Bicycle Victoria v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2010/1721, 2010/1723)
Judgment date: 24 June 2011
Date published: 22 October 2013

Summary of decision:
Outlines the ATO's response to the Tribunal's decision about entitlement to endorsement as a charitable institution and as a health promotion charity.

Overview of facts:
The applicant was an incorporated association. The purposes stated in its original Constitution were to promote the bicycle as a vehicle, to promote all forms of cycling, to facilitate research and technical information about bicycles and bicycling; to develop policies and ensure input of cyclists into government policies, to increase the skills of cyclists and to educate others about the needs of cyclists; to encourage effective planning, design and development of cycling opportunities and facilities in Victoria. | Its activities included behavioural change programs; recreational rides; lobbying government for better facilities for cyclists and providing bicycle- related products and services. | In 2009 the Statement of Purposes was amended to read: "The purpose of the association is to promote the health of the community through the prevention and control of disease by "More People Cycling More Often." | The applicant established a Medical and Public Health Reference Panel and its "Health promotion and disease prevention strategy" stated that it would work to diminish the risks of a sedentary lifestyle by getting more people riding bikes more often. It proposed to bring about change by facilitating and supporting those who wished to ride, encouraging and challenging institutions and individuals to consider that riding a bicycle would help them achieve their goals, to bring influence to bear on government and to act as a catalyst for the growth of public opinion favouring changes to support bicycle riding. | The applicant used the surplus of revenue over expenditure mainly for facilities and behaviour change activities. | The applicant applied to be endorsed as a "charitable institution" under s 50-105 of the Income Tax Assessment Act 1997 (the "ITAA97"), and s 176-1 of the A New Tax System (Goods and Services Tax) Act 1999 (the "GST Act"), and also applied to be endorsed as a "charitable institution whose principal activity is to promote the prevention or the control of diseases in human beings" (a "Health Promotion Charity") under s 30-120(a) of the ITAA97, or s 123D(1) of the Fringe Benefits Tax Assessment Act 1986 (the "FBTAA"). | During the hearing the applicant sought to refer to material relating to another entity endorsed as a charitable institution. | Issues decided by the tribunal | The Tribunal held that the applicant was a charitable institution, as its primary purpose was to benefit the general community by promoting cycling in all its forms for the overall purpose of promoting fitness which is a charitable purpose. | The Tribunal also held that the applicant's principal activity was not to promote the prevention or control of diseases in human beings, as its purpose is to promote physical fitness. Accordingly, it was not entitled to be endorsed as a deductible gift recipient or as a health promotion charity under s123D of the FBTAA. | Material in relation to other entities was not relevant in determining whether an entity is entitled to endorsement.

Issues decided:
The Tribunal held that the applicant was a charitable institution, as its primary purpose was to benefit the general community by promoting cycling in all its forms for the overall purpose of promoting fitness which is a charitable purpose. The Tribunal also held that the applicant's principal activity was not to promote the prevention or control of diseases in human beings, as its purpose is to promote physical fitness. Accordingly, it was not entitled to be endorsed as a deductible gift recipient or as a health promotion charity under s123D of the FBTAA. Material in relation to other entities was not relevant in determining whether an entity is entitled to endorsement.

ATO view of decision:
The decision that the applicant's primary activity was not to promote the prevention or the control of diseases in human beings confirms the Commissioner's view. | The finding of the Tribunal that the applicant had a purpose of promoting cycling in all its forms and an overall purpose of promoting fitness, which is a charitable purpose, was open to the Tribunal on the facts. | The ATO will apply the decision to institutions that promote an activity that is sporting or recreational in nature, if the facts indicate that the activity is a means by which a broader charitable purpose is achieved.

Administrative treatment:
Implications for ATO precedential documents (Public Rulings & Determinations etc)) | Draft Taxation Ruling TR 2011/D2 was published as a final ruling, Taxation Ruling TR 2011/4. Paragraph 266 of TR 2011/4 provides an explanation of the ATO's view of the decision in Bicycle Victoria . Although a recreational or sporting purpose is not a charitable purpose, an institution that promotes an activity that is sporting or recreational in nature can still be charitable if the activity is simply a means by which a broader charitable purpose is achieved. | Implications for Law Administration Practice Statements | None identified

Legislative references: Income Tax Assessment Act 1997 30-15 SDiv 30-B 30-120 30-120(a) 30-125 50-5 50-105 50-110 Fringe Benefits Tax Assessment Act 1986 5B(1E) 123D 136(1) A New Tax System (Goods and Services Tax) Act 1999 176-1
Subject references: Income Tax GST and FBT concessions Deductible gift recipient Charitable institution Health promotion charity