NATIONAL COUNCIL OF WOMEN OF TASMANIA v FC of T

Members:
AM Blow QC
A Cunningham M

Tribunal:
Administrative Appeals Tribunal

Decision date: 11 May 1998

---

AM Blow OAM, QC (Deputy President) and A Cunningham (Member)

The applicant (``the Council'') is an unincorporated association which was established in 1899. It earns a little interest on funds that it has invested. The Commissioner contends that it is liable to pay income tax on that interest, but it contends that it is exempt from income tax.

2. On 12 January 1996 the Commissioner received from the Council an application pursuant to s. 14ZAF of the Taxation Administration Act 1953, seeking a private ruling in respect of the years ended 1 October 1992 to 1 October 1995 inclusive as to whether it was exempt from income tax under s. 23(g)(v) of the Income Tax Assessment Act 1936 (``the Tax Act''). On 24 May 1996 a delegate of the Commissioner ruled that it was not. The Council objected to the private ruling pursuant to s. 14ZAZA(1) of the Taxation Administration Act 1953. On 26 August 1996, pursuant to s. 14Z(1) of that Act, the Deputy Commissioner disallowed that objection. The Council has applied to this Tribunal for a review of that decision under s. 14ZZ(a)(i) of that Act.

3. The critical question is whether s. 23(g)(v) of the Tax Act applies to the Council. That provision reads as follows:

``23 The following income shall be exempt from income tax:-

• ...
• (g) the income of a society, association or club which is not carried on for the purposes of profit or gain to its individual members and is-
  • ...
  • (v) a society, association or club established for community service purposes (not being political purposes or lobbying purposes).''

4. It is common ground that the Council is ``a society, association or club which is not carried on for the purposes of profit or gain to its individual members''. The Council contends that it is ``established for community service purposes'' within the meaning of s. 23(g)(v), and that those purposes are not ``political purposes or lobbying purposes''. The respondent contends that the Council is not ``established for community service purposes'' and, in the alternative, that the purposes for which it is ``established'' are political purposes and/or lobbying purposes. The Council as applicant bears the onus of proof under s. 14ZZK(b)(iii) of the Taxation Administration Act 1953.

5. At first glance, one would think that the words ``established for community service purposes'' require a consideration of the purposes for which the Council was established in 1899, but that is not so. In
Brookton Co- operative Society Limited v FC of T 81 ATC 4346; (1981) 147 CLR 441, the High Court considered s. 117(1)(d) of the Tax Act, which had the effect of exempting a company from undistributed profits tax as a ``co-operative company'' when that company ``is established for the purpose of carrying on any business having as its primary object or objects one or more of the following:-... (d) the rendering of services to its shareholders''. The approach that the High Court took is reflected in the comment of Mason J at ATC p 4352; CLR p 451 that ``the purpose for which a company is established may change in the course of time''. That case was followed by the Full Court of the Federal Court of Australia in
Cronulla Sutherland Leagues Club Limited v FC of T 90 ATC 4215; (1990) 23 FCR 82, a case which concerned s. 23(g)(iii) of the Act. The Full Court decided that the appellant in that case was not, during the relevant tax years, ``a club established for the encouragement or promotion of an athletic game or athletic sport''.

6. In
Royal Australasian College of Surgeons v FC of T (1943) 7 ATD 289; (1943) 68 CLR 436, the High Court had to determine whether the Royal Australasian College of Surgeons was

---

ATC 2126

a scientific institution within the meaning of s. 23(e) of the Tax Act. The five judges who heard that appeal unanimously held that the College was a scientific institution, on the basis that its primary and dominant object was the promotion of surgical science, notwithstanding the fact that it also pursued other objects and activities. That case was followed and applied by the Full Court of the Federal Court in the Cronulla Sutherland Leagues Club case, in which the nature of the primary and dominant object of that club was held to be critical.

7. It follows from the judgments in those cases that, in determining whether the Council was ``a society, association or club established for community service purposes (not being political purposes or lobbying purposes)'' during the five-year period ending on 1 October 1995, we need to consider the nature of its primary or dominant object or objects, having regard to its activities in and around that five- year period and the objects listed in its Constitution.

8. The meaning of the words ``community service purposes'' in s. 23(g)(v) was considered by Olney J in
Douglas & Ors v FC of T 97 ATC 4722 at 4726-4727. In that case his Honour held that the trustees of a ``Protestant Hall'' did not gain the benefit of the exemption provided for by s. 23(g)(v) since they merely held the title to the relevant land and maintained a building on it for use by other organisations, without undertaking any activity for the benefit or the welfare of the community. His Honour had regard to comments made at pp. 20-21 of the explanatory memorandum circulated by the then Treasurer upon the introduction of the Taxation Laws Amendment Bill (No 2) 1990, which introduced s. 23(g)(v). The relevant parts of the explanatory memorandum read as follows:

``Paragraph (b) of this clause will introduce subparagraph 23(g)(v) which will exempt from income tax the income of not-for-profit bodies established for community service purposes. The words `for community service purposes' are not defined but are to be given a wide interpretation. The words are not limited to those purposes beneficial to the community which are also charitable. They extend to a range of altruistic purposes. The words would extend to promoting, providing or carrying out activities, facilities or projects for the benefit or welfare of the community, or of any members of the community who have particular need of those activities, facilities or projects by reason of their youth, age, infirmity or disablement, poverty or social or economic circumstances. An exclusion from the exemption will apply to bodies established for political or lobbying purposes.

...

When purposes are directed to the benefit or welfare of members of the community in particular need, that need must arise by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances. These causes of need are intended to be read broadly. Infirmity or disablement, for example, could be intellectual or physical, and could be congenital or the product of disease or of injury. Similarly, social or economic circumstances could include such varied matters as sex, living in a remote area, or inability to speak English.

Political or lobbying purposes include standing candidates for election, campaigning for changes to the law or to government policy, and the like. Community service organisations may engage in political or lobbying activities, provided these are no more than merely incidental to other purposes beneficial to the community. But a body will be unable to claim exemption from income tax under this subparagraph if its only undertakings for the benefit of the community are political or lobbying ones.

All the traditional service clubs such as Apex, Rotary, Lions, Zonta, Quota and the like and community service organisations such as the Country Women's Association of Australia and its constituent Associations are considered to be exempt from income tax under the new subparagraph.''

9. It is appropriate to observe at this stage that the activities of the Council are in many ways unlike those of traditional service clubs. It does not undertake construction projects. Little money passes through its accounts. Its counsel submitted at the hearing that it serves the community in subtle ways.

10. Membership of the Council is governed by Article IV of its present constitution, which was adopted in 1974. A number of individual

---

ATC 2127

women are associate members and life members. But primarily the membership consists of societies and associations, many of which are probably also unincorporated. Article IV begins as follows:

``1. All organised societies or associations of women, or societies of men and women, whose objects are approved by the Council are eligible for affiliation if in sympathy with the objects of the Council. These societies shall be represented on the Council by two (2) delegates from each society.''

11. The objects of the Council were set out in Article II of the 1974 constitution in the following terms:

``The objects of the Council shall be:-

• (a) to establish a bond of union between the various affiliated societies.
• (b) to advance the interests of women and children and of humanity in general.
• (c) to confer on questions relating to the welfare of the family, the State and the Commonwealth.
• (d) to represent the need for national and local reforms to the proper authorities.''

12. Object (d) was deleted as the result of an amendment in 1991, but the other provisions remain in force.

13. Article V of the constitution provides for the management and control of the Council to be vested in an executive, which consists of a number of designated office bearers, one life member elected by the Council, and all convenors of standing committees.

14. Each year the Council holds one annual general meeting, nine monthly general meetings, ten monthly executive meetings, and a number of lunches and seminars.

15. As the membership provisions in the constitution suggest, the Council functions as an umbrella organisation, bringing together representatives of dozens of women's organisations. That has been its role ever since 1899. It has links to the National Council of Women of Australia, the International Council of Women, the National Council of Women of Launceston, and the National Council of Women of Devonport.

16. At the hearing of this application we received detailed evidence of the Council's activities during the year ended 15 March 1995. It is common ground that the Council's activities were not significantly different during the balance of the five-year period ending on 1 October 1995. The Council's financial year runs from 16 March in one year to 15 March in the next. We do not understand why a five-year period ending on 1 October 1995 was chosen when the private ruling was sought, but the consequences of that choice need not concern us.

17. One of the subtle roles of the Council is to widen the support network of its affiliated organisations. Thus delegates and members who attend Council meetings and executive meetings support the activities of affiliated organisations financially and by doing unpaid work. Council delegates and members also assist by donating and collecting goods for the needy, such as baby clothes, and also by knitting items for the needy during general meetings. Little or no fund-raising is undertaken for projects of the Council, but fund-raising is undertaken for the projects of its member organisations. Most, if not all, of those member organisations would appear to qualify as community service organisations for the purpose of s. 23(g)(v). The Council also fulfils a valuable role in providing a forum for the sharing or exchange of information and ideas. For example, at each general meeting representatives of the member organisations outline their organisation's activities, needs and concerns.

18. The Council also has a role in the dissemination of information on issues important to women. For example, it has distributed pamphlets on breast cancer and anaemia, promoted a new form of bio- degradable nappy liner, and distributed information kits for women in relation to HIV/ AIDS. In 1994, as part of its contribution to the International Year of the Family, the Council had a series of newspaper articles published on nutrition and health care for children, targeted at the less affluent parents in the community.

19. It is part of the role of the convenor of each standing committee to obtain information from a wide range of community experts as to a particular subject when so requested by a delegate of a member organisation.

20. The Council has sought to avoid party politics and matters of political controversy. For example, environmental issues are discussed, but radical environmentalists are not invited. During the years in question matters discussed

---

ATC 2128

at meetings, or spoken about by guest speakers, have included firearms, B-double trucks, poker machines, marijuana, anti-discrimination legislation, and the introduction of competition in the telecommunications industry.

21. The Council is frequently asked to make submissions as to policy matters being considered by the Commonwealth and State governments and at local government level. It is not able to provide all the submissions that it is invited to make. Requests for submissions are referred to appropriate individuals, who in turn consult the member organisations. The policy of the Council is that submissions must always reflect the views of the Council. We take it that any such submissions are meant to reflect consensus views.

22. In other respects, the Council's political and lobbying activities have been minimal. Letters to newspapers have been written on its behalf only three times in 13 years. Appointments with politicians have been made only four times in 18 years. It is thus clear that its political and lobbying activities are merely incidental to its principal activities. The critical question therefore is whether it operates substantially ``for community service purposes''.

23. In our view it is very significant that, in the first paragraph that we have quoted from the explanatory memorandum in paragraph 8 above, the then Treasurer explained the intended meaning of the words ``community service purposes'' by reference not only to the providing or carrying out of activities, facilities or projects for the benefit or welfare of the community, but also to the promoting of such activities, facilities or projects. The Council is very much a promoter of its constituent organisations' activities, facilities or projects, more than it is a provider thereof. With few, if any, exceptions, the promoted activities, facilities and projects of the member organisations are very clearly for the benefit or welfare of the community.

24. Examples of the promoted activities, facilities and projects of affiliated organisations include the following:

• (a) the provision of clothing and accommodation for the homeless and needy by the Salvation Army;
• (b) the work of the Australian Federation of University Women in raising money to support students, and in advancing the discussion of issues of concern within the community, particularly in relation to equity for women;
• (c) the raising of money to provide scholarships and bursaries for students by the Business and Professional Women's Club of Hobart;
• (d) the activities of Caroline House, which provides facilities to care for female drug users;
• (e) the work of the Catholic Women's League in support of the St. Vincent de Paul Society and other community work of the Roman Catholic Church;
• (f) the work of the Churches of Christ in the provision of pregnancy support services;
• (g) the work of the Domestic Violence Action Group in assisting victims of domestic violence; and
• (h) the work of Task Force Action for Migrant Women in the provision of English lessons within the home, migrant resource services, and books.

25. We do not regard the Council's predominant purpose as being that of a social club or discussion group. Whilst we accept that there was an element of social interaction at its meetings, we find that the predominant purpose of the meetings involves the co-ordination of community service work, and the provision and exchange of information for the purpose of facilitating community service work. One only has to consider the substantial support given to activities of the Council's affiliated associations of the sort listed above in order to see that.

26. We think the active role of the Council should be distinguished from the more passive role of the trustees in Douglas & Ors v FC of T. The trustees did no more than provide a building. They did not promote anything. Further, the trustees did not undertake any activity for the benefit or the welfare of the community, whereas the Council's core activities have included beneficial education activities.

27. For these reasons, we have concluded that at all material times the Council was an association established for community service purposes, not being political purposes or lobbying purposes, and was thus exempt from income tax pursuant to s. 23(g)(v) of the Tax Act. We have therefore decided to set aside the

---

ATC 2129

decision under review and to remit the matter to the Commissioner for reconsideration in accordance with a direction that throughout the five years ended 1 October 1995 the applicant was exempt from income tax under s. 23(g)(v) of the Income Tax Assessment Act 1936.