Australian Pork Limited v Commissioner for ACT Revenue (Administrative Review) [2018] ACAT 85
Australian Capital Territory Civil and Administrative Tribunal, Senior Member Professor T. Foley, 30 August 2018
In 2000, the Australian Pork Corporation, the Pig Research and Development Corporation and the Pork Council of Australia were amalgamated to form Australian Pork Limited (APL), a company limited by guarantee. On 12 February 2016 APL sought a payroll tax exemption from the respondent Commissioner on the ground that APL’s whole or predominant was charitable. To obtain such an exemption APL needed to be granted a ‘Beneficial Organisation Determination’ (BOD) in its favour. On 6 March 2017 the Commissioner refused the APL’s request for a BOD in its favour for the purpose of payroll tax exemption. In this application, APL sought a review of that decision pursuant to section 104 of the Taxation Administration Act 1999 (ACT) (the Act).
The application of the Act to “charitable organisations” is dealt with in Part 3A. Section 18B of Part 3A provides the following meaning of charitable organisation:
For a tax law:
charitable organisation—
(a) means an organisation carried on for a religious, educational, benevolent or charitable purpose; but
(b) does not include—
(i) an organisation carried on for securing pecuniary benefits to its members; or
(ii) an excluded organisation unless a beneficial organisation determination is in force for the excluded organisation (emphasis added).
Section 18C(1) provides that:
excluded organisation means—
(a) a political party; or
(b) an industrial organisation; or
(c) a professional organisation; or
(d) an organisation that promotes trade, industry or commerce; or
(e) a class of organisation prescribed by regulation (emphasis added).
Category (d) of section 18(C)(1) is further defined in section18C(2) as:
‘organisation that promotes trade, industry or commerce’ means an organisation that has as one of its purposes promoting, or advocating for, trade, industry or commerce, whether generally or for a particular kind of trade, industry or commerce.
The issue for determination was whether APL satisfied the requirements for a BOD in section 18F(1) of the Act:
If the commissioner receives an application for a beneficial organisation determination from an organisation, the commissioner may make the determination if satisfied that—
(a) the predominant purpose of the organisation is to advance religion, advance education, relieve poverty, or otherwise benefit the community; and
(b) the objects and activities of the organisation that make the organisation an excluded organisation are not significant in relation to the purpose of the organisation considered as a whole; and
(c) the purpose of the organisation is not, or is not intended to be, beneficial to a particular class of people (whether or not members of the organisation) rather than the community generally (emphasis added).
It was accepted between the parties that APL was an excluded organisation under the Act. But was it entitled to a BOD to overcome this fact? Did its predominant purpose benefit the community (section 18F(1)(a))? APL contended that is met the requirements by saying that ‘predominant’ in paragraph (a) was meant in a more general sense of ‘dominant’ rather than being the primary purpose with all other purposes being secondary or ancillary. This is a departure from the usual common law test of charitable purpose. The Tribunal did not accept this departure (at [124]):
The Tribunal rejects the applicant’s assertion that paragraph (a) loosens the common law requirement and accepts the respondent’s reading of the paragraph. The ‘predominant purpose’ of the applicant is on the evidence not charitable. Organisations with non-charitable secondary purposes which can be pursued independently such as the applicant do not satisfy the section.
As to section 18F(1)(b), the Tribunal said (at [130]):
The Tribunal accepts that the purpose against which the organisation’s activities and objects are evaluated in paragraph (b) is the predominant purpose from paragraph (a) which has been found to be the promotion of the pork industry. When the evidence of these objects and activities are examined, particularly in the context of the allocation of expenditure under the applicant’s funding agreement with the Commonwealth, they are to a significant degree directed to promoting and advocating for the Australian pork industry in the Oxford English Dictionary sense of “advancing the interests of” or “furthering the growth, development and progress of”.
In relation to section 18F(1)(c), the Tribunal said that APL did not benefit the community generally (at [131]):
The effect is that the purpose cannot be to be beneficial to a particular class of people whether or not they are members of the organisation. The purport of the ‘rather than’ phrase is that the benefit must be for the community generally.
This is slightly different to the usual common law test, and was contended for by the Commissioner (at [110]):
The respondent contends paragraph (c) expresses the legislature’s reformulation of the common law requirement as stated in Oppenheim [Oppenheim v Tobacco Securities Trust Co Ltd [1950] UKHL 2] that the benefit be for the community or a sufficient section of the community. The respondent says not only has the requirement been reformulated by the legislature, but it has been stated separately from the standard test in paragraph (a). In contrast to the common law charity test a benefit for a section of the community is not sufficient. The requirement has been reformulated by requiring the benefit to be for the community generally. The respondent says the benefit the applicant’s purpose provides is to the pork industry, any benefit to the community is incidental.
The Tribunal agreed that some of the activities of APL were for the benefit of the community (at [133]):
When its objects and its activities are examined (notably its activities in animal welfare, environmental sustainability, anti-microbial resistance research, and its educational and nutritional programs) they are all beneficial to the community generally and not just to pork producers. There is no doubt that increasing sustainability, maintaining healthy farms through reducing biosecurity risks, undertaking bacterial research and water research, and developing digital technology are.
However, section 18(1)(a)-(c) had to read as a whole (at [138]):
The process for satisfying the requirements for a BOD is convoluted and restrictive. Section 18F(1)(a)-(c) which set these requirements needs to be read as a whole. Paragraph (a) is essentially a refinement of the Pemsel test, but paragraphs (b) and (c) add further or separate requirements. Paragraph (b) adds a requirement to consider the ‘significance’ of the objects and activities which support the purpose. Paragraph (c) separates out the requirement of benefit and alters it from the common law in requiring a consideration as to whether the purpose is intended to benefit a particular class of people rather than the community generally. Taken together these requirements create a test which sits above the common law test. It is a test the applicant organisation does not satisfy. It is difficult to imagine an organisation that could. The respondent’s counsel could not suggest one.
In particular the ‘benefit requirement’ in section 18F(1)(c) was most important (at [135]):
The Tribunal finds paragraph (c) is concerned with benefit and where that benefit flows. The applicant says the benefit flows to the public generally, and the benefit that flows to pork producers is marginal or incidental. The respondent says the reverse, the benefit flows to pork producers, and the benefit to the public generally is consequential.
The Tribunal agreed with the Commissioner. Therefore, as APL could not meet any of the three requirements to obtain a BOD under the Act, it was not charitable and not exempt from payroll tax.
