A recent case, Victorian Farmers Federation v Commissioner of State Revenue [2017] VCAT 19 (the VFF) saw the membership based Federation fail in its attempt to be recognised as charity for payroll tax purposes.
The VFF’s objects included:
- to advance, promote and protect the interest of Members, the interest of Agricultural industries in which members are engaged and the interests of the Federation in all matters, including economic, legal, environmental, social and any other incidental matters;
- to encourage and promote the development of Agriculture; and to advance policies that will assist members to improve farm profitability.
The relevant Victorian PRT exemption is found in s. 48 of the Victorian Payroll Tax Act 2007. Section 48 provides that wages are exempt if the Commissioner is satisfied the wages are paid by a non-profit organisation having as its whole or dominant purpose a charitable purpose.
The parties agreed that if a charitable purpose was to be identified it would fall under the charitable head ‘…other purposes beneficial to the community’.
As is common with this type of cases, the decision confirmed the general law regarding what is a charity and how an organisation’s sole or dominant purposes should be ascertained by reference to both the organisations stated objects and the activities undertaken to ensure they are consistent with those objects.
It is generally accepted law that promotion of members’ interests is not a charitable purpose, although promotion of agriculture more broadly is likely to be a charitable purpose.
After weighing up the VFF’s stated objects against the nature of activities undertaken it was viewed that VFFs dominant purpose was the benefitting (or more specifically the profitability) of those involved in agriculture as opposed to benefitting agriculture generally.
There have been many cases dealing with whether an organisation is a charitable in recent years.
To the extent certain taxpayers have been successful (Chamber of Commerce and Industry of Western Australia Inc. [212] WASAT 146) it was interesting the law was changed effectively to exclude certain types of organisations from exemption. Most cases of late, however, have seen the taxpayer fail generally given the promotion of member interests was considered to be the dominant purpose.
As a further comment, tensions exist between the role of the role of the Australian Charities and Not-for-profit Commission (ACNC) in registering organisations as charities and State Revenue Office’s where tax concessions such as PRT, Duties, Land Tax etc. are tied to an organisation’s status.
We are aware there is a push for State Taxation law to recognise an organisation as a charity where it is so endorsed by the ACNC. Whilst this outcome would streamline administrative matters, the question will always remain as whether an organisation’s objects and activities support the finding that the sole or dominant purpose is charitable.