Case: Navy Health Ltd v Deputy Federal Commissioner of Taxation (2007) ATC 4568
Outcome: cited
In Navy Health Ltd v Deputy Federal Commissioner of Taxation (2007) ATC 4568 ,, Jessup J considered the characterisation of a non-profit single member company providing private health insurance through a fund. Membership of the fund was limited to serving members of the Australian Defence Forces and cognate classes of person. The company contended that its objects promoted the efficiency of the Australian Defence Forces which benefited the community as a whole so that it would fall within the description of a "charitable institution" for the purpose of an exemption under the Fringe Benefit Tax Assessment Act 1986 (Cth). Alternatively, it submitted that it was a "non profit association" established for community service purposes and thereby attracting a life exemption. 159 The fringe benefit tax exemption provision was based on s 23(g)(v) of the ITAA 1936. Jessup J referred to the Explanatory Memorandum and accepted that it was clear that the words of the exemption were not limited to charitable purposes. He said (at [83]): Although a composite expression, I consider that the essence of "community service" is that a service is provided to the community, or a section of the community. Here the word "service" is used in the sense of "health, benefit or advantage", particularly "the action of serving, helping or benefiting, conduct tending to the welfare or advantage of another" (OED 2nd Ed). His Honour held the term "community" to refer not only to the community as a whole but also to any identifiable section of the community. It did not follow that the receipt of a service by any group of persons should be regarded as the receipt of that service by a section of the community. 160 The question of characterisation of the VWL in this respect is not straight forward. It submitted that it provides for the welfare of the community or a section of it. Its purposes included the carrying out of activities and undertaking of projects for women in the law who have a particular need for those projects and activities by reason of their social and economic circumstance, namely their sex. 161 VWL also submitted that it was not involved in the furtherance of political or lobbying purposes. As to the latter it referred to the definition of lobbying in the Oxford English Dictionary: 1. To influence (members of a house of legislature) in the exercise of their legislative functions by frequenting the lobby. 2. To frequent the lobby of a legislative assembly for the purpose of influencing members' votes, to solicit the votes of members. VWL submitted that "lobbying" in its statutory context bore a narrow political meaning tying proscribed political activity to direct interaction with members of parliament for stated ends and purposes. It is not clear to me that the term "lobbying" is to be construed so narrowly given the width of the concept of political purposes. In my opinion it could extend to representations to government or members of parliament for changes in policy as well as changes in the law. 162 The Commissioner submitted that the concept of "community service" is similar to that of "public benefit" in the law of charitable trusts. It would not follow that receipt of a service by any group of persons should be regarded as the receipt of that service by a section of the community. In the Commissioner's submission "community service" requires the community or a section of the community to benefit by way of receipt of some identifiable help, benefit or advantage bestowed or provided directly by the putative benefactor. Such a requirement is not satisfied, it was submitted, merely because an association's activities or some of them might have a tendency to benefit the community as a whole or a section of it. In this regard the Commissioner relied upon the observation of Jessup J where he found that the community service requirement was not satisfied merely because the operations of the organisation had a tendency to promote the efficiency of the armed forces thereby benefiting the community as a whole. 163 In my opinion the concept of "community service" was intended to pick up a broader range of organisations than those covered by the concept of "charitable institution" and in particular that class of charitable institution falling within the rubric "beneficial to the community". However, an organisation may be beneficial to the community without delivering a "community service" in the sense contemplated by that term as explained in the Explanatory Memorandum. For the reasons I have already expressed, I am of the view that the purposes of VWL are beneficial to the community in the sense necessary to qualify it as a charitable institution. The concept of "community service" does seem to import the notion of the delivery of some practical "help, benefit or advantage" in the sense used by Jessup J. That criterion is not necessarily met by an organisation whose purpose is to change practices and attitudes in such a way as to facilitate the entry and advancement of women within the profession generally. 164 The matter is not without difficulty and it is unnecessary to reach a concluded position on it. It is sufficient unto the day that I have found that VWL is a charitable institution, that it attracts the relevant exemption and that its appeals must therefore be allowed. 165 Having regard to my conclusions about the status of VWL as a charitable institution, it is unnecessary to make any findings in relation to whether certain elements of its receipts were income in the relevant years. The appeals will be allowed. The orders which were suggested by the Commissioner in that event are the orders which I will make in the following terms: 1. The appeal be allowed. 2. The respondent's notice of assessment the subject of the appeal be set aside. 3. There is no order as to the costs of the appeal. I certify that the preceding one hundred and sixty-five (165) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French . Associate: Dated: 27 June 2008 Counsel for the Applicant: Ms A Richards QC and Ms K Streckfuss Solicitor for the Applicant: Freehills Counsel for the Respondent: Mr SW Gibbs SC and Mr S Linden Date of Hearing: 15, 16 and 17 October 2007 Date of Judgment: 27 June 2008 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/983.html