Debelle J

Supreme Court of South Australia


Judgment date: Judgment delivered 30 June 2000

Debelle J


1. This is an appeal pursuant to s 92 of the Tax Administration Act 1996. It relates to a claimed exemption from pay-roll tax.

An application for exemption

2. By letter dated 16 November 1998, Repromed Pty Ltd (``Repromed'') applied, pursuant to s 18(1) of the Tax Administration Act, for a refund of pay-roll tax which it claimed to have overpaid. In the same letter, Repromed made an alternative application pursuant to s 14(2) of the Pay-roll Tax Act 1991 for deregistration as an employer liable to pay wages.

3. Both applications were made on the ground that Repromed was exempt from payment of pay-roll tax. Section 12 of the Pay- roll Tax Act lists persons exempted from the obligation to pay pay-roll tax. Repromed relied on two exemptions. The first was that it is a public benevolent institution within the meaning of s 12(1)(b)(ii). The second was that Repromed is an employer who provides health services otherwise than for the purpose of profit or gain within the meaning of s 12(1)(ca).

4. The Commissioner replied by letter dated 11 December 1998 stating that he did not believe that Repromed fell within the exemption. Repromed then lodged, on 21 December 1998, a notice with the Treasurer pursuant to s 82 of the Taxation Administration Act objecting to the Commissioner's decision. The Treasurer overruled the objection and confirmed the decision of the Commissioner by letter dated 4 May 1999. Section 92 of the Taxation Administration Act provides a right of appeal to this Court by a person who is dissatisfied with the Minister's determination of the objection. Repromed exercised that right and appealed to this Court from the Treasurer's determination.

5. The two central issues in the appeal are whether Repromed is a public benevolent institution within the meaning of s 12(1)(b)(ii) and whether it is an employer who provides health services otherwise than for the purpose of profit or gain within the meaning of s 12(1)(ca).

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The objects of Repromed

6. Repromed is part of the Reproductive Medicine Unit of the Department of Obstetrics and Gynaecology at the University of Adelaide. Repromed was incorporated as a proprietary company in 1987 to provide clinical services in the area of reproductive medicine. The ultimate beneficial owner of the shares is the University. The first paragraph in the objects of association of Repromed states that it is established

``(1) To provide clinical and other services in reproductive medicine and associated fields including in vitro fertilisation technology and without limiting the generality of the foregoing to research develop produce and market new technological developments devices software or inventions in reproductive technology.''

The Reproductive Medicine Unit had been established at the Queen Elizabeth Hospital in the 1960s in order to provide reproductive medicine services, to advance understanding of infertility and to improve infertility treatment. Repromed was the vehicle through which the Reproductive Medicine Unit continued to provide its clinical services to infertile couples.

7. Repromed's initial capital was provided by the University of Adelaide. It was some $50000. It appears that it was established in order to provide a service of the highest quality which would also generate income for research. Apart from the initial grant by the University of Adelaide, it appears that Repromed has not received any kind of private or public benefaction.

8. Repromed now provides services at the Queen Elizabeth Hospital and the Wakefield Hospital in Adelaide and at the Darwin Private Hospital. In South Australia it is an offence to carry out an artificial fertilisation procedure unless licensed to do so pursuant to the Reproductive Technology Act 1988. Repromed holds a licence in respect of its clinics at the Queen Elizabeth Hospital and the Wakefield Hospital. Only one other person in South Australia holds a licence under the Reproductive Technology Act. It is the Flinders Medical Centre. Repromed also provides consulting services in Berri, Mount Gambier, Port Augusta and Port Lincoln. It has links with clinics providing like services both interstate and overseas.

Repromed's medical activities

9. Repromed provides a specialist medical service in the area of reproductive medicine. It provides medical services of the following kinds:

  • (a) Male and female reproductive surgery including microsurgery and laser surgery.
  • (b) Induction of ovulation.
  • (c) Intrauterine insemination.
  • (d) In vitro fertilisation.
  • (e) Intra cytoplasmic sperm injection.
  • (f) Gamete intra fallopian transfer.
  • (g) Embryo freezing.
  • (h) Donor insemination.
  • (i) Donor oocytes (eggs).
  • (j) Reproductive genetic counselling.
  • (k) Pre implantation diagnosis of genetic disease.

Repromed works in close collaboration with the Reproductive Medicine Laboratories (``the Laboratories'') at the Queen Elizabeth Hospital and at the Department of Obstetrics and Gynaecology which is part of the Medical School at the University of Adelaide. The Laboratories do not form part of Repromed. Some persons employed by Repromed are also employed by the Department and work in the Laboratories. The Laboratories are solely responsible for embryo freezing and they work in conjunction with Repromed on the activities in items (c), (d), (e), (f), (g), (h), (i) and (k) above.

10. Patients are referred by their general practitioners or gynaecologists. An initial consultation at Repromed is followed by an assessment and diagnosis. On the basis of that diagnosis, Repromed recommends a program and administers that program. Repromed provides its services to about 1500 people at any one time.

Fees for service

11. Repromed's income is essentially derived from fees for its medical and clinical services. The patients are charged fees for consultations, tests and surgery. Patients also pay for any drugs which may be prescribed. Apart from fees for its services, Repromed's only other source of income is interest on monies held by it. Interest in the past five years has not exceeded about two percent of total income

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12. Fees paid by patients for medical services and drugs are subsidised by Medicare and the Pharmaceutical Benefit Schemes of the Commonwealth Government. In addition, fees payable by patients who are on disability pensions or who are otherwise entitled to a health card concession are further subsidised by the Department of Social Services. Thus, in 1999, patients entitled to Medicare paid a total fee of $2664.60 for one in vitro fertilisation cycle of which $1834.35 was paid by Medicare. The balance of $830.25 was paid by each patient. Persons on private health insurance receive an indemnity of $69 only. Patients who are entitled to a Department of Social Services concession card pay $2253, of which $1834.35 is paid by Medicare, leaving a balance of $418.65 payable by the patient. The evidence is that about four-fifths of Repromed's income is provided by Federal Government by means of Medicare, the Pharmaceutical Benefit Scheme or the Department of Social Services. One-fifth is paid by patients.

13. It is Repromed's policy that low income earners should have access to its services. To that end, it provides substantial fee concessions for those on a health care card or disability pension. Those concessions include:

  • (i) providing free medical consultations both initially and during the course of treatment;
  • (ii) the initial diagnosis and assessment of patients is also free of charge including diagnostic surgery which is often required;
  • (iii) once a course of treatment is pursued, health care card patients are granted a concession on the standard fees of up to 62 percent;
  • (iv) where a health care card holder is required to be admitted for surgery, Repromed pays the hospital day accommodation charge on behalf of the patient.

14. No patient who is unable to pay that part of the fee remaining after Medicare or other refunds is refused treatment. Repromed either makes arrangements with the patient for payment over a period of time or it does not charge the fees. It then receives only Medicare or the other Government rebates. That is subject to one exception. All patients are required to pay $165 for the cost of a drug called ``Lucrin''. There is no rebate or subsidy for the cost of that drug.

15. At the Queen Elizabeth Hospital patients who have recently arrived in Australia, and who do not have a Medicare card, are provided with fertility services on payment of a fee which may be less than the usual fee. There are few such patients, particularly since by the time most patients wish to be treated by Repromed they have been in Australia long enough to be issued with a Medicare card.

16. Repromed's services at its Darwin clinic include services for treatment of Aboriginals pursuant to an arrangement with the Government of the Northern Territory by which a subsidy is provided to a particular level. If Repromed provides fertility services in excess of that level, it is effectively subsidising those services.

17. The fees charged by Repromed have always been less than the fees for like services recommended by the Australian Medical Association (``AMA''). For example, in 1999, the AMA's recommended fee for assisted reproductive services was $2970 but the fee charged by Repromed was $1555.90 for patients with a Medicare card and $1164.90 for patients with a concession card. There was no evidence as to the level of fees charged by the Flinders Medical Centre. The Flinders Medical Centre does not, however, treat patients on concession cards. Repromed has always had a policy of trying to keep its fees close to the Medicare rebate.

18. Repromed provides a number of services free of charge to its patients. Counselling services to its patients are provided at no cost. Its philosophy includes trying to use the least amount of technological or surgical interference to effect naturally occurring pregnancy. To that end, it runs weight loss programs which, until 1999, were provided free of charge. Since 1999, they are run at a nominal charge of $10 per month. Repromed does not benefit from running those programs. One joint project of Repromed and the Laboratories is the development of techniques to prevent the transmission of genetic disease within families by a procedure called ``pre-implantation genetic diagnosis''. In the case of patients with a family history of genetic disease, a single cell is removed from an embryo for the purpose of determining whether there is evidence of genetic disease. This service is provided free of charge and is also available to patients from other states.

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19. Repromed also operates a donor egg program to supply eggs to women born without ovaries or who, for one reason or another, no longer have ovaries. The program is run at a loss but Repromed continues to provide the service because of its obvious benefits to the 30 to 40 who, in each year, avail themselves of the service. There are few providers of reproductive medical services in Australia who make this service available. Only about one-quarter of the Reproductive Medicine Units in Australia provide this service.

Surplus funds

20. In recent years, Repromed has achieved a surplus of income over expenditure. Surplus funds of Repromed not used to provide clinical services are retained by them either as reserves to provide for future expenditure or are donated to the University of Adelaide to be handed, in turn, to the Department of Obstetrics and Gynaecology for research by the Laboratories. There is an understanding that these donations will always be handed to the Department for use by the Laboratories. The understanding is not evidenced by any letter, agreement or other document. It is apparent that Repromed has effective political remedies to ensure that payment is made.

21. Since 1994, the financial position has been as follows:

                     1994       1995       1996       1997       1998
                       $          $          $          $          $

Operating Revenue  6,624,795  5,482,097  5,838,015  5,639,946  5,440,571

Operating Profit     966,699    177,256    532,299    355,066    437,222

Retained Profits   1,233,966  1,411,252  1,343,551  1,448,617  1,585,839

Donation to          300,000     NIL       350,000    250,000    300,000
University of

It should be noted that the figures for 1994 are for an 18 month period. If regard is had to donations in previous years, Repromed has donated some $1.5 million to the University of Adelaide.

22. Repromed is holding its reserve funds against several items of potential and substantial expenditure. There is a degree of uncertainty as to the future of the maternity section of the Queen Elizabeth Hospital. If that closes, it will be necessary to relocate the Reproductive Medicine Unit at a cost of $250000 to $500000. Repromed also has a need to establish improved computing facilities. A new computer system will cost in the order of $500000. In addition, it has plans ultimately to establish a research centre which would cost about $1 million.


23. Repromed's employees are paid by Repromed except those medical practitioners who are also employed by the University of Adelaide and who receive fees on a sessional basis for their services. Some directors of Repromed are also employees of the University and they too receive fees for their services on a sessional basis. Directors' fees are paid but not to directors who are employees of the University.


24. Repromed applies a major part of its surplus funds to the Department for research by the Laboratories believing that the Laboratories have the facilities, the equipment and the professional staff to conduct the research on a better level than is possible by Repromed with its level of funding. Repromed cannot undertake the same high standard of research as the Laboratories without significantly increasing its fees. Repromed has a firm commitment to research, conscious of its potential benefits in providing fertility services at the highest level. According to Professor Norman, who is a director of Repromed as well as being head of the Reproductive Medical Unit in the Department of Obstetrics and Gynaecology and head of the Laboratories, an active and vibrant research program is critical to achieving medical advances and is the key to sustaining quality programs. In the area of reproductive medicine in particular, where medicine and scientific knowledge have been

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advancing at such a rapid pace, it would not be possible to provide the high level of service that Repromed provides without research being undertaken.

25. Repromed's objective is to promote the best practices in reproductive medicine and to foster research of the highest standard. Studies in basic science and its application to clinical practice has been an integral part of research in the Reproductive Medicine Unit for many years. Many recent advances in clinical practices utilised by Repromed such as intracytoplasmic sperm injection, pre- implantation genetic diagnosis, embryo cryopreservation, reproductive endocrinology and genetics are now routine clinical procedures following development from research initiatives. The Unit has a strong basic sciences group which is closely integrated with the clinical program. This enables advances to be rapidly translated into the clinical arena.

26. The research undertaken by the Laboratories received consistent support from the National Health and Medical Research Council, the Australian Research Council and other grants bodies. Repromed perceives that it must provide substantial financial support to the Laboratories for research if the Laboratories are to continue to receive grants from external bodies. The research team at the Laboratories is one of the biggest research teams in Australia.

27. In his evidence, Professor Norman said that Repromed does not seek to protect its intellectual property by patents or any other form of protection. Its philosophy is to share its knowledge, techniques, and skills by publishing results of its research and other work and by presenting papers and demonstrations concerning that work. In truth, the research is conducted by staff at the Laboratories. It is apparent that Professor Norman was not distinguishing between Repromed and the Department's Laboratories when giving that evidence. That is not surprising, given the close relationship between the work of the two organisations in the field of reproductive medicine. Nevertheless, the close relationship does result in skills, techniques and knowledge gained by Repromed being available to others. The research continues. Repromed and the Department expect advances and developments over the next five years in:

  • (a) reproductive immunology (implantation research);
  • (b) lifestyle changes (particularly weight loss);
  • (c) evidence based outcomes;
  • (d) embryo development;
  • (e) education programs; and
  • (f) ovary research.

As Professor Norman said, the relationship between Repromed and the Department's Laboratories is crucial to the success of Repromed.

28. The combined research effort of Repromed and the Department, through its Laboratories, enables the co-ordination of academic and clinical perspectives that has resulted in Repromed enjoying a worldwide reputation in reproductive technology and treatment of infertility. Its clinical fertility treatment programs are consistently ranked in the top three in Australia and New Zealand by the independent Australian Institute of Health and Welfare National Perinatal Statistics Unit in Sydney. It is recognised as one of the top three centres in the world for intracytoplasmic sperm injection in the world. It has trained specialists from other centres in Asia and the Pacific region. Its skills and techniques attract patients from interstate and overseas. It has a steady stream of specialists from elsewhere visiting its operations to learn from them.


29. This review of the activities and operations of Repromed shows that it is a specialist medical clinic treating patients almost all of whom are referred to it by general pracititioners or gynaecologists. Repromed assists in attempting to provide relief from infertility, which is itself regarded as an illness, and any psychological or psychiatric condition associated with the unfulfilled desire to have children. Like other clinics operated by specialist medical practitioners, it relies for its income on fees paid by its patients. Repromed's fees are substantially subsidised so that four- fifths of the revenue of Repromed is paid by Medicare or other schemes of the Commonwealth Government. It does not, however, charge fees for all of its services. It will make special financial arrangements for those who have difficulty in paying its fees and will, on occasion, waive its fees to those who cannot afford them. In short, its services are available to all who seek them.

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30. Although the members of Repromed may in general meeting declare a dividend, members have not declared a dividend. Instead, the excess of income over expenditure is in each year applied either to increase reserves or is donated to the University for research in the area of reproductive medicine.

A non-profit provider of health services?

31. I turn to examine whether Repromed is exempted by s 12(1). Section 12(1) of the Pay- roll Tax Act lists employers exempted from pay-roll tax. Section 12(1)(ca) exempts wages paid:

``(ca) by an employer who provides health services otherwise than for the purpose of profit or gain, being wages paid or payable to an employee during a period in respect of which the employer satisfies the Commissioner that the employee is engaged exclusively in the provision of those health services or is engaged exclusively in work that is incidental to the provision of those health services.''

The only issue is whether Repromed provides health services otherwise than for the purpose of profit or gain. It is common ground that Repromed provides health services and that it satisfies the balance of the requirements of s 12(1)(ca).

32. In most taxation statutes, the motive which prompts the business is irrelevant and profits or gains of the business will be liable to tax:
Religious Tract and Book Society of Scotland v Forbes (1896) 3 TC 415. But s 12(1)(ca) requires regard to be had to the purpose for which the employer provides health services. So far, Repromed has provided health services for the purpose of gaining revenue by which it can either increase its reserves or fund research. All of its surplus income is applied in either of those two ways. Its reserves are a nest egg against the day when substantial expenditure or equipment is necessary. This is no more than prudent management of a service organisation of this kind which is likely to have to purchase expensive modern equipment to maintain a high level of service. As already noted, part of those reserves might soon be spent. The research is intended to provide new and improved techniques for the delivery of reproductive medical services and the reserves are intended to fund acquisition of equipment to assist in the provision of reproductive medical services. In short, Repromed provides a very high standard of reproductive medical services and it devotes its surplus funds to improving the standard of those services and the manner in which they are delivered. Mr de Wijn QC, who appeared for Repromed, submitted that Repromed, therefore, has a non-profit motive and qualifies for an exemption under s 12(1)(ca).

33. Although it is clear that Repromed has not declared a dividend and has applied its surplus funds to its reserves and for research purposes, for the reasons which follow, I do not think that it falls within the exemption. The question turns on what is meant by the elliptical, if not enigmatic, expression ``otherwise than for the purpose of profit or gain''. That expression also appears in other parts of s 12(1) namely, subsections (c), (d)(i) and (dad) which provide:

  • ``(c) by a hospital that is carried on by a society or association otherwise than for the purpose of profit or gain to the individual members of the society or association, being wages paid or payable to a person during a period in respect of which the hospital satisfies the Commissioner that the person is engaged exclusively in work of the hospital of a kind ordinarily performed in connection with the conduct of hospitals; or
  • ...
  • (d) by a school or college that-
    • (i) is carried on by a body corporate, society or association otherwise than for the purpose of profit or gain to the individual members of the body corporate, society or association and is not carried on by or on behalf of the State; and
  • ...
  • (dad) by an employer who conducts a kindergarten otherwise than for the purpose of profit or gain, being wages paid or payable to an employee during a period in respect of which the employer satisfies the Commissioner that the employee is engaged exclusively in work of the kindergarten of a kind ordinarily performed in connection with the conduct of a kindergarten.''

Subsections (c) and (d)(i) add the words ``to the individual members of the society or association'' or ``to the individual members of the body corporate, society or association''. I do not think that the absence of like expressions

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in subsection (ca) and (dad) is material since the reference to profit or gain in those provisions implies profit or gain to those who direct the employer or who are its members. In other words, it is not intended that subsections (ca) and (dad) should have an operation or effect different from subsections (c) and (d)(i). All of these provisions are intended to limit exemptions to employers who do not carry on business for the profit of individuals. These provisions do not proscribe the making of profits or gains simpliciter. Indeed, it would be a short sighted policy if they did since any trading organisation must be able to make a profit in the sense of a surplus of income over expenditure if it is to continue to survive. Instead, the purpose of these provisions is that employers, be they incorporated bodies or not, who undertake the activities listed in subsections (c), (ca), (d)(i) and (dad) for the benefit of the undertaking as a whole will be exempt from pay-roll tax but those who permit individual members to profit or gain from the enterprise will not be exempt. In other words, these provisions distinguish between undertakings which carry on business for the well-being of the undertaking itself or the members as a whole in contrast with those undertakings which are for the profit or gain of individual members: cf.
FC of T v Cappid Pty Ltd 71 ATC 4121; (1971) 127 CLR 140. The intention is to exclude from exemption employers who conduct their business for the pecuniary profit of any person, be that person a member or any other person such as the proprietor of a business: cf.
Theosophical Foundation Pty Ltd v Commr of Land Tax (1966) 67 SR(NSW) 70 at 85. That case concerned an exemption in s 10(1)(g)(iii) of the Land Tax Management Act 1956 (NSW) which applied to ``a building owned and solely occupied by a society, club or association not carried on for pecuniary profit''. The intent and meaning of the expression ``otherwise than for the purpose of profit or gain'' is, I think, the same as ``not carried on for pecuniary profit''. Both are concerned to distinguish between profit supplied to the undertaking or membership as a whole and individual profit or gain.

34. Furthermore, the meaning of the expression ``otherwise than for the purpose of profit or gain'' is not to be determined by identifying any primary or predominant purpose since each of the subsections I have mentioned proceeds on the footing that a particular service is being provided be it a hospital, a provider of health services, a school, a college, or a kindergarten. The primary or predominant purpose of the employer is to provide the particular kind of service. The object of each of the subsections is to limit exemption to those which are not conducted for individual profit or gain.

35. In Theosophical Foundation (supra) at 85, Sugerman JA held that, in order to satisfy the requirement that the relevant body is ``not carried on for pecuniary profit'', its constitution had to provide barriers to individual profit. He said:

``The object is to accord exemption to those... whose profits, if any, are applied solely to the advancement of their objects and cannot find their way into the pockets of individuals. For instance, it is not, I think, required that a club, in order to gain exemption, should be carried on at a loss as regards its trading activities with its members or the paid services which it renders them, or should refrain from such activities and from charges to its members and rely for its support entirely upon membership subscriptions and donations.''

(Emphasis added.)

The principle that the constitution had to provide that profits could not find their way into pockets of individuals has been consistently followed and applied in New South Wales in respect of like provisions: see, for example,
Cabramatta Golf Club v Commr of Land Tax (NSW) (1977) 7 ATR 659;
The Crows Nest Club Ltd v Commr of Land Tax (NSW) 78 ATC 4408; [1978] 1 NSWLR 523;
Australian Kafarsghab (Lebanese) Association Ltd v Commr of Land Tax (NSW) (1976) 6 ATR 650; and
Illawarra Suburbs Lawn Tennis Association Ltd v Commr of Land Tax (NSW) 85 ATC 4423; (1985) 16 ATR 664. In Illawarra Suburbs Lawn Tennis Association at ATC 4428-4429; ATR 670, Lee J expressed the principle in these terms:

``... What is to be looked for in each case is whether the club has in law and in fact created the circumstance that the members cannot and do not, whilst the club body is being carried on, receive any pecuniary benefit from the profits or property of the company...''

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Mr de Wijn QC contended that regard should be had not only to the objects of the company as expressed in its memorandum of association but also at its history, its activities and the manner in which it conducts its operations:
A & S Ruffy Pty Ltd v FC of T (1958) 11 ATD 452 at 458; (1958) 98 CLR 637 at 657;
SSAU Nominees Pty Ltd v FC of T 85 ATC 4632 at 4648-4649; [1986] VR 355 at 374-376. But, if an employer's constitution enables the distribution of profits to individuals, history is no restraint upon the capacity of the employer to do so. In The Crows Nest Club Ltd v Commr of Land Tax (supra) at ATC 4410; NSWLR 526, Hutley JA quoted the observations of Sugerman JA and added:

```Cannot' has nothing to do with what has been done, and `cannot be done' has nothing to do with what is done; and what can or cannot be done can only be found by reference to the powers and authorities found in the instruments which create the corporation.''

Thus, the constitution must contain the constraint.

36. Article 86 of the Articles of Association of Repromed authorises its members in general meeting to declare dividends if recommended by the directors. No dividend has yet been declared. Instead, all surplus funds have been applied to establishing reserves for funding research. But there is nothing to prevent the members in general meeting from declaring a dividend out of profits in any year. Thus, although the members of Repromed have not in the past declared dividends, they have the capacity to do so. Repromed is not, therefore, an employer who provides health services otherwise than for the purpose of profit or gain. If Repromed is to qualify as an employer who provides health services otherwise than for the purpose of profit or gain, it must amend its constitution in an appropriate manner.

37. The practical administration of the Act requires such a conclusion. When deciding whether to grant or refuse an exemption, the Commissioner makes a decision which will be in effect for a relatively indefinite time, at least until the next application or until the Commissioner revokes the exemption. The grant of an exemption cannot, therefore, depend on facts which may change. The Commissioner is entitled to know that circumstances will not change. The fact that Repromed has not declared dividends in the past does not mean that it will not do so in the future. If Repromed asserts that it is a non-profit making organisation, it should amend its constitution so that the Commissioner knows that to be the fact.

38. Mr de Wijn QC relied on decisions such as
Shoobridge v South Australian Jockey Club [1922] SASR 224 at 232 and 237 but that case concerned a different statutory context and, although the report does not refer to the provisions of the Jockey Club's constitution, it is implicit that it was not operated for the individual profit of any of its members.

A public benevolent institution?

39. It is therefore necessary to determine whether Repromed is a public benevolent institution and, as such, falls within s 12(1)(b)(ii) of the Pay-roll Tax Act. Section 12(1)(b)(ii) exempts from pay-roll tax wages paid by:

  • ``(ii) a public benevolent institution to a person during a period in respect of which the institution satisfies the Commissioner that the person is engaged exclusively in work of the institution of a public benevolent nature.''

It is common ground that Repromed is a public institution. The issue is whether Repromed is a benevolent institution.

40. The meaning of the expression ``public benevolent institution'' has been considered in a number of decisions:
Perpetual Trustee Co Limited v FC of T (1931) 45 CLR 224;
Public Trustee (NSW) v FC of T (1934) 51 CLR 75;
Lemm & Ors v FC of T (1942) 7 ATD 138; (1942) 66 CLR 399;
Maughan v FC of T (1942) 7 ATD 131; (1942) 66 CLR 388;
The Little Company of Mary (SA) Inc v The Commonwealth (1942) 66 CLR 368; and
Union Trustee Co of Australia Ltd v FC of T (1962) 108 CLR 451. It is well established that the expression ``public benevolent institution'' is not a term of art and that it should be understood in the sense in which it is commonly used: see particularly Starke J and Dixon J in Perpetual Trustee Co Ltd v FC of T (supra), where it was held that a benevolent institution is an institution having as its objects the relief of ``poverty, sickness, destitution or helplessness'' or ``poverty, distress, suffering and misfortune''. As Taylor J noted in Union Trustee Co Australia Ltd v FC of T (supra),

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those definitions are not rigid or inflexible but they do convey the general notion of what constitutes the essential attributes of a public benevolent institution.

41. The fact that an institution charges for its services is not, standing alone, inconsistent with the institution being either charitable or benevolent in its operation. In other words, it is not essential that a public benevolent institution provide assistance only to those in poverty or destitution. As Lord Wilberforce said when delivering the opinion of the Judicial Committee in
Re Resch's Will Trusts [1969] 1 AC 514 at 542, ``It is not a condition of validity of a trust for the relief of the sick that it should be limited to the poor sick''. This principle is especially applicable in relation to the provision of medical and hospital services as is illustrated by the decision in Resch's Will Trusts and in
Commr of Pay-roll Tax (Vic) v The Cairnmillar Institute 90 ATC 4752 and, on appeal, 92 ATC 4307; [1992] 2 VR 706. So, in Resch's Will Trusts Lord Wilberforce said at 544:

``It would be a wrong conclusion from them to state that a trust for the provision of medical facilities would necessarily fail to be charitable merely because by reason of expense they could only be made use of by persons of some means. To provide, in response to public need, medical treatment otherwise inaccessible but in its nature expensive, without any profit motive, might well be charitable: on the other hand to limit admission to a nursing home to the rich would not be so. The test is essentially one of public benefit, and indirect as well as direct benefit enters into the account. In the present case, the element of public benefit is strongly present. It is not disputed that a need exists to provide accommodation and medical treatment in conditions of greater privacy and relaxation than would be possible in a general hospital and as a supplement to the facilities of a general hospital. This is what the private hospital does and it does so at, approximately, cost price. The service is needed by all, not only by the well-to-do. So far as its nature permits it is open to all: the charges are not low, but the evidence shows that it cannot be said that the poor are excluded: such exclusion as there is, is of some of the poor - namely, those who have (a) not contributed sufficiently to a medical benefit scheme or (b) need to stay longer in the hospital than their benefit will cover or (c) cannot get a reduction of or exemption from the charges. The general benefit to the community of such facilities results from the relief to the beds and medical staff of the general hospital, the availability of a particular type of nursing and treatment which supplements that provided by the general hospital and the benefit to the standard of medical care in the general hospital which arises from the juxta-position of the two institutions.''

The decision in Cairnmillar concerned the Cairnmillar Institute which had been established by the Presbyterian Church in 1961. It provided clinical services in the area of psychotherapy. Those services included the identification and treatment of psychological disorders and defects. It provided individual counselling, marriage counselling, family counselling, and group counselling. It charged fees for its services but about 10 to 12 percent of patients paid reduced fees or no fees at all. Fees were the only source of its income. McGarvie J held that the Institute was a public benevolent institution exempt from pay-roll tax. The decision was upheld on appeal to the Full Court of the Supreme Court of Victoria. The Full Court relied on the fact that the predominant aim of the Institute was not to make a profit or enrich those who directly or indirectly controlled it but to relieve distress. It was distinguished from a medical clinic by reason of the fact that it was not operated for private profit or gain.

42. The effect of these decisions is that an institution which provides hospital or medical services on payment of a fee, but not for the private profit or gain by those directing its operations, is a public benevolent institution. It is a fundamental requirement that the institution is not conducted for individual profit or gain. Profits must be applied for the benefit of the institution as a whole: Cairnmillar Institute 92 ATC at 4311; [1992] 2 VR at 711-712.

43. For the reasons already expressed, Repromed cannot satisfy this requirement. It is not, therefore, a public benevolent institution. The conclusion is not surprising. I do not think that the concept of public benevolent institution should be extended to include a body which is, in all respects, a medical clinic providing specialist medical services, in most cases, upon

ATC 4552

payment of a fee and where four-fifths of those fees are paid by Government agencies.

44. For all of these reasons, I dismiss the appeal.

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