Non-profit organisations in the health and aged care sectors may be entitled to taxation benefits such as an income tax exemption, fringe benefits tax (FBT) concessions and stamp duty exemption.
Registration as a charity with the Australian Charities and Not-for-profits Commission (ACNC) is generally a requirement to obtain these benefits. Charities registered with the ACNC as a Public
Benevolent Institution (PBI) or Health Promotion Charity (HPC) may access additional benefits such as deductible gift recipient (DGR) status.
Specific requirements apply for registration as a HPC or PBI. Broadly, a PBI must be a charitable institution whose principal purpose is to relieve poverty, sickness, suffering or disability. A HPC must be a charitable institution whose principal purpose is to promote the prevention or control of diseases in human beings.
Charities should keep in mind their approvals and charitable objects in making decisions to expand their operations to ensure that they do not put their charitable tax approvals at risk. For example, expansion into childcare services for the general community is not a PBI activity unless incidental to the charity’s approved purpose.
Income tax exemption
Registered charities, including PBIs and HPCs, can obtain an income tax exemption. An endorsement from the Australian Taxation Office (ATO) is required to access this exemption.
An FBT exemption is available for registered PBIs and HPCs, public and non-profit hospitals and public ambulance services. For each employee, the exemption is capped at $30,000 for registered
HPCs and PBIs and $17,000 for public and non-profit hospitals and public ambulance services.
Charities ineligible for the FBT exemption may be able to access a FBT rebate. The FBT rebate is available for institutions that are registered as charities with the ACNC. Certain other non-government or non-profit organisations may also qualify for the FBT rebate. The FBT rebate is currently 47% of the grossed up value of benefits provided.
For both the FBT exemption and FBT rebate, a $5000 capping threshold applies for salary packaged meal entertainment and entertainment leasing expense benefits.
Payroll tax exemption
Wages paid by non-profit organisations, PBIs and health care service providers may be exempt from payroll tax. Payroll tax is a State-based tax and it is necessary to consider the requirements for each relevant State or Territory.
Stamp duty exemption
Charities may also be entitled to an exemption from stamp duty. Again, stamp duty is a State-based tax and it is necessary to consider the requirements for each relevant State or Territory. DGR status
Registration as a charity does not of itself provide an organisation with deductible gift recipient (DGR) status, allowing certain donations to be tax deductible for the donor. Only certain categories of entities are entitled to DGR status, which requires a specific application and endorsement with the ATO. Registered PBIs and HPCs may obtain an endorsement for DGR status.