CHARITABLE INSTITUTIONS AND CHARITABLE FUNDS
18 May 2005
In TR 2005/D6, the Commissioner sets out his views on which entities and organisations qualify as charitable institutions and which organisations qualify as funds established for a charitable purpose. The release of this draft ruling is important to those organisations qualifying as charitable under the earlier definitions. It is also of significance to other organisations such as local government, government departments and agencies that have dealings with charities.
A summary of this draft ruling is provided below. Taxed members may request a copy of the full ruling from us.
This ruling sets out the Commissioner's views on the meaning of 'charitable institution' and 'fund established for public charitable purposes' for the purposes of:
· Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997), in particular items 1.1, 1.5, 1.5A and 1.5B of the table in section 50-5 of the ITAA 1997, which provides income tax exemption;
· Division 30 of the ITAA 1997, in particular item 1.1.6 of the table in subsection 30-20(1) of the ITAA 1997 dealing with charitable institutions that promote the prevention or control of diseases in humans, and item 4.1.4 of the table in subsection 30-45(1) of the ITAA 1997 dealing with public funds maintained by harm prevention charities, which provides for income tax deductions for gifts;
· subsection 57A(5) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), which provides an exemption in relation to benefits provided by charitable institutions that promote the prevention or control of diseases in humans; and
· section 65J of the FBTAA, in particular whether the employer is a charitable institution for the purposes of being entitled to a rebate of fringe benefits tax as a rebatable employer;
and wherever used in the ITAA 1997, the FBTAA and the Income Tax Assessment Act 1936 (ITAA 1936). The ruling applies to charitable institutions and charitable funds and persons who make gifts to charitable institutions.
The Ruling deals with the following:
· the circumstances in which an institution or fund will be considered charitable;
· determining whether the purpose of an institution or fund is charitable;
· the changes made by the Extension of Charitable Purpose Act 2004 , in relation to child care, religious orders and self-help groups; and
· the features that distinguish a charitable institution from a charitable fund.
For the purposes of the Ruling the following key terms are used:
' charity ' is used to describe both charitable institutions and charitable funds;
' charitable fund ' is a fund established for public charitable purposes by will or instrument of trust;
' charitable institution ' is an institution established and maintained for charitable purposes;
' harm prevention charity ' is a charitable institution whose principal activity is to promote the prevention or the control of behaviour that is harmful and abusive to human beings and which is on the register of harm prevention charities maintained under section 30-287 of the ITAA 1997;
' health promotion charity ' is a charitable institution whose principal activity is to promote the prevention or the control of diseases in human beings, as provided for by item 1.1.6 of the table in subsection 30-20(1) of the ITAA 1997 and subsection 57A(5) of the FBTAA.