The Full Federal Court (Kenny, Stone and Perram JJ) has upheld the Commissioner's appeal from the decision of Downes J (sitting as President of the AAT), who had held that Aid/Watch Incorporated was a charitable institution for the purposes of s 50-5 of ITAA 1997, s
123E of the FBT Assessment Act 1986 and s 176-1 of the GST Act 1999.
Aid/Watch does not deliver foreign aid but, instead, its objectives provide that it "monitors, researches, campaigns and undertakes activities" relating to aid and investment programs. The Full Court held that some of its activities had the necessary charitable element.
However, Aid/Watch's objectives also included lobbying Government to bring about change in, government activity and, in some cases, government policy. The Full Court held: "There can be little doubt that this is political activity and that behind this activity is a political purpose. Moreover the activity is Aid/Watch’s main activity and the political purpose is its main purpose" (para 37).
The Full Court then noted: "...a political purpose will not affect an institution’s charitable status if it is ancillary or incidental to a charitable purpose...However where, as here, the main purpose is political, the question arises whether charitable and political purposes are mutually exclusive" (para 38).
In the event, the Full Court preferred a "main or dominant purpose" test. The Court concluded, at para 48:
"In our view the Tribunal erred in concluding that Aid/Watch’s main purpose was not political and in holding that Aid/Watch is a charitable institution within the meaning of s 50 of the ITA Act. The Tribunal’s decision should be set aside and in lieu thereof the [Commissioner's] reviewable objection decision of 6 March 2007 is affirmed."
FCT v Aid/Watch Incorporated  FCAFC 128 (Full Federal Court; Kenny, Stone and Perram JJ; 23 September 2009).
For a copy of the decision, go here