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23 Jul 2014

CU and The Hunger Project Australia celebrate court win giving greater tax certainty to fundraising charities

Sydney, 23 July 2014: Leading independent Australian law firm Clayton Utz has secured a significant win for our client The Hunger Project Australia (THPA) before the Full Federal Court, paving the way for not-for-profit organisations that are engaged in fundraising activities to seek endorsement as public benevolent institutions.

THPA is a not-for-profit charity that is part of a global network of "The Hunger Project" entities dedicated to achieving a sustainable end to world hunger. THPA's main activity is raising funds for use by The Hunger Project associates operating on the ground in the developing world in countries such as Malawi, Uganda and Bangladesh.

The ATO had sought to challenge THPA's status as a "public benevolent institution" for fringe benefit tax (FBT) purposes. This would mean THPA could not gain access to an exemption from FBT.

What constitutes a public benevolent institution is an important question for not-for-profit organisations, as public benevolent institutions may be entitled to be endorsed as a Deductible Gift recipient, and / or gain an exemption from FBT.

In a decision handed down on 13 June 2014, three justices of the Full Federal Court unanimously held that "public benevolent institution" includes organisations that may not directly give or provide relief from poverty or distress, but do so via related or associated entities.

Clayton Utz tax partner Mark Friezer, who led the Clayton Utz team which represented THPA at first instance and on appeal, said the decision provided much needed clarity for fundraising organisations and charities as to their tax status.

"This is an important decision for charitable organisations that are not directly involved in providing relief on the ground to those in poverty or distress, but whose main focus is raising funds to help those who are in need.

"The Full Federal Court's decision recognises the legitimacy of contemporary methods of delivering aid in a globalised world and the complex practical realities faced by modern-day charitable organisations in seeking to achieve global outcomes.

"It will hopefully give these organisations much needed clarity around the law in this area, so the funds they raise can be used where they are most needed."

The Hunger Project Australia CEO Cathy Burke warmly welcomed the decision: "It modernises what it means to be a change maker for international development. Organisations which promote the relief of poverty can look to this case as a precedent. The ability to include the FBT exemption as a tool for attracting and retaining talent to our sector is key, especially as we work to minimise overhead and administrative costs.

"This result would not have been possible without Clayton Utz believing in the merit of the case. They were real partners for us. Their effort and leadership in this matter will have profound effect for the Aid and Development sector in Australia.'

THPA began as a pro bono client of Clayton Utz, with test case funding subsequently obtained from the ATO for the Federal Court proceedings.

In the last financial year, Clayton Utz acted for 168 not-for-profit organisations through our Pro Bono practice.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.