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Wednesday, 24 March 2004
Page: 21829


Senator CHERRY (3:30 PM) —I move:

That the Senate take note of the answer given by the Minister for Revenue and Assistant Treasurer (Senator Coonan) to a question without notice asked by Senator Stott Despoja today relating to the public benevolent institution status of charities.

The question concerned the public benevolent institution status for tax treatment and a range of South Australian institutions and other institutions around Australia whose status is currently being reviewed. It is particularly concerning because what is coming through in these various decisions—I think it was noted in Senator Coonan's answer—is that, as a result of a recent court decision, if an institution is found to have a link with a state government then it is essentially going to lose its PBI status. The tax office's view—now confirmed in a court case—is that you cannot be a public benevolent institution and a government institution at the same time. Some of these areas get very dicey. One of the examples that Senator Stott Despoja used was the Julia Farr Centre in Adelaide, which provides services for those with an intellectual disability. It is affected because the state government has the power to appoint some board members, and that is sufficient to make it a government institution for the purposes of tax office rulings.

This concerns me enormously because there are an awful lot of organisations in this world, where the dotted line between government and non-government is becoming less and less clear, that are doing genuine charitable work with minimal or no direction, control or support from government at various levels. It highlights to me the complete inconsistencies which are now emerging in the 80-year-old definition of `public benevolent institution'.

Let us recall that the definition of a `public benevolent institution' was devised by the Bruce-Page government—Page was one of those forgettable Prime Ministers of the 1920s—as the result of a desire to meet a then budget crisis and ensure that charities did not get sufficient access to all of the tax concessions that go with being a public benevolent institution. That definition has been incredibly problematic in the charity sector, because it is a privileged group of charities that get access to PBI status. The wording used by the tax office to describe a PBI is extraordinary. It is such arcane language. A PBI, based on the Perpetual Trustees case, is `a non-profit institution organised for the direct relief of such poverty, sickness, suffering, distress, misfortune, disability, destitution and helplessness as arouses compassion in the community'.

This is the wording of the 1920s. It is social policy which was left behind by this country decades ago. Yet this is the basis on which tax deductions are being determined, as we speak, by the tax office in respect of public benevolent institutions. It is time the definition was updated. In fact, the charities definition inquiry, which was formed as a result of negotiations between the Democrats and the Treasurer, has recommended that it be updated. It recommended that the whole category be thrown out and replaced with a broader, updated category called `benevolent charities'. A `benevolent charity' would have a much more comprehensive, more modern and more readable definition. A benevolent charity would be a charity whose dominant purpose is to benefit, directly or indirectly, those people whose disadvantage prevents them from meeting their needs. That recommendation was made over 2½ years ago and the government has yet to respond to it. Yet the government, as we speak, is doing a review of PBI status for a whole range of charities doing quite decent and proper work against the existing 80-year-old definition.

I am pleased to note that in Senator Coonan's answer she says that this matter is now being looked at. I hope that the government is looking at finally providing a response to the charities definition inquiry. It does not matter which way it turns PBI status—upside down, inside out, or the wrong way round—the problem is that the definition itself is so old, arcane and restrictive. It is now causing massive problems. It does not keep up with the modern notion of charitable work and service work. There is now a sense of deep unfairness that any organisation with any relationship with a government is likely to lose PBI status. The frustration with this link has been found in some of the exceptions that even the government is now being forced to agree to.

The decision to give gift deductible recipient status to ambulance services and fire services highlights the increasing complexity of this area of law. Serious fundraising and charitable work is being done in this sector by government related institutions. It is frustrating because, as a result of this PBI definition review, a whole range of eminent organisations doing good work will lose their right to have fringe benefits tax concessions and, as a result, their workers will have a cut in their take-home pay. That concerns and frustrates me. It also frustrates the sector. I hope that the issue Senator Coonan spoke about in her answer is resolved quickly, comprehensively and thoroughly, and in such a way that workers in the disability sector are not disadvantaged.

Question agreed to.