SIM AUSTRALIA (AS TRUSTEE FOR SIMAID TRUST) v FC of TMembers:
GD Walker DP
Administrative Appeals Tribunal
MEDIA NEUTRAL CITATION:
 AATA 1443
Professor GD Walker (Deputy President)
1. The applicant, which has secured endorsement as an income tax exempt eligible charity and a deductible gift recipient for income tax purposes, in 2005 sought endorsement as a public benevolent institution for fringe benefits tax purposes.
2. The Commissioner of Taxation refused the application and the applicant in 2006 applied to the tribunal for review of that decision.
3. The issue in this case is whether the applicant SIMAID is entitled to be endorsed by the Commissioner of Taxation as a public benevolent institution pursuant to s 123C(2) of the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTA Act).
Chronology and basic facts
4. An entity is entitled to endorsement by the Commissioner as a public benevolent institution (PBI) within the meaning s 123C(2) of the FBTA Act if the entity:
- (a) It is a public benevolent institution, and
- (b) It has an Australian Business Number, and
- (c) It is not an employer in relation to which step 2 of the method statement in s 5B(1E) of the FBTA Act applies.
5. It is not disputed that the applicant satisfies requirements (b) and (c).
6. SIMAID was established on 15 November 1982 pursuant to a trust deed of that date between Gordon David Hamilton Stanley as settlor and SIM Australia as the custodian trustee (T pp198-210).
7. At that time, SIM Australia was known as Sudan Interior Mission Australia. In 1976 the Sudan government requested the mission to omit the word "Sudan". Consequently, and also because of integration with other missions in South America and Asia, Sudan Interior Mission was registered as SIM Australia, the acronym "SIM" now notionally standing for "Service in Mission".
8. The applicant tendered the following chronology (Exhibit A2) (omitting references):
|15 Nov 1982||SIMAID trust established|
|19 Jan 1983||SIMAID gazetted as an eligible fund pursuant to s.78(8) of the Income Tax Assessment Act 1936|
|1 Jul 2000||SIMAID endorsed by Commissioner as an income tax exempt eligible charity under s.50-5 of the Income Tax Assessment Act 1997 ("ITAA97")|
|1 Jul 2000||SIMAID endorsed by the Commissioner as a deductible gift recipient under ss.30-80(1) and 30-85 of ITAA97|
|22 Aug 2005||SIMAID applied for endorsement as a public benevolent institution (PBI)|
|23 Nov 2005||Commissioner refused SIMAID's application for endorsement as a PBI|
|12 Jan 2006||SIMAID objects against Commissioner's refusal|
|24 Mar 2006||Commissioner disallowed SIMAID's objection|
|15 May 2006||SIMAID filed application for review of the objection decision with the AAT|
9. SIMAID was established to provide relief for persons living in certain "certified countries" and to assist in their social and economic advancement by providing such things as food, water, shelter, primary medical and health care, basic education, employment opportunities, agricultural development programs and other forms of relief that meet their basic needs or improve their standard of living. The certified countries represented essentially the world's poorest nations in Africa and South America which had been certified by the Commonwealth Minister for Foreign Affairs for the purposes of the then s 78(8) of the Income Tax Assessment Act 1936 (ITAA36).
10. SIM's management is vested in a committee of persons who are required to administer it in accordance with specified rules (Exhibit A5, p53) and who are also members of the SIM National Council (Exhibit A5, p52), which is part of SIM Australia.
11. SIMAID until recently had two full-time employees, Juanita Manahan and Ross Britton. They still have the same responsibilities as before, but their salaries now come from SIM Australia. Ms Manahan said that she reports at times to the SIMAID subcommittee and at other times to the SIM Australia National Council. The meetings of the two bodies are normally held consecutively on the same day at the same place. At one time Mr Britton was a member of the National Council, but is no longer.
12. Ms Manahan said that the applicant has been continuously carrying out the fund purposes in the certified countries since its establishment and continues to do so. It engages in activities and provides services directly for the fund purposes, rather than supplying money to others to provide those services. It employs managers, employees, agents, contractors and volunteers.
13. Ms Manahan stated that the functions undertaken by the applicant SIMAID include project initiation, design and implementation, fund-raising, monitoring quarterly reports, field visits and evaluation, correspondence with field project managers, administration and accounting. Ms Manahan said that occasionally SIMAID would see a need and discuss with SIM people in the field the possibility of developing an overseas project. An example was the work of Dr Tan with the Andean Indians in Bolivia, supplying basic medical services by means of a mobile clinic. Dr Tan also trains local doctors to operate the clinic.
14. Projects are usually initiated overseas, however, at the local level. SIMAID receives requests to fund projects that have been approved by SIM International. The usual process involves a request for funds from SIM organisations in particular countries and from SIM International. In the small percentage of cases that are initiated by SIMAID itself, they are put to the local SIM body for consideration.
15. Ms Manahan, who is SIMAID's project promotions manager, explained that when the people in the field see a need, they consult Mr Britton and herself in designing a project to meet that need. Mr Britton and Ms Manahan would make a recommendation to the SIMAID subcommittee, which would accept it or reject it. Ms Manahan would promote the project and raise funds for it, while Mr Britton liaises with the field manager and keeps the project on track. Ms Manahan also has a role in monitoring, which involves checking the reports submitted by the people in the field.
16. If a project submitted to the subcommittee does not meet the SIMAID criteria, it is rejected. SIMAID's focus is on aid and development, so mission or welfare activities, for example Bible translation, are not funded. The criteria used are based on SIMAID guidelines.
17. SIMAID monitors the project implementation on an on-going basis, checking
ATC 2246quarterly reports to see if it has met its goals in that quarter. SIMAID staff will help to keep the project on track and may suggest modifications to it. Copies of the project updates are sent to the end donors. SIMAID's fundraising is sometimes project-specific, or can be general. It produces a quarterly newsletter, Imagine, and also publishes a "gift catalogue" whereby donors can send a person to whom they would normally send a gift a voucher evidencing that a specified sum had been given to a SIMAID project.
18. SIM International, Ms Manahan said, is a worldwide missionary agency, which has under its umbrella a number of other national or trans-national affiliated organisations (Exhibit A5, p203).
19. SIMAID's development philosophy is to view the development process as a catalyst, whereby SIMAID helps people to help themselves. The Hope for AIDS project for Africa is an example. Mr Britton in particular had participated very actively in project design and Ms Manahan had been involved in that work also. That task included ensuring that the project complied with SIMAID policies and criteria, such as ensuring that the project is sustainable and will help people to help themselves. They are also concerned to ensure that the project is of a kind that will attract funds by way of gift. Educated donors do not want their contributions disappearing into "black holes", but like to see the building of capacity among needy people.
20. SIMAID's work in implementing projects is not limited to the provision of funds, but also involves providing advice, supplies and equipment.
21. One of SIMAID's self-funded volunteer workers is Diane Marshall, who is responsible for the project "Skills Building in HIV/AIDS Ministries" (Exhibit A5, p230). That is a SIM International project, but SIMAID contributes money and the services of Ms Marshall.
22. Ms Marshall, who is based in Sydney, prepared a report for SIMAID and SIM International on the progress of the project (Exhibit A5, pp237-240). Reports and other publications of that nature are used to help SIMAID to raise funds for its activities.
23. SIMAID's involvement goes beyond funding, however. Mr Britton and Ms Manahan have been invited to travel to southern Africa this year to assist with the strategic planning for the project. Ms Marshall, as a professional, has the main responsibility, but Mr Britton and Ms Manahan monitor its implementation in relation to the SIMAID criteria of development-based self-help philosophy. Sometimes SIMAID acts directly, such as by administering medicines, but essentially it is there to train others. Mr Britton and Ms Manahan also conduct monitoring visits as part of their accountability towards donors, and to ensure that the project "won't fall over". The AIDS project is particularly well managed. The local SIM body reports to SIM International, and SIMAID, but also to the local national government.
24. The applicant is providing most of the funding for a signal African project, the Maradi Integrated Development Program (Maradi project or MIDP), which aims to find, demonstrate and promote solutions to the unsustainable farming systems of Niger by decreasing desertification, regenerating farmland and improving food security by adopting new agroforestry farming systems. Several SIM bodies are involved in the project, but SIMAID, besides providing most of the funding, makes available the services of Peter Cunningham and Sally Cunningham, who are SIM Australia members employed by SIMAID. Both Mr and Mrs Cunningham are missionaries but also have agricultural science qualifications and do not undertake missionary work as part of the project. They can do so in their own time, however.
25. The Maradi project has recently been redesigned to give it a more holistic structure. The SIM Niger organisation, in the performance of its role in the project, mainly consults with Mr Britton in Australia.
26. Other volunteers who work for SIMAID are Russel Pratt, who is based in South Africa and who among other things is project co-ordinator for SIM and SIMAID HIV/AIDS projects in Africa and Asia, Dr Julie Lincoln of SIM New Zealand, who receives SIMAID funds and is currently working in Nepal on a leprosy treatment project and Jenny Fallon who is based in Burkina Faso (formerly Upper Volta), with oversight of the Hope for AIDS project in that country. Ms Fallon's role is similar to that of Ms Marshall and relates to
ATC 2247projects that are both SIMAID and SIM International responsibilities. She helps to raise international funds and develop projects that are sent to SIM International to obtain the approval that is needed before SIMAID will approve them for funding.
27. Other volunteers include Elspeth Slater, also based in Burkina Faso, who manages the Milk for Malnourished Children and Orphans project, and Dr Lawrence Tan who is based in Bolivia and whose duties include managing and implementing the Sucre Family Medicine and Community Health project, part of which conducts the mobile clinic described above. That project was initiated and promoted by Dr Tan in collaboration with SIMAID in 2004 and, Ms Manahan said, is already making a difference to the medical care and skills base in one of the poorest areas of Bolivia.
28. Dr Phil Andrew, who is based in Australia, facilitates and supervises a project that trains doctors in Nigeria at a post-graduate level, to better equip them to provide health care and preventive education to the poor. Dr Andrew assesses needs and opportunities for training through field visits and electronic communication and raises funds to meet those training opportunities.
29. In Exhibit A6, an extract from the SIMAID magazine Imagine, Mr Britton described some aspects of his role:
My new position [with SIMAID] shares some common goals and approaches with the old [position with the South Australian government agricultural agency], such as the aim to build the capacity of individuals and communities to deal with economic, climatic, political and social forces. My visit to projects in India and Bangladesh highlighted the highly personal face of this struggle and the compassion and tenacity with which our SIMAID personnel seek to bring change and hope. I heard stories of women freed from the prison of illiteracy now caring for their families with confidence. Men proudly showed me their improved animal and crop production. As I work with our partners to develop, monitor and support such projects, I continue to be inspired to grow and strengthen the support fellow Australians can offer.
30. In some cases, Ms Manahan said, SIMAID undertakes the direct provision of aid, such as in cases of direct disaster relief.
31. SIMAID's financial manager, Mr Mark Mann, explained (Exhibit A7) that SIMAID and SIM Australia operate in partnership with seven other signatory SIM entities in seven other countries, although each is managed and operated as a separate entity. In Australia, projects are either assigned to, or "owned" by SIMAID (these are SIMAID projects) or SIM Australia, but not both. That is because SIMAID projects must comply with the SIMAID trust deed, while projects owned by SIM Australia do not.
32. SIMAID projects originate with a suggestion from either the SIMAID project manager or people on overseas assignment, SIM members or associates perceiving a need within one of the countries in which SIMAID operates and which falls within the objects of the SIMAID trust deed.
33. A few SIMAID projects are undertaken in partnership with other non-SIM agencies, although the viability of those projects depends on SIMAID funding. The most recent of those was the supply of a health care machine to Niger. That project was directly funded and controlled by SIMAID, and not through the SIM system.
34. A project proposal is formulated with extensive consultation between SIMAID staff and the project managers in the particular overseas country. That consultation process is necessary because SIMAID projects must comply with the SIMAID trust deed and relevant legislation for approved overseas aid and development projects, it must form an integral part of the aims and purposes of the work in the overseas country, the project must meet the relevant federal legislative requirements if it is not be rejected, and if the project managers overseas are not fully involved, the project aims may conflict with other projects or strategies already under way in that country.
35. Most projects are approved through the SIM system, using procedures outlined in the SIM operations manual (Exhibit A5, pp78-115). Each approved project is given a unique number to facilitate organisational and
ATC 2248accounting functions. That has the advantage that the unique project number allows the SIM system of worldwide fund transfers to be used. It also gives worldwide exposure to the project, to allow it to attract other potential donors.
36. The centrepiece of the SIM system of funds transfer is a single bank account held by SIM International. Each SIM office throughout the world holds funds in that central account. A monthly inter-office transfer request is made to the SIM International accountant, who moves ownership of the funds to the receiving SIM office. Those organisations that are net senders, such as SIMAID and SIM Australia, make remittances from their local bank account to the United States bank account in anticipation of inter-office transfer requests. Those organisations that are net receivers of funding are able to draw funds from the United States to their local country's bank account. That method of funds transfer allows SIM to keep funds in countries where banks are relatively more secure and to reduce the costs associated with multiple international bank transfers.
37. Many SIMAID projects using the SIM system still have a majority of funding raised through SIMAID. By way of illustration, Mr Mann provided the following table (Exhibit A7, para 10):
|"Project||Project number||Total Cost||Raised by SIMAID||Percentage of funds raised by SIMAID||Raised by Other Sources|
|Medical Van - Bolivia||91210||$250,371||$249,311||99%||$1,060|
|Agricultural research - Maradi - Niger||97345||$103,670||$88,710||86%||$14,960|
|Co-ordinating Indigenous AIDS response - Burkina Faso||93881||$50,904||$50,904||100%||Nil|
|HIN/AIDS Reduction - South Africa||97397||$82,746||$77,732||94%||$5,014|
|Kushtia Community Development - Bangladesh||98226||$111,709||$85,146||76%||$26,563|
|Milk for Children - Burkina Faso||93291||$30,167||$24,795||82%||$5,372|
|Pakistan Earthquake relief||98064||$98,260||$18,313||19%||$79,947|
|Niger Famine Galmi Area||97311||$200,707||$69,975||35%||$130,732"|
38. Once SIMAID has approved a project, it does not merely furnish money and leave the expenditure of those funds to the complete discretion of the volunteers managing the project within the recipient country. SIMAID staff exercise control over those projects and their funding, for the same reasons as the consultation process described earlier is undertaken. That ensures that funds are used efficiently and appropriately, and in accordance
ATC 2249with the project proposal formulated by SIMAID's staff and the project managers in the particular overseas country where the project is situated.
39. SIMAID staff undertake monitoring visits and funding control for each SIMAID project and are required to monitor the progress of all SIMAID projects through regular reports received from each project manager.
40. Where regular reports from projects managers are not received, or progress is considered inadequate, it is SIMAID policy that SIMAID staff are to contact the project managers to ensure that remedial action is taken. They may provide advice on how best to achieve the project's aims in accordance with the proposal devised jointly by SIMAID staff and the project managers.
41. For the larger, more costly SIMAID projects where it is economic to undertake monitoring visits to the project site, SIMAID staff will undertake such visits. They can assist the relevant project manager with aspects of organisation while they are on site.
42. The main method of ensuring that SIMAID maintains control over the scope and progress of its projects is by making variations to, or threatening variations to, the project's funding. During the last six years, however, Mr Mann has been instructed by the SIMAID committee to withhold funding on only one project because of inadequate reporting. There have, however, been examples of threats to withhold funding, as happened with two projects in June 2005.
43. In most projects, the SIMAID funds constitute the majority of the money made available. SIMAID works closely with SIM Australia because it is a small organisation and they do not wish to duplicate administrative costs. In general, they also rely on the infrastructure of other SIM organisations, such as the provision of accommodation and salary contributions by SIM Australia to SIMAID. For international matters they will tend to rely on the infrastructure of SIM International or the local organisations.
44. The salaries of Mr Britton and Ms Manahan are now funded by donations. Under their agreements their salaries are guaranteed for 12 months at a time, and where necessary SIMAID will supplement donated funds to make up the contract salary during the current year.
45. In cross-examination Mr Mann stressed that SIMAID is usually involved in project design from the outset because the project must meet federal tax and other legislative requirements, besides complying with the SIMAID trust deed.
46. The Hope for AIDS project is one of the biggest SIM undertakings, but the Maradi project has a particular affinity for SIMAID because it involves methods for arid land agriculture using Australian trees. Most projects undertaken by the group have different SIM agencies undertaking different tasks. Nevertheless, they use SIM as a "brand name". They make use of overseas infrastructure, while obtaining funding and other resources from SIMAID, including advertising, the gathering of materials for promotional talks, education for project managers on record-keeping and reporting, help in designing follow-up projects and assuring the integrity of project implementation. SIMAID, Mr Mann said, has an obligation to do more than merely fund projects and must also undertake monitoring and similar functions.
47. Both parties made oral and written submissions.
48. At the hearing the respondent submitted that the applicant, which currently enjoys the status of a public fund pursuant to s 30-80, item 9.1.1 of the ITAA97, was seeking in addition the status of a PBI. The legislation provides a context for those two categories that makes it clear that an entity cannot be both a fund and a benevolent institution at the same time. The ITAA97 s 30-45 distinguishes between the two and they are subject to different legislative treatment. A public fund is not exempt from fringe benefits tax, but an institution is. No decided case establishes that a taxpayer may hold a dual status or double classification in that way.
49. The remarks of Windeyer J in
Stratton v Simpson (1970) 125 CLR 138 at 145, which might be taken as suggesting that a public fund could also be properly called an institution, was not a tax case.
ATC 2250By contrast, in
Trustees of the Indigenous Barristers' Trust v Commissioner of Taxation (2002) 127 FCR 63, Gyles J had this to say:
In my opinion, a body cannot be a public benevolent institution unless it can be identified as carrying on activities or providing services relevant to the benevolent purpose. In my view, a trust fund administered by trustees who provide money in order that services provided by others can be availed of is not an institution in this sense. For this reason, in my opinion, the Trust is not a public benevolent institution. That conclusion is reinforced by the presence in s30-45 of items 4.1.2 and 4.1.3, each of which distinguishes a fund from a public benevolent institution (at page 87).
51. To require that the applicant be endorsed as a PBI would effect a widening of the exemption and thus give rise to legal uncertainty. Street CJ had pointed out that danger in
Australian Council of Social Service Incorporated v Commissioner of Payroll Tax (NSW) (1985) 16 ATR 394 at 395:
The phrase 'public benevolent institution' is not circumscribed by any statutory definition; nor is it a term of art:
Public Trustee (NSW) v FCT (1934) 51 CLR 75 at 100. Its import has been illuminated by authoritative decisions. While its meaning is thus not absolutely incapable of extension or modification, the pursuit of certainty in the operation of statutes ... is a powerful factor to be taken into account when it is sought, as it is in the present appeal, to widen the established scope of those words.
52. The respondent further submitted that if dual status was permissible, the applicant nevertheless did not qualify as an institution, for the reasons given by Gyles J in Indigenous Barristers (supra). Overall, SIMAID is a trust fund administered by officers with dual capacities that provides funds for the acquisition of services rendered by others, specifically by SIM International, SIM Australia and local SIM bodies in various countries. Ms Manahan's evidence had shown that projects were overwhelmingly not initiated by SIMAID. The operating manual (Exhibit A5, p87) showed that SIMAID's work relates to compliance and is performed in pursuance of the terms of the trust and of SIMAID's tax obligations and its requirements for maintaining deductibility. Most of its activities relate to funding.
53. While it was hard to compartmentalise people, those implementing the projects on the ground are not from SIMAID but work for other SIM organisations. Even Mr and Mrs Cunningham did not describe themselves as SIMAID people.
54. Mr Sheller further contended that Ms Manahan's evidence showed that SIM's involvement in implementation related to its funding activities. Any involvement in project design was a function of its funding requirements, and its monitoring of reports was pursuant to its obligation to comply with the Trust. SIM International, not SIMAID, was the focus of the AIDS program. The field visits by Ms Manahan stemmed from the objects of the Trust and the evaluation process also was designed to ensure proper use of the funds.
55. SIMAID's own newsletter described SIMAID as "the relief and development agency of SIM Australia" and stated that its projects "contribute to SIM's purpose statement" and "are planned, implemented and supervised by personnel of SIM or its related agencies" (T p130). The organisation's newsletter, Imagine (Exhibit A6), described SIMAID's responsibilities differently from the other evidence advanced by the applicant. Overall, the evidence showed that SIMAID is a trust to fund certain purposes and is operating as a trust. It funds projects designed and implemented by others, and thus is squarely within the reasoning of Gyles J in Indigenous Barristers (supra).
56. The respondent also disputed whether SIMAID met the legal definition of "benevolent", because that term has been interpreted as requiring the direct conferral of benefits. The evidence showed that SIMAID aims to build the ability of necessitous people to help themselves, rather than provide them with direct relief. While SIMAID had provided direct relief funding in relation to the 2004 Asian tsunami and the Pakistan earthquake, its
ATC 2251overall philosophy, as shown in the operations manual (Exhibit A5, p81), was to treat the development process as a catalyst for change rather than directly to furnish assistance.
57. As there is no definition of a PBI, nor definitions of the individual words, in the FBTA Act, the phrase takes its ordinary meaning, Mr Jones said.
58. There is no dispute between the parties that SIMAID is "public". The vast majority of its funds are received as gifts from members of the public and are used for the charitable or benevolent purposes listed in the trust deed, that is, to assist needy people in listed Third World countries.
59. The High Court considered the meaning of "public benevolent institution" in
Perpetual Trustee Co Ltd v Federal Commissioner of Taxation (1931) 45 CLR 224. Starke J expressed the view that that phrase means "an institution organized for the relief of poverty, sickness, destitution or helplessness" (at 232). Dixon and Evatt JJ were of the same view (at 233 and 235).
60. SIMAID is a benevolent body, being organised for the relief of poverty, sickness, destitution or helplessness. Its purpose as expressed in its trust deed, Schedule 2, is to provide relief to persons living in Third World countries, principally among the poorest nations in Africa. SIMAID's publications make it clear that its projects are directed to the relief of poverty and sickness.
61. The Commissioner's contention that SIMAID's activities are not "benevolent" because they are designed to help people to help themselves should not be accepted. Helping extremely poor people to acquire the means to feed and take care of themselves is just as much "the relief of poverty" as directly providing food and shelter, because it will permanently rather than temporarily improve their condition. The applicant referred to a Chinese proverb that states, "If you give a man a fish, he eats for a day, if you teach him how to fish he eats for a lifetime". That simple maxim has become a guiding principle for charitable work in modern times, supplementing or qualifying the earlier approach of directly giving food or shelter, which can create dependency if sustained over a long period.
62. The real issue in dispute, the applicant argued, is whether SIMAID can properly be characterised as an "institution". The Commissioner contends that SIMAID is not an institution because it does not carry on benevolent activities, but rather administers the trust by funding projects undertaken by other agencies, and because it is a public fund and as such cannot also be a PBI.
63. The High Court considered the meaning of "institution" in Stratton (supra). Gibbs J said at 158 in that case:
In its ordinary sense "institution" means "an establishment, organization, or association, instituted for the promotion of some object, especially one of public utility, religious, charitable, educational etc." (The Shorter Oxford English Dictionary). It means, as was said in Mayor etc. of Manchester v. McAdam, "an undertaking formed to promote some defined purpose ..." or "the body (so to speak) called into existence to translate the purpose as conceived in the mind of the founders into a living and active principle". Although its meaning must depend on its context, it would not ordinarily connote a mere trust (cf. Minister of National Revenue v. Trusts and Guarantee Co Ltd.
64. Windeyer J at 145 expressly noted that a "public fund" administered by trustees could also be an institution:
But I can see no reason why, unrestrained by context, a fund raised by public contributions and administered by trustees could not be properly called an institution. Whether or not it would be a charitable institution would, of course, depend upon the trusts on which it was held. Funds raised for the relief of distress caused by bushfires or other disasters are well known. If the object to which the fund must be devoted is the continuing advancement of charity in the legal sense, it is a charitable institution.
65. As was noted above, the meaning of "institution" was recently considered by Gyles
ATC 2252J in Indigenous Barristers (supra). An issue in that case was whether a trust established to assist indigenous Australians to pursue a career at the New South Wales bar was a PBI. After considering the authorities on the matter, his Honour made the observations quoted above about the inconsistency between being a trust and being a PBI.
66. Thus, his Honour said, a trust fund administered by trustees will not be an institution if the trustees' role is "simply to apply the income of the trust in providing gifts and donations to such public charitable objects as they, in their discretion, determine":
Trustees of the Allport Bequest v Federal Commissioner of Taxation (1988) 19 ATR 1335 at 1341.
67. But in contrast with the situation in those cases, SIMAID is not a mere trust. It has an organisation that carries on substantial activities for the promotion of the relevant benevolent purposes for which it was established. In particular, SIMAID:
- (a) has a committee that is expressly empowered to administer and manage the trust fund;
- (b) has two employees that undertake extensive activities to ensure that the trust purposes are fulfilled by:
- (i) Identifying and designing projects that meet the purposes of SIMAID;
- (ii) Monitoring the progress of projects that have been approved and funded by SIMAID, including site visits;
- (iii) Providing management support to projects;
- (iv) Evaluating quarterly reports received by the volunteers in the field that are responsible for managing the project; and
- (v) Fund raising;
- (c) undertakes, through its volunteers, approved projects that deliver the relief directly to those in need.
68. Ms Manahan and Mr Mann had given evidence that SIMAID plays an active role in the design, development and management of its projects, and no evidence had been adduced to contradict theirs.
69. It is only rarely that SIMAID provides funds to other agencies that directly administer the relief, Mr Jones said. The services and benefits furnished through SIMAID projects are dispensed directly through the volunteers managing those projects. Those volunteers report directly to SIMAID and are properly characterised as agents or representatives of SIMAID, whether or not they also work for other entities within the SIM network. Both witnesses had rejected the proposition that Mr and Mrs Cunningham, the field managers for the Maradi project, were not SIMAID representatives. Mr Mann explained that such representatives "wear many hats" within the wider SIM organisation. He also explained that SIMAID does not have exclusive employees but works closely with, and relies on, other SIM organisations for administrative infrastructure in order to minimise expenditure on administrative costs.
70. Furthermore, none of the authorities cited require that an "institution" provide services directly through employees, as opposed to volunteers or representatives, who work exclusively for that institution in order for it to qualify as a PBI.
71. Finally, SIMAID does not simply dole out money to other organisations for them to perform the benevolent works. It has its own projects that are principally funded by it. The fact that sometimes other related organisations also provide funds is beside the point. Fundamentally, SIMAID exercised control over the delivery of the services and its projects by its control of funding to the project. If the project is not being undertaken consistently with the project proposal devised with SIMAID, SIMAID will withhold or threaten to withhold funding unless the project is conducted appropriately.
ATC 2253Thus, SIMAID is possessed of a quality and function that distinguishes it from a mere trust and justifies it as being categorised as an institution:
Sargents Charitable Foundation v Chief Commissioner of State Revenue 2005 ATC 4632;  NSWSC 659 at para 25.
73. The applicant SIMAID seeks to have the tribunal set aside a decision of the respondent refusing his endorsement as a PBI within the meaning of s 123C of the FBTA Act. The applicant is currently endorsed by the commissioner, pursuant to subdivision 50-B of the ITAA97 as an income tax exempt charity, being in this case a charitable fund established in Australia, pursuant to subdivision 50-A section 50-5 (item 1.5B) of the ITAA97. It also enjoys deductible gift recipient status as a public fund declared by the federal treasurer to be a developing country relief fund pursuant to subdivision 30-B section 30-80 (Item 9.1.1) and section 30-85(1) of the ITAA97. If endorsed as a PBI, the applicant may provide fringe benefits to its employees that will be exempt: see s 57A of the FBTA Act.
74. The applicant bears the onus created by s 14ZZK of the Taxation Administration Act 1953 of proving that the Commissioner's decision "should not have been made or should have been made differently" (s 14ZZK(b)(iii)).
75. Both the applicant and the respondent advanced submissions directed to the question of whether a body could, as a matter of construction, be both a fund and a PBI at the same time. In view of the conclusion I have reached below, it is not necessary to answer that question or to evaluate those submissions.
76. It is not disputed that the SIMAID Trust is "public" for the relevant purposes. What is disputed is whether it can be categorised as "benevolent" and as an "institution".
77. The respondent did not point to any authority that would disqualify SIMAID's activities from being treated as the relief of poverty, but argued that consistently with the bulk of its stated purposes and its mission statement, the projects are education-based and should be classified as worthy community objectives but not as the relief of poverty or sickness and therefore not benevolent in the relevant sense.
78. In the absence of any authority to the contrary, I think the applicant's purposes and activities do entitle it to be categorised as a "benevolent" entity. The evidence shows that in situations where a sudden natural disaster such as the 2004 Asian tsunami or the Pakistan earthquake have deprived large numbers of people of the basic necessities of life, SIMAID has provided direct relief funding through other bodies. In cases of less acute need, it applies its guiding philosophy of helping people to help themselves and treating the development process as a catalyst for change. That approach has become widely accepted as a proper objective for charitable and relief work following the realisation that continued supply of direct relief can create a dependency that makes the recipients more vulnerable than ever if direct relief supplies are reduced or interrupted for any reason.
79. The issue that therefore remains is the crucial one: whether SIMAID is an "institution".
80. It is not in dispute that SIMAID is a trust, the trustee of which is SIM Australia. SIMAID has a management committee which is a subcommittee of SIM Australia, such that the applicant's committee members are also members of the SIM National Council (Exhibit A5, pp52-53).
81. SIM Australia is part of the worldwide organisation known as SIM International (sometimes also referred to simply as SIM). That organisation includes a large number of local bodies, such as SIM Niger, SIM Burkina Faso and SIM Bolivia (Exhibit A5, pp203-209). It is to those local agencies that the applicant provides funds, which are moved via a single SIM International bank account in the United States (Exhibit A7, para 9). The project approval process is described in the SIMAID manual of operations, January 2004 revision, para 4.4:
SIMAID will review projects which have been approved by SIM or other partner agencies at the area level. This means that the project needs to have been reviewed locally and to have met local requirements ... Projects submitted by SIM areas must be submitted on the appropriate SIM International project forms. Proposals must
ATC 2254be submitted to SIM International's Projects Department for review there. They can then be sent to SIMAID for funding consideration (Exhibit A5, p87).
82. In 1996, SIMAID had two employees in Australia, Ms Manahan and Mr Britton, but as Mr Mann explained, they are no longer employed by SIMAID, which now has no employees. SIMAID's former employees and its volunteer workers are also members of SIM Australia. All major decisions made by the SIMAID management committee must be ratified by the full SIM National Council (Exhibit A5, p5).
83. SIMAID has no infrastructure of its own, but instead relies on SIM Australia for support within this country and on SIM International and local SIM agencies for support overseas. By so doing, the organisation commendably seeks to economise on administrative and overhead expenses. For the same reason, those who work for the organisation "wear many hats", as Mr Mann put it, and tend to see themselves as part of one global organisation.
84. The points so far enumerated are not inconsistent with the proposition that the applicant is a PBI that carries on its own activities. There are other matters, however, which in my view have a less ambiguous significance.
85. One is the description of SIMAID's role as set out in its manual of operations (Exhibit A5, p83):
- 3. SIMAID's Role
SIMAID provides the following support and services:
- For overseas projects
- • Review of project proposals
- • Seeking funds for approved projects
- • Receive, allocate and transfer project funds
- • Review project reports
- • On-site monitoring of projects
- • Management support for projects
- • Regular liaison with projects
- In Australia
- • Initiating and maintaining contacts with donors
- • Providing information for donors
- • General education throughout the Australian community regarding SIMAID projects
- • Specific education of SIMAID's donor constituency
- • Collaboration with SIM Australia in regard to recruiting, with a particular emphasis on providing Australians with the opportunity to experience an initial short-term first-hand involvement in development projects
- • Where appropriate, co-ordinating and liaising with representatives of the Australian government on co-funded projects and development issues
- • Actively participating in the programmes of ACFID to ensure high standards of development activities
- With SIM Around the World
- • Sharing information on SIMAID activities in relief and development areas
- • Regular communications with SIM International
- • Regular communications with other SIM National offices
- • Promotion of SIMAID and related issues in the SIM world
86. It will be seen that SIMAID's functions in relation to overseas projects are in the nature of evaluation, funding, monitoring and management support. Nothing in that description suggests that SIMAID personnel or volunteers will actually be implementing the projects, such as operating the mobile clinic in Bolivia or demonstrating the use of acacia windbreaks on farms in Niger. The actual carrying out of the projects on the ground is the responsibility of local SIM agencies or other SIM bodies. Thus, SIMAID has taken a particularly keen interest in funding the Maradi project, but it is a SIM project which is described as being "supported by SIMAID" (Exhibit A5, pp247, 269). The Burkina Faso nurse training project is being implemented in that country by Clara Klassen and Madeleine Ouoba, who are not claimed by the applicant to
ATC 2255be SIMAID representatives and appear to be attached to the Centre for Health and Social Welfare operated by SIM in Burkina Faso (T p137).
87. By the same token, the tasks that Ms Manahan lists as responsibilities of Mr Britton and herself (Exhibit A4, paras 20-21), are in the nature of fundraising, promotion, monitoring and liaison rather than the actual implementation of projects. Diane Marshall, whose role in managing and directly delivering several important projects is described by Ms Manahan in detail (Exhibit A4, para 22), works for SIM International, not for SIMAID (Exhibit A5, pp19, 190, 234, 241). The high-profile Hope for AIDS project is a SIM International project.
88. Ms Manahan states that SIMAID carries out its charitable purposes directly through volunteers such as Mr Russell Pratt, who is based in South Africa (Exhibit A4, para 22.2) and Peter and Sally Cunningham (Exhibit A4, para 22.4), with the implication that they are employees or otherwise direct representatives of SIMAID. Mr Mann's evidence, however, makes it clear that neither the Cunninghams, nor Ms Marshall nor Mr Pratt are, or ever have been, SIMAID employees and that Ms Marshall and Mr Pratt represent SIM International and SIM Australia respectively. The current funding proposal for the Maradi project describes the Cunninghams as "SIM missionaries" and the 2005 monitoring report on the project calls them "full-time SIM missionaries", with no mention of SIMAID (Exhibit A5, pp 252, 270).
89. There is no evidence before the tribunal to show that any of them are subject to SIMAID control or direction or to confirm that they regard themselves as representing SIMAID. While Ms Manahan's interpretation may be true in the loose sense in that they are all dedicated to the goal of implementing projects that are wholly or partly funded by SIMAID, there is nothing to show that they are on SIMAID's establishment, even on a volunteer, part-time or multi-role basis.
90. Ms Manahan's affidavit describes the activities of a number of self-funded volunteers who, she says, are directly carrying out SIMAID's activities. They are Diane Marshall, Russell Pratt, Dr Julie Lincoln, the Cunninghams, Jenny Fallon, Elspeth Slater, Dr Lawrence Tan and Terry Early. Although the introductory words of paragraph 22 just paraphrased do not explicitly describe them as SIMAID agents or representatives, that is the plain implication. Yet Diane Marshall is repeatedly described elsewhere as working for SIM International, not SIMAID, and the Cunninghams are described as full-time missionaries, not as SIMAID representatives or agents. Consequently, while it is not easy to ascertain from the applicant's evidence exactly whom the other persons mentioned are working for, it is a reasonable inference that, like Diane Marshall and the Cunninghams, they have no formal or institutional links with SIMAID.
91. Again, Ms Manahan describes the Maradi project as "in many respects the flagship of SIMAID being a project on which SIMAID has directly carried out its charitable purposes for over 20 years" (Exhibit A4, para 24.3). Yet a brief history of the Maradi project prepared in 2004 does not mention SIMAID (Exhibit A5, p250), nor does the Maradi project organisation chart (Exhibit A5, p256). The current Maradi project vision statement notes that SIM owns two parcels of land in Niger and leases a third (Exhibit A5, p265). SIMAID is not the owner or lessee, and indeed it might be impracticable for it to hold land in that country. A report on a 2005 monitoring visit to the Maradi project showed that Ross Britton and David Riethmuller were visiting the Maradi project on behalf of SIMAID but were not part of the MIDP team (Exhibit A5, p269). It would appear that the SIM Niger director, Gordon Evans, is the person actually overseeing the implementation of the Maradi project on the ground (Exhibit A5, p273). The report in fact made certain recommendations to the SIM Niger leadership about the conduct of the Maradi project (Exhibit A5, p278). Ms Manahan's evidence also referred to SIM Niger's role in its performance (see para 24, supra).
92. Several other pieces of evidence point in the same direction:
- • The SIMAID organisation chart does not refer to the overseas teams actually implementing SIMAID projects in the field. There is a reference to "O/S technical staff", but that does not seem apt to describe
ATC 2256that class of line personnel. The inference is that they do not belong to SIMAID.
- • The statement of principles on relations with host governments refers to SIM, not SIMAID, administrators (Exhibit A5, p170).
- • The SIMAID five-year business plan for 1995 to 2004 describes activities related to the administration of the fund, not actual physical work in the field (Exhibit A5, pp173-178).
- • The SIMAID 2003 annual report states that "11 SIM Australia members" (not SIMAID personnel) are engaged in SIMAID projects in several countries (Exhibit A5, p195).
- • The recruitment manual for personnel, including local staff, is a SIM document that makes no reference to SIMAID (Exhibit A5, p214-223).
93. Mr Mann made it clear that "SIMAID and SIM Australia operate in partnership with 7 other signatory 'SIM" companies in 7 other countries although each is managed and operated as a separate entity" (Exhibit A7, para 3, emphasis added).
94. The structure of the SIM organisation may be flexible and adaptable, but if the SIMAID component is to be characterised as directly implementing projects in Africa or South America there needs to be some defined line of responsibility for day-to-day implementation traceable back to SIMAID itself, as opposed to SIM International or SIM Australia. The evidence before the tribunal does not reveal such a link and the applicant bears the onus of proving it.
95. On the contrary, the applicant's promotional material points to the opposite conclusion. A promotional leaflet seeking to raise money for the relief of AIDS in Africa describes SIMAID as "the relief and development agency of SIM Australia" and states that its projects "are planned, implemented and supervised by personnel of SIM or its related agencies" (T p130). The same statement appears in a fundraising section in a 2007 issue of the applicant's newsletter Imagine (Exhibit A6).
96. While Mr Mann denied that those statements accurately described SIMAID's role, they are consistent with the description of SIMAID's role from the manual of operations set out above, and also with the following passage from the same outline of the applicant's role:
When SIMAID becomes involved in a funding relationship with overseas projects, responsibilities and liabilities are clearly spelled out. SIMAID's provision of funding is dependent on donor funding ... The value of this information [about the status of each project that is being funded] is dependent on consistent feedback from those directly involved with the projects (Exhibit A5, p83, emphasis added).
97. From that passage emerges the clear implication that SIMAID's role is to fund overseas projects and to ensure that donors can be satisfied that their contributions are being put to good use. SIMAID monitors each project and examines reports from those who are actually implementing them.
98. The respondent submits that there is nothing in the applicant's role as described in the manual that depicts its activities as anything more than that which would be done by a prudent trustee ensuring that trust funds were properly and effectively applied towards fund purposes. I would be more inclined to describe the applicant as a particularly energetic trustee, but the basic point remains valid. By its role in project design, monitoring, counselling and co-ordinating work, backed by an underlying threat that funding may be terminated for poor performance, the applicant strives to ensure that the projects are being implemented in a way that will ensure their success and the degree of donor satisfaction needed to ensure the continued flow of funds.
99. The applicant points out that SIMAID does not simply dole out money to other organisations for them to perform the benevolent works. It has its own projects that are principally funded by it. That is true.
100. It is also true that by using its donors' funds to help extricate the world's poorest people from starvation and disease, the applicant is engaged in a noble enterprise. But while SIMAID clearly does monitor the use of the money it makes available, it does not
ATC 2257undertake the actual implementing of the projects on the ground. That is done by the local SIM agencies or other SIM entities. The people who carry out the work are associated with the global SIM organisation, but not specifically with SIMAID, whether they also have other roles in the SIM organisation or not. Consequently, whether or not a fund can also be an institution, as Windeyer J indicated in Stratton (supra), I conclude that the applicant has not established that it is an institution and is therefore not entitled to endorsement as a PBI within the meaning of s 123C of the FBTA Act.
101. The decision under review must be affirmed.