PM Roach SM
Administrative Appeals Tribunal
P.M. Roach (Senior Member)
This application was brought before the Tribunal by a voluntary association of civic-minded ladies who have given of their time and labour to serve the community. They object that their action in freely rendering community service without financial reward to themselves should be the occasion of the exaction of a tax. They find it strange that those who gratuitously benefit the community should be subject to a tax to which they would not be liable if they
ATC 763had not contributed to the community as they did.
2. The case for the applicant was presented by its principal officer, a lady who no doubt typifies - even if she does so in an exemplary way - the persons whom she represents. She recognises that it is not for this Tribunal to do other than determine whether or not the Parliament, by the terms of the legislation it enacted, has determined that the tax in question should be paid. That view carries with it the recognition that, if the Tribunal adjudges that the Act provides for the tax to be levied, then it was the responsibility of the Commissioner to assess it and for the Tribunal to uphold the action of the Commissioner in doing so.
3. It is acknowledged on all sides that the responsibility of the Tribunal is to discern the intent of the Parliament by reference to its legislation and then to correctly apply the law so determined to the facts established upon the hearing of the reference. The legislation to be construed is the Bank Account Debits Tax Administration Act (to be hereafter referred to as "the Act").
4. The case relates to the affairs of an institution which describes itself as, is recognised in legislation as, and is commonly known throughout the community as, a "school". The particular school was established as a "secondary-school" under the provisions of the Public Education Act of New South Wales. As such, it is almost totally provided for financially by the State of New South Wales. To that extent it is to be distinguished from other secondary schools which exist within the community and which are funded, not only from the public purse, but also in substantial measure by the fees paid by parents and by the benefactions of others. Schools in the latter class are commonly conducted "otherwise than for the purpose of profit or gain to the individual members of (the) association or other body" conducting them.
5. The secondary school in question is known as the "(Community) High School". It operates under the direction of the Director-General of Education who is responsible to the Minister for Education. The "school" has a staff employed by the State who are responsible for the affairs of the "school" under the direction of a headmaster known as the principal. Although the "school" is commonly identified with a defined geographical area which it exclusively occupies, and although in the minds of many the role of the "school" is seen as nothing more than the training of its students to pass certain examinations, in fact the life of any well-conducted school is not so limited.
6. Mere cursory examination of four Education Department handbooks produced during the hearing (but not exhibited in evidence) only confirms what is commonly known. The role of the school in modern Australia is multi-faceted and diverse, being concerned with the physical, emotional, social and intellectual development of its pupils.
7. Even though "Community High School" is constituted by the State as a "public school", it is not so liberally provided for financially as to have no need for the assistance of the community at large. Such is the interrelationship between the school and its community that the Public Education Act recognises that a Parents' and Citizens' Association may be constituted in accordance with regulations made under the Public Education Act (sec. 18B). Such an association ("the Association") exists in relation to "Community High School". It exists (inter alia) to "assist in providing desirable aids to teaching which the Department of Education is unable to supply..." and "to provide pupils with recreative equipment...". Such equipment as is purchased, "whether intended for the school or for use by the Association in connection with its own administration, shall become the property of the Department of Education" (cl. 21). Upon the dissolution of the Association, the residue of its funds are to be transmitted to the Department of Education to be disbursed as the Minister for Education deems appropriate (cl. 27B). The constitution of the Association provides for the establishment of subcommittees and "Community High School Canteen Committee" - the present applicant - is such a subcommittee. It has its own constitution under which it pursues its objective of providing "balanced and nutritious lunches for the children". The evidence was that, despite the provisions of that constitution which make the applicant a subcommittee of the Association, in fact the applicant operates without interference from that sponsoring body. That is probably for the understandable reason
ATC 764that not many are willing to contribute to the service of the school in the manner required by the operation of a school canteen. The result is that the applicant-committee manages its own affairs, reporting on a regular basis to its sponsoring authority and collaborating with the principal in the advancement of the interests of the school.
8. In so acting, it conforms to the first of the three methods for the operation of "Tuck Shops and Canteens" recognised by the Education Department: first, a subcommittee of the Parents' and Citizens' Association, upon which the principal should be an ex-officio member; secondly, by lease to a private contractor; and, thirdly, by the principal as a school activity assisted by paid and/or voluntary helpers, and with the principal exercising overall supervision and financial control.
9. In addition to providing lunches, the Canteen Committee sells school jumpers and school stationery packages. With the funds so generated, in consultation with the principal it provides for the purchase of additional facilities and equipment for the school. In short, the Committee by its labours plays a substantial and integral role in the life of the school. In doing so, rather than endeavour to cast on to the State responsibility for the management and control of the moneys which it necessarily handles, the applicant operated two bank accounts. It is the maintenance and operation of one of those accounts which has given rise to this reference.
10. In 1982, by the Bank Account Debits Tax Act 1982 (No. 141 of 1982), a tax was imposed in respect of:
"(a) each taxable debit made on or after a date to be fixed by Proclamation to a taxable account;..."
The Bank Account Debits Tax Administration Act 1982 (No. 142 of 1982) made provision for the collection of that tax. It provided that the bank with which "a taxable account" was kept was liable to pay the tax on each taxable debit (sec. 8) but that the bank would be entitled to recover from account holders the tax so paid (sec. 10). It also provided (sec. 11) for certificates of exemption in relation
"to the account [of an account holder] -
- (a) if the Commissioner is satisfied that all debits made, or to be made, to the account are, or are likely to be, either excluded debits or exempt debits..."
The applicant applied to the Commissioner for such a certificate of exemption, advising that the purpose for which the account was to be used was "payment of purchases, wages etc. incurred by the canteen. Payment of donations to (Community) High School." I am satisfied that that statement is substantially accurate and not the less so because cheques are drawn on that account to meet other expenses than purchases and wages which are incidental to the operations of the canteen.
11. It is common ground that the issue to be determined is whether the cheques drawn or to be drawn are aptly described as "excluded debits" in accordance with the definition contained in sec. 3(1) of the Administration Act, namely:
"In this Act, unless the contrary intention appears -
- `excluded debit' means a debit -
- (a) made to an account kept with a bank in the name of -
- (vi) any of the following:
- (A) a public benevolent... institution;
- (C) a school, college or university that is carried on by an association or other body of persons otherwise than for the purposes of profit or gain to the individual members of that association or other body,
being a debit made in relation to a transaction or transactions carried out by or on behalf of the institution, hospital, association or body, as the case may be, wholly and exclusively in furtherance of its objects;
- (vii) any of the following:
- (A) a Department of the Government of the Commonwealth or of a State or Territory;
- (B) an authority of the Commonwealth or of a State or Territory;
- (C) a municipal corporation or other local governing body,
other than such a Department, authority, corporation or body the sole or principal function of which is to carry on an activity in the nature of a business (whether or not for profit), not being a debit made in relation to a transaction or transactions entered into by or on behalf of the Department, authority, corporation or body in connection with the carrying on of an activity in the nature of a business (whether or not for profit); or
12. In support of his decision to refuse the application for exemption, the Commissioner by his representative contends:
- (a) that there is no entitlement to the exemption because the account was not kept "in the name of" the school; and
- (b) that even if it was so kept, it was not an account of the "school" and, therefore, could not have been used, or given rise to debits incurred, wholly and exclusively in furtherance of the objects of the school.
The applicant responds by proposing that the concept of "school" in the definition should not be narrowly construed. The applicant also contends that the Tribunal should be slow to give such a construction to the Act as would attribute to the Parliament a decision to tax the activities of volunteers working so closely in association with an institution which would itself be exempt from the imposition of the tax.
13. The applicant supports its contention by pointing to the passage of an amendment to the Administration Act (No. 102 of 1984) which extended the definition of "excluded debit" to include debits
"to an account kept with a bank in the name of...
- (via) a society, institution or organization that has been established, and is carried on, wholly and exclusively for the purpose of raising money for, or otherwise promoting the interests of, a specified institution, hospital, university, college or school referred to in sub-paragraph (vi), being a debit made in relation to a transaction or transactions carried out by or on behalf of that society, institution or organization wholly and exclusively in furtherance of its objects."
14. The Commissioner counters that submission by referring to the Second Reading Speech of the Minister assisting the Treasurer upon the introduction of the amending Bill and by pointing to the Explanatory Memorandum attending it. Both by their terms indicate that the amendments were being proposed as a result of a decision by Government to extend exemptions, and not as a result of a realisation that the original Act had been passed in terms which would impose the tax where it had not been intended to impose it.
15. In my view, the force of the latter argument must be recognised. Were it otherwise, it could have been expected that the amending legislation would have provided for retrospectivity of exemption. I therefore conclude that the circumstance of the passage of the 1984 legislation cannot be relied on to achieve the result desired by the applicant. I therefore return to a consideration of the 1982 Act.
16. Unjust though the construction may be in its effect and consequences, I am none the less of the view that the conclusion is unavoidable that the Parliament was directing that the tax be paid by entities and associations such as the applicant.
17. If the "Community High School" itself is exempt from the tax, it is because the bank accounts related to the conduct of the school are the accounts of a department of the government of a State. It is simply not appropriate to describe such a school as "Community High School" as an institution "carried on by an association or other body of persons otherwise than for the purposes of profit or gain to the individual members of that association or other body".
18. Even if that were not so, the applicant had an identity distinct from the school which it existed to serve. In my view, the applicant quite clearly was "an association... of persons (carried on) otherwise than for the purposes of profit or gain to the individual members of that association...", but it was not an association
ATC 766which could be said to "carry on" a school. So such was expressly acknowledged by the applicant's representative.
19. I turn now to consider the question whether the applicant constituted a "public benevolent... institution". I have recently considered that concept at some length in a decision Case U63,
87 ATC 401 and, in my view, it will suffice for present purposes to refer two of the decisions of the High Court of Australia referred to in those reasons.
Perpetual Trustee Co. Ltd. v. F.C. of T. (1931) 45 C.L.R. 224, Starke, Dixon and Evatt JJ. (McTiernan J. dissenting) held that "Royal Naval House" in Sydney was not a public benevolent institution. Royal Naval House was conducted for the benefit of the petty officers and lower ratings of the Navy, providing accommodation and recreation for them when ashore. Evatt J. said (at pp. 235-236):
"The House of course serves very useful purposes. It is convenient that the lower ratings in actual naval service should have an inexpensive hostel available to them when on leave from their ships in Sydney. If they take leave overnight they might otherwise have to seek for places of accommodation at hotels or other places in city or suburbs. The Naval House, no doubt, has become to a large extent the club of those who are accorded its privileges. It probably enables the officers in control of His Majesty's ships of war to get quickly in touch with men required to return at short notice from leave.
There is no element of profit-making in the concern, but the receipts from service charges make the House nearly self-supporting. It resembles in this respect, bodies founded at Australian Universities by State or governing authorities in order to benefit the undergraduates. They are sometimes self-supporting; often they are not, because charges made for services are as small as possible. Halls and rooms are there used for lectures and debates but no one (except perhaps a student in sarcastic vein at a debate) would describe them as `benevolent institutions'. Yet students are as a class notoriously impecunious, much more so than the naval ratings in regular employment at a pay fixed by Government. There are, however, very many bodies which readily answer the description of `benevolent institutions'. The Benevolent Society of New South Wales provides food and clothing for those in poverty and distress, the Scarba Home takes care of deserted babies, many organizations of Church and State provide for the maintenance, housing and relief of the aged poor, orphans and those suffering from bodily or mental disease. A characteristic of most of these organizations is the absence of any charge for services or the fixing of a purely nominal charge.
Such bodies 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'.
Such a phrase seems to me to be impossible to apply to the Royal Naval House at Sydney. It is in truth a cheap and convenient club-house for those in regular naval services and pay and for no one else."
21. The matter was also the subject of consideration in
Maughan v. F.C. of T. (1942) 66 C.L.R. 388 where the Court held that the "Boys' Brigade Inc." of Sydney was a public benevolent institution. That Association was wholly maintained by public donations, subscriptions and other voluntary contributions and it rendered service to boys up to 14 years of age who were underprivileged; invariably in poor circumstances; and residing in some of the worst slum areas of Sydney.
The Court (Rich, McTiernan and Williams JJ.) unanimously held that the Brigade was a public benevolent institution. McTiernan J. said (at p. 395):
"Poverty is a relative condition. It is I think hardly open on the facts of the case to draw any other inference than that the charity of those who maintain the Boys' Brigade Inc.
ATC 767is excited by social conditions arising from poverty and that the dominant object of the institution is to elevate boys adversely affected by those conditions. It is not probable that many of the boys for whose welfare this institution exists could overcome those conditions without its aid."
22. Although the concept of "poverty" is not to be limited to extremes of physical and social deprivation such as the Boys' Brigade sought to relieve, I do not think that it is possible to describe the activities of the applicant as being directed to the relief of poverty. As with "Royal Naval House", the Canteen "serves very useful purposes", and even if, as a class, secondary school students of the present day are "notoriously impecunious", like undergraduates it could hardly be said that the organisations which exist to serve them constitute "public benevolent institutions". I am satisfied that the applicant does not constitute a "public benevolent... institution".
23. In the circumstances it is unnecessary to consider the argument that there was no entitlement to exemption only because of the form of the "name" of the account.
24. I affirm the determination of the Commissioner upon the application.