Grain Growers Limited v Chief Commissioner of State Revenue  NSWCA 359
Grain Growers Limited (“the Taxpayer”) commenced proceedings in the Supreme Court of NSW seeking a review of the Chief Commissioner of State Revenue’s (“the Chief Commissioner”) decision to disallow the Taxpayer a payroll tax exemption and refund of payroll tax for the 2009 to 2013 financial years. At first instance, His Honour Justice Black granted the Taxpayer relief sought in relation to the 2009 to 2011 financial years, and held that only a partial exemption and refund applied in relation to the 2012 and 2013 financial years.
In these proceedings, the Taxpayer appeals against his Honour’s judgment that relates to the 2012 and 2013 financial years insofar as his Honour held that the exemption was not available in those years in respect of certain employees.
The Taxpayer was recognised as a charitable institution for the purposes of the Income Tax Assessment Act 1997 (Cth). The Taxpayer contends that it is a non-profit organisation working on behalf of all Australian grain producers to promote the development of a more efficient, sustainable and profitable grains industry, benefitting not only its members but also the public at large.
On 31 December 2008, the Taxpayer acquired BRI Australia Pty Ltd (“BRI”) and, in 2009, acquired Agrecon Operations Pty Ltd (“Agrecon”). In 2011, the assets, liabilities and staff of Agrecon and BRI were transferred to the Taxpayer.
At the date of acquisition by the Taxpayer, BRI was an independent research company providing laboratory services, technical and advisory services, consultancy and training to the food industry. Agrecon conducted a business of providing satellite imaging, and advisory and consultancy services, to the agricultural sector. After the transfers, the Taxpayer’s activities comprised seven components: corporate services, grower development, industry development, business development, information services, technical services and analytical services.
The Chief Commissioner accepted that the Taxpayer was a non-profit organisation, but rejected the Taxpayer’s claim that it had a charitable purpose. Rather, according to the Chief Commissioner, the Taxpayer’s purposes “are primarily for the benefit of its members, and as such it cannot be said to have charitable purposes”.
The statutory framework
Section 48 of the Act provides:
48(1) Subject to subsection (2), wages are exempt wages if they are paid or payable by any of the following:
a non-profit organisation having as its sole or dominant purpose a charitable, benevolent, philanthropic or patriotic purpose (but not including a school, an educational institution, an educational company or an instrumentality of the State).
The wages must be paid or payable:
for work of a kind ordinarily performed in connection with the religious, charitable, benevolent, philanthropic or patriotic purposes of the institution or body, and
to a person engaged exclusively in that kind of work.”In August 2013, the Taxpayer applied to the Chief Commissioner for an exemption from payroll tax and a refund of the tax paid for the 2009 to 2013 financial years.
His Honour Justice Black found that the evidence established that the Taxpayer’s “business services activities were conducted in order to advance its larger charitable purpose, and are not to be treated as non-charitable merely because they had a commercial character, or because an attempt to advance the level of information and technical services available to the grains industry generally also benefited individual growers”: . His Honour concluded at  that the Taxpayer’s purpose in conducting its affairs and the businesses of BRI and Agrecon in particular, was that of advancing at least the Australian grain industry, and the Australian agricultural industry insofar as the grain industry formed a subset of that industry, and thus had a charitable purpose. His Honour was satisfied, therefore, that the requirements of s.48(1) of the Act were satisfied in respect of the Taxpayer’s activities in the relevant years.
As to whether the requirements of s.48(2) were satisfied, His Honour concluded at  that the Taxpayer had not established, on the evidence, that wages paid or payable to its employees working in the successor functions to the BRI and Agrecon entities were paid or payable for work of a kind “ordinarily performed” in connection with the relevant charitable purposes of the Taxpayer. That was so whether the charitable purposes were characterised as the advancement of agriculture or the advancement of the grain growing industry.
His Honour, at , held that the exemption was not available for the wages of the Taxpayer’s executive and administrative staff who were partly engaged in performing work that was necessary for charitable work but were not exclusively engaged in work of a kind ordinarily performed in connection with the Taxpayer’s charitable purposes.
Issue on appeal
The main issue for determination was whether the wages of staff employed in the successor units to BRI and Agrecon from 2011 were “for work of a kind ordinarily performed in connection with the…charitable purposes” of the organisation and “to a person engaged exclusively in that kind of work” pursuant to s.48(2) of the Act.
The essence of the Taxpayer’s argument was that the test in s. 48(2) referred to how the taxpayer ordinarily carried out its charitable purpose. The Taxpayer further submitted that its activities in providing industry services were unique and that there were no other bodies about which evidence could be adduced of what was “ordinarily performed” in the pursuit of the charitable purpose of the advancement of agriculture. It was submitted that it was necessary to look at the substance of an organisation rather than merely to have regard to its structure.
Chief Commissioner’s submissions
The Chief Commissioner submitted that his Honour was correct in the construction of the section, having regard to the text of the provision as well as its legislative history. The Chief Commissioner submitted that the expressions “work of a kind” and “ordinarily” were to be construed objectively and not by reference to the particular goods or matter or items subject of the determination.
The Court of Appeal held the following:
The starting point and end point in any question of statutory construction is the text of the provision:  (see Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27).
The expression “work of a kind” would indicate that work which is like or similar to work which, relevantly, is “ordinarily performed in connection with the … charitable ... purposes of the institution”, would fall within that phrase. The Court of Appeal referred to cases which have construed the phrase “of a kind” as denoting a “genus, class or description” in the context of goods and services tax legislation: - (see Lansell House Pty Ltd v Federal Commissioner of Taxation  FCAFC 6). However, fundamentally the phrase in question, “work of a kind ordinarily performed”, must be construed within the context of s. 48(2) of the Act itself: .
On its plain meaning and as the primary judge pointed out, “ordinarily” bears the meaning of “regularly, commonly or customarily”: .
The Taxpayer submitted that the phrase “in connection with” has a broad meaning and provided examples from the case law to support its interpretation. The Court of Appeal held that “little assistance is gained in ascertaining the meaning of the particular provision at hand by relying upon the meaning that those words have been given in a different statutory context”: . The Court of Appeal held that when construing the phrase “in connection with”, it is necessary to identify, from the terms of the relevant provision, what there is to be a connection with: .
For a non-profit organisation to be entitled to an exemption from liability for payroll tax, it has to establish that the wages must be paid or payable for work of a kind that is like or similar to that which is ordinarily, that is, regularly or commonly or customarily, performed in connection with the charitable purposes of the organisation: . This requires “an assessment of whether the particular activities of the relevant body are such that bodies with the same charitable purpose ordinarily, or in other words regularly, commonly or customarily, perform them.”
The Court also addressed the submission by the Taxpayer that, because its activities were so unique, it would be impossible for it to adduce evidence of what other bodies ordinarily perform in the pursuit of the charitable purpose of the advancement of the grain industry. Beazley P noted that because of her Honour’s finding that there does not have to be a precise identity or correspondence between work of a kind ordinarily performed in relation to a charitable purpose and the work performed by the organisation in connection with its charitable purpose, and s.48(2) contains the necessary flexibility to deal with new or innovative ways of carrying out a charitable purpose: .
The appeal is dismissed with costs.