Aid/Watch was incorporated in 1993 under the Associations Incorporation Act 1984 (NSW), gaining endorsement in July 2000 as a 'charitable institution', ie as an entity exempt from income tax liability under the Income Tax Assessment Act 1997 (Cth). It was subsequently endorsed as a 'charitable institution' for the purposes of the Fringe Benefits Tax Assessment Act 1986 (Cth) and the A New Tax System (Goods and Services Tax) Act 1999 (Cth), aka the GST Act.
In 2006 those endorsements, and thus Aid/Watch's charitable status, were revoked by the Australia Commissioner for Taxation. Aid/Watch lodged an objection to the revocation (disallowed by the Commissioner in March 2007)and then appealed to the the Administrative Appeals Tribunal, which in Re Aid/Watch Inc and Federal Commissioner of Taxation [2008] AATA 652 set aside the Commissioner's decision and determined that the organisation was a "charitable institution" within the meaning of the relevant legislation. The Commissioner appealed, with the Full Court of the Federal Court in Federal Commissioner of Taxation v Aid/Watch Inc [2009] FCAFC 128 setting aside the AAT decision of the AAT and affirming the Commissioner's 2007 decision. Aid/Watch appealed to the High Court.
Aid/Watch, which promotes itself as an "activist" organisation, is concerned with the relief of international poverty, a laudable objective. In undertaking its mission it campaigns for improvement in the delivery of Australian overseas aid. That campaigning, which necessarily involves criticism and can be construed as political comment, contrasts with traditional charitable activity such as raising funds (which may or may not stick to the charity pipeline) or engaging directly in anti-poverty initiatives.
Aid/Watch argued that it seeks to ensure that -
1 aid projects and development programs and projects are designed to protect the environment and associated human rights of local communities in countries that receive Australian aid.As a result Aid/Watch has criticised government and proposed major reforms. That activity was considered by the Commissioner to deny it charitable status, a matter explored in works such as Dal Pont's new Law of Charity (Chatswood: LexisNexis Butterworths 2010), noted here.
2 there is increased aid funding for environment programs with specific attention to renewable energy, end-use efficiency and energy conservation, small scale irrigation schemes and sustainable agriculture, land rehabilitation programs, waste management, and protection of biodiversity.
3 there are complete environmental impact assessment according to the highest standards for all projects, incorporating meaningful public/community participation.
4 aid and development projects and programs incorporate the principles of ecologically sustainable development.
5 there is respect for the rights of indigenous people and a recognition of their expertise in ecological management.
6 aid agencies, development banks and export credit agencies conduct full and regular [consultations with] community organisations, regarding the identification, planning, implementation, monitoring and evaluation of projects.
7 there is accountability and transparency in the Australian aid and export credit programs including freedom of information on all aspects of projects and programs of development agencies and multilateral development banks.
8 there is greater recognition of women's needs and greater involvement of women on development projects, and greater gender equity at all levels of the development process, including in consultancy firms contracted to implement aid programs and projects.
9 there is a halt to structural adjustment programs that contribute to environmental degradation and dislocate or damage the poorest populations.
10 there is an increased proportion of appropriate professional staff in Australia's official overseas development agency (currently AusAID), official Export Credit Agency (currently EFIC) and multilateral development agencies and consultancy firms contracted for aid programs and projects and the development banks.
11 there is increased funding of development education activities within Australia and an increased public awareness of the environmental and social impact of the Australian Overseas Development Assistance Program and related private investment, including input into environmental and developmental studies.
The majority in the High Court case indicated that -
Aid/Watch submitted that the generation by it of public debate as to the best methods for the relief of poverty by the provision of foreign aid has two characteristics indicative of its charitable status. The first is that its activities are apt to contribute to the public welfare, being for a purpose beneficial to the community within the fourth head identified in Pemsel. The second is that whatever else be the scope today in Australia for the exclusion of "political objects" as charitable, the purposes and activities of Aid/Watch do not fall within any area of disqualification for reasons of contrariety between the established system of government and the general public welfare.The court concluded that -
These submissions by Aid/Watch should be accepted. By notice of contention the Commissioner submitted that the Full Court should have decided the appeal in his favour on the ground that the main or predominant or dominant objects of Aid/Watch itself were too remote from the relief of poverty or advancement of education to attract the first or second heads in Pemsel. It is unnecessary to rule upon these submissions by the Commissioner. This is because the generation by lawful means of public debate, in the sense described earlier in these reasons, concerning the efficiency of foreign aid directed to the relief of poverty, itself is a purpose beneficial to the community within the fourth head in Pemsel.The Commissioners for Special Purposes of the Income Tax v John Frederick Pemsel [1891] UKHL 1, as noted by the High Court, is -
the source of the modern classification of charitable trusts in four principal divisions, namely, trusts for the relief of poverty, for the advancement of education, for the advancement of religion and for other purposes beneficial to the community. But even in 1891, the case law which gave the term "charitable" its technical meaning had developed considerably since the time of the British income tax statute of 1799. The case law may be expected to continue to do so as the cases respond to changed circumstances. As Lord Wilberforce put it, the law of charity is a moving subject which has evolved to accommodate new social needs as old ones become obsolete or satisfied.the ultimate question regarding Aid/Watch is whether its public advocacy fits into the charitable category of "other purposes beneficial to the community". The High Court found that it did.
In the current case the Court also concluded that -
It also is unnecessary for this appeal to determine whether the fourth head encompasses the encouragement of public debate respecting activities of government which lie beyond the first three heads (or the balance of the fourth head) identified in Pemsel and, if so, the range of those activities. What, however, this appeal should decide is that in Australia there is no general doctrine which excludes from charitable purposes "political objects" and has the scope indicated in England by McGovern v Attorney-General.In dissent Heydon J commented that Aid/Watch -
did not have the goal of relieving poverty. It provided no funds, goods or services to the poor. It did not raise funds to be distributed to the poor by others. The purposes of the appellant embraced aid to the poor, but they also embraced aid to many other sections of society as well. The goal of ensuring that there was local community involvement in the planning and implementation of aid projects was not targeted at the poor. Nor was the goal of ensuring that aid was delivered in an environmentally effective manner. Nor were the goals of respecting indigenous people and their expertise, ensuring "accountability and transparency" in relation to Australian aid programs, and increasing recognition of women's needs and involvement of women in development projects.Kiefel J concurred, commenting that -
The Tribunal was correct to find that the relief of poverty had "no particular emphasis in [the appellant's] formal objectives". The Tribunal contradicted itself when it said that "[v]irtually every purpose or activity of [the appellant] is directed towards promoting the relief of poverty." The Tribunal was not correct to find that implicitly the relief of poverty was a "major objective" of the appellant. It was an objective, but diluted and diffused by many other objectives, and actually contradicted by some. The purpose of providing aid to improve infrastructure might relieve poverty, but the appellant opposed infrastructure which damaged the environment. One of its goals was to "demand" a complete phase out of support for extractive industries: these industries often damage the environment, but they also often bring wealth to many who would otherwise be poor. Similarly, the connection between opposing the Free Trade Agreement between Australia and the United States of America and relieving poverty was obscure.
A Full Court of the Federal Court (Kenny, Stone and Perram JJ) held that its main purpose was its political purpose, which is to say, the assertion of its views. The Court considered that it was not possible to determine that the appellant's purposes were for the public benefit, since the Court was in no position to determine that the promotion of one view, rather than the other, was for the public benefit. In my view, the Court's conclusion was plainly correct.
The submission by the appellant, that its purposes are for the public benefit because it generates public debate, cannot be accepted at a number of levels. Its assertion of its view cannot, without more, be assumed to have that effect. Its activities are not directed to that end. If they were directed to the generation of a public debate about the provision of aid, rather than to the acceptance by the Government and its agencies of its views on the matter, the appellant might be said to be promoting education in that area. But it is not. Its pursuit of a freedom to communicate its views does not qualify as being for the public benefit.
