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16 Jun 14 Charitable fund raiser is a “public benevolent institution” for FBT purposes - The Hunger Project

The Full Court of the Federal Court has adopted a broad and flexible test of what constitutes a "public benevolent institution" for tax purposes. The Full Court confirmed that The Hunger Project Australia (HPA), a charitable organisation that is part of a worldwide collaboration of organisations operating under the name “The Hunger Project”, is a “public benevolent institution” within the meaning of s 57A(1) of the Fringe Benefits Tax Assessment Act 1986. The Full Court dismissed the Commissioner’s appeal from the decision of the Federal Court reported as The Hunger Project Australia v FCT [2013] FCA 693.

HPA is a not-for-profit company which is part of a global network of entities that operate under the name “The Hunger Project”. The principal objective of the Hunger Project is the relief of global hunger. The activities of HPA are mainly directed at raising funds which are then disseminated to Hunger Project members in the developing world. It is those entities that directly perform charitable acts to relieve hunger.

While HPA engages in a wide range of activities, its most substantial activity is fund raising. HPA is involved in some aspects of the strategic decision making of the global network and makes its own decisions as to where the funds it raises are to be directed. HPA also has some involvement in various programs running in different program countries. The primary judge found, however, that HPA’s “direct charitable activities are negligible when viewed in the overall scheme of its operations.”

The Commissioner contended that an entity that merely engages in fund raising activities and does not materially perform charitable works directly for the benefit of the public is not a public benevolent institution. At first instance the primary judge rejected that contention and found that HPA was a public benevolent institution even though it was predominantly engaged in fund raising.

The Full Court held unanimously that the primary judge was correct in so finding. On the facts as found, it was open to the primary judge to conclude that HPA was a public benevolent institution.

The Full Court did not consider that the primary judge erred in any way in relying on aspects of the reasoning of the High Court in FCT v Word Investments [2008] HCA 55, which concerned the expression “charitable institution”. The primary judge had made the point, by parity of reasoning, that an approach to determining whether a particular institution is a public benevolent institution which focused on the structure of the organisation, as opposed to the substance of its objectives and activities, would be erroneous. His Honour’s reasoning was directed to determining the ordinary meaning of the relevant expression and whether HPA fell within that ordinary meaning. There was no error involved in that reasoning.

The Full Court said:

“66. In our opinion, whilst there is no single or irrefutable test or definition, the ordinary meaning or common understanding of a public benevolent institution includes ... an institution which is organised, or conducted for, or promotes the relief of poverty or distress. ... [S]uch an institution conducts itself in a public way towards those in need of benevolence, however that exercise of benevolence may be manifested.

67. The ordinary contemporary meaning or understanding of a public benevolent institution is broad enough to encompass an institution, like HPA, which raises funds for provision to associated entities for use in programs for the relief of hunger in the developing world. The fact that such an institution does not itself directly give or provide that relief, but does so via related or associated entities, is no bar to it being a public benevolent institution. Such an institution is capable of being considered to be an institution organised or conducted for the relief of poverty, sickness, destitution and helplessness.”

FCT v Hunger Project Australia [2014] FCAFC 69 (Edmonds, Pagone and Wigney JJ, 13 June 2014).

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