The case is about Aid/Watch, a small non-government organisation founded in 1993. Aid/Watch researches, monitors and campaigns about overseas aid programs run by the Australian government. Its object is to promote the effectiveness of aid, from a developmental perspective and by ensuring the aid is environmentally friendly.

Aid/Watch was fully endorsed as a charitable institution for tax purposes. But in 2006, the Australian Taxation Office withdrew this endorsement because it claimed that Aid/Watch was involved in ‘political’ activities. These activities included urging the public to write to the government to put pressure on the Burmese regime, delivering an (ironic) 60th anniversary birthday cake to the World Bank and raising concerns about the developmental impacts of the US-Australia Free Trade Agreement.

Earlier that year, Aid/Watch had also criticised the spending of the government’s Tsunami Aid Fund. The Aid/Watch office received a call directly from the Foreign Minister who informed the organisation that it could expect to have its government funding cut. The office politely informed the Minister that Aid/Watch was constitutionally prevented from accepting any money from the government.

Then the ATO stepped in and withdrew the organisation’s charitable status. This meant that Aid/Watch lost funding from charitable foundations, which were an important source of income for Aid/Watch. The effect of this was to fundamentally compromise the organisation’s economic viability.

The law is clear that political parties are not charitable entities. The common law has also evolved to exclude from the definition of ‘charity’ organisations that attempt to change policies and advocate for changes to the law. With Aid/Watch, the ATO took this one step further and argued that a charity cannot promote or promulgate a particular point of view.

This is why Aid/Watch is going all the way to the High Court. While no provision in charity or tax law prohibits a charitable entity from critiquing government, the experience of Aid/Watch sends ripples of fear through many of these organisations. The consequences of such a precedent are far reaching. It is an example of the law lagging frustratingly behind modern values.

Indeed, the law is more than400 years old – it goes back to the statute of Elizabeth I. The common law has gone on to develop the notion of what is a charity, but nonetheless the starting point has been a very old set of criteria. The statute defined four purposes that were charitable:

* The relief of poverty;

* The advancement of education;

* The advancement of religion; and

*Any other purpose beneficial to the community (which must fit within the spirit of the statute).

In withdrawing Aid/Watch’s tax exempt status, the ATO argued that an entity cannot fulfil these criteria unless it is carrying out one of these purposes. The ATO was effectively saying that if an organisation only critiques, researches and campaigns around aid rather than delivering aid, it is not a charity. As Aid/Watch seeks to relieve poverty by improving the effectiveness of government programs – in this case relating to overseas aid – the court found that it has a dominant political purpose.

This view highlights the fundamental problem with a law that is more than 400 years old. How can the Wilderness Society, for example, deliver wilderness? In Elizabethan times, the role of government was quite different to what it is today. Thankfully, modern governments deliver education and a wide range of services aimed at poverty relief. Charities play a very different role to what they did centuries ago. Today they are involved much more in analysing the nature and benefits of these policies, as well as delivering outcomes.

Aid/Watch successfully appealed against the decision of the ATO to the Administrative Appeals Tribunal. The tribunal took a very sensible approach: it agreed that the important issue is the purpose of the organisation, not the method by which it carries out its aims.

The ATO then appealed against the tribunal’s decision to the Federal Court of Australia. The court found that while virtually every purpose or activity of Aid/Watch was directed towards the relief of poverty, its campaigning was a political activity with a political purpose, which disqualified it from the definition of a charity.

This is an unsatisfactory outcome based on circular logic. Aid/Watch’s charitable purpose is to relieve poverty through analysing, critiquing, and campaigning around the government’s aid policies. To do so requires that it take a particular point of view about those very policies – which is exactly what the court relied upon to find that Aid/Watch had a political purpose.

The Federal Court noted that ‘this area of Australian law is informed by concepts which, due principally to their antiquity, are not easily adapted to a modern context’. If this precedent is allowed to stand, the effect will be to send a chill through the community. The message will be that if an organisation chooses to speak out against government policy, it could face action from bodies such as the ATO, which challenge their financial viability.

Campaigning around social justice issues is central to a democratic society. Individuals and organisations should be encouraged to raise debate, critique government policy and advocate for better systems of delivering social justice. A variety of views on how to make our society more just is clearly in the public benefit.

Elizabeth O’Shea is social justice lawyer, Maurice Blackburn.