BICYCLE VICTORIA INC and COMMISSIONER OF TAXATION
[2011] AATA 444
•24 June 2011
CATCHWORDS – TAXATION – CHARITABLE INSTITUTION - whether a charitable institution – whether a health promotion charity whose principal activity is to promote the prevention or the control of diseases in human beings – endorsed as a charitable institution and as a charitable entity exempt from income tax – not entitled to be endorsed as a deductible gift recipient or a health promotion charity.
PRACTICE AND PROCEDURE – relevance of endorsement or otherwise of entities other than applicant - leave not given to applicant to lead material relating to activities of another body endorsed as a charitable institution – entitlement to endorsement to be determined by circumstances of particular entity.
Aid/Watch Incorporated v Commissioner of Taxation [2010] HCA 42; (2010) 272 ALR 417; 77 ATR 195; 85 ALJR 154
Alexandra Private Geriatric Hospital v Blewett (1984) 2 FCR 368; 56 ALR 265
ALR 417; 77 ATR 195
Adamson v Melbourne and Metropolitan Board of Works (1929) AC 142 (Privy Council)
AYSA v Canada Revenue Agency and Canadian Centre for Philanthropy [2007] 3 SCR 217
AYSA Amateur Youth Soccer Association v Canada Revenue Agency and Canadian Barclay v De Lacy [1996] 2 Qd R 112; 95 ATC 4496; 31 ATR 123
Bellinz v Federal Commissioner of Taxation (1998) 84 FCR 154; 155 ALR 220
Bellinz v Federal Commissioner of Taxation (1998) 98 ATC 4399
Bills v Pease (1917) 100 A 146
Bowman v Secular Society Ltd [1917] AC 406
Brookton Co-operative Society Limited v Federal Commissioner of Taxation [1981] HCA 28; (1981) 147 CLR 441; 35 ALR 293; 81 ATC 4346; 55 ALJR 479
Centre for Philanthropy 2007 SCC 42
Chesterman v Federal Commissioner of Taxation [1925] UKPCHA 2; (1926) 37 CLR 317
Chief Commissioner of State Revenue v Northern New South Wales Football Ltd (RD) [2010] NSWADTAP 28
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; 141 ALR 618
Commissioners of Inland Revenue v Yorkshire Agricultural Society [1928] 1 KB 611
Commissioners of Inland Revenue v Oldham Training and Enterprise Council (1996) 69 TC 231
Commissioner of Taxation v Word Investments Limited [2008] HCA 55; (2008) 236 CLR 204; 251 ALR 206; 83 ALJR 105; 70 ATR 225; [2008] ATC 20.072
Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Tax [1981] HCA 26; (1981) 147 CLR 297; 35 ALR 151
Cronulla Sutherland Leagues Club Ltd v Federal Commissioner of Taxation (1990) 23 FCR 82; 90 ATC 4215
Crystal Palace Trustees v Minister of Town and Country Planning [1950] 2 Ch D 857
De Themmines v De Bonneval [1828] ER 863; (1828) 5 Russ 28; [38 ER 1035]
Drake v Minister for Immigration (1979) 24 ALR 577
Esber v Commonwealth of Australia and Another (1992) 174 CLR 430
HA Stephenson & Son Ltd (In liq) v Gillanders, Arbuthnot & Co [1931] HCA 47; (1931) 45 CLR 476
Hobart Savings Bank v Federal Commissioner of Taxation (1930) 43 CLR 364
Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation [1971] HCA 44; (1971) 125 CLR 659
In re Income Tax Acts (No 1) [1930] VLR 211
In re King; Kerr v Bradley [1923] 1 Ch 243
In re Nottage; Jones v Palmer [1895] 2 Ch 649
Inland Revenue Commissioner v McMullen [1981] AC 1
Jebb v Repatriation Commission (1988) 80 ALR 329; 8 AAR 285
Latimer v Commissioner of Inland Revenue [2004] UKPC 13; 1 WLR 1466
McKinnon v Department of Treasury [2006] HCA 45; (2006) 228 CLR 423; 229 ALR 187; 91 ALD 516
R v Salituro [1991] 3 SCR 654
R v The Special Commissioners of Income Tax; ex parte The Headmasters’ Conference 10 TC 73; 41 TLR 651
Re Application of the NEWS CORP LTD (1987) 15 FCR 227
Re Koettgen’s Will Trusts [1954] 1 Ch 252
Re Tennant [1996] 2 NZLR 633
Re Hadden, Public Trustee v More [1931] 1 Ch 133
Re Laidlaw Foundation (1984) 13 DLR (4th) 491
Royal Australasian College of Surgeons v Federal Commissioner of Taxation [1943] ALR 377; (1943) 68 CLR 436; 17 ALJR 342; 2 AITR 490; 7 ATD 289
Royal Choral Society v Commissioners of Inland Revenue [1943] 2 All ER 101
Royal National Agricultural and Industrial Association v Chester (1974) 3 ALR 486
Royal North Shore Hospital of Sydney v Attorney-General of NSW [1938] HCA 39; (1938) 60 CLR 396
Salvation Army (Victoria) Property Trust v President, Councillors and Rate-payers of the Shire of Fern Tree Gully (1952) 85 CLR 159
Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corporation [1968] AC 138
Shi v Migration Agents Registration Authority [2008] HCA 31; (2008) 235 CLR 286; 48 AAR 345
Strathalbyn Show Jumping Club Inc v Mayes and Others [2001] SASC 73; (2001) 79 SASR 54
Tasmanian Electronic Commerce Centre v Federal Commissioner of Taxation [2005] FCA 439; ATC 4219; (2005) 142 FCR 371; 219 ALR 647; 59 ATR 10
TCN Channell Nine Pty Ltd v Australian Mutual Provident Society (1982) 42 ALR 496
The Commissioners of Inland Revenue v The Falkirk Temperance Café Trust 1927 SC 261; (1926) 11 TC 353
The Commissioners for Special Purposes of the Income Tax v Pemsel [1891] AC 531
The Young Men’s Christian Association of Melbourne v Federal Commissioner of Taxation (1925) 37 CLR 351
Thompson v Federal Commissioner of Taxation [1959] HCA 66; (1959) 102 CLR 315
Travis Trust v Charities Commission [2008] NZHC 1912
Vancouver Regional FreeNet Association v Minister of National Revenue (CA) [1996] 3 FC 880
Vancouver Society of Immigrant and Visible Minority Women v Minister of National Revenue [1999] 1 SCR 10
Wacando v The Commonwealth (1981) 148 CLR 1; 37 ALR 317
A New Tax System (Goods and Services Tax) Act 1999 s 176-1
Acts Interpretation Act 1901 ss 15AA(1), 15AB
Administrative Appeals Tribunal Act 1975
Associations Incorporation Act 1981 (Vic)
Charitable Uses Act 1601 (Imp) 43 Eliz, 1.c.4
Commonwealth Constitution s 128
Co-operation Act 1923 (NSW)
Education Act 1944 (UK)
Estate Duty Assessment Act 1914 s 8(5)
Freedom of Information Act 1982 s 58(5)
Fringe Benefits Tax Assessment Act 1986 ss 5B(1E), 123D, 123D(2)(c), 136(1)
Income Tax Act 1918 (UK) ss 37(1)(b)
Income Tax Assessment Act 1915
Income Tax Assessment Act 1922
Income Tax Assessment Act 1936 ss 23(e), 23(g), 23(g)(iii), 117(1), 117(1)(d)
Income Tax Assessment Act 1997 ss 30-15, 30-B, 30-120, 30-120(a), 30-125(1), 30-125(1)(c), 30-125(6), 30-125(7), 50-5, 50-105, 50-110, 50-110(2)
Income Tax Act RSC 1985, c.1 (5th Supp.) (Canada), ss 149.1(a) to (d)
Income Tax and Social Services Contribution Assessment Act 1936
Judiciary Act 1903 s 55ZF
Local Government Act 1946 (Vic)
Metropolitan Board of Works Act 1915 (Vic)
Taxation Administration Act 1953 ss 14ZL(1), 14ZL(2), 14ZQ, 14ZY(2), 14ZZ, 14ZZ(a)(i), 14ZZK, 14ZZK(b)(iii), Div 4 of Part IVC, Div 355 in Sch 1, 355-5, Div 426 in Sch 1, 426-25(1), 426-30, 426-35, 426-40, 426-45, 426-55, 426-55(2), 426-55(3)
Statutory Interpretation in Australia 6th edition, DC Pearce and RS Geddes, LexisNexis Butterworths, 2006
DECISIONS AND REASONS FOR DECISIONS [2011] AATA 444
ADMINISTRATIVE APPEALS TRIBUNAL )
) No. 2010/1721
TAXATION APPEALS DIVISION ) No. 2010/1723
Re:BICYCLE VICTORIA INC
Applicant
And:COMMISSIONER OF TAXATION
Respondent
DECISIONS
Tribunal: Deputy President S A Forgie
Place: Melbourne
Date: 24 June 2011
Decision:The Tribunal decides:
1.in relation to the respondent’s objection decision dated 27 November 2009 (Objection Reference No. 6285807 – Application No. 2010/1723) to refuse endorsement of the applicant as:
(1)an income tax exempt charity under s 50-110 of the Income Tax Assessment Act 1997 on the basis it is a charitable institution as described in item 1.1 of the Table in s 50-5 of the Income Tax Assessment Act 1997;
(2)a health promotion charity under s 123D of the Fringe Benefits Tax Assessment Act 1986; and
(3)a charitable institution under s 176-1 of the A New Tax System (Goods and Services Tax) Act 1999;
that decision is:
(4)set aside in so far as (1) and (3) of that decision are concerned and there is substituted for that part of the decision a decision that:
(a)the applicant is a charitable institution; and
(b)subject to the applicant’s satisfying any other criteria prescribed by the relevant provisions of the Income Tax Assessment Act 1997, it is entitled to be endorsed as:
(i)an income tax exempt charity under s 50-110 of the Income Tax Assessment Act 1997 on the basis it is a charitable institution as described in item 1.1 of the Table in s 50-5 of the Income Tax Assessment Act 1997; and
(ii)a charitable institution under s 176-1 of the A New Tax System (Goods and Services Tax) Act 1999;
(5)affirmed in so far as (2) is concerned being a decision to refuse the applicant’s endorsement as a health promotion charity under s 123D of the Fringe Benefits Tax Assessment Act 1986; and
2.in relation to the respondent’s objection decision dated 27 November 2009 (Objection Reference No. 6281520 – Application No. 2010/1721) to refuse endorsement of the applicant as a deductible gift recipient for the operation of a fund, authority or institution under s 30-120(a) of the Income Tax Assessment Act 1997 that decision is affirmed.
S A Forgie
Deputy President
REASONS FOR DECISIONS
Bicycle Victoria Incorporated (Bicycle Victoria) is an association incorporated on 20 March 1986 under the Associations Incorporation Act 1981 (Vic). It currently has approximately 45,000 members. On 27 February 2009, Bicycle Victoria applied to the Commissioner of Taxation (Commissioner) to be:
(1)endorsed as a deductible gift recipient (DGR) for the operation of a fund, authority or institution under s 30-120(a) of the Income Tax Assessment Act 1997 (ITAA97);[1]and
(2)endorsed as:[2]
(a)an income tax exempt charity under s 50-110 of ITAA97 on the basis it is a charitable institution as described in item 1.1 of the Table in s 50-5 of ITAA97;
(b)a health promotion charity under s 123D of the Fringe Benefits Tax Assessment Act 1986 (FBTA Act); and
(c)a charitable institution under s 176-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
[1] T documents in AAT No. 2010/1721 (1721 T documents) at 313-314
[2] T documents in AAT No. 2010/1723 (1723 T documents) at 45-48
The Commissioner refused the applications and disallowed Bicycle Victoria’s objections to his decisions. Bicycle Victoria has applied to the Tribunal for review of his objection decisions. I have decided that it is entitled to be endorsed as an entity exempt from income tax under s 50-105 of the ITAA97 and as a charitable institution under s 176-1 of the GST Act but that it is not entitled to be endorsed as a DGR for the operation of a fund, authority or institution under s 30-120(a) of ITAA97 and is not entitled to be endorsed as a health promotion charity under s 123D of the FBTA Act.
LEGISLATIVE BACKGROUND
The procedures that an entity must follow in order to apply for and gain any or all of the endorsements are set out in Division 426 in Schedule 1 to the Taxation Administration Act 1953 (TA Act). There is no suggestion that Bicycle Victoria has not complied with those procedures.
Deductible Gift Recipient
In so far as it is relevant, s 30-120 of ITAA97 provides:
“If an entity applies for endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953, the Commissioner must endorse the entity:
(a)as a deductible gift recipient, if the entity is entitled to be endorsed as a deductible gift recipient for the operation of the fund, authority or institution; or
(b)…”
Again in so far as it is relevant, s 30-125(1) provides:
“An entity is entitled to be endorsed as a deductible gift recipient if:
(a)the entity has an ABN; and
(b)the entity is a fund, authority or institution that:
(i)is described (but not by name) in item 1 … of the table in section 30-15; and
(ii)is not described by name in Subdivision 30-B if it is described in item 1 of that table; and
(iii)meets the relevant conditions (if any) identified in the column headed ‘Special conditions’ of the item of that table in which it is described; and
(c)the entity meets the requirements of subsection (6), unless:
(i)the entity is established by an Act; and
(ii)the Act (or another Act) does not provide for the winding up or termination of the entity; and
(d) …”
The table in s 30-15 sets out the situations in which a taxpayer can deduct a gift or contribution. It describes eight situations by reference to the recipient, the type of the gift or contribution, the amount that may be deducted and any special conditions. Only item 1 is relevant in this case and then only in relation to the description of the recipient. The description is that of “A fund, authority or institution covered by an item in any of the tables in Subdivision 30-B”. Section 30-B sets out fourteen tables. The first, headed “Health” sets out general categories of health recipients. Of these, it has been agreed between the parties and I accept, that item 1.1.6 is relevant. It describes the fund, authority or institution as:
“a charitable institution whose principal activity is to promote the prevention or the control of diseases in human beings”.
Section 30-125(6), to which reference is made in s 30-125(1)(c) must be read with s 30-125(7). When that is done with the circumstances of this case in mind, s 30-125(6) provides:
“A law (outside this Subdivision), a document constituting the entity or rules governing the entity’s activities must require the entity, at the first occurrence of an event described in subsection (7) [i.e. the winding up of the fund, authority or institution[3]], to transfer to a fund, authority or institution gifts to which can be deducted under this Division:
(a)any surplus assets of the gift fund (see section 30-130); or
(b)if the entity is not required by this section to meet the requirements of section 30-130 – any surplus:
(i)gifts of money or property for the principal purpose of the fund, authority or institution; and
(ii)contributions described in item 7 or 8 of the table in section 30-15 in relation to a fund-raising event held for that purpose; and
(iii)money received by the entity because of such gifts or contributions.”
In summary, ss 130-125(6) and (7) require that the entity be required by a law or by its constitution to transfer its funds to another DGR should it be wound up or its endorsement revoked.
[3] ITAA97, s 30-125(7)(a)
An entity exempt from income tax under s 50-105 of ITAA97
Section 50-105 of ITAA97 provides that:
“The Commissioner must endorse an entity as exempt from income tax if the entity:
(a)is entitled to be endorsed as exempt from income tax; and
(b)has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953.”
Section 50-110 sets out the circumstances in which an entity is entitled to be endorsed. That entitlement arises if an entity meets all of the relevant requirements of s 50-110.[4]
[4] ITAA97, s 50-110(1)
Only one of those requirements is relevant in this case. It is found in s 50-110(2), which provides that, in order to be entitled, an entity must be covered by one of the items it specifies. The item that is relevant in this case is item 1.1 of the table in s 50-5. That item specifies a “charitable institution”.
A health promotion charity under s 123D of the FBTA Act
Section 123D of the FBTA Act provides that:
“(1) The Commissioner must endorse an entity as a health promotion charity if:
(a)the entity is entitled to be endorsed as a health promotion charity (see subsection (2)); and
(b)the entity has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953.
(2)An entity is entitled to be endorsed as a health promotion charity if the entity:
(a)is a health promotion charity; and
(b)has an ABN; and
(c)is not an employer in relation to which step 2 of the method statement in subsection 5B(1E) applies.”
Bicycle Victoria does not come within s 123D(2)(c) as it is not a government body or a public hospital, it is not carrying on a hospital and it is not providing ambulance services or services that support those services as described in step 2 of the method statement in s 5B(1E).
The expression “health promotion charity” is defined in s 136(1) of the FBTA Act to mean “… a charitable institution whose principal activity is to promote the prevention or the control of diseases in human beings.”
A charitable institution under s 176-1 of the GST Act
Section 176-1 of the GST Act provides that:
“(1) The Commissioner must endorse an entity as a charitable institution if:
(a)the entity is entitled to be endorsed as a charitable institution (see subsection (2)); and
(b)the entity has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953.
(2)An entity is entitled to be endorsed as a charitable institution if the entity:
(a)is a charitable institution; and
(b)has an ABN.”
Endorsement: its date of effect and cessation
If the Commissioner decides to endorse an applicant for endorsement, that endorsement takes effect from a date he specifies. That may be a date before the application for endorsement was made and a date before the applicant had an ABN.[5] Under s 426-40 of the TA Act, the Commissioner has power to require information or documentation relevant to an entity’s entitlement to endorsement. An entity that has been endorsed has an obligation to advise the Commissioner if it ceases to be entitled to be endorsed. That is the effect of s 426-45. If an entity is not entitled to be endorsed, the Commissioner may revoke its endorsement under s 426-55. Revocation takes effect from the day specified by the Commissioner.[6] If the specified day is a day earlier than the day on which the Commissioner makes the decision to revoke, it must not be a day earlier than the day on which the entity first ceased to be entitled to be endorsed.[7]
[5] TA Act, Schedule 1, Division 426, ss 426-25(1) and 426-30
[6] TA Act, Schedule 1, Division 426, s426-55(2)
[7] TA Act, Schedule 1, Division 426, s426-55(3)
CONSIDERATION: statutory interpretation and the meaning of “charitable institution”
The essential issue under the endorsement provisions I have set out is that Bicycle Victoria be a “charitable institution”. If it is, that will be sufficient in the circumstances of this case to require its endorsement as income tax exempt under s 50-105 of ITAA97 and as a charitable institution under the GST Act. In order to be endorsed as a DGR under s 30-120 of ITAA97 or as a health promotion charity under the FBTA Act, I will need to consider further elements.
Approach to statutory interpretation: general principles
I am mindful that:
“...In the end the task of the court is to ascertain and to enforce the actual commands of the legislature: Scott v Cawsey ... [(1907) [1907] HCA 80; 5 CLR 132] at 155. This will best be achieved by studying the words used and the context and the purpose or object underlying the Act.”[8]
In more recent times, Hayne and Heydon JJ repeated the warning in Shi v Migration Agents Registration Authority (Shi):[9]
“ As this Court has so often emphasised … in recent years, questions presented by the application of legislation can be answered only by first giving close attention to the relevant provisions. Reference to decided cases or other secondary material must not be permitted to distract attention from the language of the applicable statute or statutes. Expressions used in decided cases to explain the operation of commonly encountered statutory provisions and their application to the facts and circumstances of a particular case may serve only to mask the nature of the task that is presented when those provisions must be applied in another case. The masking effect occurs because attention is focused upon the expression used in decided cases, not upon the relevant statutory provisions.”[10]
[8] Re Application of the NEWS CORP LTD (1987) 15 FCR 227 (Bowen CJ, Lockhart and Beaumont JJ) at 236 per Bowen CJ
[9] [2008] HCA 31; (2008) 235 CLR 286; 48 AAR 345 at [92]; 311; 366 per Hayne and Heydon JJ
[10] [2008] HCA 31; (2008) 235 CLR 286; 48 AAR 345 at [92]; 311; 366
These warnings have to be read in conjunction with four principles. In the confines of these reasons, I can state them only broadly and without their myriad of qualifications and exceptions but do so to give an indication of their content. The first is to return to the provision and apply it rather than another version of it. That this is so is apparent from the case of McKinnon v Department of Treasury[11] (McKinnon). That was a case in which Callinan and Heydon JJ said of the Tribunal’s having recast[12] the question which s 58(5) of the Freedom of Information Act 1982[13] required it to answer:
“… We would prefer to ask the question in terms of the language of the legislation itself, rather than any adaptation of it, because the former is perfectly clear in asking whether there exist reasonable grounds for the claim that the disclosure of the documents would be contrary to the public interest. …”[14]
[11] [2006] HCA 45; (2006) 228 CLR 423; 229 ALR 187; 91 ALD 516
[12] “In accordance with the above I propose to approach my task by asking whether the facts established before me are sufficient to support the claim that disclosure would be contrary to the public interest in the mind of a person guided by reason.”: Re McKinnon and Secretary, Department of The Treasury [2004] AATA 1364; (2004) 86 ALD 138; 40 AAR 167 at [23]; 144; 174 per Downes J, President
[13] “Where an application is or has been made to the Tribunal for the review of a decision refusing to grant access to a document in accordance with a request, being a document that is claimed to be an exempt document under section 36 and in respect of which a certificate is in force under that section, the Tribunal shall, in a case where it is satisfied that the document is a document to which paragraph 36(1)(a) applies, if the applicant so requests, determine the question whether there exist reasonable grounds for the claim that the disclosure of the document would be contrary to the public interest.”
[14] [2006] HCA 45; (2006) 228 CLR 423; 229 ALR 187; 91 ALD 516 at [131]; 468; 222; 551
The second is that no legislative provision stands entirely alone. Its immediate context is that of the particular legislation in which it is placed. Its wider context is that of legislation generally. Unless Parliament has expressed a contrary intention, that brings it within the purview of the Acts Interpretation Act 1901 (AI Act). Like the common law, it requires close attention to be paid to the object of any particular Act for it provides that, in interpreting it, “… a construction that would promote the purpose or object underlying the Act … shall be preferred to a construction that would not promote that purpose or object.”[15] That is so “… whether that purpose or object is expressly stated in the Act or not …”.[16] The AI Act, however, does not limit the search for the meaning of a provision, and so for the object, to the legislative provision or to the Act in which it appears. Section 15AB provides for the circumstances in which regard may be had to extrinsic material for the interpretation of an Act.
[15] AI Act, s 15AA(1)
[16] AI Act, s 15AA(1)
There is also judicial imprimatur for this approach. An example is found in High Court authorities such as Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Tax[17] (Cooper Brookes), in which Mason and Wilson JJ said:
“... The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction.”[18]
Brennan CJ, Dawson, Toohey and Gummow JJ discussed legitimate aids to construction in CIC Insurance Ltd v Bankstown Football Club Ltd[19] (CIC Insurance):
“ It is well settled that at common law, apart from any reliance upon
s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure …. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy …. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 at 388, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent…”[20]
[17] [1981] HCA 26; (1981) 147 CLR 297; 35 ALR 151
[18] [1981] HCA 26; (1981) 147 CLR 297; 35 ALR 151 at 320, 169-170
[19] (1997) 187 CLR 384; 141 ALR 618
[20] (1997) 187 CLR 384; 141 ALR 618 at 408; 634-5 (footnotes omitted) per Brennan CJ, Dawson, Toohey and Gummow JJ, and see also Wacando v The Commonwealth (1981) 148 CLR 1; 37 ALR 317 at 25-26; 335-6 per Mason J; TCN Channel Nine Pty Ltd v Australian Mutual Provident Society (1982) 42 ALR 496 at 507-508; and Alexandra Private Geriatric Hospital v Blewett (1984) 2 FCR 368; 56 ALR 265 at 375-6; 271-2 per Woodward J)
The third principle relates to legitimate aids to construction other than those relating to extrinsic material. They are the rules of statutory construction developed by the common law to aid the interpretation of legislation. In so far as their application is consistent with the principles set out in cases such as Cooper Brookes and CIC Insurance, it must be assumed that Parliament has kept them in mind and, unless it has provided to the contrary, expects them to be applied.[21]
[21] See generally, Statutory Interpretation in Australia 6th edition, DC Pearce and RS Geddes, LexisNexis Butterworths, 2006
The fourth principle is that the Tribunal is bound by any interpretation of a provision previously given by the Federal Court and the High Court. It cannot engage in statutory interpretation simply by “... studying the words used and the context and the purpose or object underlying the Act” if there is binding authority. Only the High Court can take that approach if it chooses for it is not subject to binding authority.[22]
[22] Re Application of the NEWS CORP LTD (1987) 15 FCR 227 (Bowen CJ, Lockhart and Beaumont JJ) at 236 per Bowen CJ
Approach to statutory interpretation: charitable institution
This is a case in which I will not be able to make my decision by simply studying the words used and the context and the purpose or object underlying the Act. The expression “charitable institution” has not been defined in ITAA97 or in the FBTA Act or the GST Act. There is, though, judicial authority that has interpreted the expression. Furthermore, it is binding judicial authority that takes me back to the common law and it is found in Aid/Watch Incorporated v Commissioner of Taxation[23] (Aid/Watch). Referring to the expression “charitable institution” as used in item 1 of s 50-5 of ITAA97 and in the GST Act and the FBTA Act, the majority said:
“23. Where statute picks as a criterion for its operation a body of the general law, such as the equitable principles respecting charitable trusts, then, in the absence of a contrary indication in the statute, the statute speaks continuously to the present, and picks up the case law as it stands from time to time. Further, where, as here, the general law comprises a body of doctrine with its own scope and purpose, the development of that doctrine is not directed or controlled by a curial perception of the scope and purpose of any particular statute which has adopted the general law as a criterion of liability in the field of operation of that statute.
24. Accordingly, the use of the term ‘charitable’ in the phrase ‘charitable institution’ in s 50-5, item 1.1 of the 1997 Act and the corresponding provisions of the FBT and GST Acts is to be understood by reference to its source in the general law as it is developed in Australia from time to time.”[24]
[23] [2010] HCA 42; (2010) 272 ALR 417; 77 ATR 195; 85 ALJR 154; French CJ, Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ
[24] [2010] HCA 42; (2010) 272 ALR 417; 77 ATR 195; 85 ALJR 154 at [23]-[24]; 423; 203; 161
Charitable institution: source of its meaning?
There was no issue regarding Bicycle Victoria’s being an “institution” and I accept that it is an institution for the purposes of the definition of “charitable institution”.
Consistently with Aid/Watch, both parties submitted that the expression “charitable institution” takes its meaning from the common law and, more particularly, from the preamble to the Charitable Uses Act 1601 (Imp)[25] (the Statute of Elizabeth). Such an approach was taken by the Privy Council in Chesterman v Federal Commissioner of Taxation[26] (Chesterman) in the context of the Estate Duty Assessment Act 1914. Since then, it is an approach taken by the High Court in other contexts such as the Metropolitan Board of Works Act 1915 (Vic),[27] the Local Government Act 1946 (Vic),[28] the Income Tax Assessment Act 1915[29] and the Income Tax Assessment Act 1922.[30] More relevantly in this case, it was an approach adopted by the High Court in the context of s 23(e) of the Income Tax Assessment Act 1936 (ITAA36). That section provided that the “income of a religious … charitable … institution” was to be exempt from income tax”. In Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation[31] (Council of Law Reporting case), Barwick CJ, with whom McTiernan J agreed, said of the same section in the then named Income Tax and Social Services Contribution Assessment Act 1936:
“ The Act attempts no definition of charity or of what for its purposes will be charitable. But having regard to the decision of the Privy Council in Chesterman v Federal Commissioner of Taxation … it must be taken that whether or not the institution is relevantly charitable will be determined according to the principles upon which the Court of Chancery would act in connexion with the alleged charity. That means that the indications contained in the preamble to the Statute of Elizabeth 1601 and the classifications in Lord Macnaghten’s speech in Commissioner for Special Purposes of Income Tax v Pemsel … are to be observed in deciding whether or not the institution is charitable for the purposes of the Act.”[32]
[25] 43 Eliz, 1.c.4
[26] [1925] UKPCHCA 2; (1926) 37 CLR 317 at 319-320 per Lord Wrenbury on behalf of their Lordships
[27] Adamson v Melbourne and Metropolitan Board of Works (1929) AC 142 (Privy Council)
[28] Salvation Army (Victoria) Property Trust v President, Councillors and Rate-payers of the Shire of Fern Tree Gully (1952) 85 CLR 159; Dixon, Williams, Webb and Fullagar JJ, McTiernan J dissenting
[29] The Young Men’s Christian Association of Melbourne v Federal Commissioner of Taxation (1925) 37 CLR 351; Knox CJ, Isaacs, Higgins, Gavan Duffy and Rich JJ
[30] Hobart Savings Bank v Federal Commissioner of Taxation (1930) 43 CLR 364; Isaacs CJ, Gavan Duffy, Rich, Starke and Dixon JJ
[31] [1971] HCA 44; (1971) 125 CLR 659; Barwick CJ, McTiernan and Windeyer JJ
[32] [1971] HCA 44; (1971) 125 CLR 659 at 666
The same approach is to be taken in relation to the meaning of the expression “charitable institution” when it appears in s 50-5 of ITAA97. This is apparent from the judgment of the majority of the High Court in Commissioner of Taxation v Word Investments Limited[33] (Word Investments) when they said that the “… primary relevant line of authority … is that which is concerned with the predecessor to ss 50-5, 50-50 and 50-110 of the 1997 Act, namely s 23(e) of the Income Tax Assessment Act 1936 …”.[34]
[33] [2008] HCA 55; (2008) 236 CLR 204; 251 ALR 206; 83 ALJR 105; 70 ATR 225; [2008] ATC 20-072 Gummow, Kirby, Hayne, Heydon and Crennan JJ
[34] [2008] HCA 55; (2008) 236 CLR 204; 251 ALR 206; 83 ALJR 105; 70 ATR 225; [2008] ATC 20-072 at [17]; 216; 211-212; 111-112; 233-234; 8,997 per Gummow, Hayne, Heydon and Crennan JJ
Charitable institution: Statute of Elizabeth
The Statute of Elizabeth is a reference to the Charitable Uses Act 1601 (Imp).[35] It provided that allowances were to be made in respect of certain duties charged on certain entities in respect of certain buildings:
“Or on the rents and profits of lands, tenements, hereditaments, or heritages belonging to any hospital, public school, or almshouse, or vested in trustees for charitable purposes, so far as the same are applied to charitable purposes”.[36]
[35] 43 Eliz, 1.c.4
[36] The Commissioners for Special Purposes of the Income Tax v Pemsel [1891] AC 531 at 583 per Lord Chancellor Halsbury
There was some doubt whether the word “charity” and its derivatives should be given their popular meaning or that derived in the context of trust law where a trust established for a purpose is invalid unless the purpose is a charitable purpose. The law relating to charitable trusts had developed before the enactment of the Statute of Elizabeth. In The Commissioners for Special Purposes of the Income Tax v Pemsel[37] (Pemsel), Lord Macnaghten who, together with Lords Watson, Herschell and Morris, formed the majority, distinguished between the popular and
legal meanings of “charity” and said:
“…‘Charity’ in its legal sense comprises four principal divisions: trusts for the relief of poverty, trusts for the advancement of education, trusts for the advancement of religion, and trusts for other purposes beneficial to the community not falling under any of the preceding heads. The trusts last referred to are not the less charitable in the eye of the law because incidentally they benefit the rich as well as the poor, as indeed every charity that deserves the name must do, either directly or indirectly. …”[38]
[37] [1891] AC 531
[38] [1891] AC 531 at 583
As to the application of these principles in a particular case, Barwick CJ, with whom McTiernan J concurred, considered the relevance of earlier authorities in the Council of Law Reporting case. His Honour said that, having regard to the decision of the Privy Council in Chesterman, the indications contained in the preamble to the Statute of Elizabeth and the classifications set out by Lord Macnaghten in Pemsel are to be observed in deciding whether or not an institution is charitable. His Honour continued:
“ The reported cases may in some instances afford a guide by analogy to the decision whether a particular trust, or a particular purpose is charitable. In addition, the many dicta found in the reasons for judgment in such cases, though by no means of one accord, provide valuable assistance in resolving such a question. But in the long run, it seems to me, it is a matter of judgment whether the trust or purpose fairly falls within the equity, or as it is sometimes said, ‘within the spirit and intendment’ of the preamble to the … [Statute of Elizabeth]. …
The instances given in that preamble are not exhaustive. Charity is not limited to activities eiusdem generis with those instances, if indeed a genus is really to be found in them. But the preamble does give an indication and, it would seem, a definitive indication, of what will be charitable, whether in point of trust or of purpose. Lord Macnaghten in Pemsel’s Case [1891] A.C. 531 extracted from this indication four heads or categories of charity of which the first three heads or categories are capable of more certain application than the last category …”[39]
[39] [1971] HCA 44; (1971) 125 CLR 659 at 666-667
The majority of the High Court in Aid Watch expressed the same thought when they acknowledged that:
“ The speech of Lord Macnaghten in Pemsel … is the source of the modern classification of charitable trusts in four principal divisions … But even in 1891, the case law which gave the term ‘charitable’ its technical meaning had developed considerably since the time of the British income tax statute of 1799. The case law may be expected to continue to do so as the cases respond to changed circumstances. As Lord Wilberforce put it, the law of charity is a moving subject which has evolved to accommodate new social needs as old ones become obsolete or satisfied …”[40]
[40] [2010] HCA 42; ; (2010) 272 ALR 417; 77 ATR 195; 85 ALJR 154 at [18]; 422; 202; 160; citations omitted
Their Honours did not elaborate upon the nature of any change in social need or the extent of any change that is required before the courts will respond to accommodate that change. I would venture to suggest that it is inherent in the authorities to which I have referred that the response will be cautious and consistent with that adopted by the Supreme Court of Canada in R v Salituro.[41] That response was given in a different context but a context that was also concerned with concepts developed by the common law. In delivering the judgment of the Court, Iacobucci J said:
“… Judges can and should adapt the common law to reflect the changing social, moral and economic fabric of the country. Judges should not be quick to perpetuate rules whose social foundation has long since disappeared. Nonetheless, there are significant constraints on the power of the judiciary to change the law. … [I]n a constitutional democracy such as ours it is the legislature and not the courts which has the major responsibility for law reform; and for any changes to the law which may have complex ramifications, however necessary or desirable such changes may be, they should be left to the legislature. The judiciary should confine itself to those incremental changes which are necessary to keep the common law in step with the dynamic and evolving fabric of our society.”[42]
[41] [1991] 3 SCR 654; Lamer C.J. and Gonthier, Cory, McLachlin and Iacobucci JJ
[42] [1991] 3 SCR 654 at 670 cited with approval by the majority in Vancouver Society of Immigrant and Visible Minority Women v Minister of National Revenue [1999] 1 SCR 10 Cory, Iacobucci, Major and Bastarache JJ; L’Heureux-Dubé, Gonthier and McLachlin JJ dissenting at [150]. See also Tasmanian Electronic Commerce Centre v Federal Commissioner of Taxation [2005] FCA 439; (2005) 142 FCR 371; 219 ALR 647; 59 ATR 10; [2005] ATC 4219 at [37]; 385; 659; 21; 4229 per Heerey J
Charitable institution: purposes and activities
Lord Macnaghten referred to “purposes” and Barwick CJ to both “purposes” and “activities”. The reference to “purposes” is in keeping with the equitable roots of the concept of a charitable trust. The reference to both purposes and activities is consistent with the manner in which activities may shed light on the purposes for which they are undertaken but activities do not determine purposes. As Iacobucci J explained in Vancouver Society of Immigrant and Visible Minority Women v Minister of National Revenue[43] in delivering the judgment of the majority of the Supreme Court of Canada. His Honour was explaining the problems in interpreting the word “charitable’ and continued:
“… Another is its focus on ‘charitable activities’ rather than purposes’. The difficulty is that the character of an activity is at best ambiguous; for example, writing a letter to solicit donations for a dance school might well be considered charitable, but the very same activity might lose its charitable character if the donations were to go to a group disseminating hate literature. In other words, it is really the purpose in furtherance of which an activity is carried out, and not the character of the activity itself, that determines whether or not it is of a charitable nature. Accordingly, this Court held … that the inquiry must focus not only on the activities of an organization but also on its purposes.”[44]
[43] [1999] 1 SCR 10
[44] [1999] 1 SCR 10 at [152] See also AYSA v Canada Revenue Agency and Canadian Centre for Philanthropy [2007] 3 SCR 217 at [24]
Word Investments illustrates the point. The High Court considered a submission made on behalf of the Commissioner to the effect that there was no nexus between the profit made from Word Investment’s commercial activities in publishing and the effectuation of a charitable purpose i.e. to proclaim the Christian religion. All that it did was to determine to distribute its profits to other bodies so that they could proclaim the Christian religion. In rejecting the submission, the majority of the High Court concluded that nexus is important but need not be immediate. Rather, the nexus is found in what is the natural and probable consequence of its activities. Their Honours said:
“In Baptist Union of Ireland (Northern) Corporation Ltd v Commissioners of Inland Revenue … [(1945) 26 TC 335 at 348] MacDermott J said:
‘the charitable purpose of a trust is often, and perhaps more often than not, to be found in the natural and probable consequences of the trust rather than in its immediate and expressed objects.’
Similarly, the charitable purposes of a company can be found in a purpose of bringing about the natural and probable consequence of its immediate and expressed purposes, and its charitable activities can be found in the natural and probable consequence of its immediate activities.”[45]
[45] [2008] HCA 55; (2008) 236 CLR 204; 251 ALR 206; 83 ALJR 105; 70 ATR 225; [2008] ATC 20-072 at [38]; 226; 219; 117; 241; 9,003
In Word Investments, the majority of the High Court considered the objects of a company that had a memorandum of association in which it had stated its objects. It was not required to do so but, having chosen to do so, the majority said that:
“… it is necessary to examine the objects, and the purported effectuation of those objects in the activities, of the institution in question. In examining the objects, it is necessary to see whether its main or predominant or dominant objects, as distinct from its concomitant or incidental or ancillary objects, are charitable …’[46]
[46] [2008] HCA 55; (2008) 236 CLR 204; 251 ALR 206; 83 ALJR 105; 70 ATR 225; [2008] ATC 20-072 at [17]; 217; 212; 112; 234; 8,997
In dissent, Kirby J warned that:
“… With respect, there are real dangers in assigning too much importance to the constituting document. This is especially so now that the doctrine of ultra vires in relation to companies has been discarded as an important element in Australian corporations law ….
The constituting document can obviously be drafted widely or ambiguously. Its language may generate uncertainty as to the true purposes of the institution propounded as charitable. It may contain multiple purposes but not indicate whether they are all of equal importance or whether some purposes are subsidiary to others. The document may not identify the outer limits of the purposes which the institution may pursue. For these reasons, in my opinion, the real discrimen for the characterisation of an entity propounded as a ‘charitable institution’ is what that entity actually does and what purposes it actually pursues. I take this to be the reason why, in Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation …, Barwick CJ said: ‘If its purposes are charitable, it will be such an institution for the nature of the institution inheres in the purposes it is created to and does pursue.’”[47]
[47] [2008] HCA 55; (2008) 236 CLR 204; 251 ALR 206; 83 ALJR 105; 70 ATR 225; [2008] ATC 20-072 at [173]-[174]; 265; 251-252; 140-141; 271; 9,026
It seems to me that his Honour’s words of warning are consistent with earlier English and Australian authority as well as with the principles implicit in the approach adopted by the majority. It is clear from them that the determination whether an object is charitable or not is not determined simply by reference to the objects set out in the entity’s documentation. As Mackenzie J of the Supreme Court of Queensland indicated in Barclay v De Lacy,[48] it is necessary to look to all aspects of the matter and to form an impression of the way in which an entity operates.[49] Lord Greene MR earlier warned that “It may very well be that a purpose which, on the face of it looks to be the real purpose, on close examination, is found not to be the real purpose”.[50]
[48] [1996] 2 Qd R 112; 95 ATC 4496; 31 ATR 123
[49] [1996] 2 Qd R 112; 95 ATC 4496; 31 ATR 123 at 117; 4,500; 127
[50] Royal Choral Society v Commissioners of Inland Revenue [1943] 2 All ER 101 at 106
Charitable institution: purposes, objects and motives
The cases contain references to both purposes and objects. At times, they distinguish them and at times they use them synonymously while distinguishing them from motives. As far as motives are concerned, it is clear that “Mere motive does not make a charity under the revenue laws”[51] and that:
“Whether the purposes of the trust are charitable does not depend on the subjective intentions or motives of the settler, but on the legal effect of the language he has used. The question is not what was the settlor’s purpose in establishing the trust, but what are the purposes for which trust money may be applied.”[52]
[51] The Commissioners of Inland Revenue v The Falkirk Temperance Café Trust at 268 per Lord Sands
[52] Latimer v Commissioner of Inland Revenue [2004] UKPC 13; [2004] 1 WLR 1466 at [2]; 1475
The distinction between motive and purpose is apparent in the judgment of Romer LJ in In re King; Kerr v Bradley:[53]
“ In this case I have to determine, in the first place, whether a gift of the residuary estate of the testatrix for the purpose of providing a stained-glass window in memory of herself and certain members of her family, is a good charitable bequest. I have no doubt that it is. It is clear that a bequest to provide a parish church with stained-glass windows is a good charitable gift. But it is said that the gift here is bad because the motive is not to beautify the church or to benefit the parishioners, but to perpetuate the memory of the testatrix and her relations. It was, however, pointed out in Hoare v Osborne … that in considering whether a bequest is charitable, the motive of the testator in making it is immaterial. In certain cases a gift for the purpose of erecting a tomb in a church has been held not to be a charitable gift, but the distinction between those cases and this is that a gift for erecting a tomb is not so obviously a gift for the benefit of a church as a gift for the provision of a stained-glass window. …”[54]
[53] [1923] 1 Ch 243
[54] [1923] 1 Ch 243 at 245
When distinguishing objects and purposes, it seems to me that the courts have done so in cases concerning companies required to state their objects in their Memoranda and Articles of Association. The objects expressed in those Memoranda may not be the purposes for which the company is operated. For those companies not required to state their objects or for other bodies, the two words are used interchangeably. That is also the case when the distinction is made between objects and purposes on the one hand and motive on the other.
The case of Brookton Co-operative Society Limited v Federal Commissioner of Taxation[55] (Brookton) is an example of a case in which a company was required to set out its objects in its Memorandum and Articles of Association. It was decided in 1981 and the High Court distinguished between objects and purposes and the relevance of each in establishing a company’s status as a charitable institution or otherwise. A company had been incorporated under the Co-operation Act 1923 (NSW). Its rules stated that its principal objects were the acquisition of commodities for disposal or distribution among its shareholders, who were “… professional men who encountered difficulties in looking after their personal affairs”.[56] Among the commodities supplied were wine obtained by the company’s manager from liquor retailers. It received income from capital it had invested and from dividends declared by wholly owned subsidiaries. The subsidiaries, which it acquired soon after the company was incorporated, earned substantial profits from the acquisition of shares in other companies and subsequent dividend stripping. The company argued that it should be assessed for taxation as a co-operative company within the meaning of s 117(1) of ITAA36 and, more particularly, s 117(1)(d). That section described “… a company … which … is established for the purpose of carrying on any business having as its primary object or objects one or more of the following … (d) the rendering of services to its shareholders.”
[55] [1981] HCA 28; (1981) 147 CLR 441; 35 ALR 293; 81 ATC 4346; 55 ALJR 479; Gibbs CJ, Mason, Murphy, Aickin and Wilson JJ
[56] [1981] HCA 28; (1981) 147 CLR 441; 35 ALR 293; 81 ATC 4346; 55 ALJR 479 at 447; 296; 4,350; 481 per Mason J
Mason J, with whom Murphy and Wilson JJ concurred, said:
“…in determining the purpose for which the taxpayer is established the courts below were entitled to look not merely to the activities of the taxpayer and its directors, but also to the intention of the promoters. In general a distinction is to be drawn between purpose on the one hand and motives and intentions of the promoters on the other hand, but I do not see why the intentions of the promoters may not be relevant in determining what is the purpose for which a company is established. … Likewise, in determining the purpose for which a company is established, it is permissible to look at the business carried on by subsidiary companies, at least when action to make the companies subsidiaries is taken by the promoters on the incorporation of the holding company and pursuant to plans they have previously made as promoters of the holding company.”[57]
[57] [1981] HCA 28; (1981) 147 CLR 441; 35 ALR 293; 81 ATC 4346; 55 ALJR 479 at 453; 301; 4,353; 483-484
The distinction was also made in Word Investments and again in relation to an incorporated body that was required to state its objects. The judgment of the majority in Word Investments referred to the distinction between purposes and objects and its relevance to companies having a memorandum of association with an objects clause. They relied on the following passage from the judgment of Dixon J in HA Stephenson & Son Ltd (In liq) v Gillanders, Arbuthnot & Co[58] to draw the distinction:
“ When the question is whether a particular transaction binds the company, or is extra vires, the well-known principle may not apply by which, in considering whether a company should be wound up because the substratum of its constitution has failed, its true, main, dominant or paramount purpose is ascertained and general clauses are understood as subsidiary, as conferring powers not independent but subserving the main end. In the one case the ultimate question is whether it is just and equitable that the company should be wound up, and, for its determination, general intention and common understanding among the members of the company may be important. In the other case the question is one of corporate capacity only, and this must be ascertained according to the true meaning of the memorandum interpreted by a fair reading of the whole instrument.’[59]
[58] [1931] HCA 47; (1931) 45 CLR 476
[59] [1931] HCA 47; (1931) 45 CLR 476 at 487
In the context of deciding whether an incorporated body is a charitable body, the majority of the High Court focused upon the purposes of the body. They referred to the RAC of Surgeons case in which the search was made for the real purpose rather than the stated purpose. In that case, the High Court had considered s 23(e) of ITAA36 but had done so in considering whether the Royal Australasian College of Surgeons (College) was a scientific institution within the meaning of that section and so exempt from income tax on income received from its investments. Despite that, it illustrates the approach adopted by the courts in ascertaining an institution’s objects.
There was no requirement that the scientific institution have been established only for the promotion of science or the like. The College was a limited company whose income and property were applied solely to its objects. Its objects were partly for the promotion of professional interests and partly for the promotion of surgical knowledge and practice. It conducted conferences to discuss surgical matters. A library was provided by the College for the use of its members and it published a surgical journal. It held examinations for admission to its membership and awarded scholarships to medical students but did not confer medical degrees.
The issue to be considered was whether the College was a scientific institution, and so coming within the scope of s 23(e), or a professional society, and so falling beyond it. Latham CJ said that “Unless the promotion of surgical science is the main substantial or primary object of the College, it cannot be described as a scientific institution”.[60] It had been submitted that the College’s objects included the promotion of the professional interests of its members and that they could not be regarded as subsidiary, secondary or auxiliary to the promotion of surgical science. To cultivate and maintain the highest principles of surgical practice and ethics as the objects required would be, in the normal course of events, to promote the professional interests of the members of the College. Latham CJ reasoned that the mere fact that membership of the College was confined to those who had some eminence in surgical science did not militate against its object being for the advancement of that subject. They are, after all, the only persons who have the requisite knowledge and skill to promote it.[61]
[60] [1943] HCA 34; (1943) 68 CLR 436 at 444
[61] [1943] HCA 34; (1943) 68 CLR 436 at 445
Rich J concluded in RAC of Surgeons that:
“… the main or real object of the College is the promotion and advancement of surgery. By this I mean that its essential purpose is to enlarge and extend the boundaries or area of the science of surgery. Its other objects are not collateral or independent but merely concomitant and incidental to the main object. And the fact that some of these subsidiary or ancillary functions and purposes may indirectly and incidentally be of benefit to the members of the profession does not destroy the exemption claimed.”[62]
Starke J expressed a similar conclusion in this way:
“ The activities of the College may benefit its fellows, but the facts related speak for themselves and establish that the College is doing ‘something higher and larger’ than the mere promotion of professional interests. It is actively engaged in the promotion and advancement of science in the advancement of surgical knowledge and practice. And that, I think, is the main and prevailing and the characteristic nature of the activities of the College. …”[63]
[62] [1943] HCA 34; (1943) 68 CLR 436 at 447
The same principles were applied by the Federal Court in Cronulla Sutherland Leagues Club Ltd v Federal Commissioner of Taxation[64] (Cronulla) in a different context and with a different outcome. Section 23(g)(iii) of ITAA36 provided that the income of a club was exempt from income tax if the club was not carried on for the purposes of profit or gain of its members and was “… established for the encouragement or promotion of an athletic game or athletic sport in which human beings are the sole participants”. One of the objects of the Cronulla Sutherland Leagues Club (“the Club”) was to establish, equip, furnish and maintain a Club for the benefit of its members and to promote social, sporting and educational undertakings for the advancement and benefit of its members. Another was to provide any or all of the facilities necessary to further the aims of the Cronulla-Sutherland District Rugby League Football Club and of the Cronulla-Caringbah Junior Rugby League Football Club.
[64] (1990) 23 FCR 82; 90 ATC 4215; Lockhart and Beaumont JJ, Foster J dissenting
In separate judgments, Lockhart and Beaumont JJ decided that the encouragement or promotion of sport did not need to be the exclusive purpose or object of the Club in order for its trading income to be exempt from income tax under s 23(g) of ITAA36 but it did need to be the main or predominant purpose or object.[65] It may:
“… have other objects or purposes which are merely incidental or ancillary thereto or which are secondary and even unrelated to the main object or purpose without disqualifying the body from the exemption. But if it has two co-ordinate objects, one of which is outside the exemption, the exemption cannot apply because it would be impossible to say that one object is the main or predominant object.”[66]
As Beaumont J said:
“… [A]lthough it is not necessary that the promotion or encouragement of the sport or game be the only, or exclusive, object, in order to qualify for the exemption of its income from tax, the institution must have, as its predominant purpose, the promotion or encouragement of the sport or game. If the institution has such a purpose, that will be the intrinsic character of the object it seeks to promote and the existence of merely incidental functions and purposes will not destroy the claim for exemption. …”[67]
[65] (1990) 23 FCR 82; 90 ATC 4,215 at 95-96; 4,225 per Lockhart J and at 117; 4,243-4,244 per Beaumont J
[66] (1990) 23 FCR 82; 90 ATC 4,215 at 95; 4,225
[67] (1990) 23 FCR 82; 90 ATC 4,215 at 117; 4,244
Neither of the Club’s two objects could be correctly described as ancillary or incidental to the other or as necessarily independent of the other. They overlapped to some degree but the main object was the provision of social amenities:
“ It is unreal to regard the appellant’s clubhouse and its social activities as being undertaken for the purpose of encouraging or promoting rugby league football and supporting the football club. This is a secondary purpose.”[68]
That meant that the Club was not a charitable institution.
[68] (1990) 23 FCR 82; 90 ATC 4,215 at 97; 4,227 per Lockhart J
Charitable institution: when are the purposes of an institution identified?
As to the time at which the purpose for which the company “is established” is to be determined, Mason J said in Brookton:
“… it is necessary to look, not only to the circumstances existing at the time of incorporation, but also to the activities of the company at the time when its status as a co-operative company is to be determined. No doubt it was the presence of the words ‘is established’ and the purpose of the section that led Fullagar in A & S Ruffy Pty Ltd v Federal Commissioner of Taxation … [(1958) 98 CLR 637 at p 656] and Menzies J in Renmark Fruitgrowers Co-operated Ltd … [(1969) 121 CLR 501 at p 506] to adopt this approach. To my mind it is evidently correct, allowing, as it does, that the purpose for which a company is established may change in the course of time and that with the change of purpose there may come a change in status as a co-operative company. Moreover, in Ruffy … the Court explicitly rejected the suggestion that the objects of the business were to be gathered solely from the objects clause in the memorandum. In that case the Court, in characterizing the object of the business, looked to the business activities of the company after its incorporation – see the joint judgment of Dixon CJ, Williams and Webb JJ … In Revesby Credit Union Co-operative Ltd v Federal Commissioner of Taxation … [(1965) 112 CLR 564 at 576], Mc Tiernan J said ‘The main test to be adopted in ascertaining the primary object is to ask what the actual activities of the appellant society indicate it to be.’”[69]
[69] [1981] HCA 28; (1981) 147 CLR 441; 35 ALR 295; 81 ATC 4346; 55 ALJR 479; at 451; 299; 4,352; 482-483
Aickin J underlined the need to examine the company and its activities on a year by year basis and not merely at the time of its incorporation.[70] The significant words in s 117(1)(d) were “is established”. They meant “maintained” or “kept in operation”. Therefore, the objects set out in a company’s Memorandum of Association or other documents constituting it at its incorporation could not be decisive and might only be of remote relevance.[71]
[70] [1981] HCA 28; (1981) 147 CLR 441; 35 ALR 295; 81 ATC 4346; 55 ALJR 479; at 461; 307; 4,358; 486
[71] [1981] HCA 28; (1981) 147 CLR 441; 35 ALR 295; 81 ATC 4346; 55 ALJR 479; at 461; 307; 4,358; 486
The currency of the assessment of a company’s objects is a theme also to be found in the judgment of Lockhart J in Cronulla. Noting that purpose may change over time and that the enquiry must be made in relation to a particular year of income under the ITAA 1936, Lockhart J stated that the:
“… material facts and circumstances which should be examined to characterise the main purpose of the relevant body include its constitution, its activities, its history and its control. These may alter from time to time and the purpose of establishment may correspondingly change. It is not sufficient to look to the formation of the body and to ascertain what was at the time the purpose of its formation. The statute gives a periodic operation to the words and directs the inquiry to a particular time, namely, the year of income so that consideration must be given not only to the purpose for which the society was established but also the purpose for which it is currently conducted.”[72]
[72] (1990) 23 FCR 82; 90 ATC 4,215 at 95-96; 4,225 For the reasons I give at [104]-[107] below, I do not consider that the issue I must decide is limited to any particular year of income.
Charitable institution: charitable purposes, profits and “co-payments”
From the context in which charitable purposes and charities have been considered, it is clear that a charitable entity, be it a trust, association or institution of
some sort, may make a profit. As Dixon CJ said in Council of Law Reporting case:
“… Indeed, the very fact that the [Income Tax] Act exempts the income of a charitable institution concedes that such an institution may derive profits from its activities.”[73]
[73] [1971] HCA 44; (1971) 125 CLR 659 at 670 and see also Re Tennant at [75] above
The case of The Commissioners of Inland Revenue v The Falkirk Temperance Café Trust[74] decided that a trust established for the provision of a temperance public house including a hotel, lecture hall and two types of café was a trust established for a charitable purpose i.e. the promotion of temperance by providing attractions to offset those provided by the bar of a hotel or of a public house. The benefits were not limited to those less well-to-do than others and extended to any class in the community. The trust provided the money to establish the facilities but, thereafter, the money earned from them was used to run the enterprise. The fact that those staying in the hotel had to pay for their use as did those using the lecture hall did not deprive the trust’s purpose of its charitable character. There was no element of private gain as all of the proceeds were applied to the object of the trust. Certainly, those benefitting from the trust were required to pay to use the facilities but that did not of itself deprive the trust of its charitable character.
[74] 1927 SC 261; Lord Clyde, President and Lords Sands, Blackburn and Ashmore
Charitable institution: purposes “beneficial to the community”
The fourth category identified by Lord Macnaghten was considered further by the Court of Appeal in Commissioners of Inland Revenue v Yorkshire Agricultural Society[75] in the context of s 37(1)(b) of the Income Tax Act 1918 (UK). The Yorkshire Agricultural Society (“Society”) was formed in 1837 and its objects at the relevant time were:
“(1.) The holding of an annual show for the exhibition of live stock, poultry, farm produce, horticultural produce, also of machinery, implements, tools, appliances, utensils, etc., connected with or appertaining to agriculture; such annual show to be held successively in different parts of the county; (2.) the improvement of live stock, poultry, implements, machinery and appliances in connection with agriculture; (3.) the demonstration of methods and processes connected with, and the furthering of the interests of agriculture, horticulture, arboriculture, apiculture and allied industries; (4.) agricultural education; (5.) scientific research and experimental work; (6.) watching and advising on legislation affecting the agricultural industry.”[76]
The Society derived its income from entry fees and gate receipts at its annual show, interest on investments and subscriptions of its members. It spent its money on its annual show, which was held in a different location each year, the publication of a Journal disseminating scientific knowledge of value to farmers and breeders and general administration. It invested any excess of receipts over expenditure and realised investments if there was a shortfall. The Society sought exemption from income tax on the basis that it was a body of persons established for charitable purposes only.
[75] [1928] 1 KB 611
[76] [1928] 1 KB 611 at 612-613
The Court of Appeal considered whether income that the Society derived from its investments formed part of the income of a body of persons established for charitable purposes only. Referring to the fourth category identified by Lord Macnaghten, Lord Hanworth MR made the following points:
“… What is a ‘purpose beneficial to the community’? It has long been established that a mere benevolent purpose is not necessarily a purpose beneficial to the community. …
… it has been determined that where the purpose of the association is rather for the benefit of the members themselves, than a wider aim, then such institutions as are so established are not within the purview of purposes beneficial to the community. …”[77]
[77] [1928] 1 KB 611 at 622
With regard to whether or not the Society was for a purpose beneficial to the community, Lord Hanworth found that it was for it was formed for the purpose of improving agriculture as a whole. It was not established for any confined purpose of benefiting its own members but rather for a purpose of bringing advancement and improvement to the benefit of the community at large[78] and was established for a charitable purpose and so “only” for purposes beneficial to the community. Lord Hanworth went on to consider the effect of profits gained by the Society and their implications in the particular legislative context. If the profits were applied solely to the purposes of the Society, they would be applied solely to the purposes of a charity. “The question was one of degree”.[79]
[78] [1928] 1 KB 611 at 623
[79] [1928] 1 KB 611 at 627
The benefits derived by the Society’s members were also the subject of the judgments delivered by Atkin and Lawrence LJJ, both of whom concurred with Lord Hanworth. Lord Atkin said:
“ There can be no doubt that a society formed for the purpose merely of benefiting its own members, though it may be to the public advantage that its members should be benefited by being educated or having their aesthetic tastes improved or whatever the object may be, would not be for a charitable purpose, and if it were a substantial part of the object that it should benefit its members I should think that it would not be established for a charitable purpose only. But, on the other hand, if the benefit given to its members is only given to them with a view of giving encouragement and carrying out the main purpose which is a charitable purpose, then I think the mere fact that the members are benefited in the course of promoting the charitable purpose would not prevent the Society being established for charitable purposes only. That I imagine to be this case.”[80]
Lawrence LJ said:
“ In my judgment the crucial question in this appeal is whether the appellant Society was established for the promotion of agriculture generally or was what has been conveniently called a members’ society, established for the promotion of the interests of its members in their respective businesses. If the former be the case I am clearly of opinion that the Society was established for charitable purposes only within the legal acceptation of that expression. Agriculture is an industry not merely beneficial to the community but vital to its welfare. The fact that the operations of the Society may be confined to Yorkshire–a matter upon which I desire to express no opinion–is, in my opinion, immaterial, as it is well settled that the benefit in point of local area need not extend to the public at large and that the benefit of the inhabitants of a particular district will suffice … It is plain to my mind that the general improvement of agriculture is a charitable purpose falling within the fourth class of Lord Macnaghten’s well known classification of legal charities …”.[81]
[80] [1928] 1 KB 611 at 631
[81] [1928] 1 KB 611 at 635-636
This aspect was further considered in Commissioners of Inland Revenue v Oldham Training and Enterprise Council.[82] The Oldham Training and Enterprise Council (Oldham TEC) was a company limited by guarantee and one of a number established following the publication of a White Paper by the British government regarding employment in the 1990s. It had a contract with the British government to attain objectives set out in that White Paper. To attain those objectives, it carried out three main areas of activities: provision of information and advice to business, diagnostic services and business skills training; free enterprise training for a person thinking of establishing a new business and a cash allowance; and training and retraining people for work. Its activities were largely sourced without cost but, if there were a cost, that cost was shared between Oldham TEC and the business that was receiving the service. Oldham TEC was funded by government grants.
[82] (1996) 69 TC 231
Lightman J observed that:
“… So far as the object of Oldham TEC is to set up in trade or business the unemployed and enable them to stand on their own feet, that is charitable as a trust for the improvement of the conditions in life of those ‘going short’ in respect of employment and providing a fresh start in life for those in need of it, and accordingly are for the relief of poverty … The activity of Oldham TEC in providing such benefits as business start-up services is accordingly, charitable. …”[83]
[83] (1996) 69 TC 231 at 249
Lightman J focused on those of Oldham TEC’s activities falling outside those that relieved poverty. Did they fall within Lord Macnaghten’s fourth category? He observed:
“ To fall within the fourth category, it is necessary (but not sufficient) that the object is of general public utility. The public to be benefited for this purpose may be a section of the public and this includes the inhabitants of an area such as Oldham (see e.g. In re Smith [1932] 1 Ch 153). The object must be to promote a purpose beneficial to the community, and not to the interests of individual members of the community. But an object may nonetheless be charitable as beneficial to the community though its fulfilment either directly or indirectly incidentally may benefit such individuals. Beyond such general public utility it is necessary that the object comes within the spirit and intendment, even if not within the words, of the Statute of Elizabeth. As an example, if the object of setting up the unemployed in trade or business was not charitable as being for the relief of poverty, it would fall within the fourth head of charity. It is a matter of general public utility that the unemployed should be found gainful activity and that the State should be relieved of the burden of providing them with unemployment and social security benefits, and this object is within the spirit, if not the words, of the Statute of Elizabeth, which includes amongst its list of charitable objects ‘the support, aid and help of young tradesmen and handicraftsmen’.”[84]
[84] [1968] AC 138 at 250
Analysing the objects of the Oldham TEC, Lightman J concluded that it is an altruistic organisation, in the sense that no profit or benefit is conferred on its members and its very reason for being is to assist others in and around Oldham. It is substantially publicly funded and some of its objects were indisputably charitable. His Honour then went on to consider its second main object and said of it:
“… the second main object, namely promoting trade, commerce and enterprise, and the ancillary object, of providing support services and advice to and for new businesses, on any fair reading must extend to enabling Oldham TEC to promote the interests of individuals engaged in trade, commerce or enterprise and provide benefits or services to them. …”.[85]
The facts that had been agreed between the parties showed that this was precisely the manner in which Oldham TEC had conducted itself and Lightman J said of its activities in this regard:
“… Such efforts on the part of Oldham TEC may be intended to make the recipients more profitable and thereby, or otherwise, to improve employment prospects in Oldham. But the existence of these objects, in so far as they confer freedom to provide such private benefits, regardless of the motive or the likely beneficial consequences for employment, must disqualify Oldham TEC from having charitable status. The benefits to the community conferred by such activities are too remote. …”.[86]
[85] [1968] AC 138 at 251
[86] (1996) 69 TC 231 at 251
Clearly, the fact that Oldham TEC’s main object was promoting trade, commerce and enterprise did not take it outside Lord Macnaghten’s fourth classification per se. So too in Crystal Palace Trustees v Minister of Town and Country Planning,[87] Danckwerts J found that “… the promotion of industry or commerce in general in such circumstances is a public purpose of a charitable nature within the fourth class in the enumeration of charitable purposes contained in Income Tax Special Comrs. v Pemsel …”.[88]
[87] [1950] 2 Ch D 857
[88] [1950] 2 Ch D 857 at 859
These cases show that the fourth class is not confined to purposes that were considered “beneficial to the community” in 1891. Instead, the community and what is beneficial to it has been considered from time to time. In Scottish Burial Reform and Cremation Society Ltd. v Glasgow Corporation,[89] Lord Wilberforce described how that consideration, the Statute of Elizabeth and the times dictate the meaning to be given to the word “charity” and “charitable”:
“… The purposes in question, to be charitable, must be shown to be for the benefit of the public, or the community, in a sense or manner within the intendment of the preamble to the statute 43 Eliz. 1, c. 4. The latter requirement does not mean quite what it says; for it is now accepted that what must be regarded is not the wording of the preamble itself, but the effect of decisions given by the courts as to its scope, decisions which have endeavoured to keep the law as to charities moving according as new social needs arise or old ones become obsolete or satisfied. Lord Macnaghten’s grouping of the heads of recognised charity in Pemsel’s case [1891] A.C. 531, 583 is one that has proved to be of value and there are many problems which it solves. But three things may be said about it, which its author would surely not have denied: first that, since it is a classification of convenience, there may well be purposes which do not fit neatly into one or other of the headings; secondly, that the words used must not be given the force of a statute to be construed; and thirdly, that the law of charity is a moving subject which may well have evolved even since 1891.”[90]
[89] [1968] AC 138
[90] [1968] AC 138 at 154
This is also illustrated by a case such as that decided by the Federal Court of Appeal in Canada in Vancouver Regional FreeNet Association v Minister of National Revenue (C.A.).[91] The Minister had refused to grant the Vancouver Regional FreeNet Association (“the Association”) registered charity status. The Association is a non-profit organisation whose main object was to develop, operate and own a free, publicly accessible community computer utility. Its other objects were collateral to its achieving its main object. The question for the Court of Appeal was whether the provision of free access to the internet is a charitable activity. Comparing it with the essential means of communication used at the time of the Statute of Elizabeth and referred to in it, Hugessen JA, with whom Pratte JA agreed, said, in part:
“Information is the currency of modern life. This has properly been called the information age. The free exchange of information amongst members of society has long been recognized as a public good. It is indeed essential to the maintenance of democracy, and modern experience demonstrates more and more frequently that it, more than any force of arms, has the power to destroy authoritarianism. The recognition of freedom of speech as a core value in society is but one aspect of the importance of freedom of information.
The preamble to the Statute of Elizabeth I speaks of the repair of bridges, ports, causeways and highways. These were, of course, at the time the essential means of communication. With the passage of time they have been considered so essential to the public welfare that they have been almost entirely taken over by public authorities. The same is true of the example given by Lord Macnaghten in Pemsel’s case, and the supply of pure water, though generally not ‘gratuitous’, is now viewed as an essential public service. Likewise, the provision of electric light, one of the examples listed in the foregoing quotation from Tudor on Charities.
While I do not want to insist unduly on the analogy to the information highway, there is absolutely no doubt in my mind that the provision of free access to information and to a means by which citizens can communicate with one another on whatever subject they may please is a type of purpose similar to those which have been held to be charitable; it is within the spirit and intendment of the preamble to the Statute of Elizabeth I.”
[91] [1996] 3 F.C. 880; Hugessen and Pratte JJA, Décary JA dissenting
At common law, a trust established for the purpose of attaining political objectives was invalid. The reason for that conclusion was explained by Lord Parker of Waddington in Bowman v Secular Society Ltd[92] (Bowman):
“… a trust for the attainment of political objects has always been held to be invalid, not because it is illegal, for everyone is at liberty to advocate or promote by any lawful means a change in the law, but because the Court has no means of judging whether a proposed change in the law will or will not be for the public benefit, and therefore cannot say that a gift to secure the change is a charitable gift.”[93]
[92] [1917] AC 406
[93] [1917] AC 406 at 442
This has been applied in other cases to which the majority of the High Court referred in its judgment in Aid/Watch.[94] Their Honours went back to Bowman and noted that Lord Parker had referred only to the authority of De Themmines v De Bonneval.[95] That case concerned a trust for the promotion of the doctrine of the absolute and inalienable Papal supremacy in ecclesiastical matters by the printing and circulation of a treatise by 37 French bishops. The trust failed as English law then stood because the trust was considered to be for a superstitious use and so at odds with English public policy.[96]
[94] [2010] HCA 42; (2010) 272 ALR 417; 77 ATR 195; 85 ALJR 154 at [28]-[29]; 424-425; 204; 162
[95] [1828] ER 863; (1828) 5 Russ 28; [38 ER 1035]
[96] (1828) 5 Russ 28 at 297; [38 ER 1035 at 1038]
The majority in Aid/Watch referred to Australian authorities considering Bowman and paid particular attention to the judgment of Dixon J in Royal North Shore Hospital of Sydney v Attorney-General of NSW.[97] Dixon J had, in the majority’s view, applied reasoning that followed four steps:
“(i) a purpose contrary to the established policy of the law cannot be recognised as a charitable purpose; (ii) even if (i) does not apply, the purpose in question must have the real or imputed intention of contributing to the public welfare; (iii) when the main purpose of the trust is ‘agitation’ for legislative or political changes, with respect to religion, poor relief or education, ‘it is difficult’ for the law to find that (ii) is satisfied; and (iv) the source of that difficulty is the apparent paradox in a ‘coherent system of law’ treating as for the public welfare ‘objects which are inconsistent with its own provisions’.”[98]
[97] [1938] HCA 39; (1938) 60 CLR 396; 12 ALJR 182
[98] [2010] HCA 42; (2010) 272 ALR 417; 77 ATR 195; 85 ALJR 154 at [43]; 428; 207
Bicycle Victoria would try to influence the private sector by providing data and supporting efforts to establish other data showing the financial value of higher levels of physical activity to business in general and to particular organisations. Furthermore, it will try to influence the private sector to invest in physical activity to achieve that financial value, to change its policies so that they are supportive of physical activity, to establish standards, public recognition for organisations that are making effective change and to support changes by government and others to increase physical activity.
Bicycle Victoria would look to the tertiary sector to work with it to develop an understanding of bicycle riding in the community and the means of monitoring that riding so that an improved evidentiary basis becomes available.
Bicycle Victoria noted in its Strategy-First Draft that it continued to develop effective partnerships with non government organisations (NGOs) and to emphasise its connections with organisations that have an interest in physical activity, disease prevention and health promotion. The Strategy – First Draft stated:
“As the Taskforce says ‘NGOs, at all levels, are partners and often leaders in prevention, providing research and development, advocacy, social marketing, public information and primary care, as are professional associations and academic groups.’
We continue to develop our effective partnerships in this area. We will emphasise connections and organisations that have an interest in physical activity, disease prevention and health promotion.
For example in physical activity we seek to develop relationships with community based recreational bike riding groups whether municipality based or organised in local areas by national organisations such as YMCA and Youth Hostels Association.
In disease prevention we seek to develop relationships with organisations that work with preventable ‘lifestyle diseases’ such as diabetes, heart disease, depression and cancer.
In health promotion we will work with organisations that promote physical activity either like the Heart Foundation as part of ‘core business’ or those that use physical activity and bike riding to raise funds like the MS society.
Where possible we will seek to develop partnerships that increase our ability to influence government and the private sector to support higher levels of physical activity.”[235]
[235] 1721 T documents at 383
I find that the Strategy-First Draft was considered by Bicycle Victoria’s Board and its members considered the document during 2010. It was not a document on which the Panel members were asked to comment.[236] The Board agreed that it wanted a “shorter and punchier document”.[237] It considered a revised draft (Strategy-Second Draft) at its October 2010 Board meeting. While happy with the length, it raised other matters including its title. It was now to be called “Bicycle Victoria Strategy”.[238] That draft was to be considered at the March 2011 Board meeting.[239] The substance and direction is the same as Strategy-First Draft although a “shorter and punchier document” as desired by the Board.
[236] Transcript of the evidence of Dr Rissel at 39 and Professor Moodie at 54
[237] Supplementary Statement of Mr Barber, Exhibit E at [7]
[238] Exhibit E at [9]
[239] Exhibit E at [10]-[11] and Attachment M
Bicycle Victoria’s behavioural change programmes
On the basis of the evidence of Mr Barber, I find that Bicycle Victoria runs behavioural change programmes such as the Over 50s Riding Program (formerly the Seniors Riding Program) and the Women’s Cycling Program. These are in addition to the Ride to Work Program and the Ride2School Program. Over 50,000 students participate in the Ride2School Program nationally and approximately 30,000 participate in the Ride to Work Program nationally. Both contain a number of flexible units and are tailored by schools and workplaces to meet their particular needs.
Ride2School’s Annual Report for 2006-2007 sets out reasons for walking and riding to school. It noted the decrease in the numbers walking and riding to school with the corresponding increase in childhood obesity. As the numbers who walked and rode increased, Bicycle Victoria predicted that more schools would become aware of the benefits for both their students and their local community:
“… Riding and walking to school provides some of the 60 minutes of daily physical activity recommended for school students – it’s good for their health, good for the environment and good for the family budget. A winning concept all round.”[240]
[240] 1721 T documents at 100
Mr Barber had taken up a similar theme in the August-September 2005 issue of Bicycle Victoria’s magazine RideOn:
“Some years ago most children got themselves to school – often by bike. Not today. Looking back we realise that this one little thing did a lot of people a lot of good.
We know that the independence and responsibility of getting yourself to school builds social and life skills and is linked to improved academic performance.
The health benefits keep depression, diabetes, osteoporosis and heart problems at bay. You really can’t afford not to do it. The main risks to children today are, ironically, not kidnapping and the other things that parents fear.
Parents also benefit from reduced taxi time – as do we all: family taxis make up 17% of road congestion during the school term.
The good news is that many kids are keen to tear off the parental bubble wrap and be independent. There are still schools that encourage children to ride. The experience and practice gained in these smart schools can feed back into the mainstream.”[241]
[241] 1721 T documents at 134
Ride2School’s Annual Report for 2006-2007 set out strategies for encouraging students to walk or ride to school as well as addressing barriers that discourage their doing so. Barriers include lack of adequate parking for bicycles and busy roads. Bicycle Victoria advised on grants that were available from the Sustainability Fund for bike sheds and the manner in which they could be constructed. It also drew attention to its website where it advised how to develop Quiet Neighbourhood Routes. Encouragements included frequent rider incentives, competitions and prizes. Ride2School assisted in locating equipment, providing volunteers to assist teachers and developing students’ skills.[242]
[242] 1721 T documents at 98-120
Ride2School conducted workshops, conferences and stalls during 2006-2007:[243]
[243] 1721 T documents at 107
| Workshop, conference or stall | Activity |
| Healthy Schools for Health Kids Conference, Shepparton | Ride2School delivered a presentation of the programme outline and facilitated a discussion of the barriers frequently encountered when considering walking and riding to school. |
| Toolbox for Environmental Change Conference, RMIT | Ride2School provided a workshop for teachers to inspire them and give them resources to enable them to return to the classroom to promote effectively walking and riding. |
| Millenium Kids Sustainability Road Show, Toorak Library | Two workshops were run for primary and secondary students from the area. Students discussed their experiences of riding and walking to school and were challenged to develop strategies that overcame barriers to their doing so. |
| Workshop, conference or stall | Activity |
| Victorian Teachers Games, Geelong | Ride2School provided information to teachers on the Ride2School programme and offered an opportunity to discuss the ideas, barriers and achievements. |
| Gisborne Secondary School | A Ride2School Stall was run as part of a Careers and Environment Expo. Stickers and postcards were distributed, students discussed their experiences of walking and riding to school and lunchtime prizes were drawn for those students who had ridden to school. |
The then Minister for Sport, Recreation and Youth Affairs, Mr James Merlino, launched the “1000 Bikes campaign” in May 2007. That campaign rewarded Year 6 students in government schools who had been nominated as being exceptional as student leaders and as committed to walking and cycling to school. The campaign was sponsored by Malvern Star and 500 government primary schools each received two Malvern Star bicycles together with helmets and locks.[244]
[244] 1721 T documents at 106
Bicycle Victoria’s income, expenditure and surplus
On the basis of Mr Reynold’s evidence, I find that Bicycle Victoria generated nearly $11.7m in the financial year ending 30 June 2010 and spent some $11.6m leaving it with a surplus of $116,000. On the basis of the pie charts in his statement, I find that Bicycle Victoria’s revenue and expenditure in that year can be allocated according to its source as a percentage of the whole as follows:[245]
[245] Exhibit 6 at 2-3
| Source | Revenue | Expenditure |
| Rides | 58% | 48% |
| Membership fees and donations | 19% | 12% |
| Facilities | 2% | 8% |
| Behaviour change | 9% | 8% |
| Other products, services, interest and investments | 12% | 24% |
Mr Reynolds’ reference to “facilities” is a reference to campaigns so that the reference to “facilities revenue” is a reference to revenue received from campaigns to improve bicycle infrastructure. Campaigns of that sort involve some government lobbying in the sense of working with local councils to ensure that they put their money into the correct bicycle infrastructure. It also includes work for local councils, which generates revenue. Bicycle Victoria’s work for local councils includes, for example, the number of cyclists travelling through various municipalities. Information of that sort is required for planning and design work undertaken by local councils.
Revenue for rides is generated by the fees paid by participants and from donations by their sponsors. The sponsor for the most recent Great Victorian Bike Ride was HBA and that for the Around the Bay in a Day Ride was the RACV.
The revenue generated under the heading of “behaviour change” is generated from programmes such as Ride2School and Ride to Work. As it is donated by sponsors and government departments, the activities undertaken in such programmes must be tailored to the revenue received. In the financial year ending 30 June 2010, the Ride2School activities had to be scaled back from previous years for that reason. The behaviour change activities are intended to be revenue neutral. If they exceed the revenue received from sponsors and government departments, Bicycle Victoria will fund the difference but the intention is that they do not. If they cost less than the revenue received, the surplus is applied to Bicycle Victoria’s other activities.
In the financial year ending 30 June 2010, revenue of approximately $1.3m was received from other products, services, interest and investments with $190,000 of that sum being interest and investment income. The remainder was generated from the sale of such items as parking rails used to lock up bicycles on the street.
The main purpose for which Bicycle Victoria uses the surplus of revenue over expenditure is in relation to facilities and behaviour change. The division of that surplus and its sources in the year ending 30 June 2010 is set out in
the following table:[246]
[246] Exhibit C at 4
| Source | Surplus contribution | Surplus utilisation |
| Rides | 87% | |
| Membership fees and donations | 6% | |
| Facilities and behaviour change | 82% | |
| Profit/(Loss) | 18% |
Cycling and health
Evidence on the relationship between cycling and health was given by:
| Witness | Qualifications |
| Dr Chloë Mason[247] | Tertiary qualifications in Medical Geography, Industrial Relations, Environmental Studies and Law. She is admitted as a legal practitioner in New South Wales and has a PhD (Industrial Relations) from the School of Economics at the University of New South Wales. Dr Mason is a consultant on policy, programme development and implementation and research in areas circumscribed by the intersection of her qualifications and experience. |
| Professor Alan Rob Moodie[248] | A Fellow of the Royal Australian College of General Practitioners as well as holding a Diploma in Obstetrics and Gynaecology and, from Harvard University, a Master of Public Health in International Health. Inaugral Chair of Global Health at the Nossal Institute for Global Health and leading the Disease Prevention and Health Promotion Unit in that Institute. Over the past 30 years, Professor Moodie has held a range of positions in the field of public health and health promotion. More recently, he chaired the Commonwealth Government’s National Preventative Health Taskforce overseeing Australia’s National Preventative Health Strategy, “Australia: the Healthiest Country by 2020”. |
| Professor Neville Gordon Owen[249] | Co-Director of the Cancer Prevention Research Centre and a Professor of Health Behaviour in the School of Population Health at the University of Queensland and an Honorary Professorial Fellow at the Baker IDI Heart and Diabetes Institute. He has a PhD in Experimental Psychology and a Bachelor of Arts and is an expert in behavioural epidemiology and chronic disease prevention research with a particular focus on physical inactivity and health outcomes and on the identification of evidence to inform population strategies to reduce the risk of major chronic diseases. |
| Associate Professor Chris Ernest Rissel[250] | Director of the Health Promotion Service in the Sydney South West Area Health Service and Associate Professor at the School of Public Health at the University of Sydney. |
[247] Exhibit A
[248] Exhibit G
[249] Exhibit B
[250] Exhibit F
Associate Professor Rissel and Professor Owen are also members of the Panel. They and Associate Professor Salmon, Professor Baur, Professor Olds, Professor Brown, Dr Sloman and Mr Shilton have all written to the Commissioner regarding various aspects of the benefits of physical activity in general and of bicycle riding in particular. Dr Mason, Professor Moodie and Professor Owen have also prepared statements. Each has supported their opinions with references and supporting material.
On the basis of their evidence, I find that one of the greatest public health challenges facing Australia is obesity. Meeting the challenge is a task that is complex and cannot be solved simply by education or the provision of information or by a directive or prohibitionist approach. Cycling is a form of physical activity that can prevent, remediate and control diseases, including those associated with obesity. Obesity is responsible for, or operates as a predictor for, many lifestyle diseases such as diabetes, osteoarthritis, cardiovascular disease, colorectal, breast, uterine and kidney cancer.
The role of cycling in reshaping people’s behaviour was recognised in Technical Report 1 to Australia, the healthiest country by 2020 (Technical Report 1) when it referred to it as one of the strategies under the heading of “Reshape urban environments towards healthy options”.[251] It recorded that, in April 2009, the Australian Government had announced a $40m cycle path fund for bicycle infrastructure to be administered by the Department of Infrastructure, Transport, Regional Development and Local Government. Funding was available for new routes and extensions or refurbishment of existing infrastructure including bicycle paths (but not dedicated mountain bike trails), on-road bicycle lanes and bicycle parking facilities. Another strategy proposed in Technical Report 1 was to promote physical activity in schools. Although evidence was sparse, active strategies, as opposed to classroom based strategies, appeared to promote physical activity effectively. School initiatives must be supported and reinforced in other community settings including that of the workplace. In the past, there has been a focus on increasing people’s physical activities in recreational settings as a means of preventing major chronic diseases such as type 2 diabetes, cardiovascular disease and breast and colon cancer as well as obesity but, for many people, their time for recreational or discretionary activities is limited. Therefore, the Technical Report 1 found that the promotion of active commuting by using public transport, walking and cycling must feature more prominently in the approach taken by public health authorities and those engaged in urban planning and transport.
[251] Statement of Professor Moodie: Exhibit G, Attachment A at 91-105
On the basis of the approach taken in Technical Report 1 and on the evidence of Professor Owen in his statement, I am satisfied that behavioural epidemiological studies demonstrate that external factors such as the access to information and their environments, physical and otherwise, influence people’s choices. People are more likely to exercise when their physical environment is conducive to walking and/or cycling. If they are to be effective, health promotion campaigns must address the external factors that have an impact upon behaviour. Therefore, health promotion programmes must extend beyond the provision of information and advice. They must establish an environment in which people can make choices about the activities in which they engage. Establishing that environment is a multi disciplinary task that draws in people such as health care professionals, urban and transport planners, educators and employees.
Bicycle Victoria’s purpose and activities
I must bear in mind that I must look beyond the intentions of Bicycle Victoria to the purpose for which it was established and for which it remains in operation. The purpose may vary over time. On the basis of the findings I have already made in the preceding paragraphs, I find that the primary purpose for which it was established in 1976 was to encourage people to use the bicycle as a means of transport and as a means of getting together for fun, sport and recreation. Its other purposes were ancillary to its main purpose in that they were directed to infrastructure, such as bicycle paths, parking facilities and safety standards, required to promote its main purpose.
The reasons for encouraging people to use bicycles was not articulated in the early literature. I find, however, that there is an emphasis in the material on Bicycle Victoria’s being concerned about the environment. At least some of its focus was upon promoting cycling as one of the ways in which the environment could be protected from pollution. Reference is made to cycling and walking as ways in which people could have access to forestways and parks in material submitted by Bicycle Victoria from that time.[252] The minimal impact of cyclists on the environment is also the subject of an editorial in The Age on 31 January 1976 and included in the material submitted by Bicycle Victoria to the Commissioner. This emphasis is understandable given that the founders of BIV included both cycle enthusiasts and environmentalists.
[252] ST documents at ST13-814
There is also an emphasis in the material on the social side of cycling.[253] This emphasis has continued to more recent times.[254] At the same time, there is an emphasis in Bicycle Victoria’s magazines on the health of cyclists. In the rideOn magazine of June-July 2005, an article entitled “Pedalling off the sugar” dealt with the issues of Type 2 diabetes and the role that exercise such as cycling can play in managing or preventing it.[255] In the same edition of the magazine, an article gave advice on the importance of maintaining fitness and boosting the metabolism rate in order to control weight. Advice was given on appropriate food and the need to monitor consumption.[256] This has continued to be a theme in later editions where it has received greater coverage. I refer, for example, to the article entitled “Rice delight” in the December 2010-January 2011 edition of Ride On. It began with the statement that “Full of steadily-released energy, rice is an ideal food for bike riders fuelling up and replenishing”.[257] Appropriate food and the benefits of exercise in relation to sleeping difficulties, mental health, diabetes and cancer prevention were addressed under the heading of “Health Report’ earlier in the magazine.[258]
[253] See, for example, the articles grouped under “Bikes & Love” and “Touring” in rideOn, June-July 2005; ST documents at ST15-856-859 and ST15-874
[254] See, for example, the articles entitled “Hit the road” and “Head to the Hills” in ST documents at ST16-910 and ST16-924
[255] ST Documents at ST15-867
[256] ST Documents at ST15-868
[257] ST Documents at ST16-954
[258] ST Documents at ST16-930
On its own, this increasing focus on health in the magazines is of no particular consequence either way. It becomes of consequence when seen in the context of the development of Bicycle Victoria’s activities and the changes in its constitution as well as the editorial comment in rideOn over the years and particularly since 2004. It was in that year that there was a marked increase in the reference to fitness and health in the section of the magazine written by Mr Barber. His article in the February 2004 edition spoke of the common thread identified by Bicycle Victoria linking all those who rode bicycles for various reasons and purposes. Mr Barber linked the promotion of the “the thing we love” with making “a huge contribution to our community as well” and did so in the context of the “public health push for physical activity”.
This emphasis, I find, has continued in later magazines. It has been at the foundation of the changes made by Bicycle Victoria. Its President flagged in its June-July 2005 edition that Bicycle Victoria was reviewing both its constitution and strategy that “Life’s better on a bike”. Certainly, its aim was to get as many people as possible riding bicycles but not simply for the sake of riding. What is inherent in the mantra that “Life’s better on a bike”, is developed in subsequent publications. In Bicycle Victoria’s booklet “The Cycle-Friendly Workplace”, Mr Turnbull’s foreword identified cycling’s benefit to health (controlling stress, anxiety and depression) and social connections as a means to improving the workplace and productivity.
Bicycle Victoria has continued the theme through its Annual Reports and the introduction of the Panel. It is true that nobody from that Panel has yet been called upon to advise Bicycle Victoria on its health strategy but its members are available and, on the basis of Professor Owen’s evidence, I find that this is not an unusual practice. Not only are the health professionals on the Panel prepared to provide ad hoc advice, they are prepared to have their names associated with Bicycle Victoria.
The changes made by Bicycle Victoria to its constitution on 16 November 2009 were consistent with the steady changes that had occurred in Bicycle Victoria over the years since its inception as BIV. The documents, supported by the evidence and particularly that of Mr Barber, show its members first wanting to share the experience they so much enjoyed and then looking for what it was that they enjoyed and for the common threads that bound its members. Having found those common threads, Bicycle Victoria identified them as being the benefits that flow from physical fitness. Its view on this is supported by the findings I have made with regard to the benefits flowing from the reduction of obesity and from physical fitness generally.[259]
[259] See [181]-[183] above
The same trend can be seen in its activities. Initially, its activities focused on safety for its riders, facilities for them and cycling activities in which they could engage be they social or competitive. This is apparent in the early rideOn magazines. There is an emphasis, for example, on bicycle lanes in Chapel Street and on parking or storage facilities at workplaces and shopping centres. Attention is given to the construction of bicycle paths.
As Bicycle Victoria identified the common threads of interest and motivation of their riders, they continued with these activities. On the surface, it could be said that little has changed. Programmes such as Round the Bay and the Great Victorian Bike Ride have continued for many years with the introduction of new programmes such as Ride2Work and Ride2School in more recent years.
There is no question that all of Bicycle Victoria’s programmes are directed at the use of the bicycle for transport or for leisure and for promoting the use of the bicycle. They are directed not only to their members but also to the wider community. Participation in programmes such as Round the Bay and the Great Victorian Bike Ride is open to anybody whether a member of Bicycle Victoria or not. Programmes such as Ride2Work and Ride2School are specifically directed to those who are not already cycling to work or school and so to persons who are unlikely to be members of Bicycle Victoria. Ancillary programmes are directed to supporting its cycling programmes. They include the information sessions held in association with the Ride2School programme.
Whereas such activities developed in an ad hoc way in the earlier days, I find that they are now part of an overall strategy by Bicycle Victoria directed to promoting fitness and, by that means, preventing disease. Also part of that strategy is the development of infrastructure required for safe cycling. That is not something that Bicycle Victoria can achieve through its own labour but what it does do is agitate for improved infrastructure and an environment free of pollution by lobbying both the public for its support and government for its commitment to allocate the resources necessary to establish that infrastructure. Within these two broad groups are many smaller groups. There are, for example, those focused on the environment, health, town planning, road safety and so on. The way in which it presents its message to various interest groups may vary according to the particular interests of the group concerned but, I am satisfied, the essential message and the reasons for presenting it are consistent. The message is to get people cycling more often and the reasons for it are to make people fitter and healthier.
In view of my findings, I am satisfied that the purpose of Bicycle Victoria is to benefit the general community. That leads to the next issue which is whether the promotion of cycling is a charitable purpose. Cyclists may, and do, engage in cycling as a competitive sport but sporting activities are only one of the ways in which Bicycle Victoria promotes its purpose. If it is to encourage more people to cycle more often it has to present the appeal of cycling in many forms. The other forms in which it presents it are as transport and as a recreational activity. The presentation of cycling in these various forms is part of its strategy to encourage cycling just as agitating for a safe environment in which they may do so is part of it. The fact that cycling may be a sport in some instances and a leisure activity in another does not characterise Bicycle Victoria’s purpose as being for sporting purposes or for recreational purposes as such. It is for the purpose of promoting cycling in all its forms and for the overall purpose of promoting fitness. That is a purpose that has been recognised as charitable. Therefore, I am satisfied that Bicycle Victoria is a charitable institution.
Section 50-105 of ITAA97 and section 176-1 of the GST Act
Provided Bicycle Victoria meets the other criteria prescribed in the provisions, my conclusion means that it is entitled to be endorsed as an entity exempt from income tax under s 50-105 of the ITAA97 and as a charitable institution under s 176-1 of the GST Act.
Section 30-120 of ITAA97 and 123D of the FBTA Act
My conclusion that Bicycle Victoria is a charitable institution does not mean that it is necessarily a charitable institution whose principal activity is to promote the prevention or control of diseases in human beings. On the findings I have made, its purpose is to promote physical fitness. Certainly, it describes itself as promoting “… the health of the community through the prevention and control of disease by ‘More People Cycling More Often’” but, on the evidence, I am not satisfied that this is so. Its purpose is to promote cycling and cycling will promote the improvement of health by cyclists’ improving their level of physical fitness and reducing the risk of their becoming obese. The increase in the level of physical fitness and the reduction in obesity assists in the prevention of certain diseases and may play a part in containing certain diseases. Seen in its context, prevention and control of disease is a consequence of Bicycle Victoria’s principal activity which is the promotion of cycling and of physical fitness. Prevention and control of disease in human beings is not its principal activity.
Consequently, Bicycle Victoria is not a charitable institution whose principal activity is to promote the prevention or control of diseases in human beings. It is not entitled to be endorsed as a DGR for the operation of a fund, authority or institution under s 30-120(a) of ITAA97 and is not entitled to be endorsed as a health promotion charity under s 123D of the FBTA Act.
DECISION
For the reasons I have given, I have decided:
1.in relation to the respondent’s objection decision dated 27 November 2009 (Objection Reference No. 6285807 – Application No. 2010/1723) to refuse endorsement of the applicant as:
(1)an income tax exempt charity under s 50-110 of ITAA97 on the basis it is a charitable institution as described in item 1.1 of the Table in s 50-5 of ITAA97;
(2)a health promotion charity under s 123D of the FBTA Act; and
(3)a charitable institution under s 176-1 of the GST Act;
that decision is:
(4)set aside in so far as (1) and (3) of that decision are concerned and there is substituted for that part of the decision a decision that:
(a)the applicant is a charitable institution; and
(b)subject to the applicant’s satisfying any other criteria prescribed by the relevant provisions of ITAA97, it is entitled to be endorsed as:
(i)an income tax exempt charity under s 50-110 of ITAA97 on the basis it is a charitable institution as described in item 1.1 of the Table in s 50-5 of ITAA97; and
(ii)a charitable institution under s 176-1 of the GST Act;
(5)affirmed in so far as (2) is concerned being a decision to refuse the applicant’s endorsement as a health promotion charity under s 123D of the FBTA Act; and
2.in relation to the respondent’s objection decision dated 27 November 2009 (Objection Reference No. 6281520 – Application No. 2010/1721) to refuse endorsement of the applicant as a DGR for the operation of a fund, authority or institution under s 30-120(a) of ITAA97 that decision is affirmed.
I certify that the preceding one hundred and ninety nine paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: .......................................................................
Leah Berardi, Associate
Dates of Hearing 1 and 2 February 2011
Date of Decision 24 June 2011
Counsel for Applicant Mrs J Batrouney SC and Ms M Baker
Solicitor for Applicant Mr M Baird
Moores Legal
Counsel for Respondent Ms H Symon SC and Ms J Jacques
Solicitor for the Respondent Mr N Gulati
ATO Legal Services Branch
A related example is found in Barclay v De Lacy [1996] 2 Qd R 112 in which the Supreme Court of Queensland was required to consider whether the Queensland Construction Training Fund was an institution exempt from stamp duty under the Stamp Act 1894 (Qld). Section 59E exempted a body from stamp duty if it had been declared to be “… an institution … the principal object and pursuit of which is the fulfilling of a charitable object or an object promoting the public good (not being an object or pursuit that is a sporting, recreational, leisure or social pursuit or object or an object or pursuit declared by order in council …”. Mackenzie J concluded at 117 that:
“ Having considered all of these aspects of the matter and formed an impression of the way in which the body operates and is intended to operate, I am satisfied that it fits the statutory test. The underlying premise in the objects of the Fund is that the level of skills of those engaged in the building and construction industry will be enhanced by enhancing their level of education and training through the medium of facilities assisted by the Fund and that thereby the public would benefit from better and more efficient services and products. It is true that the industry as a whole may benefit by reason of its enhanced efficiency but what is the principal object and pursuit of the fund is to be determined by an overall view of its structure and operation. In my view, any benefit to any particular individual in the industry or the industry generally is incidental rather than the principal object and pursuit of the Fund.”
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