WA Charities Open to Political Intimidation

Proposed legislation in Western Australia aimed at removing some charitable organisations from state tax exemptions will leave them vulnerable to political intimidation, law experts have warned.

The Western Australian Government says its Taxation Legislation Amendment Bill 2014 will amend the Duties Act 2008; Land Tax Assessment Act 2002; Pay-roll Tax Assessment Act 2002; and Taxation Administration Act 2003, to improve the efficacy of existing State tax exemptions for charitable institutions.  

But according to the Australian Charity Law Association it would also mean that applications by organisations seeking tax exemptions would be determined by the Minister of the day.

As well Assistant Professor Ian Murray, from the Law Faculty at the University of Western Australia said the Bill, more generally, risked politicisation of the concessions, which might render advocacy bodies more at risk.

The amendments came in response to a decision of the State Administrative Tribunal that found the Chamber of Commerce and Industry of Western Australia to be a charitable organisation and therefore, eligible for State taxation exemptions.

“The State Government is concerned with the precedent created by that decision,including the potential extension to other organisations for which a State taxation exemption is considered inappropriate,” the State Government said in its explanatory memorandum.

“By way of background, the common law definition of charity encompassesorganisations that promote: the relief of poverty; the advancement of education; the advancement of religion; or other purposes considered beneficial to the community, the last of which is commonly known as a ‘fourth limb’ charity.”

However the Australian Charity Law Association said it would also mean that certain otherwise charitable entities that do anything to promote or advocate for trade, industry or commerce in WA would risk losing their State tax exemptions.

“It is most unfortunate that certain charities will be left to the mercy of the Minister of the day to be able to access State Tax exemptions,” the Australian Charity Law Association said in a statement.

“The Minister’s determination will “not be subject to objection or review … or to any other form of appeal or review” [proposed section 34A of the Taxation Administration Act 2003].

“This is a most unusual and concerning development.

“The legislation will, we fear, leave otherwise charitable organisations potentially vulnerable to being penalised on a political whim. No other State or Territory in Australia has any such legislation. Nor does the Federal law seek to penalise charities in this way.”

Assistant Professor Ian Murray, from the Law Faculty at the University of Western Australia, has been following the Bill and has spoken to Not for Profits who he said were surprised by the changes.

Prof Murray said more generally the Bill risked politicisation of the concessions, which might render advocacy bodies more at risk.

“The risk is increased by the fact that the Bill also enables additional classes of charities to be prescribed so that they no longer receive state tax concessions,” he said.

“Further, if charities are seeking to convince the Minister for Finance that they ought to be re-included for the concessions, it is likely to be harder for bodies that provide less tangible benefits to achieve this. For instance, advocacy bodies, again, and peak bodies may find this difficult.

"My interpretation of the Bill is that the exclusions it applies to charities are broader than is strictly required to deal with the WA Chamber of Commerce and Industry decision and like organisations.

“Indeed, the mechanism that the Bill adopts is to rely on a relatively broad exclusion and to then provide a process for re-inclusion within the state tax concessions.

“The concern is that the re-inclusion mechanism purportedly relies on the absolute discretion of the Minister – it is a non-reviewable decision and is to be made without reference to any factors identified in legislation.

“This is not best practice. This will mean that for affected charities, it comes down to the absolute discretion of the Minister, whether those concessions apply or not."

Prof Murray said that while the exclusions could be described as broad and, to judge from the explanatory materials, certainly broader than the Government appears to contemplate, the changes won't impact all charities.

“They will primarily affect any charity that promotes trade, industry or commerce and, to a lesser extent, professional associations,” he said.

“However, these exclusions could still apply to a wide range of organisations. First, there is no definition of what ‘trade’, ‘industry’, or ‘commerce’ means and the ordinary meaning of these words is likely to be fairly wide and subject to some debate.

“Second, an entity need only have a purpose, within its broader range of purposes, of promoting or advocating trade, industry or commerce.

“Any entity which has such a purpose is automatically excluded unless it can show that it has a sole or dominant purpose of relieving poverty, advancing education or advancing religion. Does an entity with the dual purposes of relieving poverty and advancing education meet these requirements? Very possibly not.

“Further, many entities will have other sole or dominant purposes, such as the protection of the environment or the relief of sickness. A purpose of promoting trade, industry or commerce within the purposes of such organisations would cause them to be excluded.

"The worry is that any organisation that is working to assist with economic development for disadvantaged people might be characterised as having a purpose, amongst its various charitable purposes, of promoting trade, industry or commerce.

“For instance, charities which aim to close the gap for Indigenous people, or charities working to address disadvantages faced by rural, regional and remote communities. There have always been some limits on the extent to which charities can assist with economic development, but this Bill poses risks for what has been permitted so far."

To view the Taxation Legislation Amendment Bill 2014, click here.