FaCSIA Sheet 4: Charities - Definition and Endorsement
The aim of this FaCSIA sheet is to explain what a charity is for taxation purposes and the endorsement process for charitable organisations.
- How do we know if our organisation is a 'charity' for taxation purposes?
- What are the benefits of seeking endorsement as a tax concession charity (TCC) in terms of taxation status?
- What impact does being endorsed as a TCC have on funding from FaCSIA?
- Does TCC status entitle me to receive tax deductible gifts?
- How does my organisation apply for endorsement as a TCC and/or DGR?
- If my application for endorsement is unsuccessful, can my organisation appeal the Tax Office's decision?
- Further Information
- Related Information
How do we know if our organisation is a 'charity' for taxation purposes?
A charity is an entity established for altruistic purposes that the law regards as charitable. Charitable purposes are the relief of poverty, the relief of the needs of the aged, the relief of sickness or distress, the advancement of religion, the advancement of education, the provision of child care services on a non-profit basis and other purposes beneficial to the community (or section of the community).The characteristics of a charity are:
- it is an entity that is also a trust fund or an institution
- it exists for the public benefit or the relief of poverty
- its purposes are charitable within the legal sense of that term
- it is non-profit, and
- its sole purpose is charitable.
- it is carried on for the purposes of profit or gain to particular persons including its owners or members, or
- it is primarily for sporting, recreational or social purposes, or
- it is primarily for political, lobbying or promotional purposes.
- commercial or business enterprises operated for fund raising purposes
- community service organisations that have a significant membership purpose, such as traditional service clubs, for example, Rotary and Lions clubs
- organisations carried on for the common interests of the members, such as professional or trade groups
- organisations established primarily for political, lobbying or promotional purposes.
What are the benefits of seeking endorsement as a tax concession charity (TCC) in terms of taxation status?
Endorsement as a tax concession charity (TCC) provides a charity with access to charity tax concessions.Charities are not automatically entitled to charity tax concessions. Charities must be endorsed by the Tax Office if they want to access one or more of the following concessions:
- income tax exemption
- goods and services tax (GST) charity concessions
- fringe benefits tax (FBT) rebate
- FBT exemption.
What impact does being endorsed as a TCC have on funding from FaCSIA?
Generally, the receipt of a government grant will be subject to GST where the grant represents consideration for a supply, which is a taxable supply made by the grantee. An entry into a binding obligation with the government to use the grant in a certain way will establish a supply to the government for the grant. This supply will be a taxable supply where it is connected with Australia, it is made by the grantee in carrying on an enterprise, the grantee is registered or required to be registered and the supply is not GST-free or input taxed.If you are registered for GST, any grant or other funding you receive from FaCSIA that is subject to GST, will be grossed up by 10%. You will need to remit one eleventh (1/11) of the payment from FaCSIA to the Tax Office.
FaCSIA will claim back from the Tax Office, as a GST credit, the GST included in the payment. If you are registered for GST you will be entitled to claim GST credits (the amount of GST included in the price) on purchases made for a creditable purpose. A purchase will be for a creditable purpose to the extent that it is acquired in carrying on the organisation's enterprise and is not used for making input taxed supplies.
If you are not registered for GST, because your annual turnover is less than $100,000, you will not be liable for GST and FaCSIA will not gross up the funding to your organisation by 10%. Also, you will not be entitled to any GST credits on acquisitions you make.
Does TCC status entitle me to receive tax deductible gifts?
No. Endorsement as a TCC does not entitle you to receive tax deductible gifts.There is a separate endorsement process for organisations seeking deductible gift recipient (DGR) status.
How does my organisation apply for endorsement as a TCC and/or DGR?
You will need to complete and lodge the relevant application form(s) with the Tax Office. The relevant forms are:- Application for endorsement as a tax concession charity or income tax exempt fund (NAT 10651), and
- Application for endorsement as a deductible gift recipient (NAT 2948).
Before your organisation can apply for endorsement it will need to have an Australian Business Number (ABN).
You can apply for an ABN:
- electronically through:
- the Australian Business Register if all you want to do is apply for an ABN
- the Australian Government business website where you can access a range of information and services
- on paper form, available by phoning the Tax Office on 13 28 66, or
- through a tax agent, who will lodge your application using the electronic lodgment system.
If you indicate on the ABN application that your organisation wants to be endorsed as a tax concession charity and/or deductible gift recipient, the Tax Office will post you the relevant application form(s) and accompanying instructions.
If your organisation already has an ABN, you can obtain the endorsement application forms and instructions by:
- phoning the Tax Office on 1300 130 248
- visiting the Tax Office website (under Getting started select Endorsement - Application packs)
If my application for endorsement is unsuccessful, can my organisation appeal the Tax Office's decision?
Yes, you can. If an endorsement is refused, the Tax Office will provide you with a clear explanation of its decision.Any decisions or actions affecting you can be reviewed. If you want the Tax Office to review its decision, you should contact the person handling your case or the Tax Office where the decision was made or action was undertaken.
You also have the right under the law to ask the Ta x Office for a review by lodging an objection against the refusal. Your objection must be:
- made in writing and dated
- lodged within 60 days of the date of notice of decision - although in certain circumstances you may be granted an extension of time
- addressed to the Tax Office, and
- explain the grounds that you rely on.
Further Information
For more information about:- TCC endorsement see the Tax Office fact sheet The endorsement process to access charity tax concessions (NAT 3192)
- DGR endorsement see the Tax Office fact sheet The endorsement process for deductible gift recipients (NAT 3193)
Copies of these publications are obtained by phoning 1300 720 092 or from the Tax Office website.
People considering issues relating to the application of the GST should not solely rely on the information in this FaCSIA Sheet. Further, comprehensive advice relevant to your particular circumstances should be obtained either from the Tax Office or from an appropriate professional advisor.