Edited version of private advice

Authorisation Number: 1051950576203

Date of advice: 18 February 2022

Ruling

Subject: Responsible person - public ancillary fund

Question

Would the Chairperson of a Class B cemetery trust in Victoria meet the responsible person requirement as a committee member of an incorporated association that acts as the trustee for a public ancillary fund?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Incorporated Association is the trustee of a public ancillary fund.

The Incorporated Association has members who are also the members of its Committee.

The majority of members comprising the Committee meet the requirements of being a responsible person.

Another member of the Committee also serves as the Chairperson of a Class B Cemetery Trust in Victoria.

Relevant legislative provisions

Cemeteries and Crematoria Act 2003 (VIC) section 5

Cemeteries and Crematoria Act 2003 (VIC) section 6

Cemeteries and Crematoria Act 2003 (VIC) subsection 6(3)

Cemeteries and Crematoria Act 2003 (VIC) clause 1 in Schedule 1

Cemeteries and Crematoria Act 2003 (VIC) subclause 1(4) in Schedule 1

Cemeteries and Crematoria Act 2003 (VIC) clause 2 in Schedule 1

Cemeteries and Crematoria Act 2003 (VIC) clause 7 in Schedule 1

Cemeteries and Crematoria Act 2003 (VIC) clause 8 in Schedule 1

Cemeteries and Crematoria Regulations 2015 (VIC)

Charter of Human Rights and Responsibilities Act 2006 (VIC)

Public Administration Act 2004 (VIC) section 3

Public Administration Act 2004 (VIC) section 4

Public Administration Act 2004 (VIC) section 5

Public Administration Act 2004 (VIC) section 7

Taxation Administration Act 1953 section 426-102 in Schedule 1

Taxation Administration Act 1953 paragraph 426-102(1)(b) in Schedule 1

Taxation Administration Act 1953 section 426-103 in Schedule 1

Reasons for decision

Summary

The Chairperson of the Class B cemetery trust in Victoria who is a member of the Incorporated Association and its Committee is a responsible person.

Detailed reasoning

Public ancillary fund - responsible person requirement

Section 426-102 in Schedule 1 of the Taxation Administration Act 1953 (TAA) states a trust is a public ancillary fund if, among other things, each trustee of the trust has agreed to comply with the rules in the public ancillary fund guidelines (paragraph 426-102(1)(b)).

Section 426-103 in Schedule 1 of the TAA requires the Minister to set out rules for public ancillary funds and its trustees in the form of guidelines made by legislative instrument. Section 426-103 states:

426-103 PUBLIC ANCILLARY FUND GUIDELINES

The Minister must, by legislative instrument, formulate guidelines (the public ancillary fund guidelines) setting out:

a) rules that *public ancillary funds and their trustees must comply with if the funds are to be, or are to remain, endorsed as *deductible gift recipients; and

b) the amount of the administrative penalty, or how to work out the amount of the administrative penalty, under subsection 426-120(1) in relation to public ancillary funds.

In accordance with section 426-103 in Schedule 1 to the TAA the Minister has formulated the Public Ancillary Fund Guidelines 2011 (Guidelines). The purpose of the Guidelines is to set minimum standards for the governance and conduct of a public ancillary fund and its trustee.

In relation to the trustee, the Guidelines prescribe the requirement that the majority of the individuals involved in the decision-making of the fund must be individuals with a degree of responsibility to the Australian community as a whole. The Guidelines state:

The Trustee

13.      The trustee of the fund must exercise the same degree of care, diligence and skill that a prudent individual would exercise in managing the affairs of others.

14.      At all times, a majority of the individuals involved in the decision-making of the fund must be individuals with a degree of responsibility to the Australian community as a whole.

Note 1: Those individuals with a degree of responsibility to the community as a whole are generally known as 'responsible persons'. This requirement is stricter than the requirement applying to private ancillary funds. The Taxation Administration (Private Ancillary Fund) Guidelines 2019 require at least one of the individuals involved in the decision-making of the fund to be a responsible person.

Note 2: 'Individuals with a degree of responsibility to the Australian community as a whole' would generally include: school principals, judges, religious practitioners, solicitors, doctors and other professional persons, mayors, councillors, town clerks and members of parliament. Generally, individuals who are accepted as having a degree of responsibility to the community as a whole are known to a broad section of the community because they perform a public function or they belong to a professional body (such as the Institute of Chartered Accountants, State Law Societies and Medical Registration Boards) which has a professional code of ethics and rules of conduct. Individuals who have received formal recognition from the Government for their services to the community (for example, an Order of Australia award) will also usually have the requisite degree of responsibility.

14.1. An individual with a degree of responsibility to the Australian community as a whole includes an individual before whom a statutory declaration may be made.

Example: An individual who before whom a statutory declaration may be made include individuals who are licensed or registered to practice in a range of occupations such as a dentist, legal or medical practitioner; a nurse, a pharmacist, a bailiff, a bank officer or officer of a building society or credit union with 5 or more continuous years of service; a clerk of the court; a justice of the peace, a judge, magistrate; a member of various professional associations including a member of Engineers Australia, a member of Chartered Secretaries Australia; a member of the various professional accounting associations in Australia; a marriage celebrant, mayors, town clerks and members of Parliament; a government employee with 5 or more years of continuous service; a teacher employed on a full-time basis at a school or tertiary education institution.

14.2. The individuals referred to in guideline 14 must be actively involved in the decision-making of the fund either by being directors of the trustee or members of any other controlling body of the fund.

Individuals with a degree of responsibility to the Australian community as a whole are also known as 'responsible persons'. Taxation Ruling TR 95/27 Income tax: public funds (TR 95/27) provides guidance about who qualifies as a responsible person in relation to public funds. Public ancillary funds are required to be public funds therefore the definition of responsible persons in TR 95/27 is also relevant to determining whether the trustee of public ancillary fund has responsible persons involved in the decision-making of the fund. TR 95/27 relevantly states that:

7.         There are two types of funds which are considered to be 'public funds':

...

(b) funds to which the public is invited to contribute and in fact does contribute. These funds must be controlled or administered by persons or institutions having a degree of responsibility to the community as a whole. This could arise, for example, from a person's occupation or tenure of some public office, or a person's or institution's position in the community. [Emphasis added]

Responsible persons

21.          For the purposes of paragraphs 7(b) and 9(f) of this Ruling, persons who are considered to have a degree of responsibility to the community as a whole include: church authorities, school principals, judges, clergymen, solicitors, doctors, and other professional persons, mayors, councillors, town clerks and members of parliament. Generally, persons who are acceptable as having a degree of responsibility to the community as a whole are known to a broad section of the community because they perform a public function or they belong to a professional body (such as the Institute of Chartered Accountants, State Law Societies and Medical Registration Boards) which has a professional code of ethics and rules of conduct. Other persons who are acceptable are appointees of a Chief Justice of the Supreme Court. Persons who have received formal recognition from the Government for their services to the community (for example, an Order of Australia award) will also be considered to have the requisite degree of responsibility.

22.          Organisations such as Rotary, Lions and Apex Clubs often sponsor funds having objects covered by one of the items listed in the tables in subsection 78(4). Although the sponsoring organisation itself may not have a public character because of some reason, such as selective membership, the committee controlling the fund may have a public character if it includes persons who have a degree of responsibility to the community in general, as distinct from obligations as members of the sponsoring organisation. Generally, funds which are established by organisations which have well recognised community service functions and whose members are drawn from many sectors of business and the professions can be accepted as having a public character.

23.          Even though a public fund is required to be controlled by an executive committee made up of a majority of responsible persons, the day-to-day running of the organisation need not be carried out by those persons. The fund must, however, be set up in such a way that it is not possible for public control to lapse for any period.

Chairperson of a Class B cemetery trust in Victoria

Whether the Chairperson of a Class B cemetery trust in Victoria qualifies as a responsible person requires consideration of whether they have a degree of responsibility to the community as a whole as required by the Public Ancillary Fund Guidelines 2011.

Various legislation and other policies or guidelines, as discussed below, prescribe the duties and responsibilities, standards of behaviour and appointment of the Chairperson of a Class B cemetery trust in Victoria and assist in determining whether the Chairperson qualifies as a responsible person.

Cemeteries and Crematoria Act 2003

The disposal of human remains including burials is regulated by law and governments. Each State and Territory has its own rules and regulations governing what is permissible in the respective State or Territory. The management and operation of cemeteries and crematoria in Victoria is governed by the Cemeteries and Crematoria Act 2003 (the Act) and Cemeteries and Crematoria Regulations 2015.

Section 5 of the Act provides that the Governor in Council may, by order published in the Government Gazette, establish a cemetery trust to serve the community by providing cemetery services and maintaining public cemeteries, specifying whether the cemetery trust is a Class A or Class B cemetery trust.

Upon the recommendation of the Minister, a cemetery trust is appointed by the Governor in Council to manage one or more public cemeteries. A Class B cemetery trust must properly and efficiently manage and maintain each public cemetery for which it is responsible and carry out any other function conferred on it under the Act or any other Act. Class B cemetery trusts are ultimately accountable to the Minister for Health therefore if they fail to meet their obligations the government may intervene.

Class B cemetery trust members are appointed by the Governor in Council, on the recommendation of the Minister, pursuant to section 6 of the Act. As stated in subsection 6(3) of the Act, Schedule 1 of the Act has effect with respect to the membership and procedure of Class B cemetery trusts. Clause 1 in Schedule 1 of the Act specifies the terms of appointment of Class B cemetery trust members:

1 Terms of appointment of Class B cemetery trust members

(1) A member of a Class B cemetery trust holds office for the period, not exceeding 5 years, specified in the instrument of his or her appointment.

(2) A member of a Class B cemetery trust is eligible for re-appointment.

(3) The instrument of appointment of a member of a Class B cemetery trust may specify terms and conditions of appointment.

(4) The Public Administration Act 2004 (other than Part 3 of that Act) applies to a member in respect of the office of member.

Clause 2 in Schedule 1 of the Act states that the members of a Class B cemetery trust must appoint one of the members to be the trust's Chairperson. A Chairperson of a Class B cemetery trust is therefore a member of a Class B cemetery trust who has responsibilities and obligations as a trust member and who also has additional responsibilities and obligations as a result of being appointed as the Chairperson. Clauses 7 and 8 in Schedule 1 of the Act specify the additional obligations the Chairperson has in relation to presiding at meetings and the proceedings of the cemetery trust.

As stated in subclause 1(4) in Schedule 1 of the Act the Public Administration Act 2004 (PAA) applies to the members of a Class B cemetery trust, other than Part 3 of that Act which is about public service employment. It is therefore necessary to consider the obligations, expectations and duties placed upon the Chairperson of a Class B cemetery trust by the PAA.

Public Administration Act 2004

The objects of the PAAare specified in section 3 and include:

•         promoting the highest standards of integrity and conduct for persons employed within the public sector; and

•         establishing values and principles to guide conduct and performance within the public sector.

The PAA applies to the entities that form the 'public sector' which is defined in section 4 of the PAA to mean the sector that comprises the public service, public entities and special bodies. 'Public entities' are organisations established by the government to undertake a range of administrative, service delivery and regulatory functions outside government departments (section 5 of the PAA). A public entity is a body that:

•         is established by either an Act of Parliament, the Governor in Council or a government minister,

•         has a public function to exercise on behalf of the State or is wholly owned by the State; and

•         in the case of a body corporate, may have at least one half of its members appointed by the Governor in Council or a minister.

For the purposes of the PAA a cemetery trust is a 'public entity' therefore trust members are required to demonstrate the public sector values specified in section 7 of the PAA which states:

7 Public sector values

(1) The following are the public sector values-

(a) responsiveness-public officials should demonstrate responsiveness by-

(i) providing frank, impartial and timely advice to the Government; and

(ii) providing high quality services to the Victorian community; and

(iii) identifying and promoting best practice;

(b) integrity-public officials should demonstrate integrity by-

(i) being honest, open and transparent in their dealings; and

(ii) using powers responsibly; and

(iii) reporting improper conduct; and

(iv) avoiding any real or apparent conflicts of interest; and

(v) striving to earn and sustain public trust of a high level;

(c) impartiality-public officials should demonstrate impartiality by-

(i) making decisions and providing advice on merit and without bias, caprice, favouritism or self-interest; and

(ii) acting fairly by objectively considering all relevant facts and fair criteria; and

(iii) implementing Government policies and programs equitably;

(d) accountability-public officials should demonstrate accountability by-

(i) working to clear objectives in a transparent manner; and

(ii) accepting responsibility for their decisions and actions; and

(iii) seeking to achieve best use of resources; and

(iv) submitting themselves to appropriate scrutiny;

(e) respect-public officials should demonstrate respect for colleagues, other public officials and members of the Victorian community by-

(i) treating them fairly and objectively; and

(ii) ensuring freedom from discrimination, harassment and bullying; and

(iii) using their views to improve outcomes on an ongoing basis;

(f) leadership-public officials should demonstrate leadership by actively implementing, promoting and supporting these values;

(g) human rights-public officials should respect and promote the human rights set out in the Charter of Human Rights and Responsibilities by-

(i) making decisions and providing advice consistent with human rights; and

(ii) actively implementing, promoting and supporting human rights.

Charter of Human Rights and Responsibilities Act 2006

Section 7 of the PAA requires trust members to respect and promote the human rights set out in the Charter of Human Rights and Responsibilities. The reference to the Charter of Human Rights and Responsibilities in the PAA is a reference to the Charter of Human Rights and Responsibilities Act 2006 (the Charter).

The main purpose of the Charter is to protect and promote the 20 human rights specified in the Charter by a number of means including:

•         by setting out the human rights that Parliament specifically seeks to protect and promote; and

•         by imposing an obligation on public authorities to act compatibly with human rights.

The trust members of a Class B cemetery trust, including its Chairperson, are subject to the obligations imposed by the Charter to protect and promote human rights by making decisions and providing advice consistent with human rights and actively implementing, promoting and supporting human rights.

Code of Conduct for Directors of Victorian Public Entities (2016)

In addition to the obligations discussed above, Class B cemetery trust members are also required to comply with the Victorian Public Sector Commission, Code of Conduct for Directors of Victorian Public Entities (2016)(Code of Conduct). The Code of Conduct applies to and is binding on all Directors and statutory office holders of public entities and sets the standard of behaviour expected of them.

As defined in section 4 of the PAA, 'director' in relation to a public entity, means a member of the board of the public entity. A Class B cemetery trust is a public entity and its board is comprised of members appointed by the Governor in Council. The Code of Conduct therefore applies to and is binding on the members of a Class B cemetery trust board, which includes the Chairperson of the cemetery trust.

The behaviours required by the Code of Conduct exemplify the duties and values contained in the PAA. The behaviours are essential to how Class B cemetery trust members (i.e. Directors) perform their duties and are essential to the cemetery trust as a public entity meeting the high standards the community expects of it and its directors, and to maintaining integrity and trust in the public sector generally. The behaviours expected of Class B cemetery trust members pursuant to the Code of Conduct include:

•         Exercise power for proper purpose - Directors must comply with and exercise their power for the purpose for which it was provided under relevant legislation, ministerial charter, constitution, terms of reference or other document under which the public entity was established. Directors must also comply with any government policies and priorities or any ministerial directions that affect the public entity.

•         Retain discretion -Directors must use their own discretion when voting at Board meetings and should not allow themselves to be directed to adopt a particular position. They must not allow their personal or professional interests or relationships to influence their judgement and must remain impartial means when participating in board discussions and decisions.

•         Avoid improper use of a position -Directors must act in good faith in the best interests of the public entity. They use the information they gain in the course of their duties only for its intended purpose. Directors must only disclose official information or documents when required to do so by law, in the legitimate course of duty, when called to give evidence in court or when proper authority has been given. They do not use information to obtain an advantage for themselves or another person or to cause detriment to the public entity. They respect confidentiality and use their discretion, prudence and good judgement when deciding how to treat information.

•         Exercise care, skill and diligence - Directors exercise their powers with a reasonable degree of care, diligence and skill. They understand the business of the public entity and the role of its Board. Directors have a duty to make their decisions in good faith, for proper purpose, not have a material interest in the matter, adequately inform themselves about the matter and reasonably believe their judgement is in the best interest of the public entity.

•         Act diligently and prudently in the business of the trust - Directors act in good faith in the best interests of the public entity, in a way that reflects well on their standing as a Director and on the reputation of the public entity. They act with honesty and integrity and promote the public sector values through their exemplary behaviour. They are open and transparent in their dealings and comply with the law, policies and generally accepted standards of behaviour. They respect human rights and foster a culture that is free of intimidation and bullying. The Board makes decisions within its power. If the Board wishes to do something not authorised under the public entity's establishing legislation, but in the public interest or consistent with the objectives of the public entity, then it raises the matter with the department or Minister for consideration. The Board ensures that the public entity has appropriate arrangements in place to meet its legal, ethical and policy obligations.

•         Disclose conflicts of interest -Directors must not use their position to seek an advantage for themselves or another person. Directors must disclose pecuniary interests or any other interests that could conflict with the proper performance of their duties. The Board must manage any conflicts of interest and duty in the public interest

•         Keep and render proper accounts and give full information when required - Directors act in a financially responsible manner. They exercise care in relation to public funds and assets and comply with the applicable compliance and reporting requirements of state and federal legislation. Directors demonstrate due diligence through active monitoring of the public entity's financial accounts and financial position.

Victoria State Government - Department of Health

The Cemetery Sector Governance Support Unit of the Victoria State Government Department of Health provides support to Class B cemetery trust members and other stakeholders to help them meet statutory obligations. In addition, the Department of Health publishes guidelines and other documents to assist Class B cemetery trusts. These documents include the Class B cemetery trust chairperson position description and Manual for Victorian Class B Cemetery Trusts.

Class B cemetery trust chairperson position description

The Class B cemetery trust chairperson position description states that Class B cemetery trust Chairpersons are elected by the trust to represent the local communities in which the trust and its cemeteries are located and are expected to act in good faith, fairly and impartially, with honesty and integrity, and in the best interests of the trust and their communities. As is most relevant, the duties, responsibilities and legal obligations of a Chairperson are:

Duties and responsibilities

Duties and responsibilities of Class B cemetery trust chairpersons include:

•         leading the cemetery trust

•         ensuring each public cemetery for which the trust is responsible is managed properly and efficiently

•         exercising their power under the Cemeteries and Crematoria Act 2003 for the intended purpose

•         ...

•         ensuring services provided by the trust meet community needs

•         making decisions in good faith by being adequately informed about trust matters and exercising their judgement in the best interest of the trust

•         ensuring the trust's performance and accountability

•         acting diligently and prudently in managing the business of the trust

•         ...

•         ensuring the department is informed as soon as practicable of significant issues of public concern in relation to the trust or services provided by the trust

•         ...

Position terms and conditions

•         ...

•         Legal obligations

Trust chairpersons have legal obligations and duties under common law and under the constituting legislation, being the Cemeteries and Crematoria Act 2003, Cemeteries and Crematoria Regulations 2015, Public Administration Act 2004 and other relevant state and federal legislation.

Manual for Victorian Class B Cemetery Trusts

The Manual for Victorian Class B Cemetery Trusts (the Manual) has been developed by the Department of Health to assist members of Class B cemetery trusts to understand their duties and obligations under the Cemeteries and Crematoria Act 2003.

In relation to the Chairperson of a Class B cemetery trust the Manual states that at a broad level, the role of the Chairperson is to lead the cemetery trust board, ensure its performance and accountability, and to exercise procedural control over trust meetings. The specific responsibilities of the Chairperson will vary depending on the size and complexity of the cemetery trust. The Manual provides a list of the responsibilities that a Chairperson may have including:

•         ensuring the board performs appropriately in relation to:

­        adhering to its objectives

­        risk management

­        accountability to the responsible minister

­        assessing the performance of members

­        adhering to theCode of conduct for directors of Victorian public entities

­        a conflicts of interest policy

­        a gifts policy

­        financial accountability

•         building an effective trust with the necessary skills and capabilities

•         leading trust members and developing them as a cohesive and effective team

•         assisting trust members in their understanding of their role, responsibilities and accountability

•         setting the trust's agenda and ensuring key issues are discussed

•         ensuring there are no potential conflicts of interest or duty

•         ensuring interactive participation by all trust members

•         arranging adequate support for trust members

•         welcoming new trust members and leading the process for their induction

•         representing the trust to external parties as an official spokesperson for the trust

•         managing the principal relationships of the board - for example, relationships with cemetery managers and senior staff, committees of the board, the department and the minister, and

•         ensuring relevant policies are brought to the attention of members of the board.

Application to the Incorporated Association

The Public Ancillary Fund Guidelines 2011 specify the requirement that a majority of the individuals involved in the decision-making of a public ancillary fund must be individuals with a degree of responsibility to the Australian community as a whole. Those individuals must be actively involved in the decision-making of the fund by reason of being either a director of the trustee or a member of any other controlling body of the fund.

The Incorporated Association is the trustee of a public ancillary fund. As the trustee of the fund it is the controlling body of the fund. The individual who is the Chairperson of a Class B cemetery trust in Victoria is a member of the Incorporated Association and is also a member of its Committee. This member is therefore an individual actively involved in the decision-making of the public ancillary fund.

Whether this member also has a degree of responsibility to the community as a whole, as a result of their role as the Chairperson of a Class B cemetery trust in Victoria, requires consideration of all of the matters discussed above which are summarised below:

•         Class B cemetery trusts are public entities and are a part of the public sector. They are established by the Governor in Council upon the recommendation of the Minister for Health and they have a public function to exercise on behalf of the State which is to serve the community by providing cemetery services and maintaining public cemeteries.

•         Class B cemetery trust members are appointed by the Governor in Council on the recommendation of the Minister for Health.

•         Class B cemetery trust members must comply with the Public Administration Act 2004 to achieve its object of promoting the highest standards of integrity and conduct for persons employed within the public sector. This requires cemetery trust members to demonstrate responsiveness, integrity, impartiality, accountability, respect and leadership.

•         Class B cemetery trust members have obligations imposed upon them by the Charter of Human Rights and Responsibilities Act 2006 to protect and promote the 20 human rights that Parliament specifically seeks to protect and promote.

•         Class B cemetery trust members are bound to comply with the Code of Conduct for Directors of Victorian Public Entities. The conduct and behaviours required of trust members are essential to the cemetery trust meeting the high standards the community expects of it and its members, and to maintaining integrity and trust in the public sector generally. Trust members must act in good faith, fairly and impartially, with honesty and integrity, and in the best interests of the trust and its community.

• The Chairperson of a Class B cemetery trust is a trust member elected by other appointed members to perform the role of Chairperson.

•         The Chairperson of a Class B cemetery trust represent the local communities in which the trust and its cemeteries are located. They are expected to act in good faith, fairly and impartially, with honesty and integrity, and in the best interests of the trust and their communities. They must ensure services provided by the trust meet community needs. Their responsibilities include exercising procedural control over trust meetings, ensuring the board performs appropriately in relation to its objectives, risk management, accountability to the responsible minister, assessing member's performance, representing the trust to external parties as an official spokesperson for the trust, and managing the principal relationships of the trust board including with the Department and the Minister. They must also ensure the Department is informed of significant issues of public concern in relation to the trust or the services it provides.

Class B cemetery trusts in Victoria clearly have a public function to perform on behalf of the State and are constituted for the benefit of the community. Being public entities with public functions and with members appointed by Government, cemetery trusts and their governing members are subject to scrutiny and regulation by the Government and are held to the highest standards of conduct by the both the Government and the community. Various legislation and policies ensure trust members' conduct and behaviour maintains integrity and trust in the public sector and are in the best interests of the trust and their communities. In addition to the obligations placed upon the Chairperson of a Class B cemetery trust as a member of the trust, the role of Chairperson places additional obligations and responsibilities on that individual to both the Government and the community. It is therefore considered that the Chairperson of a Class B cemetery trust is a responsible person because in that role the individual has a degree of responsibility to the Australian community as a whole.

The member of the Incorporated Association who also serves as the Chairperson of a Class B Cemetery Trust in Victoria is an individual with a degree of responsibility to the Australian community as a whole and they are involved in the decision-making of the public ancillary fund of which the Incorporated Association is the trustee, as required by the Public Ancillary Fund Guidelines 2011. That is, they are a responsible person.