The Court of Appeal in Western Australia recently confirmed that not for profit aged care and retirement villages, where residents are charged entry fees and fees for services, may still be characterised as 'charitable', in the case of City of Mandurah v Australian Flying Corps & Royal Australian Air Force Association (WA Division) Inc  WASCA 185 (the RAAFA decision).
Objection to the rate record
The Australian Flying Corps & Royal Australian Air Force Association (WA Division) Inc (RAAFA) lodged objections to the rate notices issued by the City of Mandurah (City). The objections related to land owned by RAAFA and upon which RAAFA operated a retirement village facility. RAAFA asserted that the land was used exclusively for charitable purposes and, pursuant to s.6.26(2)(g) of the Local Government Act 1995 (LGA), was not rateable land.
The residents of the retirement village were required to pay an interest free entry loan in consideration of a grant of a lease of an independent living unit, and to pay for rent, rates, utility charges, any meals provided to them, and any fees payable to hairdressers, doctors and nurses for services provided to them.
The City dismissed RAAFA's objections to the rate record on the grounds that the accommodation and services at the retirement village were provided to the residents for the full cost of doing so, and this use did not constitute a charitable purpose. RAAFA sought a review of the City's decision in the State Administrative Tribunal (Tribunal).
The Tribunal at first instance
The Tribunal held that the land was used exclusively for a charitable purpose within the meaning of s.6.26(2)(g) of the LGA.
The Tribunal rejected the City's argument that charitable relief of the aged requires that any accommodation or other services provided be subsidised. The Tribunal noted that the needs and disabilities of the aged are not financial in nature, but include such things as relief from isolation and loneliness, medical care, fraternity, and security of accommodation.
The Tribunal determined that it was not necessary that, to be charitable, relief must be by way of bounty rather than by way of bargain. Even if the residents of the retirement village were required to pay the costs associated with the provision of accommodation and other services, and even if the amount paid consistently produced a surplus of income, that will not preclude a conclusion that the land was used exclusively for a charitable purpose. This was subject to the provisos that the surplus should not be for the private profit of the provider, and the costs of the accommodation and services should not be so great as to exclude the element of public benefit.
The City unsuccessfully sought leave to appeal in the Supreme Court. Upon further appeal, the Court of Appeal granted the City leave to appeal the decision of the Tribunal.
The RAAFA Decision
The Court of Appeal dismissed the appeal. In determining whether aged care accommodation had to be subsidised to be charitable, the Court held:
- the relief of the burdens and disadvantages attributable to age may be charitable without any element of poverty. Those burdens and disadvantages may be suffered by aged persons who are 'well-to-do and wealthy';
- if a purpose is otherwise charitable, the purpose will not cease to be charitable merely because the benefits or services are received on a contractual basis;
- if a purpose is otherwise charitable, the purpose will not cease to be charitable merely because the persons who receive the benefits or services make significant or substantial payments to the entity which provides the benefit or services, provided the entity is a non-profit making organisation or any profits must be retained by the entity for the purpose in question and none can be distributed to the members of the entity or applied for a non-charitable purpose.
The Court noted that the small surplus RAAFA generated from its operation of the retirement village was credited to the resident's maintenance accounts or applied toward the repair or improvement of the retirement village.
It would also be beyond the capacity of each of the applicants for admission to the retirement village to alleviate, from his or her own resources, the relevant burdens and disadvantages [attributable to age] by the construction, operation and maintenance of a similar facility or otherwise.
Although persons of modest means may be unable to afford the cost of securing accommodation and other services at the retirement village, the cost is not affordable only by the wealthy.
Local Government Consideration
Local governments should consider the RAAFA decision when considering an application for a rate exemption under s.6.26(2)(g) for not-for-profit aged care or retirement villages. The fact that entry fees and ongoing fees are charged for the accommodation and services does not mean that the use does not constitute a charitable purpose.
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