Few (if any) of our readership would consider themselves unfamiliar with the "institution" called The Salvation Army (Salvos), or the charitable works done by the Salvos in Australia. It may then come as a surprise that both the charitable status and institutional nature of The Salvation Army became the subject of controversy when the NSW Chief Commissioner of State Revenue (Commissioner) denied the Salvos an exemption from stamp duty sought on a real property acquisition pursuant to Duties Act 1997 s275 (s275).
This case was an appeal against that decision of the Commissioner.
Property was purchased by the plaintiff as trustee of the Salvos' General Work Trust (GWT) in June 2014, for the purpose of centralising all of the administration of the Salvos' Australian Eastern Territory (SAET) social work programs into one headquarters.
Notably, the GWT is one of two purpose trusts upon which Salvos' assets are held in NSW by the plaintiff: GWT has both charitable and religious objects whilst the Social Work Trust (SWT) objects are purely charitable.
After having already paid full ad valorem stamp duty upon lodgement of the contracts for stamping, the plaintiff then made an application for an exemption from the duty paid under s275 on the grounds the acquisition was made by the plaintiff as trustee for the purposes of the Salvos through the organisation SAET.
Relevantly, s275 provides relief from duty to any "body corporate, society, institution or other organisation for the time being approved by the Chief Commissioner..." whose resources are used wholly or predominantly for approved charitable and benevolent (excluding religious) purposes.
In support of refusal of relief pursuant to s275, the Commissioner contended:
- No trust exists whereby a person known as 'The Salvation Army' is a beneficiary;
- The property was purchased by the plaintiff acting as trustee for the purposes of the GWT;
- There is no distinction between the charitable purpose and the charitable institution, so GWT is therefore the relevant "institution" to consider when applying s275;
- The plaintiff is the trustee of two separate and distinct purpose trusts (GWT and SWT), and the purposes (and resources) of each must be considered separately;
- When only the resources of the GWT are considered, the plaintiff is not an exempt charitable or benevolent body; and
- "for the time being approved" means the time at which the liability to duty arose and the Court may not approve the plaintiff retrospectively.
Chief Justice Ward in equity found for the Salvos, noting in particular:
- It does not follow from the facts that two separate purpose trusts have been established, that those are institutions, or that the relevant institution for the purposes of s275 is one that is limited to the purposes of one of the trusts alone;
- There is no basis for assigning a separate persona to the collection of rights and obligations imposed on the trustee of a purpose trust as would be necessary for it to be considered an "institution" in the conceptual sense of s275;
- The plaintiff in its capacity as trustee of the GWT is really acting for the benefit or the purposes of the SAET as a separate administrative entity or subset of the Salvos in Australia; and
- The Court has the power to make afresh a decision of the Commissioner and so the relevant time for an organisation to be approved runs from the time of acquisition of the property through to the time of an appeal from the disallowed application for exemption.
Ward CJ also made the following helpful comments in relation to secondary and tertiary arguments made by the plaintiff (that did not need to be decided):
- Using rent from leased premises for the purpose of social work programs does not amount to that property being used for charitable or benevolent purposes and would not attract an exemption under s275 on that basis; and
- When determining the purpose for which the land is used pursuant to Duties Act 1997 s275A, it is relevant to consider both how the land concerned is actually used as well as the use intended at the time that land is acquired.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.