The Buddhist Society of Western Australia Inc

What you need to know

• In contesting objection decisions, it is possible to bring both an appeal and an application for judicial review in a single proceeding. 
• A 'school' is any place where people assemble for the purpose of being instructed in an area of knowledge or activity. This definition is not restricted by:
  • The regularity or systematic nature of educational activities; or 
  • The nature of educational activities (recreational or vocational); or 
  • The provision of certificates or recognised qualifications. 
• Following a successful judicial review, the Court cannot limit the material that the Commissioner is to consider when remaking objection decisions in a manner inconsistent with the Commissioner's statutory powers.
• If you win in court, but fail in one or more causes of action, or fail in some issues, any order for costs in your favour may be reduced.

What you need to do

• Entities seeking deductible gift recipient status as a school building fund must ensure that the buildings are used for school activities (within the above broad definition), or for non-school activities connected to those school activities that contribute to the overall purpose of providing instruction in an area of knowledge or activity. 
• In deciding whether to seek review of an objection decision, remember that if the decision is set aside, the Commissioner is entitled to gather further information in remaking the decision.
• Exercise caution in deciding whether to run a judicial review alongside an appeal in contesting an objection decision, as there may be adverse cost consequences.

Facts

The dispute surrounded the Commissioner's revocation of his endorsement of the Dhammaloka Buddhist Centre Building Fund's status as a deductible gift recipient (DGR), and his subsequent disallowance of the Society's objection ('objection decision').

The Dhammaloka Buddhist Centre is the main teaching and administrative centre for the Buddhist Society of Western Australia ('the Society'). 

The Centre hosts a broad range of activities, including guided meditation, children's Dhamma classes, chanting, study groups, and online video teachings. 

The Commissioner revoked his endorsement of the Fund's DGR status on the grounds that only the children's Dhamma classes constituted a 'school' activity. In classifying the other activities as 'non-school', they relied on factors outlined in Tax Ruling 2013/2 (TR 2013/2) and Australian Airlines.  Because the children's Dhamma classes only represented 5% of the building's use, the Commissioner ultimately concluded that buildings were not being used as a school. 

First Judgement 

The Society sought to bring both an appeal against the objection decision under the Taxation Administration Act 1953 (Cth) (TAA) and an application for judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR) in a single proceeding. The Commissioner opposed this, citing several procedural arguments including mutual inconsistency. 

The Court allowed both causes of action to proceed as a matter of efficient case management. 

Second Judgement 

Appeal

The appeal failed for evidential reasons. The Society did not adduce any evidence beyond that which the Society had originally provided the Commissioner. The Society was therefore unable to discharge the burden of proving that the taxation decision should have been made differently, as is required by the TAA. 

Judicial Review 

The principal question for the Court's consideration in the review was whether the Commissioner's interpretation of the word 'school' was consistent with law. 

The Court analysed and affirmed a string of Australian authorities that set down the ordinary meaning of 'school' (Cromer Golf; Leeuwin; Australian Airlines). Their key findings were as follows.

First, the ordinary meaning of 'school' is any place where people come together for the purpose of being instructed in an area of knowledge or activity. It does not require that the instruction provided be 'regular, ongoing or systematic'. 

Secondly, the factors in Australian Airlines and TR 2013/2 are not essential requirements of the ordinary meaning

These include: 

• The existence of a defined syllabus or curriculum, defined programs and qualified instructors.
• External certification of those syllabuses, programs, instructors or equipment. 
• Formal enrolment of students.
• Some form of assessment.
• The existence of portable or externally recognised qualifications. 

These factors are relevant to, but not determinative of the question of whether an entity is a school. The absence of any of these factors will not disqualify an entity from being a school. 

Thirdly, the ordinary meaning of 'school' does not require the course of education to be vocational as opposed to recreational. Entities providing instruction on so-called 'recreational' pursuits, such as ballet or drama, can properly be described as schools. Statements to the contrary in TR 2013/2 are inconsistent with Australian law. 

Lastly, and more specifically to the question of DGR status for a school building fund (s30-25(1) Item 2.1.10 ITAA97), in determining whether a building is 'used, or to be used' as a school, regard must be had to: 

• The overall purpose (or purposes) for which the building has been established and maintained; 
• The importance of each of the activities carried out to that purpose; and 
• Any connection that the non-school activities may have to the school activities, and the extent to which both pursuits contribute to the furtherance of the overall purpose.

This question is not to be determined by attributing percentage values to the time that a building is used for school and non-school activities. 

The Commissioner relied on an incorrect definition of school. The objection decision was therefore made under an error of law. Accordingly, the Commissioner was required to decide the matter again, according to law. 

Third Judgment 

The final hearing dealt with the Court's orders in the previous judgement related to the Commissioner's remaking of the objection decision, and to costs. 

Further Direction

The society sought a direction restricting the material upon which the Commissioner could remake the decision ('Further Direction') to the information he had when making the original decision. 

The Court declined to make the Further Direction. There is to be no fetter on the ordinary exercise of statutory powers given to the Commissioner by legislation. The Commissioner is entitled to use the same powers in remaking the objection decision as in their initial consideration of the objection. 

The Commissioner has a statutory power to request further information when determining a tax objection. This cannot be removed or limited by the Court in ordering the Commissioner to remake their decision. 

The Court held that it was immaterial that the power to request further information was not exercised in the initial decision-making process. 

Costs 

The Commissioner sought a reduced costs order in recognition of the Society's failure in one of the two causes of action. 

It is an established principle that a party may be awarded a portion of its costs in situations where they win overall but fail in one or more causes of action or issues that they raise. 

The Court rejected several of the Society's arguments made in an attempt to secure a complete costs order. These included: 

• That both the appeal and review turned on the same substantive issue, namely the proper meaning of 'school'. Therefore, the Society succeeded on the central substantive issue and was entitled to a full costs order. 
• That the Commissioner only raised the evidential issue (through which they defeated the appeal) as a 'test case', and it was therefore unreasonable to make the Society cover the expense. 

The Court instead found that the evidential issue was a substantive one, and that there was no unreasonableness on the part of the Commissioner in raising it. 

Ultimately, the Court awarded the Society two-thirds of its costs. This reflected their loss in a major limb of the proceeding, while still recognising their overall success. 

Authors: Geoffrey Mann, Partner, Bronwyn Kirkwood, Counsel