GavelOn 3 July 2013 the Administrative Appeals Tribunal upheld the decision of the Commissioner of Taxation to refuse endorsement of Home Health Pty Ltd as a public benevolent institution or a charitable institution.

Home Health Pty Ltd (Home Health), a mental health services provider is a proprietary company incorporated on 9 June 1997. The Tribunal refused endorsement on the basis that Home Health is not an ‘institution’.

The Tribunal considered the elements of recognising a ‘public benevolent institution’ as set out in Perpetual Trustee Co Ltd v Federal Commissioner of Taxation [1931] HCA 20. Perhaps self-explanatory, but significant nonetheless, a public benevolent institution must be: (i) public, (ii) benevolent and (iii) an institution.

Home Health satisfied the “public” requirement as the relief provided by the organisation was directed to a sufficiently large sector of the community.

Home Health also satisfied the “benevolent” requirement due to the nature of work conducted and the not-for-profit clause which was inserted into its constitution in 2011.

However, Home Health did not satisfy the “institution” requirement.

What is an institution?

The term institution is not defined for the purposes of section 50 of the ITAA 97 and the Tribunal noted that it was by no means easy to give a definition that would cover every use. In determining the use of the term for this matter, the Tribunal considered itself bound by previous cases including:

  • Pamas Foundation Inc v Commissioner of Taxation [1992] FCA 154 (Pamas Foundation) where membership consisting of a husband, wife, 4 children and 2 other people was not sufficient to constitute a ‘religious institution’; and
  • Christian Enterprises Ltd v Commissioner of Land Tax (NSW) (1968) 72 SR (NSW) 72 (Christian Enterprises), membership of 7 persons was insufficient to be recognised as a ‘charitable institution’.

The Tribunal held that the control (held unilaterally by Mr Archard, the sole director of Home Health) and the small and exclusive membership (which consisted only Mr Archard and his wife) was not sufficient to constitute an institution. In fact, Home Health was found to be even smaller and more exclusive than what existed in either Pamas Foundation or Christian Enterprises. The Tribunal held that Home Health was neither a public benevolent institution nor a charitable institution.

More information

If you would like more information regarding this case, public benevolent institutions or charitable institutions please contact Bill d’Apice or Anna Lewis of this office.