Case H24

Judges:
JL Burke Ch
RE O'Neill M
CF Fairleigh QC

Court:
No. 1 Board of Review

Judgment date: 22 June 1976,

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J.L. Burke (Chairman): The issue before the Board is whether the taxpayer's gift of $100 on 16 October 1971 to the Balmain Amateur Swimming and Life Saving Club qualifies for deduction under sec. 78(1)(a)(ii) of the Income Tax Assessment Act 1936 (as amended) as being a gift to ``a public benevolent institution''.

2. The Club has a long history - it was founded in 1884 - but the written Constitution in force during the year of income in question was that adopted in 1924 as amended from time to time.

3. The ``objects'' and ``membership'' clauses of the Constitution are as under:

``2. The objects of the Club shall be:

• (a) the instruction and encouragement of swimming in all of its branches.
• (b) the study and practice of the method of life saving taught by the Royal Life Saving Society.
• (c) the instruction and practice in the game of water polo.
• (d) the instruction and encouragement of diving.''

``5.

• (a) Members are those who have applied for and been granted membership, and whose fees have been paid for the current year; together with those declared to be Honorary Life Members under Clause 6.
• (b) Only those who hold the status of amateurs as defined by the N.S.W. Amateur Swimming Association, may compete in Club competitions, or represent the Club in competitions.
• (c) No person shall be eligible to start in any race or competition, to take part in any meeting or to hold office, until he has been accepted as a member and has paid his subscription and discharged all liabilities to the Club.''

4. Rule 8 provides for the Club to be affiliated with the N.S.W. Amateur Swimming Association, The N.S.W. Amateur Water Polo Association, The District Swimming Association and the N.S.W. Branch of The Royal Life Saving Society.

5. The office bearers of the Club were specified in Rule 15 as being Patrons and Vice Patrons, etc., and there was provision for the appointment of Race Officials. Water Polo Officials and delegates to affiliated associations.

6. ``Rules Governing Races'' were set out in Rules 24 to 34 and covered such matters as Fixtures, Officials, Time Trials, Point Scores, Championships (specification of strokes, distances and age groups), Trophies and the registering of Record Times.

7. There were tendered in evidence before the Board the Annual Reports of the Club for the 1970-1971 and 1971-1972 seasons. The Club's year runs from 1 October and the two reports are broadly the same in form and content. The detailed reference hereunder is to the 1971-1972 report. It lists the committee members appointed for the year including race starters, referees, handicappers, judges, time-keepers and coach and those appointed as water polo coaches and selectors. A life saving instructor was appointed as well as a committee member for ``Learn to Swim''. Delegates were named for Affiliated Associations being The Royal Life Saving

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ATC 176

Society, the City of Sydney Amateur Swimming Association and the N.S.W. Amateur Water Polo Association.

8. The report gave details of the swimmers registered with the N.S.W. Amateur Swimming Association (Life Members - 8, Senior Members - 15, Junior Members - 88, Water Polo Players - 143) and added a break up of swimmers in each age group (boys and girls) Under 8 to Open. It listed point score, championship and trophy winners in the various classes and devoted a section to water polo activities.

9. Under the heading ``Learn to Swim Classes'' the report stated ``Classes were not conducted, due to lack of an instructor. But our sincere thanks go to S, who untiringly taught a great number of children and adults and was able to issue 80 certificates to children and 9 to adults.'' The paragraph headed ``Life Saving Classes'' read as follows: ``Here again classes were not run through lack of an instructor. But a number of members gained awards through their schools.''

10. The taxpayer said that every year the Club conducted either a formal ``Learn to Swim'' class or else, as was the case in 1971-1972, children and adults were taught on an informal basis by a Club member. On and off, the Club conducted classes for the various certificates and awards of the Royal Life Saving Society and furnished annual returns to the Society of those who qualified under the Club's tutorship. More recently life saving instruction has been given on a more individual basis dovetailing with that given at a local school which arranged for the examinations and furnished the required returns to the Society.

11. Speaking of the Club activities the taxpayer said ``water polo is played as a very popular sport and that keeps many of the old people in the Club.'' In the season water polo was played two or three nights a week and on those nights the Council handed over control of the baths to the Club which, in addition to manning the turnstiles, had to provide qualified people to patrol the baths. When the baths were open in the day time the Council formally supervised them but the club-rostered members (including those not qualified in life saving) assisted by taking part in unofficial patrols.

12. The Club has premises at the local baths, these being provided rent free by the Council. Membership fee in 1972 was of the order of $2 but, so the Board was told, boys and girls were admitted as members without any formality. According to the taxpayer's evidence: ``Boys' names are taken down, either by the secretary or the treasurer, and they are immediately members of the club. There is no test for membership, or any vetting of the boys.'' If membership fees were not paid, older members would pay in to balance the books. To the taxpayer's knowledge only one person had been expelled from the Club and that was for a serious misdemeanour.

13. In his evidence the taxpayer, who appeared on his own behalf, laid stress on the reputation that the Club has enjoyed over the years for acts of benevolence to residents of the district. He illustrated by reference to the case of a deserted wife who was given financial assistance and help in the home over a period of a year and instanced boys with physical deformities who have been assisted to overcome their disabilities. However having regard to the Constitution of the Club and to the fact that Club funds were not used for benevolent acts of the kind mentioned by the taxpayer, such benevolence, worthy of commendation as it is, cannot be regarded as a Club activity or function even though organized through and effected by people who were members of the Club.

14. The answer to the question presently before the Board is made clear, in my opinion, by the decision of the High Court in
Perpetual Trustee Co. Ltd. v. F.C. of T. (1931) 45 C.L.R. 224 . There the Court was interpreting the phrase ``public benevolent institution'' as used in sec. 8(5) of the Estate Duty Assessment Act 1914-1928. I quote from the decisions of the members of the Bench who comprised the majority: -

``In the context in which the expression is found, and in ordinary English usage, a `public benevolent institution' means in my opinion, an institution organized for the relief of poverty, sickness, destitution, or helplessness. The Royal Naval House has none of these characteristics:...''

(per Starke J. at p. 232)

``But, in my opinion, it (i.e., the Royal Naval House the bequest to which was denied exemption by the Court) is neither promoted nor conducted for the relief of poverty, distress, suffering or misfortune,...''

(per Dixon J. at pp. 232-233)

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ATC 177

``Such bodies (bodies which readily answer the description of `benevolent institutions') vary greatly in scope and character. But they have one thing in common: they give relief freely to those who are in need of it and who are unable to care for themselves. Those who receive aid or comfort in this way are the poor, the sick, the aged, and the young. Their disability or distress arouses pity, and the institutions are designed to give them protection. They are very numerous - `the nobler a soul is the more objects of compassion it hath' - and they have come to be known as `benevolent institutions'''

(per Evatt J. at pp. 235-236)

15. The above passages were cited with approval by Dixon J. in the subsequent case of
Public Trustee (N.S.W.) v. F.C. of T. (1934) 51 C.L.R. 75 in which he went on to say (at p. 104): ``Institutions connected with the health, upbringing, welfare, and education of young children coming within the legal conception of `charitable' may be imagined to which no one would apply the term `public benevolent institution'.''

16. The cases draw the contrast between the statutory phrase ``public benevolent institution'' and the expression ``charitable purposes'' which was removed from the Estate Duty Assessment Act 1914-1922 after it had been interpreted by the Judicial Committee of the Privy Council in
Chesterman's case (1925) 37 C.L.R. 317 as having its technical legal sense.

17. By sec. 23 (1)(h)(ii) of the Income Tax Assessment Act 1922-1925 the only deduction allowable against assessable income for donations was that for ``gifts exceeding Five pounds each made... to public charitable institution in Australia...'' By Act No. 32 of 1927 the provision was amended, inter alia, to incorporate a definition of ``public charitable institution'' as meaning ``a public hospital, a public benevolent institution and includes a public fund established and maintained for the purpose of providing money for such institutions or for the relief of persons in necessitous circumstances.''

18. In the 1936 Assessment Act sec. 23(1)(h)(ii) was replaced by the present sec. 78(1)(a) and the catalogue of institutions and funds gifts to which were made allowable has been extended from time to time. The important thing to note however is that the statutory phrase ``public benevolent institution'' was retained in sec. 78(1)(a)(ii)and there is nothing in the history of the section which suggests that it should not be given the interpretation applied judicially in the cases to which I have previously referred and which were decided prior to 1936. See per Williams J. in
Maughan v. F.C. of T. (1942) 66 C.L.R. 388 at p. 397 .

19. The Balmain Amateur Swimming and Life Saving Club is, having regard to its Constitution and activities, a Club basically devoted to the encouragement of swimming as a recreational activity for young and old alike. Such activity is fostered in the competitive sense through organized races, championships and handicaps, and in the recreational field through water polo. Ancillary to its primary activities it naturally enough contributes, through its members, its share to the ``learn to swim'' campaigns, with which we are all familiar, and play a significant role in training swimmers to the standards required for the various awards of the Royal Life Saving Society, Laudable and all as are the objectives and activities of the Club they do not constitute the Club a ``public benevolent institution'' for the purposes of sec. 78(1)(a)(ii). It is far removed from an institution which could fairly be described as one organized ``for the relief of poverty, sickness, destitution, or helplessness'' (see per Starke J. in Perpetual Trustee Co. Ltd. v. F.C. of T. supra ).

20. For the foregoing reasons I would uphold the Commissioner's decision on the objection and confirm the assessment the subject of review.