AustLII Home | Databases | WorldLII | Search | Feedback

Aboriginal Law Bulletin

Aboriginal Law Bulletin (ALB)
You are here:  AustLII >> Databases >> Aboriginal Law Bulletin >> 1991 >> [1991] AboriginalLawB 29

Database Search | Name Search | Recent Articles | Noteup | LawCite | Help

Hanna, Michael --- "Tax Exemptions... Who Misses Out?" [1991] AboriginalLawB 29; (1991) 1(50) Aboriginal Law Bulletin 4


Tax Exemptions... Who Misses Out?

by Michael Hanna

Critics of Government "hand-outs" to Aborigines usually ignore the many other grants and subsidies made to particular sections of the public. With tax exemptions, for example, politicians have been very generous with tax-payer funds, frequently exempting financially strong groups in no need of help from the public purse. On the other hand, many Aboriginal welfare organisations are not aware of, or are denied, their legal entitlement to tax exemptions, especially for local government rates, even though they are financially deprived and working for the most disadvantaged and oppressed section of society. This article briefly examines tax exemption schemes and particular exemptions most relevant to NSW Aboriginal welfare organisations. A current appeal against the levying of local government rates on two Aboriginal housing associations is also discussed.

The General Law

Although the wording and reach of the individual provisions vary, taxing statutes in Australia exempt a range of private organisations or community associations with objects or purposes which are "non-profit" (in terms of not distributing profits, surplus funds or assets to members). Some statutes, especially those relating to income, land, pay-roll and local government taxes, cover a very wide spectrum, expressly exempting bodies such as religious institutions; private schools; sporting clubs; agricultural societies; registered employer and employee associations; friendly societies; private hospitals and nursing homes; and public benevolent institutions and/or public charities.

In relation to welfare organisations, the courts have interpreted the term "public benevolent institution" narrowly (but sensibly), adopting a concept similar to the ordinary or common meaning of public charity. So its meaning has been limited to organisations established and carried on for "the relief of poverty, sickness, suffering, distress, misfortune, destitution or helplessness",[1] such as the Salvation Army or Red Cross. In this context poverty is a relative term and beneficiaries do not have to be destitute, simply needy.

In contrast, there has been a very broad interpretation of the "public charity" category. Rather than apply its ordinary or popular meaning, the courts use the common law "legal" meaning. This bizarre definition includes any non-profit organisation with objects exclusively for "the relief of poverty; the advancement of education; the advancement of religion; or other purposes beneficial to the community, not falling under any of the preceding heads, and even if, incidentally, they benefit the rich as well as the poor".[2] In applying this definition, the courts also have classified as charitable many activities having little real connection with poverty, education or religion, and/or where the benefit to the community has been only minor, indirect or remote. Some examples include relatively exclusive, well-resourced, Church-run retirement homes which charge occupants large sums to rent or acquire units; the College of Law (NSW), which provides pre-admission practical training for law graduates and continuing legal education for practising solicitors; and the McGarvie Smith Institute, which manufactures and sells vaccine to prevent disease in livestock for a profit.

The result of having these general types of exemption schemes is that many bodies in the public charity and other categories are exempt from taxes even though:

Aboriginal Organisations

Given this generosity of the legislature and judiciary, poorly funded Aboriginal organisations should have been prominent in the express statutory exemptions, especially those bodies providing essential services to their needy communities and thus the most meritorious claimants for taxpayer subsidy. Yet there are no general exemption categories for Aboriginal groups at all.

Also, among the exemptions specifying individual organisations, there is only one which exempts an Aboriginal body; and that is explained by the particular tax. The NSW Land Tax Management Act exempts Aboriginal Land Councils (NSW, Regional and Local) constituted under the NSW Aboriginal Land Rights Act from land tax. Given that the NSW land rights scheme is funded from land tax, it would have been illogical to impose the tax on an intended beneficiary of it. An alternative way of gaining exemption is for Aboriginal organisations to be recognised by individual tax collection agencies as a public charity or public benevolent institution. Despite the narrow definition of public benevolent institution, a large number of Aboriginal welfare bodies would qualify under this classification; while it is reasonable to expect that virtually all Aboriginal welfare bodies applying would be exempted under the broad charity definition.

There are a number of individual rulings by particular taxation agencies recognising Aboriginal organisations as public charities or public benevolent institutions. The rulings of the Australian Taxation Office have been circulated to Aboriginal welfare groups, so presumably most eligible bodies have already been exempted from Commonwealth taxes.

The rulings of NSW Government agencies are not as well known, possibly Ieaving many eligible organisations without exemption. Whether the NSW authorities put a greater effort into informing Aboriginal organisations of their legitimate entitlements remains to be seen, but it is unlikely for exemptions to be obtained on a wide scale until this occurs.

Local Government Rates

Despite containing one of the broadest sets of exemptions, the NS W Local Government Act has been a virtual disaster area for Aboriginal organisations. The NSW Land Rights Act and the Local Government Act jointly provide for exemption from local government rates for land vested in the Land Councils if the Minister administering the Land Rights Act so approves. As the Toomelah saga has shown, in practice such approvals are rarely given no matter how meritorious the circumstances (see Aboriginal Law Bulletin - [1988] AboriginalLB 40; 2(33)pg11 and [1988] AboriginalLB 58; 2(35)pg8).

For Aboriginal welfare organisations owning land acquired outside the land rights scheme (usually through transfer or purchase by a Commonwealth agency, such as ATSIC or, formerly, ADC or the Aboriginal Land Fund Commission), the result is similar. There is no attempt to inform potentially eligible Aboriginal bodies of their entitlements; and every application known to be made has been rejected at local council level. The two known successful applications have been in Sydney and apparently an important factor in each case was the organisation's status as a registered charity under the NSW Charitable Collections Act. As the NSW Government recently announced major changes to the Charitable Collections Act, including the phasing out of registration of charitable organisations as such and the authorising of particular public fund-raising appeals instead, Aboriginal welfare bodies probably will not be able to adopt that status in the future.

Another undesirable local council practice relates to land occupied or used by an Aboriginal welfare organisation but where the title of the land is still in the name of the Commonwealth agency pending transfer to the Aboriginal organisation. Such land is exempt from local government rates under s.114 of the Commonwealth Constitution, which prohibits State (or local council) taxes on property belonging to the Commonwealth[3] and under s 71 of the ATSIC Act (or s.42 of the former ADC Act), which protects ATSIC (or formerly ADC) from State (or local council) taxes. Despite these provisions, it is understood that some local councils are still issuing rate assessment notices for such land; and that some Aboriginal organisations, unaware of their legal entitlements and rights, have been paying such rates.

This absence of recognition at local government level may be about to change. In June 1989 Nungera Co-operative Society, formed to provide housing and employment training to needy Aborigines at Maclean in northern NSW, they applied to Maclean Shire Council for exemption from local rates, as a public benevolent institution or public charity. Although the Australian Taxation Office recognises Nungera as a public benevolent institution for exemption from relevant Commonwealth taxes, Maclean Shire Council has refused to exempt it. Also, some of the land used by Nungera is still in the name of a Commonwealth agency, yet assessment notices have been issued and rates paid on this land.

In May 1990 Malcolm Hunt, administrator of Nungera, contacted Prof. Garth Nettheim of the Aboriginal Law Centre at the University of NSW Law School concerning its claim. Prof. Nettheim asked this writer to examine the problem, which I did in conjunction with Malcolm Hunt. As a consequence, the Aboriginal Legal Service recently lodged an appeal on Nungera's behalf in the NSW Land and Environment Court. A similar appeal was also lodged on behalf of Tingha Aboriginal Corporation, another housing association in northern NSW. Both councils are represented by the same legal firm and presumably the NSW Shires Association is levying shire councils across the State to fund the cases, a practice usually followed when faced with the chance of an "undesirable" precedent being set which may affect other councils.

Although there are no known NSW cases concerning Aboriginal organisations being declared charitable or benevolent institutions for tax exemption purposes, there have been instances in Victoria where gifts for the benefit of Aborigines have been held to be for a charitable purpose.[4] There has also been a Northern Territory decision (with the appeal not yet resolved) recognising Tangentyere Council Inc., a federation of Aboriginal housing associations at Alice Springs, as a public benevolent institution for exemption from pay-roll tax (see [1990] AboriginalLB 33; 2(45)pg11 )[5] and another Northern Territory decision recognising Aboriginal Hostels Ltd. as a charity for local government rates exemption purposes.[6] The addition of Nungera and Tingha to this list would be a small but welcome advance for Aboriginal legal rights.

References:

1. M. Chesterman, (1979) Charities,Trusts and Social Welfare, Weidenfeld and Nicolson, London.
2. Australian Taxation Office, Taxation Ruling No: ST(NS) 3002, dated 26 July 1990; and Memorandum to Department of Aboriginal Affairs dated 30 Jan. 1987 and 12. Jun. 1987.
3. Local Government and Shires Associations of New South Wales, (1981) Submission to the Inquiry into Local Government Rating.

[1] Perpetual Trustees Co. v F.C.T (1931)45 CLR 224.

[2] The Commissioners for Special Purposes of the Income Tax v Pemsel [1891] AC 531 at page 583; Salvation Army (Vic.) Property Trust v Fern Tree Gully Corporation [1952] HCA 4; (1952) 85 CLR 159; Ashfield Municipal Council v Joyce [1976] 1 NSWLR 455.

[3] Municipal Council of Sydney v The Commonwealth [1904] HCA 50; (1904) 1 CLR 208; Fssendon Corp v Criterion

Theatres (1947) 74 CLR I.

[4] Re Mathew 11951] VLR 226; Re Barry [1971] VicRp 48; [1971] VR 395; Re Bryning [1976] VicRp 8; [1976] VR 100.

[5] Tangentyere Council Inc v The Commissioner for Taxes (1990) 90 ATC 4352.

[6] Aboriginal Hostels Ltd v Darwin City Council (1985) 33 NTR 1.


AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.austlii.edu.au/au/journals/AboriginalLawB/1991/29.html