WIN FOR AID/ WATCH IN HIGH COURT - POLITICAL ACTIVITY SUPPORTS, NOT OVERRIDES, CHARITABLE PURPOSE

The decision of the High Court last week in Aid/Watch v Commissioner of Taxation [2010] (Aid/Watch) overturned the decision of the Full Federal Court in September 2009 which ruled that Aid/Watch was not a charitable institution, due to its political activity

This decision in favour of Aid/Watch is important for other not-for-profit organisations, particularly those seeking to influence government policy in the public interest.

Background

Aid/Watch “monitors, researches, campaigns and undertakes activities on the environmental impact of Australian and multinational aid and investment programs, projects and policies.” To achieve this, Aid/Watch sought to generate public debate about the efficiency of foreign aid directed to relieve poverty, influence Government and where necessary, change Government policy with a view to changing the laws applicable to foreign aid.

Aid/Watch had self-assessed its tax exempt status, exempting it from Income Tax, Fringe Benefits Tax (FBT) and Goods and Service Tax (GST). It was then endorsed as a ‘charitable institution’ by the Commissioner from 14 July 2000 (income tax) and 1 July 2005 (FBT and GST). In October 2006, the Commissioner revoked the tax exempt status on the basis that it was not a ’charitable institution’.

Charitable institution

The term is not defined in the income tax legislation, meaning that the definition is based on common law.

At common law, a purpose is charitable if it falls within one of the following four categories:

1. The relief of poverty.
2. The advancement of education.
3. The advancement of religion.
4. Other purposes beneficial to the community.
   

Political activity

An entity is not charitable if its purpose is advocating a political party or cause, attempting to change the law or government policy, or promoting a particular point of view.

However, if an entity’s purpose is otherwise charitable, the presence of political, lobbying or promotional activity that is incidental to the charitable aims will not prevent it being a charity.

The Decision

The decision by the majority of the High Court held that Aid/Watch’s primary objectives fell within two of the categories described above; the alleviation of poverty and public benefit and its activities were ultimately in pursuit of these objectives.

Authors: Allan Mortel, Director & David Chan, Assistant Manager, Moore Stephens Sydney.


Contact

Allan Mortel
T +61 2 8236 7700
amortel@moorestephens.com.au

www.moorestephens.com.au