The Productivity Commission has now released its draft Future Foundations for Giving Draft Report. The recommendations are both well considered and wide-ranging. We note and summarise five key draft recommendations that may be of interest to our clients:

  1. Basic Religious Charities

The concept of, and exemptions available to, Basic Religious Charities (‘BRC’) are proposed to be removed. Many religious institutions are intentionally structured as BRCs, so this change would significantly affect both their reporting and governance obligations.

We expect that religious institutions will wish to make submissions to the Productivity Commission on why the BRC category should remain.

  1. Changes to Deductible Gift Recipient endorsements

It is proposed that Deductible Gift Recipient (‘DGR’) status should be extended to most classes of charitable activities, with the exception of the following classes of charitable activities or subtypes:

  • primary, secondary, religious and other informal education activities, with an exception for activities that have a specific equity objective (such as activities undertaken by a Public Benevolent Institution (“PBI”));
  • the activities of childcare and aged care in the social welfare subtype (other than activities undertaken by a PBI); and
  • all activities in the subtype of advancing religion.

There are many winners resulting from this proposal, with the notable losers being school building funds. We recommend that our education clients with DGR endorsed school building funds in particular take note of this proposal and consider making submissions to the Productivity Commission.

The recommendation otherwise appears to preserve the status quo for religious charities and the “advancing education” subtype generally.

  1. Statutory definition of Public Benevolent Institutio

There is significant uncertainty around the scope of this category, with many in the sector taking issue with the ACNC’s recent Commissioner’s Interpretation Statement on Public Benevolent Institutions. Greater certainty in this space will be of great benefit to the sector and a statutory definition could potentially provide this certainty.

We expect that landing on a statutory definition will be difficult and hotly contested, and will therefore be of significant interest to our PBI clients.

  1. ACNC Test Case Funding

Unlike in the commercial context, charities are generally averse to incurring the costs of going to court to contest the government on uncertainties in the law. Test case funding would greatly assist the sector in both getting on with their good work (rather than pouring resources into complex and prolonged litigation) and in helping clarify ambiguity within the law.

  1. Binding Rulings

A binding ruling scheme from the ACNC would potentially provide charities (particularly those with novel activities and structures) with an avenue to seek greater certainty that they are appropriately registered and are entitled to tax concessions/endorsement.  We consider such a framework to be of great interest and benefit to the sector.

Submissions to the Productivity Commission close on Friday, 9 February 2024.

Please do not hesitate to contact our office if your charity would like support in making submissions to the Productivity Commission. Our specialist charity and not-for-profit team is well placed to assist.

This article was written  by Paul Neville.