Northern NSW Football Limited v Chief Commissioner of State Revenue
[2009] NSWADT 113
•20 May 2009
CITATION: Northern NSW Football Limited v Chief Commissioner of State Revenue [2009] NSWADT 113 DIVISION: Revenue Division PARTIES: APPLICANT
RESPONDENT
Northern NSW Football Limited
Chief Commissioner of State RevenueFILE NUMBER: 086081 HEARING DATES: 11 March 2009 SUBMISSIONS CLOSED: 11 March 2009
DATE OF DECISION:
20 May 2009BEFORE: Hole M - Judicial Member LEGISLATION CITED: Payroll Tax Act 1971
Duties Act 1997
Payroll Tax Act 2007
Charitable Uses Act 1601(Imp).
Administrative Decisions Tribunal Act 1997CASES CITED: Pro-Campo Ltd v Commissioner of Land Tax 81
ATX 4270Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531
Metropolitan Fire Brigades Board v Federal Commissioner of Taxation (1990) 27 FCR 279
FCT v Launceston Legacy (1987) 15 FCR 527
re MacDuff [1896] 2Ch 451
In re Nottage [1885] 2Ch 649
Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54
Royal National Agricultural and Industrial Association v Chester (1974) 3 ALR 486
Re Laidlaw Foundation (1984) 13 DLR(4th) 491
Yachting Australia Inv v Chief Commissioner of State Revenue [2005] NSWADT 208
The Incorporated Council of Law Reporting of the State of Queensland v The Commissioner of Taxation of the Commonwealth of Australia (1971) 125 CLR 659
Royal National Agricultural and Industrial Association v Chester (1974) 3 ALR 486Lloyd v FCT 93 CLR 645
Australian Council of Social Services Inc v Commissioner of Pay-roll Tax (NSW) 85 ATC 4235REPRESENTATION: APPLICANT
RESPONDENT
I S Young
L J ByrneORDERS: 1.The applicant has as its dominant purpose a benevolent and or charitable purpose and therefore the wages paid or payable by the applicant as a non-profit organisation for work ordinarily performed in connection with the benevolent purpose of the applicant in accordance with Section 48(2) of the Payroll Tax Act 2007 are exempt wages
2.The applicant and respondent agreed that in the event that the applicant is entitled to the exemption regarding payroll tax then the exemptions pursuant to Section 259(1)(c) of the Duties Act 1997 and Section 267(2) of the Duties Act 1997 would also be available and therefore in accordance with Order 1 the applicant is so exempt.
1 This application has been made by Northern NSW Football Limited in respect of a decision of the respondent to withdraw the exemption previously applied to the applicant in terms of Section 10(1)(j) of the Payroll Tax Act 1971 (“the 1971 Act”).
History
2 The applicant filed an “Application for Exemption – Pay-roll Tax” with the respondent on 21 January 2004 relying on Section 10(1)(j) of the Act. At about the same time the applicant filed applications for exemption from stamp duty in respect of insurance under Section 259(1)(c) of the Duties Act 1997 (“Duties Act”) and in respect of motor vehicle registration under Section 267(2) of the Duties Act based on similar grounds to the Payroll Tax exemption sought.
3 These exemptions were approved by the respondent with effect from 1 July 2003 thus the applicant was exempt from payroll tax on the wages paid to employees engaged in the charitable, benevolent, patriotic or philanthropic work of the applicant.
4 On 14 February 2007 the applicant notified the respondent of a corporate name change and requested that the three exemption approvals be updated.
5 The respondent advised the applicant on 29 March 2007 to the effect that (as submitted by the respondent):-
“a. that the exemptions under sections 259(1)(c) and 267(2) of the Duties Act 1997 were wholly withdrawn on the basis that a recreational or sporting purpose is not a charitable purpose (the “Duties Withdrawals”). It was noted that the withdrawals would take effect only on 1 April 2007 (so, duties that would have been payable over the period from 1 April 2004 to 30 March 2007 would not be pursued by the Respondent); and
b. similarly, that the exemption under section 10(1)(j) of the Pay-roll Tax Act 1971 was wholly withdrawn on the same basis (the “Payroll tax Withdrawal”). Again it was determined that the Applicant’s liability to payroll tax would commence on 1 July 2007. Accordingly, payroll taxes from 30 June 2003 to 30 June 2007 would not be pursued by the Respondent.”
6 The effect of the withdrawal of the exemptions in respect of payroll tax was that the applicant’s liability to pay payroll taxes commenced from 1 July 2007. On 1 July 2007 the 1971 Act was replaced by the Payroll Tax Act 2007 (“the 2007 Act”).
7 The original exemptions were made pursuant to the 1971 Act. The decision to withdraw the exemptions, made by the respondent, which would have effect from 1 July 2007 would have been made by the respondent taking into account the provisions of the 1971 Act and they were prospective in nature. On 1 July 2007 the 2007 Act came into operation after the repeal of the 1971 Act.
8 The 2007 Act defines non-profit organisations at Section 28(1) as:
“48 Non-profit organisations
(1) Subject to subsection (2), wages are exempt wages if they are paid or payable by any of the following:
(a) a religious institution,
(b) a public benevolent institution (but not including an instrumentality of the State),
(c) a non-profit organisation having wholly charitable, benevolent, philanthropic or patriotic purposes (but not including a school, an educational institution, an educational company or an instrumentality of the State).
(2) The wages must be paid or payable:
(a) for work of a kind ordinarily performed in connection with the religious, charitable, benevolent, philanthropic or patriotic purposes of the institution or body, and
(b) to a person engaged exclusively in that kind of work.”
The 1971 Act did not define non-profit organisations rather it described by whom wages were paid or payable as:
“Section 10(1)
(1) Subject to subsections (1A) and (2), the wages liable to pay-roll tax under this Act do not include wages paid or payable …
(j) by a non-profit organisation (other than a school or college, statutory body or an instrumentality of the State) having as one of its objects a charitable, benevolent, philanthropic or patriotic purpose.”
Section 10(2) refined the description of wages as:
“Section 10(2)
(2) Paragraphs (j), (j1) and (k) of subsection (1) only operate so as to exclude from wages liable to pay-roll tax under this Act wages which are paid or payable to employees in respect of time when they are engaged in charitable, benevolent, philanthropic or patriotic work of the non-profit organisation or the charitable work of the organisation, society or institution.”
The 2007 Act introduced the requirement that the non-profit organisation have as its “sole or dominant purpose” one of the charitable, benevolent, patriotic or philanthropic purposes.
Clause 12 Schedule 2 of the 2007 Act refines the description of wages as:
“Clause 12 of Schedule 2
(1) Wages are exempt for the purposes of this Act if they are paid or payable by …
(c) by (sic) a non-profit organisation (other than a school or college, statutory body or an instrumentality of the State) having as one of its objects a charitable, benevolent, philanthropic or patriotic purpose, to a person in respect of time when the person is engaged in charitable, benevolent, philanthropic or patriotic work of the non-profit organisation, being a non-profit organisation in existence immediately before the repeal of the Pay-roll Tax Act 1971 …
(2) Wages are exempt under sub-clause (1)(c) or (3) only if the organisation, society or institution concerned has not, since the repeal of the Pay-roll Tax Act 1971, altered its constitution in so far as its constitution relates to its charitable, benevolent, philanthropic or patriotic purposes.”
9 The decision by the respondent notified to the applicant on or about 27 April 2004 exempting the organisation from payroll tax appears to have been made on the basis that it operated “a trust for purposes beneficial to the community”.
10 On 14 February 2007 the applicant advised the respondent of the change of name to “Northern NSW Football Limited” and sought updates of the exemptions then existing – Payroll Tax, Duty on Insurance and Stamp Duty regarding motor vehicle registration.
11 On 14 February 2007 the respondent notified the applicant of the decision to apply the exemption in respect of Duty on Insurance.
12 On 15 February 2007 the applicant supplied the respondent with a copy of the Objects of the Company as requested. Those Objects being:
“ 1 Objects of The Company
1.1 Objects
The objects for which the Company is established are:
(a) to be the member of FFA in respect of the Jurisdiction and to comply with the constitution and by-laws of FFA;
(b) to control Football throughout the Jurisdiction, prevent infringement of the constitution and by-laws of FFA and protect Football from abuse;
(c) to foster friendly relations among the officials and players of Football and encouraging Football games in the Jurisdiction;
(d) to prevent racial, religious, gender or political discrimination or distinction among Football players in the Jurisdiction;
(e) to promote, provide for, regulate and manage Football tournaments and games in the Jurisdiction;
(f) to promote, provide for, regulate and manage Football players representing the Jurisdiction;
(g) to co-operate with FFA, other members of FFA and other bodies in the promotion and development of, or otherwise in relation to, Football, the Statutes and Regulations and the Law of the Game;
(h) to facilitate the provision and maintenance of grounds, playing fields, materials, equipment and other facilities for Football in the Jurisdiction; and
(i) any other object which, in the opinion of the Directors, is in the best interests of Football.”
13 On 6 March 2007 the respondent notified the applicant of the decision to apply the exemption in respect of Motor Vehicle Registration.
14 On 28 March 2007 the respondent notified the applicant of the decision to apply the exemption in respect of payroll tax.
15 On 29 March 2007, following a telephone call of 27 March 2007, the respondent notified the applicant that the exemptions had been reviewed and withdrawn.
16 The reasons for the clear and present change of reasoning of the respondent appear to have been as set out in an internal memorandum including:
“The advice from the Technical help desk is that Northern NSW Football Federation LTD is not a charitable organisation and as such should not have been granted an exemption from pay-roll tax, Motor vehicle and Insurance Duty.
The reason for this view is that the main objects of Northern NSW Football Federation LTD are to facilitate the promotion of soccer in northern NSW.
In accordance with ATO Rulings and prior cases that have been handed down, recreational and sporting purposes such as the sport of yacht racing, associations for rowing, swimming and amateur athletics are not charitable even though there might be elements of benefit to the community.
In order for sporting purposes and activities to be considered as charitable they would have to be merely incidental to a purpose that is otherwise charitable such as sporting activities associated with universities or schools where they form an integral part of the carrying on of the charitable purpose.
Other Sporting associations, whose activities might be considered to be charitable, would be those that have training and education as their main objects. In such cases, only wages paid to those persons performing the charitable activities would be exempt from payroll tax.”
Consequentially the respondent notified the applicant that the exemptions were withdrawn by letters dated 29 March 2007.
17 The applicant then sought a review of the decisions through political process as available to all citizens and organisations in New South Wales. This was not successful.
18 The applicant commenced these proceedings on 7 August 2008 prior to the respondent being requested to review its decisions. Subsequently the respondent was asked and did review its decisions although the request had been made out of time. On 25 November 2008 the respondent advised the applicant that the objections to the decisions made on 29 March 2007 were disallowed. This application was then reinvigorated.
Evidence
19 The applicant placed evidence before the Tribunal consisting of a statutory declaration by the Business Manager of the applicant. Annexed to the declaration was a copy of the Constitution of the applicant, a copy of the Annual Reports of the applicant for 2008, 2007 and 2006 and a copy of the Administration Resource Manual 2007 of the applicant. The Business Manager gave evidence and impressed the Tribunal as an efficient, committed, straightforward and honest person.
20 The Business Manager drew attention to the change of the objects of the applicant made on 5 September 2007 which precluded the applicant from taking advantage of transitional provisions in the 2007 Act. The objects now being defined in the Constitution as:
“1 Objects of Company
1.1 Objects
The objects for which the Company is established are:
(a) to be the member of FFA in respect of the State and to comply with the constitution and by-laws of FFA;
(b) to govern Football throughout the State and protect Football from abuse;
(c) to provide and promote Football as an undertaking which benefits communities within the State through enhancement of and improvement in, the health and general well-being of participants;
(d) to provide and promote education of Football players, coaches, referees and administrators;
(e) to provide and promote a healthy lifestyle in schools, and communities generally, through Football education;
(f) prevent infringement of the constitution and by-laws of FFA to the extent that it is able to do so;
(g) to foster friendly relations among the officials and players of Football by encouraging Football games in the State;
(h) to take all reasonable steps to ensure that discrimination or distinction does not occur among Football participants on any grounds regulated under any Equal Opportunity Law;
(i) to promote, provide for, regulate and manage Football tournaments and games in the State;
(j) to promote, provide for, regulate and manage Football players representing the State;
(k) to co-operate with FFA, other members of FFA and other bodies in the promotion and development of, or otherwise in relation to, Football, the Statutes and Regulations and the Laws of the Game;
(l) to facilitate the provision and maintenance of grounds, playing fields, materials, equipment and other facilities for Football in the State so that Registered Participants and communities, in general, enjoy safe environments; and
(m) to carry on any business, enterprise or undertaking in any sphere or activity which is permitted by law.”
The Income and Payments being covered in the Constitution as follows:
“2 Income and payments
2.1 Company’s Application of income
All the Company’s profits (if any), other income and property, however derived, must be applied only to promote its objects.
2.2 No dividends, bonus or profit to be paid to Members
None of the Company’s profits or other income or property may be paid or transferred to the Members, directly or indirectly, by any means.
…”
He further drew specific attention to objects (d), (e), (f), (g), (h) and (i) as those objects relate to activities which enhance and improve the health and general well-being of participants and have an educational component. Object (j) supporting object (e), object (k) supporting object (h) and object (e) supporting object (l).
He attested to the emphasis placed on the overall provisions of the objects and the manner in which the operation of the applicant benefited a large number of registered participants and general members of the community in the geographical area of northern NSW encompassing Morisset in the south to Tweed Heads in the north and diagonally inland including Lightning Ridge and Moree.
The Business Manager was cross-examined during which he agreed that the applicant made representations to Councils and other bodies concerning support of local competitions, improvement of sporting grounds, provision of new grounds and lobbying for use of grounds for other activities including soccer. He agreed that the applicant works collaboratively with other organisations and councils to make representations for areas to be used. He also agreed that the applicant does not undertake lobbying for other organisations and is selective on the basis that the lobbying has to be in the interest of the applicant or future plans of the applicant.
21 When asked what was the primary objective of the applicant the Business Manager agreed that one of the principal activities of the applicant was to promote sport and the vehicle is playing football, the objective is to promote sport.
22 The Business Manager’s attention was drawn to the 2008 Report of the applicant which referred to:
- “Activities The principal activities of the company in the course of the financial period ended 30th September 2008 were the promotion and management of the game of football throughout Northern NSW.”
Apart from the date, this was also recorded in the 2007 Report.
23 On re-examination, the Business Manager agreed that the applicant had a significant interest in female sport promotion.
24 The statement by the Business Manager, which is helpful in construing the objects and purpose of the applicant included:
“2. One of the objects for which NNSWF is established is to provide and promote football as an undertaking which benefits communities within the State through enhancement of and improvement in, the health and general well-being of participants (paragraph 1.1(c) of the Constitution). In Tab 12 of the Respondent’s Section 58 Statement (filed in the Tribunal on 17 December 2008), there is an excerpt of the objects of NNSWF’s previous constitution. References to the constitution in this statement are to the current NNSWF constitution, a copy of which is included as “Annexure 1” to this statement.
NNSWF covers the geographical area of northern New South Wales from Morisett in the South to Tweed Heads in the north and diagonally inland incorporating Lightning Ridge and Moree.
NNSWF, through the provision of a structured framework, provides for all participants to undertake a safer and healthier lifestyle through:
the playing of football throughout this geographical area as I have described above;
the very general benefits of movement and activity;
the benefits in safe practices, nutrition, smoking and alcohol in sport;
goal post safety;
education courses in training techniques;
sports therapy; and
club administration.
The services provided by NNSWF to member zones, member clubs and individuals in the sport enable a coordinated approach to community activities not only ensuring their long term sustainability but also week to week reliability.
One of the objects for which NNSWF is established is to provide and promote education of football players, coaches, referees and administrators (paragraph 1.1(d) of the Constitution). NNSWF, through its affiliation with Football Federation Australia, is the licensed provider of accredited training and coaching techniques accredited by the international organisation, FIFA. Courses conducted include but are not limited to:
Grassroots Coaching;
Junior Coaching Licence;
Youth Coaching Licence;
Senior Coaching Licence;
Referees Licence Class 1-5;
Futsal Coaching Licence; and
Futsal Referees Licence.
Education of football players is coordinated in NSW through the provision of services and education to zones and clubs for direct interaction with grassroots participants. This education is provided through club seminars, club coaching seminars and on park coaching sessions, all of which are tailored approaches for clubs to pass these benefits directly onto the grass root participant. In addition to this, the NNSWF Club Administration Manual produced by NNSWF contains information on club operations, club policies, child protection, alcohol, smoking, pregnancy, risk management, diseases, sun safety and goalpost safety.
Further education is provided on an annual basis to club administrators with direct NNSWF Administration Seminars conducted throughout the geographical region of the state of NSW. The NNSWF Operations Manager, through direct contact with club delegates, conducts an education seminar which progresses through the Club Administration Manual providing examples and explanations plus human interaction to ensure education flow down. Multiple hard and soft copies of this manual are provided to each club.
Direct coaching is provided by NNSWF staff including alliances with the NSW Institute of Sport and Johnny Warren Football Academies to elite players wishing to further enhance their skill levels. Skills coaching as well as performance testing, nutrition and training techniques are included within the program. Referees are also given the opportunity of participation in Academy Programs and selected based on performance.
One of the objects for which NNSWF is established is to provide and promote a healthy lifestyle in schools, and communities generally, through football education (paragraph 1.1(e) of the Constitution). NNSWF recognizes that it has a responsibility to the community to promote a healthier and more active lifestyle and to provide willing participants with an introduction to football. NNSWF visits over 200 local schools (approximately 30,000 school children) and promotes the healthy lifestyle through participation in football. Over the past three years NNSWF has given schools kit bags to these schools which include balls, nets and cones to enable the particular school to continue the promotion of sport throughout their school. Over the last three years, NNSWF has given between 1200-1500 kits to schools. There is no requirement that school children register to play football nor is there any financial cost to the participating school.
One of the objects for which NNSWF is established is to take all reasonable steps to ensure that discrimination or distinction does not occur among football participants on any grounds regulated under any Equal Opportunity Law (paragraph 1.1(h) of the Constitution). NNSWF promotes participation by persons wishing to undertake a more active lifestyle by pursuing football as their chosen sport. NNSWF encourages a safe sporting environment through its implementation of internal policies and regulations including protection of members from harassment, discrimination and child protection. IT is compulsory for all member organizations to adopt these policies.
NNSWF plays an active role in the education of member zones and competition administrators pertaining to disciplinary, grievance, Code of Conduct, Spectator Code of Conduct and Member Protection Regulations and their enforcement, as well as the fair and equitable treatment of all participants including any appeal provisions.
One of the objects for which NNSWF is established is to facilitate the provision and maintenance of grounds, playing fields, materials, equipment and other facilities for football in the State so that registered participants and communities in general, enjoy safe environments (paragraph 1.1(l) of the Constitution). NNSWF provides for registered participants and general members of the community to enjoy safe and secure recreational facilities. NNSWF facilitates the provision and maintenance of ground facilities for use and enjoyment (by not only registered participants but also by members of the community who access the facilities) through the following mechanisms.
Annual visitation and consultation with every council within the NNSWF region (approximately 42 in total) detailing concerns over ground facilities, and attempting a coordinated approach to the upgrade and continued maintenance of these facilities in the best interests of the community and participants.
Active involvement of Federal and State Initiatives concerning facility safety.
The provision of education and training seminars on safe practices and risk management, club administration seminars for ground inspection, incident reporting, security and ground control officers.
The provision of administration services and assistance in the identification and completion of grant information.
Adequate state wide insurance overages to not only permit hiring of these facilities but also to ensure that all volunteers are appropriately covered and not endangering any of their personal assets whilst conduction activities in relation to maintenance and provision of sporting facilities to the community.”
25 Both the representatives for the applicant and the respondent agreed that the crux of the matter is whether the applicant could be considered to be a non-profit organisation having as one of its objects (or having as its sole or dominant purpose) a charitable, benevolent, philanthropic or patriotic purpose.
26 The representatives for the applicant and the respondent made comprehensive written and oral submissions which have been very helpful. The submissions canvassed the facts, the legislation, academic texts and authorities.
Applicant’s submissions
27 Attention was drawn to the provisions of the legislation particularly Sections 259(1)(c) and 267(2) of the Duties Act and Sections 10(1) and 10(2) of the 1971 Act.
28 The applicant is a non-profit organisation by virtue of the provisions of its constitution and this has not been challenged by the respondent.
29 The applicant contends that at least one of its objects as set out at paragraph 20 above, if not the entirety of those objects, is charitable. If not all then one or more are benevolent or philanthropic. Reference to object in the relevant legislation is a reference to an object in the Constitution; this follows from the decision in Pro-Campo Ltd v Commissioner of Land Tax 81 ATX 4270 (“Pro-Campo”).
30 Attention was drawn to the four heads or classes of charitable purpose set out by Lord Macnaghten in Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531 (“Commissioners for Special Purposes of Income Tax”) at 583:
“… advancement of education, advancement of religion, relief of poverty; other purposes beneficial to the community.”
31 The applicant’s contentions include that the objects 1.1(c), (d), (e), (h) and (l) are charitable purposes in that they are for purposes which are beneficial to the community.
32 Examples of gifts which have been for the purposes of creating or maintaining public parks and recreational grounds in a locality which have been held to be beneficial to the community include:
“Shillington v Portadown Urban District Council [1911] 1 IR 247: re Hadden [1932] 1 Ch 133 at 141 per Clauson J.; re Morgan (deceased) [1955] 2 All ER 632 at 633 per Harman J (public recreation ground for inhabitants of a named parish); Morgan v Wellington City Corporation [1975] 1 NZLR 416 at 419 per McCarthy P (grant of land upon trust for the purposes of public recreation and enjoyment to a city corporation for the benefit of its citizens); City of Burnside v Attorney General (1993) 61 SASR 107 at 35 per Legoe J (oval and surrounding area as recreational land); re Mair (deceased) [1964] VR 529 at 535 per Adam J (a gift of land as a public park for the provision of recreation in the form of facilities for outdoor activities of a public kind); re Smith (deceased) [1967] VR 341 at 343 per Menhennitt J (a gift of land “to be used as a garden park or reserve for the use of the public or for municipal markets or other similar purposes’); Brisbane City Council v Attorney General (Queensland) [1979] AC 411 at 422-424 (a gift ‘for Showground, park and recreation purposes’); and re Hadden [1932] 1 Ch 133 at 141-142 per Clauson J (a gift for playing fields, parks gymnasiums and other plans which will give recreation to as many people as possible).”
33 Gino Dal Pont at page 195 of “Charity Law in Australia and New Zealand (1st Edition) Oxford University Press (2000) comments that the effect of the cases referred to in paragraph 32 is :
“Recreational or sporting purposes that come within the fourth head of charity are also charitable. The principal example in this context is the provision of public recreational facilities for a locality, which has been held to be charitable even though the facility will enable the carrying on of sporting or recreational purposes.”
The applicant’s submission contends that object 1.1(l) specifically satisfies this criteria and is therefore supported by the decisions referred to in paragraph 32.
34 The word “benevolent” and the phrase “a benevolent institution” have no defined technical meaning and therefore a dictionary definition needs to be sought. Benevolent is not synonymous with charity. The Macquarie International English Dictionary defines “benevolent” to include “performing good or charitable acts and not seeking to make a profit”. The benevolence must be directed towards the public or a section of the public: Metropolitan Fire Brigades Board v Federal Commissioner of Taxation (1990) 27 FCR 279 at 291 per Wilcox, Spender and Pincus JJ.
35 ‘Benevolent’ is not limited to the relief of poverty, sickness, disability, destitution, suffering, misfortune or helplessness. Northrup J said in FCT v Launceston Legacy (1987) 15 FCR 527 at 541:
“The concept of benevolence being limited to the destitute is no longer accepted.”
Thus the applicant being a non-profit organisation provided its services and benefits to the registered participants and the general population in the geographical area as defined in northern NSW.
36 The definition of “philanthropic” purposes is one “which indicates goodwill to mankind in general” as commented by Lindley LJ in re MacDuff [1896] 2Ch 451 at 464.
37 The applicant submitted that the decision in re Nottage [1885] 2Ch 649 (“Nottage”) should be considered as an example of where the prize (or gift) offered was for a sporting trophy and that the stated object in the bequest was “to encourage the sport of yacht-racing”. Attention was drawn to the comment by Lindley LJ at page 655:
“It is a prize for a mere game … Now, I should say that every healthy sport is good for the nation – cricket, football, fencing, yachting, or any other healthy exercise and recreation; but if it had been the idea of lawyers that a gift for the encouragement of such exercises is therefore charitable, we should have heard of it before now. … I deal with the present case on the broad ground that I am not aware of any authority pointing to the conclusion that a gift for the encouragement of a mere sport can be supported as charitable.”
38 The reference in the previous paragraph to “a mere sport” was further considered in Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54 (“Strathalbyn”) wherein Bleby J concluded that “… earlier decisions that the mere playing of games or enjoyment of amusement or competition was not per se charitable, nor necessarily educational …”
39 The decision in Nottage has been criticised particularly in the following three instances:
1. In Royal National Agricultural and Industrial Association v Chester (1974) 3 ALR 486 at 489 after noting the sentiments prevailing in the days of Elizabeth II and the preamble to the Statute 43 Elizabeth I, clause 4 observed that “The law is in need of reform”.
2. H.A.J. Ford and W.A. Lee, the authors of “Principles of the Law of Trusts”, 2nd Edition at paragraph [1947] comment:
“Nevertheless it is respectfully submitted that it is to be regretted that the High Court of Australia in Chester’s saw fit to follow so doggedly in the footsteps of re Nottage. The opinion in that case was uttered, nearly 100 years ago, in the context of a sport then reserved almost exclusively for the very rich; and it hardly reflects credibly on the law that such a decision should have been gradually broadened beyond its original context so as to govern the law of a country so ardently convinced of the public value of sport as Australia is. If the spiritual and moral well-being of the community at large is accepted as charitable, as it is in a wide variety of forms, its physical well-being should likewise, although no doubt one should stop short of extending the benefits of charity to sporting clubs which are substantially places of social resort. ‘Perhaps the law is in need of reform’ is, at present the only comment which the High Court of Australia has made.”
3. In Re Laidlaw Foundation (1984) 13 DLR(4th) 491 (“Laidlaw Foundation”) a decision of the Ontario Supreme Court, Divisional Court on appeal from the Surrogate Court constituted by Judge Dymond, the circumstances were on point with this matter. The Foundation made
“… donations to the following:
(a) Sports Fund for the Physically Disabled;
(b) Jexu Canada Summer games;
(c) Canadian Track and Field Association;
(d) Commonwealth Games of Canada Inc; and
(e) Olympic Trust of Canada.”
The case considered whether the above organisations were “charitable organisations in law”. The Surrogate Judge stated:
“… participation in organized competitive amateur sports is in itself educational, both in the sense of training in discipline and maintenance of a healthy body and further in respect to education resulting from the interchange of people from different cultures in cases where competitions involve more than local participants.
…
“It is my view that an organization, the main object of which is the promotion of an amateur athletic sport which involves the pursuit of physical fitness is prima facie an organization beneficial to the community within the spirit and intendment of the Statute of Elizabeth and may be classified as a charitable organization provided that any other non-charitable object of the organization be incidental or ancillary to the promotion of that amateur sport, and provided that the public benefit test be met with respect to the class of persons who will benefit.”
The Surrogate Judge also identified the public benefit test as a reference to:
“a definite community or section of the community … identifiable as such; it must be of appreciable importance and it must not depend on any personal relationship”.
Each of the above two passages were quoted, with approval by the Ontario Supreme Court on Appeal Southey J for the Court stated:
“Having thus recognized a broader scope for charitable objects relating to sports in modern times, the learned Surrogate Court Judge examined each of the recipients of donations from the respondent and held that they were charitable organizations. I think she was correct in so holding for the reasons given by her.”
Gino Dal Pont discussed the decision in Laidlaw Foundation and concluded that:
“Once it is accepted, as the courts have done, that to provide sporting facilities for a locality is a charitable purpose, and that there need only be a weak link between a sporting purpose and an educational institution to secure charitable status, to dispute the above proposition is to engage in sophistry. Moreover, if the protection of animals is charitable in raising the moral tone of society, it is anomalous that activities that improve the physical health and fitness of society are not charitable. Such a view also flies in the face of governmental initiatives to encourage participation in amateur sport so to improve community health.”
40 The applicant receives Commonwealth grants and the payroll tax will be a State tax on those grants.
Respondent’s submissions
41 The respondent’s representative provided a detailed and comprehensive record of the history of the matter and noted that the respondent had withdrawn the exemptions on the basis that a recreational or sporting purpose is not a charitable one. Further noting the payroll tax and duties which would have been payable for the period from 1 April 2004 to 30 March 2007 would not be pursued by the respondent.
42 The transitional provisions included in the 2007 Act at Clause 12 Schedule 2 exempts from payroll tax the wages paid by a taxpayer who was, as at 30 June 2007, a non-profit organisation with a qualifying object to a person in respect of time when the person is engaged in work in pursuit of the qualifying object. This transitional provision is not available where the organisation had since 30 June 2007 changed its constitutional objects with respect to the qualifying objects. The qualifying objects being those as set out in Section 10(1)(j) of the 1971 Act. The applicant had changed its objects on 5 September 2007 and consequently the transitional provision was not applicable and the liability must be determined under Section 48 of the 2007 Act.
43 The respondent submitted that the sole or dominant purpose of the applicant is the promotion of soccer. That if the applicant could establish that its sole or dominant purpose was a qualifying object then only wages paid to persons employed in respect of that qualifying object would be exempt.
44 The respondent relies on the submissions made in respect of potential payroll tax exemption as the test for qualification for exemption under Section 259(1)(s) and Section 267(2) of the Duties Act in relation to stamp duty on insurance and in respect of motor vehicle registration.
45 The requirement of the sole or dominant purpose to be a charitable, benevolent, philanthropic or patriotic one should be interpreted as that the object should be one that is actively pursued. If the exemption could be applicable by the expedient of placing a pro forma charitable object in the constitution of a non-profit organisation then this would not promote the purpose or object underlying Section 10(1)(j) of the 1971 Act or Section 48 of the 2007 Act. The underlying purpose of Section 10(1)(j) being as referred to in Yachting Australia Inv v Chief Commissioner of State Revenue [2005] NSWADT 208 (“Yachting Australia”) by Block J as:
“the legislative purpose … was to exempt wages insofar as they were incurred by a non-profit organisation in carrying on charitable activities. There is in my view no reason why the objects of the relevant entity should be confined to those actually written, they could indeed extend to unwritten objects clearly established …”
Further that Pro-Campo is not authority for the proposition that the relevant objects are those as set out in the organisation’s constitution.
46 A charitable purpose is one falling within the four categories set out in Commissioners for Special Purposes Income Tax at page 583. Those categories being trusts for:
the relief of poverty;
the advancement of education;
the advancement of religion; and
for other purposes beneficial to the community not falling under any of the preceding heads.
The fourth category must be construed as only beneficial purposes that fall “within the spirit and intendment of” as set out in the preamble to the Statute 43 Elizabeth I, Clause 4 (Charitable Uses Act 1601(Imp)).
This restriction is referred to in The Incorporated Council of Law Reporting of the State of Queensland v The Commissioner of Taxation of the Commonwealth of Australia (1971) 125 CLR 659 and Royal National Agricultural and Industrial Association v Chester (1974) 3 ALR 486 (“Chester”).
47 The High Court has noted in Chester at page 489 lines 32 et seq that:
“In the course of reaching the conclusion under appeal, the learned judge considered the cases in which it has been held that to encourage a sport is not charitable:re Nottage”.
The respondent submits that Laidlaw Foundation does not weaken the High Court authority.
Dymond Surr Ct J refers in Laidlaw Foundation to Nottage at page 500 and notes that Lindley LJ said in 1895:
“Now, I should say that every health sport is good for the nation – cricket, football, fencing, yachting or any other healthy exercise and recreation; but if it had been the idea of lawyers that a gift for the encouragement of such exercises is therefore charitable, we should have heard of it before now.
and ended by saying [at pp. 655-6]:
… I deal with the present case on the broad ground that I am not aware of any authority pointing to the conclusion that a gift for the encouragement of a mere sport can be supported as charitable.”
and further at page 500 notes that Lopez LJ said:
“I am of opinion that a gift, the object of which is the encouragement of a mere sport or game primarily calculated to amuse individuals apart from the community at large, cannot upon the authorities be held to be charitable, though such sport or game is to some extent beneficial to the public. If we were to hold the gift before us to be charitable we should open a very wide door, for it would then be difficult to say that gifts for promoting bicycling, cricket, football, lawn-tennis, or any outdoor game, were not charitable, for they promote the health and bodily well-being of the community.”
48 The respondent acknowledged that in certain circumstances, sporting bodies may engage in charitable activities. In Yachting Australia that body was held to have a charitable purpose because of the educational activities it conducted to a significant degree; the evidence therein disclosed that the activities extended beyond the mere sport of competitive yachting to general instruction in water safety. In Lloyd v FCT 93 CLR 645 the High Court considered the activities of the Navy League which included lectures on hygiene, conduct, citizenship, general seamanship, service, leadership, first aid and life saving. The educational activities of the applicant appear limited to education in respect of the game of soccer in the submission of the respondent.
49 The term “benevolent” does not have a long settled legal meaning and ought to be construed in accordance with its ordinary meaning as affected by the context and purposes of the Statute. The definitions to be preferred being “(of an organisation) charitable rather than profit-making” and/or “charitable (benevolent fund, society)”, as referred to in Concise Oxford Dictionary (7th edit).
These definitions connote a narrower concept of generosity to the poor and infirm and this narrower concept is absent from the activities and objects of the applicant. In support of this definition reference was made to the comments by Priestly JA in Australian Council of Social Services Inc v Commissioner of Pay-roll Tax (NSW) 85 ATC 4235 at p4242 that:
“… the word ‘benevolent’ in the composite phrase “public benevolent institution” carries with it the idea of benevolence exercised towards persons in need of benevolence, however manifested.”
50 The word “philanthropic” carries a connotation of a love of mankind in general and a desire to improve the condition thereof. It is on a higher plane than ‘love of sport’. This is not reflected in the activities or objects of the applicant.
51 The 2007 Act at Section 48(c) refers to “its sole or dominant purpose” rather than as in the 1971 Act Section 10(1)(j) reference to “as one of”. The sole or dominant purpose of the applicant is the promotion of soccer and this is not a charitable, benevolent, philanthropic or patriotic purpose.
52 If the applicant is able to demonstrate that it has a charitable, benevolent, patriotic or philanthropic purpose as one of its purposes or the sole or dominant purpose it would need to establish that it had paid wages to one or more persons employed in respect of that qualifying purpose for work done in relation to that purpose and the level of those wages. It has failed to do this.
53 The evidence provided by the Business Manager included the Reports of the applicant. The 2007 Report is the only reliable source from which the activities of the applicant may be demonstrated. Attention was drawn to the Director’s Charter, the Director’s Code of Conduct, Professionalisation, Business and Director’s Report as set out in the Report. There is no suggestion in the Report that one of the objects or that the sole or dominant purpose is one within the terms of Section 10(1)(j) 1971 Act or Section 48 2007 Act.
54 There is an anomaly between the situation where the Commonwealth Government is supplying aid to sporting bodies and the State Government is taxing it. Until the State enacts a sports assistance provision or the case law supporting the respondent’s interpretation is overturned then the exemption sought is not available.
55 The applicant has suggested that approximately 80% of the wages paid by it are for work within the provisions of Section 10(2) 1971 Act or Section 48(2) 2007 Act. If the application is successful there would need to be further activity undertaken to calculate any exemption.
Reasons for decision
56 In 1601 the Charitable Uses Act was passed in England and is known in Australia as Statute 43 Elizabeth I (“the Statute”) or as the Charitable Uses Act 1601(Imp). The preamble to this Act has been the subject of much debate both in case law in the Commonwealth and Australia and in learned texts dealing with charitable trust, trusts generally and charity law.
57 In the text Principles of the Law of Trusts by H.A.J Ford and W.A. Lee (1983 ed) the authors discussed the evolution of the law relating to trusts for sport or recreation. Commencing in 1974 with “Chester” which concerned a trust in favour of an organisation for “improving the breeding and racing of homer pigeons”. The High Court held this not to be charitable on the grounds that “it seems to us that the breeding of pigeons cannot, either by analogy or by reason of the character of the activity itself, be said to be of benefit to the community in a sense within the preamble”. That is that the beneficial purpose must be “within the spirit and intendment” of the preamble to the Statute. This was in accordance with the precedents as at 1974.
58 The starting point of the modern law being Nottage in 1895 in which Kekewich J held that a gift to the Yacht Racing Association of Great Britain for the encouragement of yacht racing was not beneficial to the community. On appeal the decision of Kekewich J was upheld, a distinction being made that “the prize was for a mere game:
“It is a prize for a mere game … Now, I should say that every healthy sport is good for the nation – cricket, football, fencing, yachting, or any other healthy exercise and recreation; but if it had been the idea of lawyers that a gift for the encouragement of such exercises is therefore charitable, we should have heard of it before now.”
This was in 1895.
59 The decision in Chester followed the decision in Nottage (1895). The sport under consideration in Nottage was yacht racing, a sport reserved in 1895 almost exclusively for the very rich; the authors of Principles of the Law of Torts commented:
“… it hardly reflects creditably on the law that such a decision should have been gradually broadened beyond its original context so as to govern the law of a country so ardently convinced of the public value of sport as Australia is.”
The High Court did comment in Chester (1974) that:
“Perhaps the law is in need of reform.”
60 In 2001, in Strathalbyn, once again the series of cases relied on or commented on commencing with Nottage concerning charitable trusts was considered. The comments in Nottage were referred to as “The general rule that trusts for mere sport will not be charitable”. Although the High Court considered Nottage in Chester, the comments made included:
“In the course of reaching the conclusion under appeal, the learned judge considered the cases in which it has been held that to encourage a sport is not charitable: Re Nottage [1895] …”
“… This his Honour did in answer to an argument “that the object of the trust could serve a purpose useful in both military and civil defence”. His Honour referred to the cases to emphasize that, although the side effects of the gift may indirectly serve such purpose, the promotion of such purposes is not the direct and necessary object of the bequest. The cases were properly regarded as instances of the application of the rule that, if a gift permits applications for uses which are not charitable, it is not charitable in the legal sense. Although we have put our decision upon a somewhat broader basis, we do agree with the learned trial judge that the provision of racing facilities and trophies would certainly be within the discretion of the trustee and that such an application of the income of the estate would not be for charitable purposes.”
61 The issue as to whether a trust concerning an amateur sports organisation was charitable was considered in 1984 in Canada by the Ontario High Court in Laidlaw Foundation. The issue was considered in relation to the donation to the foundation to five specific organisations. The issue concerned whether those five organisations were “charitable organisations in law”. In the decision under appeal Dymond Surr Ct J stated:
“… participation in organized competitive amateur sports is in itself educational, both in the sense of training in discipline and maintenance of a healthy body and further in respect to education resulting from the interchange of people from different cultures in cases where competitions involve more than local participants.
…
It is my view that an organization, the main object of which is the promotion of an amateur athletic sport which involves the pursuit of physical fitness is prima facie an organization beneficial to the community within the spirit and intendment of the Statute of Elizabeth and may be classified as a charitable organization provided that any other non-charitable object of the organization be incidental or ancillary to the promotion of that amateur sport, and provided that the public benefit test be met with respect to the class of persons who will benefit.”
The decision in Laidlaw Foundation has been the subject of discussion as referred to above by Gino Dal Pont.
62 The factual information attested to on behalf of the applicant discloses that the objects of the company included at 1.1 are directed to providing a benefit to communities in the geographic area that the applicant is operative. The objects emphasise the promotion of football for the benefit of communities within the State; to promote the health and general wellbeing of participants; to provide and promote education of players, coaches, referees and administrators; to provide and promote a healthy lifestyle in schools and communities generally; to take steps to ensure that discrimination or distinction between participants does not occur among participants; and to provide and maintain grounds, fields and equipment. These taken as a whole describe a purpose that is not for the encouragement of a mere sport. The 2007 Act requires that in order for the exemption to apply the non-profit organisation must have as its “sole or dominant purpose” one that is charitable or benevolent or patriotic or philanthropic”. The purpose of the applicant is clear only when the objects set out in the constitution of the company at Clause 1 are taken as a whole. When taken as a whole the sub-clauses of Clause 1 describe a dominant purpose being to “provide and promote football as an undertaking which benefits communities, the benefit being the improvement in the health and general wellbeing of participants, through education which encompasses education generally and specifically relating to football”. This is an amalgam of the objects and describes a clear and dominant purpose beneficial to the community.
63 The annual reports attached to the statement by the Business Manager were drawn for the purposes of reporting the general activities of the applicant to the participants and to the world at large. The reports provide an indication of those activities, however, they are an indication only.
64 The preamble to the Statute describes:
“The relief of aged, impotent and poor people, the maintenance of sick and maimed soldiers and mariners, schools of learning, free schools and scholars of universities; the repair of bridges, havens, causeways, churches, sea banks and highways; the education and preferment of orphans; the relief, stock or maintenance of houses of correction; marriages of poorer maids; supportation, aid and help of young tradesmen, handicraftsmen and persons decayed; the relief or redemption of prisoners or captives; and the aid or ease of any poor inhabitants concerning payment of fifteens, setting out of soldiers and other taxes”
The case law since 1601 has gradually extended the types of charitable uses that are considered to be worthy of the description. The High Court did not appear to apply Nottage in Chester rather alluded to the judge in first instance having considered the cases.
65 The applicant is undertaking a beneficial purpose for the community in following its objects for a principle purpose as gleaned from its objects. The vehicle that is used for the purpose is to undertake activities for the promotion and management of football in the geographic area in which the applicant operates.
66 The question to be answered is would the participants gain if they are educated in respect of health, co-operation, non-discrimination or indeed patriotism if the applicant did not provide that education to them.
67 The exemption pursuant to Section 10(1) of the 1971 Act or Section 48 of the 2007 Act is restricted to the wages paid or payable where the employees are engaged in a charitable or benevolent purpose. In this instance where the activities of the applicant are ones that benefit communities and/or the health and general wellbeing of participants; and/or the promotion of a healthy lifestyle in schools and communities generally through football education; and/or provide education that ensures that discrimination or distinction does not occur among participants; or is the participation beneficial to the community then those wages are exempt. In 2009 it is apparent that the youths (both males and females) and adults who participate in the applicant’s programs are able to be educated through the undertaking of the objects of the company. A significant feature of the objects of the company is to improve the health and general wellbeing of participants and to promote a healthy lifestyle in schools and communities through football education.
68 The applicant had prepared its case on the basis that the 1971 Act was to be followed. The respondent sought itemisation of wages to satisfy the provisions of Section 48(2). The applicant conceded that the wages paid which would be within the provisions of Section 48(2) would be less than 100%.
69 The objects referred to at 1.1(c), (d), (e), (h) and (l) do not just indirectly serve the other objects in Clause 1. They are direct and necessary objects of the purpose of the applicant as demonstrated by the evidence provided by the Business Manager to the Tribunal. It follows that the described beneficial purpose set out at paragraph 62 and paragraph 67 above is within the spirit and intendment of the preamble to the Statute.
70 The test in the 2007 Act is more stringent than that in the 1971 Act. The 1971 Act only required that it was necessary to be able to demonstrate that “one of” the objects of the organisation was charitable, benevolent, patriotic or philanthropic. The objects as set out in the applicant’s constitution prior to 15 February 2007 complied with this requirement by virtue of sub-clause 1.1(d) and (h) as those objects were beneficial to the community and therefore the spirit and intendment of the Statute.
71 The evidence given by the Business Manager disclosed that the objects of the applicant are undertaken for the benefit of both females and males, indigenous females and males and for every young person both advantaged and disadvantaged.
72 The facts of this application demonstrate the clash of generational requirements for charitable, benevolent, patriotic or philanthropic undertakings. That the Statute of 1601, passed in the UK, should be construed conservatively in respect of the requirements of New South Wales in 2009 is faulty. A perusal of the Preamble to the Statute discloses that three of the serious issues that would have been addressed in 1601 for the benefit of the community would have been improvement of health, the encouragement to participate in a healthy lifestyle and the need to reduce discrimination. Further that those three issues are inherent in the words used then as understood 400years later.
73 The High Court did have an opportunity in 1974 to consider the issue, the purpose being for “the breeding and racing of homing pigeons”. The Court commented:
“Perhaps the law is in need of reform.”
Reform has not occurred.
74 The Ontario High Court of Justice considered the issue in 1984 and confirmed that the decision by Dymond Surr Ct J in Laidlaw Foundation to “distinguish a gift in the year 1895 from one made in 1981 for the encouragement of sports that promote health and physical fitness” was apt. Southey J went on to comment that:
“… I agree with the analysis made of the English authorities by the learned surrogate court judge, and with her conclusions which include the following:
I am satisfied that:
(a) Promotion of amateur athletic sports under controlled conditions promotes health, and is akin to those cases which have decided that the promotion of health is a charitable purpose, e.g., Re McClellan’s Will (1918), 46 N.B.R. 161, and
(b) participation in organized competitive amateur sports is in itself educational, both in the sense of training in discipline and maintenance of a healthy body and further in respect to education resulting from the interchange of people from different cultures in cases where the competitions involve more than local participants.
It is my view that an organization, the main object of which is the promotion of an amateur athletic sport which involves the pursuit of physical fitness is prima facie an organization beneficial to the community within the spirit and intendment of the Statute of Elizabeth and may be classified as a charitable organization provided that any other non-charitable object of the organization be incidental or ancillary to the promotion of that amateur sport, and provided that the public benefit test be met with respect to the class of persons who will benefit.”
This Tribunal must take note of a decision of the Ontario High Court of Justice as a persuasive precedent.
75 Pursuant to Section 63 of the Administrative Decisions Tribunal Act 1997 the Tribunal is authorised and required to decide the application.
76 The Tribunal has power to decide the application on the basis that the decision be made relying on the provisions of the 2007 Act. The Tribunal should not make a decision which would not resolve the matter, this would be the situation if the provisions of the 1971 Act were relied upon.
77 The transitional provisions included in the 2007 Act do not apply to the applicant.
78 It is sufficient that a non-profit organisation not being a school, an educational institution, an educational company or an instrumentality of the State has as its sole or dominant purpose a charitable, benevolent, philanthropic or patriotic purpose for the exemptions provided in Section 48(1) of the 2007 Act to be applicable as qualified by Section 48(2) of the 2007 Act.
79 This application is to review the decisions made on the 29 March 2007 by the respondent to disallow the exemptions sought pursuant to Section 48 of the 2007 Act, Section 259(1)(c) of the Duties Act and Section 267(2) of the Duties Act.
ORDERS
1. The applicant has as its dominant purpose a benevolent and or charitable purpose and therefore the wages paid or payable by the applicant as a non-profit organisation for work ordinarily performed in connection with the benevolent purpose of the applicant in accordance with Section 48(2) of the Payroll Tax Act 2007 are exempt wages.
2. The applicant and respondent agreed that in the event that the applicant is entitled to the exemption regarding payroll tax then the exemptions pursuant to Section 259(1)(c) of the Duties Act 1997 and Section 267(2) of the Duties Act 1997 would also be available and therefore in accordance with Order 1 the applicant is so exempt.
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