The Grain Growers case shows that there are charity payroll tax exemption limits in respect of commercial operations.
Grain Growers Ltd applied for an exemption from payroll tax under section 48 of the Payroll Tax Act 2007 (NSW) on the basis that it had charitable purposes. It also sought a refund of the payroll tax paid in the previous five (5) years on the same basis.
The application was refused by the Chief Commissioner, and legal proceedings were commenced.
Grain Growers asserted that a non-profit organisation working to produce a more productive and efficient grain industry, such as themselves, was for the benefit of the Australian public. It submitted that the promotion of Australian agriculture was vital to the community’s welfare.
Grain Growers Ltd was held to be a non-profit entity on the basis that its Constitution contained the requisite clauses that:
- required its income and property to be applied solely towards its objects;
- prevented distribution to members, including on the winding up of the entity.
The court cited Word Investments, that in order to determine whether an entity’s purpose is charitable, it is necessary to examine its objects and the manner in which those objects are effected by its activities, and to determine whether its “main or predominant or dominant objects, as distinct from its concomitant or incidental or ancillary objects, are charitable”.
It was held at paragraph 75 that: “…Grain Growers’ purpose in conducting its affairs, and the businesses …, is that of advancing at least the Australian grain industry, and the Australian agricultural industry so far as the grains industry forms a subset of that industry, and has a charitable character. The requirements of s 48(1)…are therefore satisfied…”.
The Court concluded that the promotion of industry and commerce can be a charitable object, and that agricultural activities benefit the Australian public and that employees working in connection with that purpose were exempt.
Therefore payroll for core staff was exempt.
Grain Growers Ltd had also acquired two commercial companies, together with its staff and assets.
The Court observed that the test in section 48 is assessed on whether the work undertaken by the employees is of a kind “ordinarily performed” (that is commonly, customarily or regularly) in connection with the charitable purpose of a particular type of body. Grain Growers Ltd could not establish that the commercial work undertaken by employees of the acquired companies was ordinarily performed in connection with the charitable purpose.
Therefore, the exemption from payroll tax was not available in respect of the acquired employees.