Non-Profit News Service No. 0435 – Federal Court decision on SPED appeal
The Federal Court decision in The Study and Prevention of Psychological Diseases Foundation v Commissioner of Taxation was handed down on 21 October 2015 in favour of the ATO.
The appeal related to the retrospective revocation of endorsements for charity tax concessions and deductible gift recipient status of the applicant, The Study and Prevention of Psychological Diseases Foundation Inc. (SPED).
The original decision of the Administrative Appeals Tribunal (AAT) confirmed the Commissioner’s decisions that SPED was neither a ‘charitable institution’ nor a ‘health promotion charity’, and to revoke the entity’s endorsements.
SPED claimed its principal activities were research carried on by members 24 hours per day, seven days a week. The AAT did not accept this, and found SPED’s activities were predominately the ordinary activities of life and were carried out for the personal benefit of members themselves.
The three issues considered by the Federal Court were:
- Did the AAT apply the correct approach in determining the applicant was not a ‘charitable institution’ at the relevant times?
- Did the AAT deny the applicant procedural fairness or constructively fail to exercise its statutory review function in finding the activities of the applicant did not amount to ‘research’?
- Did the AAT deny the applicant procedural fairness or fail to take relevant considerations into account by failing to consider certain submissions of the applicant regarding the date of effect of the revocation of the relevant endorsements?
The Court did not accept the applicant’s grounds on the first two issues. In doing so, it accepted the earlier decision of the AAT that the applicant was not at any relevant time a ‘charitable institution’, and that its principal activity was not at any relevant time ‘to promote the prevention or control of diseases in human beings’ (that is, a ‘health promotion charity’).
The Court referred the issue of the effective date of the revocation of these endorsements back to the AAT, on the basis the AAT may not have considered all of the taxpayer’s submissions on this issue.
The decision helps protect the integrity of the not-for-profit sector by ensuring charity tax concessions are accessed only by those entitled to do so.
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The Federal Court decision in The Study and Prevention of Psychological Diseases Foundation v Commissioner of Taxation was handed down in favour of the ATO.