The following information provides a brief overview of two charity subtypes – PBI and HPC.
We recommend that organisations seeking to change their charity subtype review the more detailed information available from the links below, and access independent professional advice.
What is a PBI or an HPC?
When your charity is registered with the Australian Charities and Not-for-profits Commission (ACNC) it is registered with at least one ‘subtype’ that reflects your charitable purpose. A Public Benevolent Institution (PBI) is one of these subtypes, a Health Promotion Charity (HPC) is another. Your charity can have more than one subtype.
The ACNC describes a PBI as “a type of charitable institution whose main purpose is to relieve suffering that is serious enough to arouse a feeling of pity or compassion in members of the community. Such suffering could be caused by conditions such as poverty, sickness, helplessness or distress.”
The ACNC describes an HPC as “a charitable ‘institution whose principal activity is to promote the prevention or the control of diseases in human beings”.
Why is subtype important?
Both the PBI and HPC subtypes entitle charities to receive a capped exemption for fringe benefits tax (FBT). This means that a PBI or HPC can provide employees with benefits which are FBT-free, subject to a capped limit. These benefits include salary packaging.
Most charitable providers of community services (such as aged care, disability care etc) are registered as PBIs. Medical research charities, and charities that raise awareness of diseases, their causes and preventative measures, may be registered as HPCs. This means that they can provide salary packaging benefits to their staff.
Information on the tax concessions for PBIs and HPCs is available on the ATO website.
What are the requirements for PBI status?
In order to register as a PBI your organisation must:
- Meet the legal meaning of charity
- Be an institution – for example you must be an organisation or association that delivers your own activities, engages others to deliver activities on your behalf or delivers activities in partnership with others.
- Have a main purpose of benevolent relief, such as working to relieve poverty or distress. The level of need you are trying to meet must be more than people experience in ordinary daily life. It must be clear and significant enough that it would arouse compassion from people within the community.
For organisations that provide support through funding, rather than direct activities, you will need to demonstrate that your activities are focussed on relieving the poverty or distress of people in need.
Your governing document (your constitution) describes the purposes or objects of your organisation, so it is a key document for determining your PBI status.
What are the requirements for HPC status?
In order to register as an HPC your organisation must:
- Meet the legal meaning of charity
- Be an institution – for example you must be an organisation or association that delivers your own activities or engages others to deliver activities on your behalf.
- Have a principal activity of promoting the prevention or control of disease in human beings. A more general approach to improving health or wellbeing will not be sufficient to qualify as an HPC. There are specific requirements relating to the definitions of disease (rather than an accident or general ailment), and of promoting prevention or control. The definition of disease covers both physical and mental illnesses.
Your principal activity is the main activity of your charity, or the activity that you do more than any other.
Applying for PBI or HPC status
The ACNC is responsible for determining your charity’s subtype. You can apply for the PBI or HPC subtype via an online form on the ACNC Charity Portal. Before you apply we recommend that you:
- Review the ACNC guidance on the PBI subtype or HPC subtype – whichever is most appropriate to you.
- Check your constitution and activities against the ACNC guidance. You may need to amend your constitution or your main activity in order to demonstrate that you are a PBI or HPC.
Seek legal advice if there are any areas that are unclear to you or if you need specialist help to apply to change your subtype. We suggest that you seek advice from a charity law specialist, such as Prolegis Lawyers.
When you have PBI or HPC status
The ATO will accept the ACNC registration of your organisation’s subtype of PBI or HPC, making you eligible for the relevant tax concessions. Once you have PBI or HPC status (or if you have it already), CBB can assist you in setting up your salary packaging benefits for your employees.
Want to know more?
Contact us on:
Phone: 1300 763 505