The Study and Prevention of Psychological Diseases Foundation Incorporated and Commissioner of Taxation
[2013] AATA 919
•20 December 2013
[2013] AATA 919
Division TAXATION APPEALS DIVISION File Number
2012/2088
Re
The Study and Prevention of Psychological Diseases Foundation Incorporated
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Deputy President I R Molloy
Date 20 December 2013 Place Brisbane The objection decision is affirmed.
........................[Sgd]................................................
Deputy President I R Molloy
CATCHWORDS
TAXATION – Income Tax – Tax exemption – Income tax exempt entity – Deductible gift recipient – Whether charitable institution – Whether health promotion charity – Date of effect of revocation – Objection decision affirmed
LEGISLATION
A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 176-1
Fringe Benefits Tax Assessment Act 1986 (Cth) ss 123D, 136
Income Tax Assessment Act 1997 (Cth) ss 30-15, 30-20, 30-125, 50-5, 50-110, 50-105, Subdiv 50-BTaxation Administration Act 1953 (Cth) s 426-55
CASES
Christian Enterprises Ltd v Commissioner of Land Tax (NSW) (1968) 88 WN (Pt 2) (NSW) 112
Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531
Downing v Federal Commissioner of Taxation (1971) 125 CLR 185
Federal Commissioner of Taxation v Wade (1951) 84 CLR 105
Federal Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204
Pamas Foundation (Inc) v Commissioner of Taxation (1992) 35 FCR 117
Re Krishnamurti Australia Inc and Commissioner of Taxation [2011] AATA 512Stratton v Simpson (1970) 125 CLR 138
REASONS FOR DECISION
Deputy President I R Molloy
20 December 2013
INTRODUCTION
The Study and Prevention of Psychological Diseases Foundation Incorporated was incorporated in 2005.
The Foundation (or SPED as it refers to itself) obtained the following endorsements from 1 January 2005:
·An entity exempt from income tax as a charitable institution under s 50-110 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) in accordance with s 50-5 item 1.1.
·A deductible gift recipient in accordance with s 30-125 of the ITAA 1997 on the basis that it is a health promotion charity under s 30-20 of the ITAA 1997, item 1.1.6.
SPED also obtained the following endorsements from 1 July 2005:
·A charitable institution under s 176-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (“GST Act”).
·A health promotion charity under s 123D(2) of the Fringe Benefits Tax Assessment Act 1986 (Cth) (“FBTAA”).
A review of SPED’s endorsement as an income tax exempt charity under Subdiv 50-B of the ITAA 1997 was commenced in August 2009.
By letter dated 6 April 2011 the Commissioner advised SPED that it had not satisfied the requirements for the above endorsements, and that they were revoked pursuant to
s 426-55 of the Taxation Administration Act 1953 (Cth) effective from 1 January 2005.
SPED applies for a review of a decision dated 27 April 2012 disallowing its objection to the Commissioner’s decision.
ISSUES
Under s 50-105 of ITAA 1997 an entity is entitled to exemption from income tax if, on application, it is entitled to such endorsement in the circumstances set out in s 50-110. In SPED’s case the relevant circumstance, under s 50-110(2), and item 1.1 of the table in
s 50-5, is that it is a “charitable institution”.The requirements of each of the other endorsements, relevant to SPED, namely exemption from fringe benefits tax, exemption from goods and services tax, and the status of a deductible gift recipient, also include that it be a charitable institution.[1]
[1] FBTAA ss 123D and 136(1) (exemption from fringe benefits tax); GST Act s 176-1 (exemption from goods and services tax); ITAA 1997 ss 30-125(1) and 30-15 Item 1 (deductible gift recipient).
In respect of the deductible gift recipient provisions of the ITAA 1997, and its exemption from fringe benefits tax, there is a further requirement that SPED be a health promotion charity.
The issues are:
(a)Is SPED a charitable institution?
(b)Is SPED a health promotion charity? and;
(c)If any of SPED’s endorsements are revoked, then from what date (or dates) should revocation take effect.
FACTUAL BACKGROUND
Evidence was given of SPED’s background and formation by Naomi Elizabeth Perry, a member and past president of SPED. She recounts attending a meeting in the early 1980s at which a former soldier, James Salerno, spoke of his personal experiences during and on his return from the Vietnam War.
In meetings over the next few years, an emerging group developed what were called “laws” on how to deal with each other, and “a working knowledge base on what is required to create sustainable harmonious and cooperative human association”.[2]
[2] Exhibit 5, p. 4.
In the mid-1980s, Dr Perry (a graduate chiropractor), and other members of the group, moved to Kununurra in northern Western Australia. They lived on a cattle station purchased as a “group investment”. There, says Dr Perry, they experimented with varying organisational structures and leadership rotations. She says they researched, experienced, and developed an understanding of what made good leaders.
Dr Perry says: “During this time, James Salerno, the brainchild and a founding member of the research started collating the research and developed a test for choosing leaders that was coined the Emotional Quotient (EQ).”[3]
[3] Exhibit 5, p. 6.
Dr Perry says that by 1989 the “research team” was undergoing changes. Dr Perry herself had moved back to South Australia, and had two children, Anika Salerno and Navarone Salerno. The cattle station was sold in 1991 and the finances divided.
Dr Perry says that those who were left, including herself and some other founding members, regrouped and redefined their purpose. She says they started raising funds “for further research” by starting a number of “multidisciplinary health clinics” that employed some of the “research team”. James Salerno wrote a book, published in 1996, entitled “The Emotional Quotient – Are you ready for it?”
Dr Perry says that during 1995 to 2000, with the launch of the book, members travelled extensively, made television appearances, and presented at national and international conferences. She says that in around 1999 the research team became known as the Ideal Human Environment Social Research Team (“IHESRT”) with a membership of about 40.
In 1999 IHERST “raised enough funds” for its next project, which brought together 60 strangers who lived for five to six months in a camp in the rugged outback of the Kimberley. The project, she says, was fully funded by IHERST at a cost of over $500,000. The purpose was to road-test the principles of the Ideal Human Environment.
The concept of the Ideal Human Environment is described as follows:[4]
The IHE is a place where all people regardless of race, colour, creed or religion can be emotionally and physically safe from and with each other.
[4] Exhibit 1, T-Document 7, p. 59.
In 2000 IHERST established the IHE Foundation. The aim of the Foundation, of which Dr Perry was president, was to provide direct relief to young people suffering from social disorders.
Dr Perry says during 2000-2004 the IHE Foundation provided assistance for thousands of people through its programs and telephone hotline. It also ran, she says, a 31 bed full-time live-in facility for those needing short term accommodation.
In 2004, says Dr Perry, the group looked to restructure its activities to enable focus on the study of early indicators of psychological disease: “The focus was on how we needed to act and think, to create an environment that prevented the development and expression of psychological disease – namely the ideal human environment.”[5]
[5] Exhibit 5, p. 15.
Dr Perry says it was agreed that to achieve primary prevention of psychological disease it was necessary to undertake an intense period of research. All members of the research team had to be prepared to undergo intensive personal and interpersonal examination and self-exposure.
In the following year, 2005, SPED was incorporated. According to Dr Perry its primary activity was to undertake “24 x 7” research and then trial and test research findings through the conduct of programs designed to promote the prevention of psychological disease.
SPED’S CONSTITUTION
SPED’s objects are expressed in clause 4 of its Constitution:[6]
The Foundation [sic] objects are for public benefit and charitable purposes, in seeking to promote the prevention and control of psychological diseases in human beings and therefore setting out to ultimately create the Ideal Human Environment (IHE).
[6] Exhibit 1, T-Document 27, pp. 1112-1133.
The functions of SPED are set out in clause 5 of its Constitution, including:
5.1 primarily to operate and fund a research team that functions 7 days a week, 24 hours a day, whose purpose is to research human psychological disease by studying a cross-section of human behavior in a variety of emotional, social and physical conditions, circumstances and environments.
Clause 10 of SPED’s Constitution provides that the number of members shall be unlimited. Under clause 11 any person may apply to be a member by signing an application form and, upon approval by the Board, and payment of the annual subscription fee, shall become a member.
Under clause 63 of its Constitution, with certain exceptions, such as payments in good faith for the remuneration of officers or servants, SPED’s income and property may only be applied towards the promotion of its objects.
MEMBERSHIP
Dr Perry says SPED has two forms of membership: Full Time Research (“FTR”) team members and Free Lance Research (“FLR”) team members. Free Lance Researchers include anyone who has attended a SPED program.
Dr Perry acknowledges that FLR team members are not “official members” of SPED, and the only members are the FTR team members.
In the year ended 30 June 2005 there were 21 members as follows:[7]
[7] Exhibit 6.
Dr Naomi E Perry
Emma T Salerno
Lincoln Haycroft
Julie MacDonald
Anna Dupont
Matteo T Salerno
Deborah Hamilton-Smith
Victoria Salerno
Justine Bond
Ben Salerno
Grayson Hamilton-Smith
Navarone Salerno
Kerrian Salerno
James Salerno Jnr
Anika Salerno
Julius T Salerno
Andrew MacDonald
John McKelvie
Sonia Sandro
Oliver Salerno
Hannah Salerno
From 2005 to 2009, the membership did not change significantly. Of the above 21 persons, four members, John McKelvie, Sonia Sandro, Oliver Salerno and Hannah Salerno, departed in 2008/2009. There were no additional members.
Notably the membership did not include James Salerno Snr. It did include his wife (or former wife), Kerrian Salerno; his brother, Ben Salerno; and some of his children.
SPED acknowledges that the members are bound by blood ties, marriage or friendship.
The qualification for membership under SPED’s Constitution refers to payment of an annual subscription. The application form for membership, and the SPED membership agreement, contain further requirements.
Clause 9 of the application form is headed “Entry Principle [sic] Assets” and provides:[8]
a. Upon joining the SPED SRT [Social Research Team] all your assets become part of the asset base to be available for use by the SPED Foundation. This includes cash and all forms of property. These assets form part of what is termed entry principle assets.
[8] Exhibit 1, T-Document 9, p. 152.
There is provision in the form to list the applicant’s assets, including those assets the applicant does not want to make available to SPED. Assets are said to be returnable “upon completion of this agreement” but “no interest is payable”. Implicitly, an applicant’s assets, and whether those assets will be available for use by SPED, are relevant to an application for membership.
The membership agreement with SPED provides, in clause 1, that the member will:[9]
[9] Exhibit 1, T-Document 9, p. 108.
1.1Undertake study into the IHE principles under the guidance of the SPED Social Research Team (SRT).
…
1.3 Be available to participate in the following:
…
1.3.7 become familiar with the IHE program principles;
1.3.8be accountable to abiding by the IHE principles for all daily decisions on all actions. All actions and the psychology behind those actions and reactions form part of the research data.
1.3.9 Participate in fund raising activities for the Foundation.
By clause 3.1, it is agreed that any income the member derives is classified as fund-raising for SPED. Any expenses “derived” from the efforts of the member are SPED expenses (unless otherwise decided by the SPED Board).
By clause 4.1 of the agreement, participation as a member may be terminated by either party on 24 hours’ notice without giving a reason. Under clause 4.2, the agreement will “cease” if the member does not display a genuine attempt to follow the Ideal Human Environment principles, or displays actions whereby the member is deemed to be an “unsafe person”.
The evidence was that no application for membership has ever been refused. As the only changes have been persons leaving, there presumably have been no new applications for membership.
Dr Perry says membership is entirely open to the public, “however, we have not actively solicited members of the public to become members”.
SPED’S ACTIVITIES
SPED is said to undertake “action based qualitative research whereby research is undertaken in an interactive real time manner”. Qualitative research is said to cover “methodologies that describe and explain people’s experiences, behaviours, interactions and social contexts without the use of statistical procedures or quantification”.[10]
[10] Exhibit 5, p. 18.
A summary of what SPED did was provided at the time of the audit:[11]
The one activity that the SPED Foundation undertakes is the study of psychological disease and the implementation of the IHE in order to prevent psychological disease. This activity is 24 x 7. The number of hours devoted to this task is the whole number of possible hours in any one week.
…
As previously outlined, the unique design of the SPED research is in its 24 x 7 methodology. No action is outside the scope of the research.
[11] Exhibit 1, T-Document 7, p. 62.
The members are described as both the researchers and the “guinea pigs”. They are not required to have any qualifications in psychology or social science. The only member who had studied psychology at all, at a tertiary level, was Dr Perry.
The activities of the members are said to be analysed over the cycle of a 24 hour day,
seven days a week. Dr Perry says: “Researchers undergo normal life activities such as going to work, minding children, and maintaining a household.”[12] The range of human experiences are said to include dealing with poverty, opulence, crowded living, living alone, living in cities, living in remote isolated communities, living overseas, and living in Australia.
[12] Exhibit 5, p. 19.
Apart from Dr Perry, the only other witness was Anna Lucia Dupont, the public officer and treasurer of SPED. Her introduction, to the then Ideal Human Environment Social Research Team, was through attending the same school as Emma Salerno, a daughter of James Salerno. Miss Dupont has qualifications of a Bachelor of Arts (Communication), and a Master of Business (Accounting) degree. She has children from a relationship with James Salerno Jnr, from whom she is now separated.
Miss Dupont says “being a full-time researcher is like the scientist who uses his own body to experiment and has to go through all the consequences of those experiments to find the cure we all want.” Miss Dupont says she is a full-time mother juggling her role as treasurer of SPED and other administrative and accounting duties. However, she is “first and foremost a guinea pig of the SPED social research. This means there are no ‘holidays’ and no ‘time off’ from the research.”[13]
[13] Exhibit 7, p. 5.
Miss Dupont says that, through research, she has been able to more honestly investigate her own disposition towards disorders like bulimia and depression: “The research team as a whole has been engaged in investigating my thought patterns that are early warning signs to maladaptive behaviour.”[14]
[14] Ibid at p. 4.
Everything that SPED’s members do, 24 hours a day, seven days a week, is deemed research.
SPED has also run various “projects”. As part of what was called Project Inebriation, SPED investigated aspects of human behaviour as it relates to luxury motor vehicle use. This research was undertaken using motor vehicles purchased by SPED. They included a Hummer, for which it paid about $100,000, a Ferrari purchased for about $300,000, and a Rolls Royce at about $695,000. When asked about the use of these vehicles, Miss Dupont said the Ferrari was generally driven by the young men, and the Rolls Royce by “one of the older women”.
Other projects included Project India (undertaken when SPED members visited India to attend a wedding), and “Project Gambling: Understanding thought processes and addictive behaviour from engagement in games of chance”.
There is no evidence of any of SPED’s research or findings being published in the traditional sense. Nothing has made its way into, or even been submitted to, any medical or other journal. SPED’s publications are for internal purposes.
FINANCIAL AFFAIRS
The entire income of its members, some of whom are or were employed (or self-employed) in conventional occupations, is given over as donations to SPED. In this way the members pay no income tax. Their living and other expenses are provided for by SPED.
Consistent with its view that every activity of its members amounts to research, SPED claims every outlay, including but not limited to its members’ ordinary living expenses, is a research expense. SPED also covers at least some of James Salerno Snr’s expenses even though he is not a member. This is justified on the basis that he is still an adviser.
SPED’s financial statements, as the Commissioner has submitted, reveal the following:
(a)During the years in question SPED entered into a significant number of transactions buying and selling shares in publicly listed companies;
(b)This culminated in transactions between 12 November 2008 and 30 June 2009, during which time, SPED outlaid $98,597,632.13 and generated an income in the order of $123,333.05.[15]
(c)During the 2006 financial year, SPED’s “research expenses” amounted to $324,264. Of that total, $47.00 was spent on “advertising and marketing” and the line item “study and research” accounted for $394.[16]
(d)The 2009 “research expenses” amounted to a total of $761,052. Advertising and marketing comprised $1,516 and “internet and website” comprised $783. There is no line item for “study and research”.[17]
(e)SPED’s balance sheet as at 30 June 2009 reveals that it had total assets of $10,665,655 and total liabilities of $3,151,812.[18] Of the liabilities, the largest creditor appears to be, A.M. Macdonald, whose “debt” is noted in the amount of $2,954,222.[19] Andrew Macdonald had been a member of SPED, but left around Christmas 2009. He was said to be in a relationship with Anika Salerno, Dr Perry’s daughter.
His mother, Julie MacDonald, is SPED’s secretary.[15] Exhibit 1, T-Document 10, p. 323.
[16] Ibid at p. 343.
[17] Ibid at p. 344.
[18] Ibid at p. 348.
[19] Ibid at p. 352.
The approximately $760,000 in research expenses for 2009, referred to above, include the following, recorded under a heading “Credit card and petty cash”:[20]
[20] Ibid at p. 344.
Food $80,000
Fuel $70,000
Insurance $30,000
Internet $5,000
Medical $40,000
Miscellaneous $35,980
Office $2,000
Personal Items $80,000
Registration & Subscriptions $3,000
Repairs & Maintenance $60,000
Study & Training $20,000
Travel $50,000
Utilities $10,000
Vehicles & Maintenance $20,000
$505,980
One of SPED’s investments was a development in Vanuatu with a company incorporated in that country, Vanuatu Indigenous Development Alliance Limited. The agreement between SPED and the Vanuatu company includes recitals that it is the parties’ intention to work together on a commercial enterprise that will also produce benefits to the economy of Vanuatu, and that SPED has agreed to advance $1,100,000 towards the development.[21] This was “Project Vanuatu”. The development did not proceed, and the property was sold in 2008, although the sale did not settle until some four years later.
[21] Exhibit 1, T-Document 4, p. 41.
Transactions recorded in SPED’s accounts for 2006 include Salerno Perry Pty Ltd – $730,000. Miss Dupont thought this was a loan, although she could not recall seeing a loan agreement. Another entry was Salerno Bradock Pty Ltd – $65,000. Miss Dupont thought this referred to a construction company one of the researchers had formed, and again possibly a loan.
In the 2008 accounts, SPED’s income is recorded as $2,368,105. This includes “Donations” of $66,188, “Dividends from Shares” of $55,242, and a “Gain on Options Trading” of $104,119. The highest amount of income was $1,849,700 from “Trust Distributions”.[22] Miss Dupont thought the source was the Salerno Perry Family Trust.
[22] Exhibit 1, T-Document 10, p. 347.
There is a pattern of similar transactions over all of the years in question.
CHARITABLE INSTITUTION
The Commissioner contends that SPED is neither “charitable”, nor an “institution”. Whether an entity is an institution within the description “charitable institution” depends on the whole of the circumstances. I will assume for now that SPED is correctly described as an institution.
An institution is “charitable” if it has “charitable purposes”. The word “charitable” has a technical legal meaning, that can be traced to the law of trusts and, ultimately, to the preamble to the Statute of Elizabeth: Federal Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204 at 262.
In Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531, Lord Macnaghten, at 583, 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.
A purpose is for the public benefit if it offers a benefit to the community that is real and of value, either tangible or intangible, and the benefit is available to the public: Downing v Federal Commissioner of Taxation (1971) 125 CLR 185.
SPED claims to be a charitable institution having charitable purposes within two of the classes described in Pemsel: the advancement of education or other purposes beneficial to the community.
An institution is charitable if its only, or its main or dominant purpose is charitable in the technical legal meaning, and it is established and maintained for that charitable purpose: Federal Commissioner of Taxation v Word Investments Limited (2008) 236 CLR 204 at 216–217.
If an institution’s objects in its constituent documents indicate a purpose that is charitable, but its actual activities and other relevant factors indicate the substance and the reality is to the contrary, the institution will not be charitable.
In Word Investments Ltd (supra), at 220–221, the majority said:
In Royal Australasian College of Surgeons v Federal Commissioner of Taxation (1943) 68 CLR 436 McTiernan J said that whether the appellant in that case fulfilled the description of a scientific institution depended less on the fact that it could direct its efforts to scientific objects than “what it does in pursuit of each of them”. The inquiry, so far as it is directed to activities, must centre on whether it can be said that the activities are carried on in furtherance of a charitable purpose.
SPED’s principal activities, as it claims, are the research its members are carrying on 24 hours per day, seven days a week. I do not accept that this is research. The members’ activities, described by SPED as research, are predominately the ordinary activities of life. They are carried out for the personal benefit of the members themselves.
Similarly SPED claims that all of its expenditure is on research. However, overwhelmingly, its expenditure goes on its members’ living expenses, other personal expenditure, and commercial investments. Expenditure in any way beneficial to the community is insignificant compared to expenditure on private purposes.
SPED says that it has been represented at conferences, has conducted seminars or workshops, and has run various programs. I find the extent of these activities greatly exaggerated.
Even accepting that SPED were involved in running programs, or these other activities, as it asserts, these are minor, by any measure, compared to its main activities, namely the research SPED claims is being carried out by its members 24 hours a day, seven days a week.
SPED’s actual activities do not coincide with the stated objects in its Constitution. It does not fulfil the charitable purposes it asserts. It exists, and existed during the relevant years, for the benefit of its small number of members. A considerable part of that benefit is financial, although I suspect not evenly shared.
SPED was not at any relevant time a charitable institution.
The Commissioner also disputes that SPED is an “institution”. An entity is not an institution, as that term is used in the description “charitable institution”, merely through incorporation.
In Stratton v Simpson (1970) 125 CLR 138, at 158, Gibbs J said:
In its ordinary sense an “institution” means “an establishment, organization, or association, instituted for the promotion of some object, especially one of public utility, religious, charitable, educational etc”. (The Shorter Oxford English Dictionary).
In Pamas Foundation (Inc) v Commissioner of Taxation (1992) 35 FCR 117 a medical practitioner incorporated the Pamas Foundation for the express purpose of providing financial support for the spread of Christian teaching and the carrying on of charitable works in Australia and overseas, as well as to improve the spiritual, intellectual, social and physical condition of young men. The only members of the foundation were the medical practitioner, his wife, his four adult children and a doctor of divinity and his wife. The rules of the foundation specifically permitted a wider membership, notwithstanding the factually limited membership.
At page 125, Beaumont and Lee JJ, referred to Christian Enterprises Ltd v Commissioner of Land Tax (NSW) (1968) 88 WN (Pt 2) (NSW) 112, where, at 119, Walsh JA rejected a submission that every company with charitable objects is a charitable institution. Their Honours proceeded:
As has been seen, Walsh JA went on to say that it may well be that, in the ordinary use of language, one would speak of the Order of Franciscans as being now, but not in their early days, an “institution”. In our opinion, these observations are also apposite here. The context in which the expression “religious institution” appears includes the juxtaposed term “public benevolent institution” which tends to suggest that the word “institution” is to be given a meaning greater than a structure controlled and operated by family members and friends.
SPED’s members are all related by blood, marriage or friendship. The conditions that it places on its members mean that its membership is unlikely to grow. Any new membership is likely to be confined to persons who are born into SPED, or marry or commence a relationship with an existing member.
There is little, if any, public utility in SPED’s activities. Its activities, which it calls research, are predominately its members’ ordinary activities of life, carried out for their own benefit. Its expenditure, in general, is for the personal benefit of its members.
SPED is not an institution in the relevant sense.
HEALTH PROMOTION CHARITY
In addition to being a charitable institution, there is a requirement (in the context of the deductible gift recipient provisions of the ITAA 1997 and exemption from fringe benefits tax under the FBTAA) that SPED’s principal activity be to promote the prevention or the control of diseases in human beings. Disease includes any mental or physical ailment, or disorder.
In dealing with this issue, in Re Krishnamurti Australia Inc and Commissioner of Taxation [2011] AATA 512, the Tribunal said, at [22]:
Neither by expenditure, allocation of resources, statements of objects, subject matter of publications, nor by any other measure, could it be said that control or prevention of mental illness was a principal nor even a subsidiary activity of any significance. The representatives of KA could not point to any specific passage or publication, activity or object which addressed the subject in a direct way.
The same could be said of SPED, with the exception of its statement of objects in its Constitution.
SPED’s principal activity was not, at any relevant time, to promote the prevention or control of diseases in human beings.
REVOCATION
It follows that SPED was not entitled to any of the endorsements granted to it in 2005.
SPED points out that under s 426-55(1)(a) of the Taxation Administration Act1953 (Cth) the power of revocation is expressed in discretionary terms. In the circumstances of this case the discretion should not be exercised against revocation.
Under s 426-55(2) of the Taxation Administration Act1953 (Cth) the revocation has effect from a day specified by the Commissioner (which may be a day before the Commissioner decides to revoke the endorsement).
SPED complains that the revocations were back-dated to 1 January 2005. It submits that, if the endorsements are revoked, then the revocation should be from the date of this Tribunal’s decision or, at worst, from the date of the Commissioner’s decision.
SPED does not assert an estoppel: see Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 at 117. It contends that there is a discretion which in the circumstances should be exercised in its favour. Those circumstances include that SPED, as Miss Dupont says, has implemented investment strategies influenced by its endorsements.
It also points out that SPED was subject to a Business Activity Statement (“BAS”) audit, finalised in February 2007, in which the auditor found it was properly endorsed as a health promotion charity. It also received notice of a review in 2007, in response to which it provided information requested by the Commissioner. SPED also, of course, relies on the fact of being granted the original endorsements.
In this case it is correct that the revocations do take effect retrospectively. That is appropriate in all the circumstances, especially having regard to SPED’s actual activities and financial affairs. The BAS audit in 2006/07 did not examine those matters in any depth. Neither did the review proposed in 2007. The subsequent audit required information of SPED that was not previously made available.
The decision of the Commissioner, and the objection decision, were that the endorsements be revoked effective from 1 January 2005. It seems to have been assumed that all of the endorsements were granted from that date. The material before the Tribunal indicates that two of the endorsements did not take effect until 1 July 2005. However there was subsequent correspondence about back-dating, so that it is possible that these endorsements also took effect from the earlier date. The matter was not specifically raised by the parties.
The intention is that each revocation encompass the respective period of endorsement. The objection decision achieves that and provides certainty.
CONCLUSION
The objection decision is affirmed.
I certify that the preceding 95 (ninety-five) paragraphs are a true copy of the reasons for the decision herein of Deputy President I R Molloy ............................[Sgd]............................................
Associate
Dated 20 December 2013
Dates of hearing 22 & 23 October 2013 Solicitor for the Applicant Ms Emma Salerno Counsel for the Respondent Mr Vince Brennan Solicitor for the Respondent Ms Sue McPhee
Key Legal Topics
Areas of Law
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Taxation Law
Legal Concepts
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Tax Exemption
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Charitable Institution
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Health Promotion Charity
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