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AID/WATCH Incorporated v Commissioner of Taxation [2010] HCA 42 (High Court of Australia, 1 December 2010)

The High Court determined in this decision that AID/WATCH was not disqualified from charitable status by virtue of its main purposes which included to generate public debate about the effectiveness of foreign aid. Moreover, there is no general doctrine in Australia to exclude political objects from charitable purposes.

AID/WATCH is an incorporated association which researches, monitors and campaigns about the delivery of overseas aid. It is an organisation concerned with promoting the effectiveness of Australian and multinational aid including investment programs, projects and policies. It does not deliver any aid directly to any person, but produces research reports about Australian aid effectiveness as well as performing publicity events (such as sending derisory 60th birthday gifts to the World Bank suggesting it was time for the bank to retire).

AID/WATCH had been endorsed as a charitable institution (exempt from income tax liability under Income Tax Assessment Act 1997) from 14 July 2000; and endorsed as exempt from FBT and GST from 1 July 2005. But the Commissioner revoked these endorsements in October 2006. Aid/Watch lodged an objection, but the Commissioner disallowed the objection. Aid/Watch applied for review of the decision to the Administrative Appeals Tribunal (AAT).

The Commissioner's objection was that first it was an institution which did not itself distribute aid and thus was not charitable and second, it achieved its objects through campaigning which amounted to a political purpose.

The AAT decision
The AAT reviewed the Commissioner's decision (see casenote Aid/Watch Inc v Commissioner of Taxation) and found that the organisation was entitled to status as a charitable institution, whose major objective of AID/WATCH was the relief of poverty; and that the organisation's activities included the advancement of education which was also charitable. In addition, as AID/WATCH did not have changes to the law as a main object, the AAT determined that it was not disqualified from charitable status; although it could be disqualified if its objects and activities concentrated too much on trying to influence government. In such a case "The argument against charitable status may be enhanced because of its activist approaches and confrontational methods".

The Commissioner appealed to the Federal Court.

The Full Court of the Federal Court decision
On appeal, the Full Court of the Federal Court found that AID/WATCH's purposes were not charitable as relief of poverty and education were not its primary purpose (see the casenote at Commissioner of Taxation v Aid/Watch). The Court did find that research and publications produced by AID/WATCH had the necessary educational element and that its activities were directed towards purposes which would fall within relief from poverty, so that the purposes should be characterised as charitable in the legal sense unless disqualified because of their political nature.

However the Full Federal Court found (para 37) that behind its political activities was a political purpose, and that this was its main purpose. Because the political purpose was its main purpose and not ancillary to its charitable purposes, it was disqualified from charitable status.

Aid/Watch appealed to the High Court.

The High Court Decision
The High Court examined the history of the law on this point drawing on the UK cases (in particular Bowman v Secular Society [1917] AC 406; and McGovern v Attorney-General [1982] Ch 321 at 340) and their consideration in Australia (e.g. Royal North Shore Hospital of Sydney v Attorney-General (NSW) (1938) 60 CLR 396). The Court also discussed the position in the US.

The majority of the Court (5 to 2) accepted Aid/Watch's submissions that its generation of public debate was a charitable purpose because its activities contributed to public welfare and were therefore charitable within the fourth head of Pemsel; and that, whatever the scope of exclusion for political purposes is in Australian law, Aid/Watch's "purposes and activities ... do not fall within any area of disqualification for reasons of contrariety between the established system of government and the general public welfare" (para 46).

The majority of the Court stated (para 47)

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. [emphasis added]

The court decided that the English case of McGovern v Attorney-General [1982] Ch 321 does not apply in Australia and thus there is no general doctrine which excludes "political objects" from charitable purposes (para 48).

The majority decision did issue a note of warning that disqualification of charitable purpose may still occur where a purpose does not contribute to the public welfare, probably by reason of the particular ends and means involved (para 49).

The two dissenting judgments took a more orthodox approach finding the organisation did not fall within any of the heads of charity.

The case may be viewed at http://www.austlii.edu.au/au/cases/cth/HCA/2010/42.html

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