SHOULD NOT FOR PROFITS, THAT MAKE MASSIVE PROFITS, PAY TAX?
(
FTC v Cooperative Bulk Handling Ltd [2010] FCAFC 155
)
The Facts
Cooperative Bulk Handling Limited (CBH) is a tax exempt not for profit company whichstarted operations in 1933 in Western Australia for the purposes of establishing,maintaining and conducting schemes or systems for the handling of wheat and othergrains in bulk.Since then, its operations have expanded and its undertakings have been diversified butthey have remained true to their original objects of providing services to WesternAustralian grain growers by doing such things as:
y
research and development of methods to determine grain contamination;
y
developing the Australian Grains Centre to undertake grain testing and analysisfor the industry nationally;
y
developing methods used for sealing and fumigating grain in storage.It operates primarily for the Western Australian grain industry. Its services are availableto all Western Australian grain growers not just its members. Its customers pay for itsservices. It has been endorsed by the Australian Taxation Office as tax exempt since1971.In the 2006 financial year CBH had a turnover of $321 million
wi
th a prof
i
t of $83m
illi
on
. In 2007 its gross income was $233 million with a loss of $47,000.Two obvious questions arise:1.
How can a ³not for profit´ derive such huge income and profits?2.
Why shouldn¶t they pay tax on those profits?The Commissioner of Taxation thought that after 73 years of operation they should paytax.The Commissioner of Taxation went to the Full Federal Court to get an order that CBHshould not be tax exempt.The Commissioner lost.CBH had complied with all requirements set out by the Australian Tax Office as to whatand who should qualify as tax exempt. Before changing its structure or constituentdocuments over the years, CBH sought ATO approval. Prior to 1971 CBH paid tax on thebasis that it was a co-operative. In 1971 the organisation restructured and sought theCommissioner¶s advice as to whether it would qualify as tax exempt. The Commissionergranted such tax exemption.
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