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by Fiona Martin
The Australian Government, through the Income Tax Assessment Act 1997 (Cth) (‘ITAA’) ensures significant fiscal advantages, particularly the exemption from income tax,[1] of entities that are considered charities. As there is no statutory definition of ‘charity’ or ‘charitable’ in this legislation, the common law must be analysed in order to determine if an entity is a charity. The law on charities has developed over several centuries and is by its very nature a field that is constantly evolving alongside community values and attitudes. What might once have been considered a matter that was not charitable may now be considered a worthwhile and altruistic ideal worthy of charitable status. As far back as 1601 an attempt was made in England to classify or provide guidelines for the identification of charitable purposes in the Preamble to the Charitable Uses Act 1601.[2] Clearly, when this law was developing, the rights of Indigenous people in Australia was not in its contemplation.
The modern conception of what is meant by the terms ‘charity’ and ‘charitable’ was established in 1891 by Lord Macnaghten in Commissioner for Special Purposes of Income Tax v Pemsel[3] (‘Pemsel’s case’). This legal concept has been applied and adapted over the centuries by the judiciary in both the United Kingdom and Australia.[4]
This article considers the application of the common law concept to current Australian law and how it has been applied to cases involving charities founded for the enhancement and preservation of Indigenous Australian culture.
The income of charitable institutions is exempt from income tax in accordance with s 50-5, item 1.1, of the ITAA,[5] however there is no definition of ‘charity’ in the Act. This is despite the fact that a statutory definition was recommended by the 2001 Report of the Inquiry into the Definition of Charities and Related Organisations.[6]
‘Charity’ and ‘charitable’ are words that have a common or everyday meaning.[7] They are also words that have a technical legal meaning; meanings which have been analysed and elaborated on over the years by the courts.[8] There are therefore several aspects to the test for whether or not an organisation has charitable status under s 50-5. The organisation's main object and activity must be the promotion of charitable objectives; these charitable objects must come within the legal meaning of charitable; and finally, the entity must be an institution. This article considers the second of these requirements, that is, what objects are considered charitable within the legal meaning and in particular focuses on the question of whether the aim of preserving and enhancing Indigenous culture is a charitable purpose.
In 1601 an attempt was made in England to classify or provide guidelines for the identification of charitable purposes in the Preamble to the Charitable Uses Act 1601.[9] This Act is referred to as the Statute of Elizabeth and its Preamble set out a list of charitable purposes that included relief of the aged and poor, maintenance of sick and maimed soldiers and mariners, repair of bridges and marriages of poor maidens. The list was clearly not meant to be exhaustive. Some obvious charitable areas were omitted such as charities for the advancement of religion and of some educational institutions.[10]
Two hundred years later the English courts ruled that for a purpose to be ‘charitable’ it had to be within the spirit and intendment of the Preamble and also for the public benefit.[11]
In 1891 Lord Macnaghten stated in Pemsel’s case that the legal meaning of ‘charity’ could be placed into four separate classifications. He stated that a charity should be a trust for one of the following:
The classification of charitable purpose into these four areas was seen as a milestone and has been consistently used in judicial considerations ever since.[13]
In The Incorporated Council of Law Reporting of the State of Queensland v The Commissioner of Taxation, Barwick CJ of the High Court accepted this classification and the importance of the Preamble to the Statute of Elizabeth when he stated:
[W]hether or not the institution is relevantly charitable will be determined according to the principles upon which the Court of Chancery would act in connexion with an alleged charity. That means that the indications contained in the preamble to the Statute of Elizabeth 1601 and the classifications in Lord Macnaghten’s speech … are to be observed in deciding whether or not the institution is charitable for the purposes of the Act.[14]
In the same case Windeyer J emphasised the importance of the Preamble and analogous situations when he said:
A charitable institution is an instrument designed for carrying a charitable purpose into effect…What in law is a charitable purpose is to be gathered from the miscellany of objects set out in the preamble to the statute, 43 Eliz, I., c. 4. The spirit and intendment of that enactment, as well as its words have for centuries dictated the meaning of charity in law.[15]
In 1974, the High Court of Australia confirmed the place of the Preamble to the Statute of Elizabeth in Australian law in its conclusion that in order for an institution to be charitable it must be:
The Australian Government also considers that there are two aspects to the test for an entity to be considered charitable. In Taxation Ruling TR2005/21 ‘Income Tax and Fringe benefits tax: Charities’, the Australian Taxation Office (the ‘ATO’) states that:
For a purpose to fall within the technical legal meaning of ‘charitable’ it must be:
- within the spirit and intendment of the Statute of Elizabeth, or deemed to be charitable by legislation applying for that purpose; and
- beneficial to the community, or deemed to be for the public benefit by legislation applying for that purpose.[17]
To fall within the definition of charitable, the purpose of the entity must fall within one of the four categories established in Pemsel’s case. The majority of recently decided cases dealing with Indigenous people of Australia have considered whether or not the entities are charities for either the relief of poverty (the first category) or the fourth category: charities for the benefit of the community not otherwise falling within the other three categories.
In 1990, the Supreme Court of the Northern Territory considered in Tangentyre Council Inc v Commissioner of Taxes (NT)[18] the issue of whether or not an Aboriginal housing association was a public benevolent institution and therefore entitled to exemption from pay-roll tax. This question raises issues similar to those addressed when considering whether an entity is ‘charitable’.[19] The Council serviced the permanent and transient occupants of 19 Aboriginal town camps in and around Alice Springs. The major purpose of the Council was to provide housing and housing-related services to its members. The Commissioner argued, amongst other things, that by engaging in activities to assist its members to observe non-western customary values and traditions, the Council was not acting in a benevolent manner in the charitable sense. The court rejected this argument. Angel J stated:
Helping those who cannot help themselves to retain and observe their customary values, traditions and culture, western or not, is benevolent, at least in the sense that it is their social and spiritual welfare and the welfare of society as a whole.[20]
Some doubts were cast on the wide application of this statement in MacLean Shire Council v Nungera Co-Operative Society Ltd[21] when Handley JA commented (without having to decide this issue) that an institution with an independent object of fostering the cultural values of a particular group would not be a public benevolent institution.[22] However the subsequent decision of Toomelah Co-operative Limited v Moree Plains Shire Council[23] came down in favour of Indigenous culture and specifically disagreed with these comments.[24] This case considered the issue of whether the Co-operative was a public benevolent institution or charity for the purposes of gaining an exemption from local government rates on land that it owned and used to provide housing for Aboriginal people in the area. The court considered that the aim of fostering and developing Aboriginal and Torres Strait Islander identity and culture was within the ideals of a public benevolent institution or public charity.[25] Furthermore (whilst not having to decide this issue), the court commented that the aim of promoting land rights and other legal and cultural rights of the Indigenous community was also charitable within the fourth category set out in Pemsel’s case and possibly even the first.[26] This view was supported in the later decision of the Northern Territory Court of Appeal in Northern Land Council v Commissioner of Taxes.[27]
The idea that benevolence (which is very closely aligned with ‘charitable’) can extend to the promotion of Indigenous Australian culture was also approved in Gumbangerrii Aboriginal Corporation v Nambucca Council.[28]
With respect to Indigenous cultures, it has been argued that activities that build social capital and develop community cohesion would be an appropriate area for the benefit of charitable concessions.[29]
This perspective has been contended by various Indigenous organisations. In its submission to the National Inquiry into the Definition of Charities and Related Organisations, the Lumbu Indigenous Community Foundation argued:
The scale and nature of challenges in Indigenous communities requires proactive, creative initiatives that build social capital and leverage financial resources. Unfortunately though under the current definitions ‘charity’ is confined to consequences after the fact. Prevention is better than cure – yet the medicine cabinet remains locked under a legal definition that belongs in another century and another world.[30]
Although not specifically decided in any of the cases dealing with Indigenous organisations, there have been some references to how trusts for Indigenous people can fall within the charitable concept generally and also how this reasoning can be extended to apply to trusts to enhance the social cohesion of Australia’s Indigenous peoples. In Re Mathew the court concluded that Aboriginal Australians are a class which is, generally speaking, in need of protection and assistance.[31] The judge went on to say that as this class was analogous to the classes in the Preamble to the Statute of Elizabeth the result was that anything for the benefit of this class was charitable.[32]
By extension, this reasoning arguably means that a trust for the protection of the social cohesion of Indigenous people, being a trust for the benefit of a class of persons falling within the Preamble to the Statute of Elizabeth, would be charitable.
In Northern Land Council v Commissioner of Taxes[33] the court held that an objective aimed at preserving Aboriginal spirituality, culture and tradition and protecting Aboriginal people from the cultural dominance of non-Aboriginal society was within the concept of charitable.[34]
The cases discussed have dealt with cultural and traditional values as an aspect of, or one of the objects of the entity seeking charitable status. Consequently, there has been no definitive decision by the courts on this matter. However the cases analysed above indicate a willingness by the judiciary to consider that the enhancement and preservation of Indigenous culture is certainly worthy of charitable status. Several courts have pointed out the necessitous situation of many groups of Indigenous people and that this by itself makes them akin to the categories established under the Preamble to the Statute of Elizabeth.[35] Other cases have specifically considered the issue of traditional ways of life and preservation of culture and stated that that these objects are within the legal concept of charitable.[36]
It is compelling that Angel J concluded with the following quote in Tangentyre Council Inc v Commissioner of Taxes (NT):
[T]raditional societies must be defended, if we wish to preserve diversity … History has thus far been plural: different visions of humanity, each with a different vision of its past and future. To preserve this diversity is to preserve a plurality of futures, that is to say life itself … we must cultivate and defend particularity, individuality, and irregularity – life.[37]
Fiona Martin is the Associate Head of School (Education) and a Senior Lecturer with ATAX, Faculty of Law, University of New South Wales.
[1] Income Tax Assessment Act 1997 (Cth), s 50-5 item 1.1. This section was formerly s 23(e) of the Income Tax Assessment Act 1936 (Cth).
[2] 43 Eliz I c4.
[3] [1891] All ER Rep 28, 55; [1891] UKHL 1; [1891] AC 531, 583.
[4] See, for eg, Salvation Army (Victoria) Property Trust v Shire of Fern Tree Gully [1952] HCA 4; (1952) 85 CLR 159, 173; Ashfield MC v Joyce [1904] ArgusLawRp 67; (1976) 10 ALR 193.
[5] This section was formerly s 23(e) of the Income Tax Assessment Act, 1936 (Cth).
[6] Commonwealth, ‘Report of the Inquiry into the Definition of Charities and Related Organisations’ (June 2001) 18; The Hon Peter Costello MP, ‘Final Response to the Charities Definition Inquiry’ (Press Release, 11 May 2004) <http://www.treasurer.gov.au/tsr/content/pressreleases/2004/031.asp> at 24 August 2007.
[7] Commissioners for Special Purposes of Income Tax v Pemsel [1891] All ER Rep 28, 55; [1891] UKHL 1; [1891] AC 531, 583 (Lord Macnaghten).
[8] See, for eg, Commissioners for Special Purposes of Income Tax v Pemsel [1891] All ER Rep 28, 55; [1891] UKHL 1; [1891] AC 531, 583 (Lord Macnaghten); Re Hilditch deceased (1986) 39 SASR 469, 475 (O’Loughlin J); Alice Springs Town Council v Mpweteyerre Aboriginal Corporation (1997) 139 FLR 236, 251-252 (Mildren J).
[9] 43 Eliz I c4.
[10] For a complete discussion, see Hubert Picarda, The Law and Practice Relating to Charities (3rd ed, 1999) 72; F M Bradshaw, The Law of Charitable Trusts in Australia (1983) 2.
[11] Morice v Bishop of Durham [1805] EWHC Ch J80; (1805) 10 Ves 522; 32 ER 947.
[12] Income Tax Special Purposes Commissioners v Pemsel [1891] All ER Rep 28, 55; [1891] UKHL 1; [1891] AC 531, 583.
[13] For example Salvation Army (Victoria) Property Trust v Shire of Fern Tree Gully [1952] HCA 4; (1952) 85 CLR 159, 173; Ashfield MC v Joyce [1904] ArgusLawRp 67; (1976) 10 ALR 193.
[14] [1971] HCA 44; (1971) 125 CLR 659, 666.
[15] [1971] HCA 44; (1971) 125 CLR 659, 671.
[16] Royal National Agricultural Association v Chester [1974] 48 ALJR 304, 305.
[17] Taxation Ruling TR2005/21 ‘Income Tax and Fringe Benefits Tax: Charities’ [8].
[18] 90 ATC 4352.
[19] Taxation Ruling TR 2003/15 ‘Income Tax and Fringe Benefits Tax: Public Benevolent Institutions’ states that ‘For the purposes of Division 50 of the ITAA 1997, a public benevolent institution which is an entity is a charitable institution’ [24]. In fact the definition of PBI is more restrictive as whilst every entity that is a PBI is a charity, not all charities are PBIs. As Gino Dal Pont states ‘a public benevolent institution is not synonymous with a charitable institution but can properly be seen as a subset of charitable institutions’ Charity Law in Australia and New Zealand (2000) 37.
[20] 90 ATC 4352, 4359.
[22] 84 LGERA 139, 143.
[24] [1996] 90 LGERA 48, 58 (Stein J).
[25] [1996] 90 LGERA 48, 57-58 (Stein J).
[26] [1996] 90 LGERA 48, 59 (Stein J).
[27] [2002] NTCA 11, [33]-[34].
[28] (1996) 131 FLR 115, 121 (Stein J).
[29] Submission to Commonwealth Inquiry into the Definition of Charities and Related Organisation, January 2001, 7 (Lumbu Indigenous Community Foundation), <http://www.cdi.gov.au/submissions/223-LumbuIndigenousCommunityFoundation.doc> at 24 August 2007.
[30] Ibid.
[31] In Re Mathew (deceased) [1951] VicLawRp 29; [1951] VLR 226, 232.
[32] In Re Mathew (deceased) [1951] VicLawRp 29; [1951] VLR 226, 232 (O’Bryan J).
[34] [2002] NTCA 11, [34] (Mildren J), [75] (Thomas J).
[35] For example In Re Mathew (deceased) [1951] VicLawRp 29; [1951] VLR 226, 232 (O’Bryan J); MacLean Shire Council v Nungera Co-operative Society Ltd 84 LGERA 139, 144; Toomelah Co-operative Ltd v Moree Plains Shire Council (1996) 90 LGERA 48, 59.
[36] For example Tangentyre Council Inc v Commissioner of Taxes (NT) 90 ATC 4352, 4360; Northern Land Council v Commissioner of Taxes [2002] NTCA 11, [33]-[34].
[37] Angel J citing Octavio Paz, Convergences: Essays on Art and Literature (1987) 117 and 118 in Tangentyre Council Inc v Commissioner of Taxes (NT) 90 ATC 4352, 4360.
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URL: http://www.austlii.edu.au/au/journals/IndigLawB/2007/52.html