Case X64
Members:P Gerber DP
Tribunal:
Administrative Appeals Tribunal
Dr P. Gerber (Deputy President)
The Gotham City Fire Brigade Board (``Gotham'') is a fire brigade board established by Order in Council issued pursuant to the Fire Brigades Act 1964-1985 (Qld). Gotham claims that fringe benefits totalling $19,215 for the period 1 July 1986 to 31 March 1987 are ``exempt fringe benefits'' within sec. 57A(1) of the Fringe Benefits Tax Assessment Act 1986 (``the Act''). Section 57A(1) (as amended by sec. 32 of Act No. 139 of 1987) provides:
``Where the employer of an employee is a public benevolent institution, a benefit provided in respect of the employment of the employee is an exempt benefit.''
2. Since several other fire brigade boards have applications pending before this Tribunal which are said to be in cosimili casu, both parties agree to treat the present application as a test case without, however, conceding that its outcome is necessarily decisive in each or any of the other applications in which the facts may be distinguishable.
3. The sole issue to be determined is whether Gotham is ``a public benevolent institution'' so as to qualify for fringe benefits tax exemption under sec. 57A(1) of the Act.
4. Section 8 of the Fire Brigades Act deems Gotham to be a body corporate. Section 9 sets out the general powers and duties of the Board. It provides:
``A Board, in relation to the district for which it is constituted, is invested with the following duties:
- (a) controlling and extinguishing fires;
- (b) protecting life and property in case of fire;
- (c) undertaking fire prevention measures;
- (d) providing an advisory service in relation to fire prevention;
- (e) complying with directions given by the Minister in pursuance of his powers and duties under this Act...''
5. The costs to Gotham to discharge these duties effectively are considerable. Indeed, Gotham's annual report for the 1987 tax year discloses a general expenditure of $25,491,807.
6. The evidence disclosed that the funds required for capital and operating expenditure are derived predominantly from the State Government (12.5%) and a mandatory levy imposed on ``prescribed property owners'' (87.5%). Chapter 16.2.1 of the Administrative Services Handbook outlines that ``the basic principle of the Queensland Fire Service Funding Scheme is that of payment for Fire Services, by property owners, in accordance with the expectation and availability of service''. I find this statement to be not without significance in the resolution of the issue I have to decide.
7. Section 34A of the Fire Brigades Act authorises the Governor by Order in Council to prescribe the annual contributions payable by owners of ``prescribed properties'' (defined in sec. 30B). The levy payable by owners may vary -
``according to categories of prescribed properties, the use of any prescribed properties, the nature and availability of services by and the facilities of fire brigades servicing properties or upon such other basis or bases as the Governor in Council considers appropriate.''
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8. By Order in Council dated 8 August 1985, it was stipulated that the term ``prescribed property'' in sec. 30B shall be ``any other parcel of land (including a part or parts of buildings or of land comprising a lot shown on a building units plan or group titles plan) which is used for any of the following purposes: Residential; Shops/Commercial; Transport/Storage; Industrial; Institutions; Educational; Recreational; Rural and Miscellaneous Services''. The Order in Council then specifies the actual amounts payable in pursuance of sec. 32 and 34 of the Fire Brigades Act.
9. Gotham's receipts in the 1987 tax year, as shown in its annual report, were:
$
Attendance at fires 6,764
Interest 643,948
* Fire alarm charges and
maintenance 240,907
* Services 396,332
* False alarms 50,657
* Demonstrations 15,846
* Fire alarm connections 13,634
* Workshop charges 12,497
* Miscellaneous 31,066
Commonwealth contributions 312,012
State Government contributions 3,046,664
Property owners' contributions 21,326,647
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$26,096,974
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*These items were recorded in Note 2 of the annual report which provides a detailed breakdown of ``Other Receipts'' of $760,939.
10. The Commonwealth contribution to the State of $312,012 is paid for fire protection services to Commonwealth property and is levied at 0.8% of that year's actual operating costs adjusted annually by the Government final consumption expenditure deflator index.
11. Gotham's accountant gave evidence detailing each of the chargeable items listed above. The fee for ``attendance at fires'' was said to be the standard fee to attend and extinguish a motor vehicle fire. ``Fire alarm charges and maintenance'' represent a fixed charge for the connection of an alarm system from occupiers' premises to the Brigade Watchroom as well as an annual rental charge. ``Services'' charges were fees imposed for the inspection and recharging of fire extinguishers in various premises. These ``services'' were undertaken by Gotham's Special Services Department, operating in competition with commercial organisations. ``False alarms'' fees were payable in the event of either excessive or malicious false alarms. A ``demonstrations'' charge was said to be merely the cost of recharging fire extinguishers used in demonstrations. ``Workshop charges'' were fees levied for services provided by Gotham's electronic technicians to other fire brigade boards. ``Miscellaneous'' encompassed sundry recoveries, such as a recovery upon a superannuation plan, and the proceeds from the sale of surplus equipment and clothing.
12. To complete the picture, the applicant called the chief fire officer of Gotham to outline the organisation's structure and the activities performed by its personnel.
13. I find on the evidence that the Board has two major divisions - ``Brigade'' and ``Administration''. Within the Brigade Division there are further lines of subdivision. The personnel directly under the control of the chief officer are all trained firemen. In any one year, firemen spend between 7 and 10% of their time attending to fires, approximately 75% in training and some 15% on maintenance of equipment. whenever time permits, they are also expected to perform such domestic duties as cleaning. I am also satisfied on the evidence that considerable time is spent on public relations activities, such as lectures, demonstrations, visits to schools and kindergartens. In addition, Gotham's trained firemen provide ``fire prevention services'' for private premises free of charge. (``Fire prevention'' involves an inspection of the premises focusing on the means of escape, the provision of fire fighting equipment, the adequacy of existing equipment, emergency lighting, the general structure of premises and recommendations to improve the overall integrity of premises.) Gotham also offers training to outside groups in both fire fighting and the correct use of breathing apparatus free of charge and, if required, provides limited first aid, attends fires in vehicles or boats, assists other district fire brigades, and generally is able to ``respond to any sort of request from the community for assistance''.
14. Appendix 2 of the 1987 annual report is a ``Summary of Calls for Year Ended 30th June 1987''. The table has three columns (i) Fires;
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(ii) Special Service; and (iii) False Alarms. Special Service is further broken down into categories of (a) special service; (b) life rescue; and (c) salvage. Special services provided by Gotham include washing petrol off roads or absorbing oil on a roadway, responding to calls in respect of gas and chemical leakages, attending the scene of an accident, assisting when power lines are down, and setting free persons locked in lifts or buildings. ``Life rescue'' covers life threatening situations, for example, where individuals are preparing to jump from a building or where persons are trapped inside motor vehicles. ``Salvage work'' encompasses work undertaken to rectify major water damage to buildings. Indeed, Gotham may be called to render assistance in cases which are totally unrelated to fire protection. It seems that not all false alarm calls are billed; only those calls which are either malicious or exceed a predetermined standard are charged.15. Mr McGill submits that on the whole of the evidence adduced, Gotham is a ``public benevolent institution'', so that the fringe benefits of motor vehicles, telephone expenditure and entertainment expenses paid to its employees are ``exempt benefits'' within sec. 57A(1) of the Act. He places particular reliance on the following propositions:
- (a) the wide variety of services undertaken by Gotham which are provided free of charge;
- (b) that ``other receipts'' constitute but a token proportion of total receipts ($760,939 out of a total receipt of $26,096,974), and further, that the commercially orientated Special Services Department which generated the bulk of that ``other receipts'' revenue, was a distinct and minor division of the entire board's operations;
- (c) that the levy payable by prescribed property owners is akin to a land tax rather than a payment for services rendered;
- (d) that the services provided by Gotham assist in the relief of distress in potentially tragic and hazardous situations.
16. Mr Fryberg, of senior counsel for the Crown, after analysing the relevant authorities, extracted a list of characteristics, which although not exhaustive, he submits would assist in determining what constitutes ``a public benevolent institution'' for present purposes. The considerations he identified were:
- (i) that the institution should be organised for the relief of poverty, sickness, destitution or helplessness;
- (ii) the absence of any substantial charge for services;
- (iii) an element of doing good;
- (iv) the existence of an appreciably needy class to whom the service is provided, and that that is a class which does not include the whole community;
- (v) that the service is provided voluntarily.
Applying these characteristics to the evidence, he submits that Gotham does not fall within the double requirement of ``public benevolent''.
17. Mr McGill, on the other hand, submits that the term ``public'' has been accepted in a dual context by the Courts, being applied on the one hand to the institution (i.e. ``public institution'') and on the other, in the context of benevolence (i.e. ``public benevolence'').
18. In
Maughan v. F.C. of T. (1942-1943) 66 C.L.R. 388 at pp. 397-398, Williams J. (with whom Rich J. agreed) stated:
``... Parliament evidently intended the word `public' to include institutions which, like the Royal Naval House, provide for the needs of some special but substantial class of the community. But this is merely a recognition of the view established by many decisions (see the cases collected in the judgment of Rich J. in
The Little Company of Mary (S.A.) Incorporated v. The Commonwealth & Anor (1942-1943) 66 C.L.R. 368 that an institution which aims at benefiting an appreciable and particularly but not necessarily an appreciable needy section of the community is a public institution.''
Also at p. 397 his Honour said:
``The question whether an institution is subject to some form of public control is a factor to be taken into account in determining whether it is a public institution (The Little Company of Mary (S.A.) Incorporated v. The Commonwealth). But public control is not essential (the main criterion is the extensiveness of the class it is the object of the institution to benefit)
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and, in order to be of a public nature, the control need not be, in my opinion that of some government body. A constitution which provides for those members of the public who are sufficiently interested in the work of the institution to subscribe to its funds and thereby become annual members and as such eligible to vote at the election of the controlling body creates a control which is public in its nature.''
19. On the whole of the evidence, I am satisfied Gotham is ``public'' in the sense that it is both a government institution and a creature of statute. Thus, some members of the Board are appointed by government and some by local authorities. For good measure, its funding is essentially derived from government. Additionally when one considers the services performed by Gotham, it is clear that they are designed to serve and assist the public.
Is Gotham a benevolent institution?
20. In
Perpetual Trustee Co. Ltd. v. F.C. of T. (1930-1931) 45 C.L.R. 224, Starke J. said at p. 232:
``... a `public benevolent institution' means, in my opinion, an institution organized for the relief of poverty, sickness, destitution or helplessness.''
At pp. 233-234, Dixon J. held:
``... I am unable to place upon the expression `public benevolent institution' in the exemption a meaning wide enough to include organizations which do not promote the relief of poverty, suffering, distress or misfortune.''
McTiernan J., while dissenting on the facts, said at p. 241:
``... it may be difficult to bring within the scope of the exemption which has been granted in aid of a public benevolent institution, a gift to an institution which is of a public character, but does not exist for the relief of distress or misfortune occasioned by poverty.''
Evatt J. commented at pp. 235-236:
``There are, however, very many bodies which readily answer the description of `benevolent institutions'. The Benevolent Society of New South Wales provides food and clothing for those in poverty and distress, the Scarba Home takes care of deserted babies, many organizations of Church and State provide for the maintenance, housing and relief of the aged poor, orphans and those suffering from bodily or mental disease. A characteristic of most of these organizations is the absence of any charge for services or the fixing of a purely nominal charge.
Such bodies vary greatly in scope and character. But they have one thing in common: they give relief freely to those who are in need of it and who are unable to care for themselves.
Those who receive aid or comfort in this way are the poor, the sick, the aged, and the young. Their disability or distress arouses pity, and the institutions are designed to give them protection. They are very numerous - `the nobler a soul is the more objects of compassion it hath' - and they have come to be known as `benevolent institutions'.''
Mr McGill directed my attention to the observation of Northrop J. in F.C. of T. v. Launceston Legacy 87 ATC 4635 at p. 4646:
``... it should be noted that the authorities cited show a softening of attitude to what comes within the concept of `benevolent' in the phrase `public benevolent institution'.''
21. In Case X32,
90 ATC 299, I had occasion to consider whether a Brownie Pack (part of the Girl Guide Movement) qualified for exemption under sec. 3 of the Bank Account Debits Tax Administration Act 1982 qua ``public benevolent institution''. In concluding that the particular Brownie Pack did not so qualify, I observed (at p. 304):
``that the recent authorities - including the Legacy case - continue to insist, as a condition precedent, that to qualify as `a public benevolent institution', the organisation must itself be engaged in the relief of poverty, suffering, distress or misfortune, albeit a distress falling short of destitution.''
22. I accept Mr McGill's submissions that all the activities of Gotham need not necessarily be benevolent, and that it renders invaluable assistance to persons in need of relief. Quite clearly, to experience the loss of one's home due to fire is a cause of suffering, distress and
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misfortune. Nevertheless, I am satisfied that the interpretation given to ``public benevolent institution'' in sec. 78 of the Income Tax Act applies, mutatis mutandis, to sec. 57A(1) of the Act and that, on the evidence, Gotham is not, for present purposes, a ``public benevolent institution''. Indeed, I am satisfied that the applicant constitutes a classic example of a government-controlled enterprise, levying a charge for the availability of its services upon prescribed property owners. To call such a levy a ``land tax'' is hardly descriptive of the charge imposed any more than calling kittens ``cakes'' because they were born in an oven. this is confirmed by chapter 16.2.1 of the Administrative Services Handbook, which states that ``the basic principle of the Queensland Fire Service Funding Scheme is that of payment for Fire Services, by property owners, in accordance with the expectation and availability of service''. Again, the contribution of $312,012 by the Commonwealth was not a ``gratuity'' but paid for fire protection services to its property.23. Against this background, the argument that many of Gotham's services are offered free of charge, however charitable and benevolent, is not sufficient to convert what is, au fond, a commercial undertaking into a ``public benevolent institution''. In any event, the evidence disclosed that no more than 7 to 10% of a fireman's duty is devoted to extinguishing fires and the occasional rescue - the only activities which can, arguably, be said to constitute ``relief of poverty, suffering, distress or misfortune''. For good measure, the Authority is not in receipt of donations or subscriptions, one of the classic characteristics of a public benevolent institution. Again, ``other receipts'' of $760,000 can hardly be said to be nominal. (One may ponder on the coincidence of the issue of a political directive to scale down this commercial activity at the very time when the fringe benefits legislation came into effect. I have ignored this aspect for present purposes.)
24. In the result, I can do no better than adopt the observation of Evatt J. in Perpetual Trustee Co. Ltd. v. F.C. of T. (1930-1931) 45 C.L.R. 224 to the effect that an essential characteristic of a ``public benevolent institution'' is the ``absence of any charge for services or the fixing of a purely nominal charge''. Applied to the evidence as it emerged in this case, I am satisfied that Gotham is not a ``public benevolent institution'' within the meaning of the Act and thus not exempt from fringe benefits tax as provided for by sec. 57A(1).
25. For the above reasons, the Commissioner's decision on the objection is affirmed.
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