Al-Jaafaria Society Incorporated v Chief Commissioner of State Revenue [2017] NSWCATAD 283

Date of judgement 20 September 2017 Proceeding No. 2016/00378506
Judge(s) NS Isenberg, Senior Member
Court or Tribunal New South Wales Civil and Administrative Tribunal
Legislation cited Administrative Decisions Review Act 1997

Charities Act 2013 (Cth)

Duties Act 1997

Public Instruction Act 1881

Taxation Administration Act 1996
Catchwords MERITS REVIEW – revenue law – onus - s 275 Duties Act 1997 - exempt charitable or benevolent body – relief of poverty in Australia - promotion of education in Australia - predominantly religious purposes - Treasurer’s Guidelines for an exemption under s 275 (3) (b) of the Duties Act 1997
Cases cited B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187

Benjamin v Downs & Another [1976] 2 NSWLR 199

Burt v Federal Commissioner of Taxation (1912) 15 CLR 469

The Commissioner for Special Purposes of the Income Tax v John Frederick Pemsel (1891) AC 531

Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25

Faith Baptist Church Inc v Chief Commissioner of State Revenue [2007] NSWADT 199

Faith Baptist Church Inc v Chief Commissioner of State Revenue [2008] NSWADTAP 31

Ferella & Anor v Chief Commissioner of State Revenue [2014] NSWCA 378

Background

The Society was established in 1991 and its purpose was described as catering for the social, educational and religious needs of the general community through the teachings of the Quran and Ahlulbayt. The Chief Commissioner did not challenge this description.

In 2007, the Society purchased a property in Kogarah, New South Wales, upon which it intended to conduct its activities. In 2015, the Society sold the Kogarah property because it decided to purchase a larger site, so as to expand its existing and proposed activities.

On 9 November 2015, the Society entered into a contract of sale for the purchase of a property in Revesby Heights, the property that is the subject of these proceedings (“the Property”).h3The Society sought an exemption under s. 275 of the Duties Act on the basis that the Society is an exempt charitable and benevolent body. On 31 March 2016, the exemption was denied by the Chief Commissioner and a Duties Notice of Assessment was issued. The Society then applied to the Tribunal for a review of the decision.

The Legislation

Section 275 of the Duties Act provides that certain charitable and benevolent bodies are exempt from stamp duty that is otherwise payable on the purchase of property, provided that they meet the requirements under s 275(3)(a), the “resources test” and s 275(3)(b), the “transaction test”.

The resources test provides that an exempt charitable or benevolent body is a society whose resources are used in accordance with the society’s rules or objects predominantly or wholly for the relief of poverty or promotion of education.

The transaction test provides an exemption if, in the opinion of the Chief Commissioner by reference to the Treasurer’s guidelines, the body has a charitable or benevolent nature and the transaction concerns property that is going to be used for this purpose and not predominantly for religious purposes. The Guidelines list the relief of poverty, sickness, disability or disaster related distress, promotion of education or assisting special needs sections of the community as requirements for the exemption.

The Resources Test – Relief of Poverty

Submissions

The Chief Commissioner accepted that the Society is a charitable or benevolent body within the definition of s. 275 and that its purpose is to cater for social, educational and religious needs of the general community through the teachings of the Quran and Ahlulbayt, part of which included teaching Arabic in New South Wales state schools.

The Society submitted that its operating model defines their primary object and purpose, which is to promote education and relieve poverty, and that the Property was to be used for the collection and distribution of clothing and other poverty-relief items. Further, the Society submitted that the resources test is forward-looking and takes into account the purpose for which it may be used in the future. The Society tendered evidence of its advertisements for the collection and distribution of sleeping bags in Iraq. The Society also contended that its religious focus did not preclude it from having a predominantly charitable or educational purpose.

The Chief Commissioner submitted that the Society must prove that:

  • its objects include relief of poverty or promoting education in Australia;
  • its resources are used predominantly for this purpose; and
  • its purpose must be a predominant object.

Tribunal’s findings

The Tribunal found that only one of the objects of the Society’s constitution expressly relates to the relief of poverty in Australia and that the rest refer to poverty abroad, indicating that the Society’s predominant object is to provide relief of poverty overseas.

Further, the Tribunal found that the Society submitted incomplete and unaudited account statements and property plans, which only evidenced that the proposed use of the Property was in fact for “general” and “religious activities”. The evidence given on cross-examination sought to suggest that the Property was to be used for the collection and distribution of poverty-relief items; however the Tribunal found that the Society submitted no material evidence from volunteers or beneficiaries of the charity to that effect. The Tribunal therefore found that the Society’s evidence fell short of discharging its onus of proof, namely to prove that its resources were used for the relief of poverty.

The Resource Test – Educational Purposes

Submissions

The Society submitted that its primary object included promoting education and that various activities listed in its constitution, such as sporting and religious activities, evidenced this. The Chief Commissioner accepted that while generally such activities could be considered to fall within the provision of education, the resources test excludes education that is primarily related to religion, and the majority of the Society’s activities had predominantly religious elements.

Tribunal’s findings

The Tribunal considered the evidence submitted by the Society which included its accounts; evidence given on cross-examination, and the Society’s website pages, and found that the activities conducted by the Society were for religious, recreational and general community purposes and therefore it could not be said that the whole or a predominant part of the Society’s resources was and/or would be used for educational purposes.

The Transaction Test

Submissions

The Society submitted that the power of the Chief Commissioner to refuse an exemption where the subject property was acquired by a religious organisation predominantly for religious purposes was ultra vires. The Tribunal rejected this submission on the basis that it is contrary to the wording in the provision.

The Society also submitted that it is an educational organisation as opposed to a religious organisation and accordingly, education is the predominant purpose because education can encompass religious education. Consequently the Society argued that the transaction was for a predominantly educational, and not religious, purpose.

The Chief Commissioner submitted that, although the transaction had secondary purposes, including the provision of education, these did not amount to the Society’s predominant purpose and therefore failed to satisfy the requirements of the transaction test.

Tribunal’s findings

The Tribunal found that the first object of the Society’s Constitution which stated “to promote general understanding of Islam…” suggests that the Society operates and utilises resources in accordance with this object which is predominantly religious. The Tribunal found that neither it nor the Chief Commissioner could allow an exemption on this basis as it would be contrary to the Treasurer’s guidelines, which provide that transactions for property acquired by religious organisations are not entitled to the exemption if the property is to be used predominantly for religious purposes.

Tribunal decisions

As the Society bears the onus of proof, there were no findings made in relation to its claim for partial exemption under s 275A.

Senior Member Isenberg was not satisfied that on the balance of probability the Society had satisfied the requirements for exemption under s.275 in relation to its purchase of the Property.

Orders

The decision of the Chief Commissioner under review was confirmed.

Link to decision

Al-Jaafaria Society Incorporated v Chief Commissioner of State Revenue [2017] NSWCATAD 283

Last updated: 5 October 2017