Decision Date: June 1, 2017
Link: Case Summary Document
Citation: Supreme Court of Victoria, Croft J
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.


The Telecommunications Industry Ombudsman Ltd (TIO) claimed that it was exempt from state payroll tax in Victoria under section 48(1) of the Payroll Tax Act 2007 (Vic) (the Act). Wages paid by the TIO would be exempt from payroll tax if the TIO was a ‘non-profit organisation having as its … dominant purpose a charitable … purpose’ (the first limb of section 48(1)(a)(iii)), and the wages were paid to persons ‘engaged exclusively in work of a … charitable … nature for the … non-profit organisation’ (the second limb under section 48(1))). The Commissioner of State Revenue (the Commissioner) took the view that this was not the case.

The TIO was established in 1993 as a company limited by guarantee. It provides a free and independent dispute resolution service for small business and residential consumers who have an unresolved complaint about their telephone or internet service in Australia. The court considered the constitution and other governance documents of the TIO and concluded (at [48]):

The evidence indicates, and in my view quiet clearly, that the core function of the TIO is dispute resolution. Over the Relevant Period [from 1 July 2012], the TIO received 1,388,884 new complaints, and the Ombudsman made 58 determinations. As part of its dispute resolution function—perhaps the broader, longer term, perspective aspect of that function—the TIO also investigates systemic issues. Dispute resolution is not the only activity of the TIO, as it also undertakes other related activities in pursuit of its purpose; namely, policy and research, publications, outreach activities and industry engagement. The emphasis placed on each of these categories of supporting ancillary or supporting activities changes over time, depending on a variety of factors, such as needs and resources. Nevertheless, the TIO has undertaken activities within each of these categories—as well as dispute resolution and the investigation of systemic issues—throughout the Relevant Period.

The TIO is a not-for-profit organisation that is funded by telecommunications providers, who are required by law to be members of, and provide funding to, the scheme. In addition, it is a cost-recovery organisation, in that it seeks to recover the costs of its operations from the fees paid by its members, but it does not seek to make a profit.

The Commissioner contended that the main purpose of the TIO, administering a scheme for the investigation and determination of complaints about telecommunications carriage services, was not charitable. Rather, the TIO had a regulatory purpose.

Did the TIO have a charitable purpose? The term ‘charitable purpose’ in section 48(1)(a)(iii) of the Act is to be understood in Victoria by reference to its source in the general law. In the absence of a contrary intention in the statute, the word ‘charitable’ is given its technical legal meaning as set out by Lord Macnaghten in Commissioners for Special Purposes of the Income Tax v Pemsel  by reference to the four heads of charity, and the spirit and intendment of the preamble of the Statute of Charitable Uses Act 1601. The TIO submitted that the relevant head in its case was the fourth head of charity, ‘for purposes beneficial to the community’. In order for an organisation to fall within the fourth head of charity, its purpose must be ‘beneficial to the community’ and ‘within the equity of the [P]reamble to the Statute of Elizabeth’ (the Preamble) (at [108]).

Was the TIO’s purpose beneficial to the community? The court said that it was, particularly in its outreach aspect to indigenous, disabled and disadvantaged consumers (at [114]):

…the TIO’s purpose of providing a free, independent dispute resolution service to residential and small business consumers of telecommunications services is beneficial to the community, as are the broader services which are closely associated with this service, thus providing benefit to the wider community…

There were strong submissions that the purpose of the TIO was also within the equity of the Preamble. The court agreed that it was not a case of a regulator, but rather of a charity (at [140]). After a detailed consideration of the relevant cases, the court took the view that charity law moves with the times (at [147]):

Thus, it is clear that as the TIO submits, charity law moves with the times. On the basis of the authorities to which reference has been made, I accept the TIO’s submission that a regulatory object does not necessarily result in the characterisation as a non-charitable purpose. It does, as the cases indicate, depend on all the circumstances. In the present circumstances, the governing documents of the TIO and the evidence as to the implementation of its purposes and the carrying out of its functions makes it quite clear, in my view, that, in the words of the New Zealand High Court, “the intended outcome to which those functions are directed” is not regulation.

Moreover, the corporate structure of the TIO did not affect this outcome i.e. that the TIO’s dominant purpose was charitable. The TIO being found to be charitable, its wages were exempt from payroll tax. All amounts of payroll tax overpaid since 1 July 2012 were to be refunded by the Commissioner.

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