators in the cultural arts field, and the like
• science fiction clubs
• social clubs and organisations
• stamp-collecting clubs
• trade unions

Defence and public order

Description

Non-profit entities that operate for the public benefit to contribute to the defence of Australia and to help maintain public order are charities.

Social and recreational groups are not charities. Government instrumentalities carrying out the ordinary functions of government are unlikely to be charities.

Charities examples

• defence research organisations which provide research into aspects of Australian defence and national security
• disabled soldier associations which care for soldiers injured or maimed during service, for example blinded soldiers associations and limbless soldiers associations
• family support organisations which help the families of deceased veterans or police personnel
• historical societies which record and research the history of the armed forces
• social welfare organisations for the benefit of armed forces personnel and their dependants
• volunteer emergency rescue bodies
• veterans organisations if their purpose is to provide welfare services for veterans

Non-charities examples

• government instrumentalities carrying out the ordinary functions of government
• homing pigeon associations
• pistol and rifle clubs
• social or cultural groups set up by defence force members, police or emerge ncy personnel
• trade unions and employee associations for members of the police force and other emergency personnel

Disaster relief

Description

Non-profit entities that operate for the public benefit to relieve or prevent the distresses caused by natural and man-made catastrophes are charities.

Government instrumentalities are unlikely to be charities.

Charities examples

• cyclone relief funds
• flood relief funds
• public funds for disaster relief
• public funds relieving necessitous circumstances
• surf lifesaving clubs
• volunteer emergency rescue bodies

Non-charities examples

• employee associations that protect the industrial interests of employees in the emergency services sector
• funds for private persons who have been in natural or man-made disasters
• government instrumentalities carrying out the ordinary functions of government

Education

Description

Non-profit entities that operate for the public benefit to advance education are charities.

Organisations run for the profit of their owners or the common interests of members (for example professional and business associations) are not charities. Lobbying and political bodies are not charities.

Charities examples

• bursary and prize funds set up to reward academic excellence that are for a section of the public and not for private interests such as the employees of an employer
• childbirth education bodies
• educational institutes which are not party political and whose purpose is to stimulate debate on cultural, political, economic, moral or philosophical issues
• grammar schools
• health education bodies , for first aid and resuscitation
• historical societies whose purpose is to preserve historical items and educate the public in history
• industry training organisations if they are for the public benefit and not only for particular businesses
• kindergartens
• parents and friends groups of non-government schools
• parents and citizens groups of government schools
• pre-schools
• public universities
• schools and colleges run by religious denominations
• school and university sports organisations where they are integrated with the advancement of education in charitable education institutions
• scholarship trust funds set up to give scholarships for students of a particular school
• Scouts and Guides
• student union bodies if they are integrated in a particular university or college
• Sunday school associations
• trust funds distributing solely to educational charities

Non-charities examples

• childcare centres
• computer users clubs
• educational trusts for individuals, family members or employees of particular employers
• lobbying bodies which promote a particular view, for example organisations promoting euthanasia, the rights of the unborn child or funding of education
• occupational associations which educate only members
• playgroups
• professional associations for accountants, lawyers, writers, sales people, etc
• public speaking associations
• social clubs and organisations including ex-student associations
• sporting organisations even where they involve school-age children as participants, for example a junior football club
• teachers associations which further the professional interests of teachers or represent their views
• trade unions such as academic staff associations and teachers unions

Environment

Description

Non-profit entities that operate for the public benefit to protect, preserve, care for, and educate the community about the environment are charities.

Lobbying and political bodies are not charities.

Charities examples

• conservation bodies which help protect the environment provided they are not for lobbying or political purposes
• environmental associations whose purpose is to educate the public about environmental issues
• flora and fauna conservation societies which are not political or lobbying in nature
• friends of botanic gardens
• Landcare groups and other greening organisations involved in tree-planting and revegetation
• marine conservation societies which are involved in the conservation of Australia's coastal areas or coral reefs
• natural resource organisations which educate the public about the wise use of Australian resources such as soil, water and forests
• support groups for national parks

Non-charities examples

• bushwalking clubs
• government instrumentalities carrying out the ordinary functions of government
• lobbying bodies even if their activities may have consequences for the environment
• outdoor recreation clubs
• political bodies
• resident action groups set up to oppose planning policies detrimental to their lifestyle
• watersports clubs

Health

Description

Non-profit entities that operate for the public benefit to advance health are charities.

Organisations run for the profit of their owners or the common interests of members (for example health funds) are not charities. Lobbying and political bodies are not charities.

Charities examples

• accommodation services for the relatives of hospital patients
• alcohol and drug education bodies
• Alzheimer's associations
• arthritis foundations
• associations supporting nursing mothers
• auxiliaries of public hospitals
• alcohol drug rehabilitation services
• family planning services and contraception organisations
• family support services providing services such as counselling
• health promotion bodies for example cancer councils, diabetes societies, epilepsy associations, heart and asthma foundations
• medical counselling organisations for psychiatric illnesses and disorders
• medical research bodies
• natural family planning organisations
• nursing services
• patient transport services
• pregnant women support services
• support groups for sufferers of a particular disease or disorder, for example drug dependence or chronic fatigue syndrome
• trust funds distributing to charities that promote health or relieve sickness
• women's shelters

Non-charities examples

• friendly societies that are not carried on solely for the relief of poverty
• health benefit funds
• hospitals run by mutual societies or for-profit entities
• hospital benefit funds
• medical benefit funds

Indigenous persons

Description

Non-profit entities that operate for the public benefit to advance the condition and welfare of Australian indigenous persons are charities.

Organisations run for the profit of their owners or the common interests of members (for example business associations) are not charities. Lobbying and political bodies are not charities.

Charities examples

• Aboriginal and Islander health and welfare bodies
• Aboriginal and Islander legal services
• cultural organisations for indigenous art, dance or history
• educational and resource centres for Aborigines and Islanders
• family support services for Aborigines and Islanders
• housing co operatives for Aborigines and Islanders
• research organisations into Aboriginal and Islander affairs
• youth services for Aborigines and Islanders

Non-charities examples

• lobbying and political bodies

Industry, commerce, agriculture

Description

Non-profit entities that operate for the public benefit to advance industry, commerce or agriculture are charities.

Organisations run for the profit of their owners or the common interests of members (for example business associations) are not charities. Providing services to, and furthering the private interests of, businesses or agriculturalists are not charitable purposes. Lobbying and political bodies are not charities.

Charities examples

• agricultural show societies
• apprenticeship and traineeship organisations if they are for the public benefit and not for particular businesses
• industry training organisations if they are for the public benefit and not for particular businesses
• research organisations that make the benefits of their research publicly available

Non-charities examples

• aviation clubs
• breeders associations that represent the interests of breeders and help members in their breeding activities
• business associations which exist for the benefit of members
• co-operatives which provide buying and selling services for members
• development or progress associations campaigning on governmental or planning issues
• employer associations
• farmers and growers bodies advancing the business interests of their farmer or grower members
• hobby farmers associations
• industry regulators
• marketing agencies
• professional associations set up to advance a profession or its members, for example associations of accountants, administrators, doctors, engineers, surveyors, lawyers, secretaries and executives
• retailer or seller associations promoting or marketing businesses and their products
• trade unions

Locality or neighbourhood

Description

Non-profit entities that operate for the public benefit to provide charitable benefits for a particular town, city or region are charities.

Organisations will not be charities simply because they operate in a particular region. For example, a social club for the residents of a particular suburb is not a charity.

Charities examples

• accommodation providers for the needy
• citizens advice bureaus
• community information and referral services which make people aware of rights and responsibilities and the services and facilities available to them
• community justice and mediation centres which provide informal dispute resolution services
• crisis accommodation services
• family support services providing services such as counselling
• health information organisations which collect and disseminate health information
• historical societies whose purpose is to preserve historical items and stimulate interest in history
• information, translating and interpreting services for migrants
• marriage counselling organisations
• migrant resource centres
• multiple birth organisations
• neighbourhood centres
• public radio stations
• relationships counselling organisations
• surf lifesaving clubs
• telephone crisis counselling services
• women's shelters
• associations supporting the work of the United Nations

Non-charities examples

• expatriate organisations providing a social forum for people from a particular country
• lobbying groups
• political parties
• republican or monarchist organisations
• recreational clubs promoting sporting or recreational activities in a region
• resident action groups lobbying on development or planning issues
• social clubs for newcomers to a particular residential area
• traditional service clubs

Moral improvement

Description

Non-profit entities that operate for the public benefit to advance moral improvement in society are charities.

Lobbying and political bodies are not charities.

Charities examples

• alcohol and drug education bodies
• community justice and mediation centres which provide informal dispute resolution services
• ethical societies
• marriage counselling organisations
• relationships counselling organisations
• road safety organisations which educate on dangers of drink-driving, fatigue or dangers of speeding
• temperance societies
• associations supporting the work of the United Nations

Non-charities examples

• lobbying and political bodies on issues such as morals, animals, the environment etc.
• fraternal associations

People with disabilities

Description

Non-profit entities that operate for the public benefit to relieve needs arising from physical or mental disability are charities.

Organisations catering for people with disabilities, but not for the relief of their special needs, (such as purely social or recreational bodies) are not charities. Lobbying and political bodies are not charities.

Charities examples

• Braille libraries
• carer support services
• community organisations that provide food, home visits and assistance with shopping for people with disabilities
• disability resource centres
• disability employment services
• guide dog associations
• information support services for people with disabilities and their carers
• intellectually handicapped associations
• respite care services
• sheltered workshops
• spastic societies
• support organisations for people with particular disabilities, for example autism, cerebral palsy, Down's syndrome, hearing or sight impairment, and paraplegia
• toy libraries for the handicapped
• trust funds distributing solely to charities that relieve disability

Non-charities examples

• lobbying bodies

Poverty

Description

Non-profit entities that operate solely to relieve poverty are charities.

Charities examples

• accommodation providers for the needy
• community services that provide food to the elderly and infirm
• crisis accommodation services
• hostels for the homeless
• overseas aid organisations
• prisoners aid associations
• refugee relief bodies
• soup kitchens
• trust funds distributing solely to charities that relieve poverty

Non-charities examples

• lobbying and political bodies

Public works and utilities

Description

Non-profit entities that operate for the public benefit by providing socially necessary facilities for use by the community are charities.

Government instrumentalities carrying out the ordinary functions of government are unlikely to be charities.

Charities examples

• botanic gardens
• halls provided for public use
• law reporting councils
• public art galleries
• public libraries
• public museums
• observatories
• trusts for places of historic interest
• providers of public recreational facilities, such as sporting fields and public parks
• public radio stations
• showground societies

Non-charities examples

• fee-for-service providers of normal amenities such as cinemas and shops
• government instrumentalities carrying out the ordinary functions of government

Religion

Description

Non-profit entities that operate for the public benefit to advance religion in a direct and immediate sense are charities.

Religion involves belief in a supernatural being, thing or principle and acceptance of canons of conduct which give effect to that belief.

Charities examples

• Bible colleges
• Bible societies distributing religious literature
• building funds for the construction, maintenance or furnishing of church buildings, mosques, synagogues etc
• church choirs
• churches and other religious congregations
• clergy funds to maintain priests, pastors, ministers of religion, students for the ministry etc
• institutions of missionaries
• religious instruction funds for teaching religion in schools
• religious orders but not orders which do not act for the public benefit
• religious retreat bodies for lay persons
• seminaries
• Sunday school associations

Non-charities examples

• family companies controlled by family members and friends, even where they practice religion
• for-profit entities that sell religious books, artefacts and other materials
• fraternal associations
• lobbying bodies , for example groups applying pressure on church governance issues
• self-betterment groups which are designed to enhance personal success
• social clubs for the followers of a particular religion

Research

Description

Non-profit entities that operate for the public benefit by carrying out research are charities. The subject matter of the research must be useful to the community (for example agriculture, education, health, indigenous culture, public administration or water) and the results must be made publicly available.

Lobbying bodies that carry out research to promote their aims are not charities.

Non-charities examples

• business research bodies if the research is primarily for particular businesses or groups of businesses
• lobbying bodies whose research is only a means for their lobbying aims

Science

Description

Non-profit entities that operate for the public benefit by advancing science are charities.

Professional associations carried on for the benefit of a profession or its members (such as engineers, doctors, or surveyors) and other organisations run for the benefit of their members are not charities. Hobby groups are not charities.

Charities examples

• archaeological societies
• astrono mical societies that are not hobby groups
• botanical societies
• geographical societies
• herpetological societies that are not hobby gr oups
• scientific research organisations

Non-charities examples

• business associations
• employer associations
• industry regulators
• professional associations
• trade unions

Unemployment

Description

Non-profit entities that operate for the public benefit to relieve needs arising from unemployment are charities.

Organisations run for the profit of their owners or the common interests of members are not charities. Lobbying and political bodies are not charities.

Charities examples

• apprenticeship or traineeship organisations if they are for the public benefit and not for particular businesses
• vocational guidance counselling bodies that are non-profit
• disabled persons employment services
• prisoner employment services for recently released prisoners
• training organisations if they are non-profit and operate for the public benefit

Non-charities examples

• commercial enterprise entities are not charities merely because they take on unemployed people
• employers will not be charities merely because they provide employment opportunities for disadvantaged people
• recruitment organisations for employers

Young persons

Description

Non-profit entities that operate for the public benefit to assist, educate and develop young people are charities. Sporting, social and recreational groups are not charities.

Charities examples

• child abuse associations which exist to prevent cruelty to, or exploitation of, children and are not political or lobbying in nature
• children's disease organisations , such as asthma foundations and cancer foundations
• child health associations
• children's disability organisations which provide services and information to carers of children with disabilities
• information services for young people providing advice and support on a range of issues such as health and accommodation
• youth development programs , for example Scouts, Brownies and Guides
• youth orchestras
• youth leadership associations
• youth suicide organisations

Non-charities examples

• childcare centres
• playgroups
• sporting organisations for the young, for example cricket and junior football.

If you are a charity chapter 1 gives an explanation of your income tax status. Charities are not automatically exempt from income tax and must be endorsed by the ATO.

As explained earlier, if you are not a charity, this guide does not apply to you. The income tax status of corporations and unincorporated associations that are not charities is explained in ClubPack which is available from the ATO by phoning 13 24 78 .

Need more information?

Further information about what constitutes a charity for taxation purposes is available from the sources listed in this guide.

Appendix 2 - List of definitions

Australian Business Number (ABN)

The Australian Business Number is the new identifier for your dealings with the ATO and for future dealings with other departments and agencies.

Business Activity Statement

This is the single form you use to account for GST and some other taxes at the end of each tax period under The New Tax System.

Organisations not registered for GST will use an Instalment Activity Statement to report their entitlements and obligations.

Charity

A charity is an institution or fund established for a charitable purpose. Charitable purposes are those which the law regards as charitable. The term 'charitable' has a technical legal meaning which is different from its everyday meaning. Charitable purposes are:

• the relief of poverty or sickness or the needs of the aged
• the advancement of education
• the advancement of religion, and
• other purposes beneficial to the community.

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.

Charitable institution

A charitable institution is an institution that is established and run to advance or promote a charitable purpose.

Deductible gift recipient (DGR)

A DGR is an entity that is entitled to receive income tax deductible gifts. All DGRs have to be endorsed, unless they are named specifically in the income tax law. There are two types of DGR endorsement: one for entities in their own right and the other for an entity that is only a DGR in relation to a fund, authority or institution it operates. For the second type, only gifts to the fund, authority or institution are tax deductible.

Entity

An entity is an individual (for example a sole trader), a body corporate (a company), a corporation sole (an ongoing paid office, for example a bishopric), a body politic, a partnership, an unincorporated association or body of persons, a trust, or a superannuation fund.

Fringe benefits tax (FBT)

FBT is a tax payable by employers who provide fringe benefits to their employees or associates of their employees.

Goods and services tax (GST)

GST is a broad-based tax of 10 per cent on the supply of most goods, services and anything else consumed in Australia and the importation of goods into Australia.

GST-free

If a supply is GST- free you do not charge GST on the supply, but you are entitled to input tax credits for anything acquired or imported for use in your activities.

Income tax exempt charity (ITEC)

An ITEC is a charity that has been endorsed by the ATO as exempt from income tax.

Input tax credits

When you pay GST on any taxable supplies you purchase or acquire for use in your activities, you can claim these amounts (called input tax credits) back from the ATO.

Input taxed supplies

If a supply is input taxed you do not charge GST on the supply, but neither are you entitled to input tax credits for anything acquired or imported to make the supply.

Non-profit

An organisation is non-profit if it is not carried on for the profit or gain of its individual members. This applies for direct and indirect gains, and both while the organisation is being carried on and on its winding up. The ATO accepts an organisation as non- profit if its constitution or governing documents prohibit distribution of profits or gains to individual members and its actions are consistent with the prohibition.

Non-profit sub-entity

Certain non-profit organisations with independent branches (units) have the option of treating their units as if they were separate entities for GST purposes and not part of the main organisation. A non-profit sub-entity of a charity is not entitled to its own separate ITEC endorsement.

Pay As You Go (PAYG) instalments

PAYG instalments replaces provisional tax and company and superannuation fund instalments tax. Under PAYG instalments, taxpayers who are notified by the ATO of an instalment rate will be required to pay their own tax by regular self-assessed instalments.

Pay As You Go (PAYG) withholding

PAYG withholding requires an entity to withhold an amount if it makes certain listed payments including salary, wages, commission, bonuses or allowances to an employee, directors' fees, payments for a supply (goods or services) to another business which does not quote an ABN and certain dividend, interest and royalty payments.

Public benevolent institution (PBI)

A PBI is an 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, and
• its dominant purpose is providing benevolent relief.

More information on PBIs can be found in the ATO's guide GiftPack .

Supplies

Supplies include the goods and services you sell as part of your activities. Not all supplies are taxable supplies.

Taxable supply

The term is widely defined to include most supplies (goods, services and anything else) you make. A supply is not a taxable supply if it is GST- free or input taxed.

Appendix 3 - Charity Pack Worksheet

Appendix 3 - Worksheet - reviewing your ITEC endorsement

This worksheet will help you work out whether you are st ill entitled to endorsement as an income tax exempt charity (ITEC). Do not write on the original worksheet keep it as a template so that you can make copies whenever you carry out a self-review .

ITECs must tell the ATO if they stop being entitled to endorsement. Things that can affect your entitlement are changes to your purpose and operations, physical presence in Australia, loss of endorsement as a deductible gift recipient (DGR) and where you incur your expenditure. You should self-review each year and whenever there is a major change in your structure or operations.

Keep it with your records of organisation as it will help future office bearers.

Who should use this worksheet

All charities that have been endorsed as ITECs should use this worksheet.

What you will need

• a copy of CharityPack (and the latest CharityPack Updater)
• the ATO notice that states you are endorsed as an ITEC, and
• your governing or constituent documents, and information about your activities and finances.

1. Full name of the organisation

2. Australian Business Number (ABN)

3. Tax file number (TFN)

4. Period of review

To

5. Reason for review

Annual review

Change in circumstances

Other please specify.....................................

6. Date of endorsement on ATO notice

AUSTRALIAN BUSINESS NUMBER (ABN)

7. Is your ABN still current?

	Yes Go to question 8.
	No You are no longer entitled to be endorsed as an ITEC. The ATO will notify you that your endorsement has been revoked.

You must have a current ABN to be entitled to endorsement as an ITEC.

ABNs are explained. The ABN is a single business identifier used for dealings with government departments and agencies.

You can check on your ABN by searching the Australian Business Register (ABR) internet site at www.business.gov.au or by calling the ATO on 13 24 78 . If your ABN has been cancelled, you will have received written notification of this.

CHARITY

8. Are you a charity?

	Yes Go to question 9.
	No You are no longer entitled to be endorsed as an ITEC. You must tell the ATO that you have ceased to be entitled to ITEC endorsement and give the date that you ceased to be a charity.

It is possible that an organisation can cease to be a charity. You must verify if you are still a charity.

The meaning of the term 'charity' is explained in appendix 1 of CharityPack, 'Are you a charity?'

A charity is an institution or fund established and operated for purposes which are charitable. Charity has a legal meaning for taxation purposes which differs from how the term is used in everyday language.

Appendix 1 explains charitable purposes and gives examples of organisations that are considered to be charities and those that are not.

NOTES: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

CHARITABLE INSTITUTION OR CHARITABLE FUND

9. Are you a charitable institution or a charitable fund?

	Charitable institution Go to question 10.
	fund Go to question 11.

The distinction between charitable institutions and charitable funds is explained in chapter 1 of CharityPack .

To be a charitable fund you must be established under an instrument of trust or a will for public charitable purposes. Charitable funds mainly manage trust property and/or hold trust property to make distributions to other entities or persons.

Charitable institutions mainly carry out charitable activities rather than holding or managing property.

NOTES: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

CHARITABLE INSTITUTIONS

10. Do you meet at least one of the three tests: physical presence, deductible gift recipient and prescribed by law?

	Yes You are eligible to retain your endorsement as an ITEC. Go to the end of the worksheet.
	No You are no longer entitled to be endorsed as an ITEC. You must tell the ATO in writing and give the date that you ceased to be entitled.

You must meet at least one of the following tests:

Physical presence

you have a physical presence in Australia, and to the extent of your Australian presence, you pursue your objectives and incur your expenditure principally in Australia

Deductible gift recipient

you are a deductible gift recipient (DGR), or

Prescribed by law

you are a prescribed institution listed by name in the income tax regulations, and

• you are located outside Australia and you are income tax exempt in your country of residence, or
• you have a physical presence in Australia and incur expenditure and pursue objectives principally outside Australia.

These tests are explained further in chapter 1 of CharityPack .

NOTES: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

CHARITABLE FUNDS

11. Is the charitable fund being applied for the purposes for which it was established?

	Yes Go to question 12.
	No You are no longer entitled to endorsement. You must tell the ATO in writing and give the date that you ceased to be entitled.

ITECs that are charitable funds must be applied for the purposes for which they were established.

If you use all your property and income only and fully for your charitable purposes, you will meet this requirement.

This is explained further in chapter 1 of CharityPack .

NOTES: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

TYPE OF CHARITABLE FUND

12. Which of these three best describes you?

	established by will before 1 July 1997 and after that date you have received assets under a will or assets for which you did not give valuable consideration. Go to question 13.
	established by will before 1 July 1997. You continue to be entitled to endorsement as an ITEC. Go to the end of the worksheet.
	Established in Australia and established by instrument of trust, or established by will on or after 1 July 1997. Go to question 14.

Different conditions apply for different sorts of charitable fund.

If you were established by will before 1 July 1997 there are two different situations. You must decide whether the first or second box best describes you. Do not choose the second box if the first box applies. If the first box applies, you will be treated as two separate parts: an 'old trust' and a 'new trust'. You will need to meet further requirements to be entitled to endorsement for the 'new trust'. The 'new trust' and the further requirements are explained in the instructions for question 13. The 'old trust' does not need to meet the further requirements.

If you are best described by the third box, you will have to meet further requirements to be entitled to endorsement. The instructions for question 14 explain this.

NOTES: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

13. Does the part of the charitable fund that is the 'new trust' meet at least one of the four tests: Australian purposes, deductible gift recipient, Australian distribution and gift distribution?

	Yes You continue to be entitled to endorsement as an ITEC. Go to the end of the worksheet.
	No The 'old trust' continues to be entitled to ITEC endorsement. However, the 'new trust' is not entitled. You must tell the ATO in writing that the 'new trust' is not entitled to endorsement and give the date it ceased to be entitled.

The tests are explained in chapter 1 of CharityPack .

The 'new trust' must meet at least one of these tests in order to retain ITEC endorsement. You will need to work through the four tests.

The 'new trust' is the part of the charitable fund that comprises:

• assets that become part of your trust property under a will on or after 1 July 1997
• assets you received on or after 1 July 1997 for which you did not give valuable consideration (for example, distributions received from other trusts), and
• income derived from these assets.

The 'new trust' is explained further in chapter 1 of CharityPack .

The part of you that is not the 'new trust' is the 'old trust'. Even if you are no longer entitled to be endorsed for the 'new trust', your endorsement for the 'old trust' continues.

NOTES: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

14. Do you meet at least one of the four tests: Austral ian purposes, deductible gift recipient, Australian distribution and gift distribution?

	Yes You are entitled to endorsement as an ITEC.
	No You are not entitled to endorsement as an ITEC. You will need to tell the ATO in writing and give the date you ceased to be entitled.

The tests are explained in chapter 1 of CharityPack. You will need to work through them to determine your eligibility to endorsement as an ITEC.

NOTES: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Once you have completed this worksheet you should:

• sign it off and keep it with your organisation's other records, and
• make an entry in the log at the back of CharityPack showing you have conducted the review.

Name of person conducting review -----------------------------------------	Position held ----------------
Signature --------------------------	Date --------------
Approval by Board/Committee/Trustee -------------------------------------------------- -------------------------------------------------- --------------------------------------------------

Appendix 4 - Log of ITEC status reviews

We recommend you make an entry in this log each time you conduct a self-review of your ITEC status. Self-reviews are explained Self-review am I still entitled to endorsement?

Period reviewed		Person conducting review	Position held	Signature	Date
Start date	End date

Record your organisation's key information in the table below:

Name of organisation
Australian Business Number
Tax File Number
Date of endorsement on ATO notice

Need more information?

If you would like to find out more about charities and The New Tax System:

• phone the business Tax Reform Infoline on 13 24 78
• download information from our web site at www.taxreform.ato.gov.au
• obtain A Fax From Tax on 13 28 60 , or
• write to us at PO Box 9935 in your capital city.
• If you do not speak English and need help from the ATO, phone the Translating and Interpreting Service (TIS) on 13 14 50 .
• People with a hearing or speech impairment can phone the Telephone Typewriter Service on 1300 130 478 .

Contact: [name] | Phone: [number]

Section: [section] | BSL: [bsl]

Last Update: [ 11/04/2002 ]

ATO references:
NO NAT 3131