Facts

• ‘The Global Hunger Project’ is a network constituted by entities operating in a number of countries around the world, administered by the global office in New York.
• The member entities are either in countries in the developing world (‘program countries’) or the developed world (‘partner countries’).
• The Hunger Project seeks a sustainable end to world hunger through a methodology based on principles of self-reliance, gender equality and participatory local governance.
• The global office, which is funded from its United States operations, co-ordinates the raising of funds in partner countries with the subsequent expenditure of those funds on hunger relief programs in program countries.
• There are individual ‘The Hunger Project’ entities in the nine partner countries and the applicant, as the Australian entity, is one of those nine.
• The relationship between the entities in the partner countries is governed by an agreement, called the Global Chartering Agreement, which was made in or about June 1986.
• Clause 2(a) of its Memorandum of Association (‘the Memorandum’) for the applicant demonstrates that it is a not-for-profit company whose exclusive object is:
  • The relief of poverty, sickness, suffering, distress, destitution and helplessness with a particular emphasis on directly aiding and developing those suffering from chronic and persistent hunger in certified developing countries as approved by the Australian Minister for Foreign Affairs from time to time.
  • The Hunger Project Australia will work towards the sustainable end of hunger by identifying what is missing in achieving he [sic] goal of ending hunger and creating strategic initiates to provide it.
• It has other objects but these exist, according to cl 2(a), ‘solely for the purpose of carrying out’ the object set out above.
  • These subordinate objects include the soliciting of donations (cl 2(p)), the raising of funds (cl 2(d)) for the purpose of making donations for charitable purposes (cl 2(b)) and co-operating with other entities having similar objects (cl 2(c)).
  • Clause 3 of the Memorandum prohibits the distribution of money to members or directors so that the not-for-profit nature of the applicant is structurally ensured.
• Of the activities conducted by the applicant, it is clear that the most substantial is fund raising.
  • Note that fundraising falls into two distinct categories:
    • ‘unrestricted funds’ – the money donated could be used for any purpose within The Hunger Project
    • ‘restricted funds’ – designated by an individual donor either for expenditure in a particular program country or, more proscriptively, on particular activities in a specified program country.
• On 12 November 2010 the applicant applied to the Commissioner for endorsement as a public benevolent institution under s 123C of the FBTA Act and this was refused by him on 11 February 2011. An objection to that decision was lodged by the applicant on 12 April 2011 but this was refused on 16 August 2011

 

Issue

Whether the applicant is a ‘public benevolent institution’ within the meaning of s 57A(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986). If it is, then the provision of a benefit to one of its employees will be an exempt benefit for the purpose o the legislation and not brought to tax

 

Held:

Appeal allowed

• Upon examining the evidence, Perram J concluded that the applicant was involved, although not in a central way, with some aspects of the strategic decision making of the global organisation.
  • Its fund raising activities in Australia take place on an independent basis.
• Process by which funds were dispersed:
  • The global office would send a request for funding to a particular partner country for a specified purpose in an identified project country.
    • Such a request would usually only be made in respect of a project appearing in an already approved budget.
    • The request would indicate whether the funds are required on a restricted or unrestricted basis.
  • Following this, the transfer of funds to the program country entity is approved by the applicant and the funds directly disbursed by it.
  • The board of the applicant retains control of this process and, on occasion, refuses requests for transfers of funds.
• Upon studying a number of authorities, Perram J concluded that judicial opinion is inconclusive about the position of the directness test’s application.
• The expression ‘institution’ has a range of meanings but it does not, without more, connote a mere trust for charitable purposes. The same may be said of funds.
• There is a distinction to be drawn between institutions and funds which the section observes but it is a distinction concerned with the structural difference between the two.
  • The reference to funds, therefore, expands the exemption to include non-institutional concepts such as funds but the expansion is limited to that class of fund which raises money for the institutions mentioned in s 8(5).
  • The fact that the expansion of the exemption into the class of funds is delimited in that way says nothing about the nature of public benevolent institutions.
• Section 57A of the FBTA Act did not originally contain a reference to a fund.
• The reference in s 57A(3)(b) (ambulances) to ‘services that support those services’ cannot be read down in relation to s 57A(1) (public benevolent institutions) or s 57A(2) (public hospitals etc) so as to exclude fund raising entities.
• The Explanatory Memorandum, Taxation Laws Amendment Bill (No 2) 2001 (Cth) was in these terms:
  • 5.4 Generally, a PBI:
    • has as its main or principal object, the relief of poverty, sickness, suffering, distress, misfortune, destitution or helplessness;
    • is carried on without purpose of private gain for particular persons;
    • is established for the benefit of the public or a section or class of the public;
    • the relief is available without discrimination to every member of that section of the public which the organisation aims to benefit; and
    • the aid is given directly to those in need.
• However that phrase did not appear in s 57A(5) of the FBTA Act, which indicates that the passage in the EM reflects the view on the part of its author that directness in the dispersion of aid is a required characteristic of a PBI. But this has nothing to do with the legislative task with which the Bill was concerned.
  • The case law concerning public benevolent institutions does not hold that directness is a requirement, and, to the extent that the explanatory memorandum suggests to the contrary, it is wrong.
• Perram J did not accept that it is a requirement that a PBI engage directly in the activities making up the object of its benevolence.
• The applicant’s objects are not abstract, and its principal object of relieving hunger is achieved through tis relationships with The Hunger Project entities in program countries.
• Hence the applicant is a PBI.