Some opponents of my Fair Charities Bill have been misrepresenting its purpose. I have had concerned messages from several of my constituents who have been misled in this way, so I have put together an FAQ to dispel these rumours.
If you have any questions with regards to my Bill then please feel free to get in touch.
Q. Is this a tax on religious institutions?
A. Absolutely not.
This bill is not an attack on religious organisations or the fantastic charitable work they do. It instead seeks to redefine what a charity is; to protect genuinely charitable work and crack down on for-profit businesses taking advantage of tax exemptions.
Q. Will places of public worship have to pay land tax?
A. No, the Bill will not impose land tax on places of public worship. They will be protected by an exemption codified under my plan.
Q. But opponents of this bill are saying churches will have to pay land tax?
A. This is not true. The second reading speech is plain in relation to the Bill’s intentions and the protections provided for places of worship. Buildings used ‘exclusively’ as a place of worship will not have to pay land tax.
To suggest that land tax exemptions will not apply to the community activities at churches, temples and synagogues is to misunderstand the rules of statutory interpretation. A court, if called upon to interpret this legislation, will look to related documents including the second reading speech (or even this website!). The phrase ‘used exclusively as a place of public worship’ in new section 91A should not be construed narrowly in this context. The word ‘exclusively’ was chosen for this section as a way of describing churches, synagogues and temples and to prevent someone from saying, for example, that they were entitled to a place of worship tax exemption because they prayed regularly in their office or house.
Q. Will small congregations have to pay payroll tax?
A. No. Existing payroll tax thresholds will still protect local congregations.
Q.Will churches be taxed for their community contributions?
Religious organisations do some amazing charitable work and this Bill will not affect that. Genuine charitable work, including the charitable work performed by religious institutions, should be tax exempt and will remain tax exempt under my plan.
Removing ‘advancement of religion’ as a charitable status does not prevent religious institutions from maintaining their ‘charitable purpose’. Soup kitchens, food banks, schools, play groups, support groups as well as many other events and activities will all be protected under the current definitions of ‘charitable purpose’ – as they should be.
Q. Why do we need this Bill?
A. Tax exemptions for religions have a long history founded in the Statute of Charitable Uses 1601 (UK) preamble, which although long repealed, has informed the meaning of charity for centuries. These purposes were condensed and adopted at common law in Income Tax Special Purposes Commissioners v Pemsel , with charitable heads including the ‘advancement of religion’. This head remains part of Victorian law today, despite being abolished in the United Kingdom in 2011.
Many large and highly profitable commercial enterprises owned by religious institutions take advantage of this charitable head to avoid certain taxes, despite operating as for-profit businesses, and despite not carrying out objectively charitable works.
My Bill corrects this imbalance. This Bill cracks down on for-profit businesses taking advantage of tax exemptions meant for charitable activities.
Q. Will this Bill stop religious-run businesses from generating profits?
A. Paying its ‘fair share of tax’ does not abrogate the ability of a religious-run business to generate profits for a religious institution – just as normal businesses will pay tax and return profits to shareholders. Taxes collected and spent in the state, benefit the community in a pure form, just as charitable activities do.
Q. Are there any examples of for-profit businesses taking advantage of ‘advancement of religion’ for tax exemptions?
A. Yes. Sanitarium, the manufacturer of Australia’s iconic breakfast cereal Weet-Bix, is an obvious example. Sanitarium is registered as a charity. As a nation we buy and consume more than 1.4 billion Weet-Bix per year, yet as a consequence of its charitable status, Sanitarium pays no company tax in Australia, quite unlike its multinational competitors Kellogg’s, Kraft and Nestlé.
Were Sanitarium still based in Melbourne where it was founded, it would also be entitled to exemptions from various Victorian taxes, including land tax, stamp duty and payroll tax.
How is this possible? That the manufacture and sale of breakfast cereal for profit is a charitable activity? Because Weet-Bix is manufactured by a company wholly owned by the Seventh Day Adventist Church.
A charitable tax break of this type does not mean that the resulting income stays in Victoria or is even spent on charitable activities. As the Seventh Day Adventist Church has acknowledged, it has invested millions of dollars generated by its ‘group one’ entities, including Sanitarium, into US-based companies.
Q. How many charities report ‘advancement of religion’ as their charitable purpose?
A. Of all registered charities in Australia, 37.4% report advancement of religion as their charitable purpose. This is the biggest category of charitable purpose. The exact figures are unavailable but a commonly cited estimate from 2009 suggests that religious tax exemptions cost Australia $31 billion per annum.
This bill does not mean that those 37.4% would no longer be eligible for tax exemptions. So long as the meet the criteria of the charitable purpose they will continue to receive tax exemptions.
Q. What are the heads of charity under the Bill?
A. The charitable heads under the new definitions include:
- advancing health, including preventing and relieving sickness, disease or human suffering
- advancing education
- advancing social or public welfare
- relieving the poverty, distress or disadvantage of individuals or families
- caring for and supporting the aged
- caring for and supporting individuals with disabilities
- caring for, supporting and protecting children and young individuals; and
- assisting the rebuild after a disaster
Q. What tax breaks do charities currently receive?
A. At Victorian state level, concessions include:
- Land Tax Exemptions
- Payroll Tax exemptions
- Stamp duty exemptions
At Federal level, concessions include:
- Exemptions from paying company tax
- Exemption from income tax for eligible entities
- Capital Gains Tax exemption for registered religious charities and trusts
- Goods and Services Tax (GST) concessions
- Exemption or rebate under the Fringe Benefits Tax Scheme
 Gomes, F & Perkins, L (2009) ‘ Taxes and subsidies: the cost of “advancing religion”, Australian Humanist, no 93