Wednesday’s decision overturns a lower court ruling in favour of the Australian Taxation Office.
The ATO had argued successfully that Aid/Watch’s lobbying activities meant its main purpose was political and that it could not be categorised as a charitable institution.
But five of the seven High Court judges held that generation of public debate concerning the efficiency of foreign aid directed to the relief of poverty was itself a purpose beneficial to the community.
‘It is the operation of these constitutional processes which contributes to the public welfare,’ they said in their judgment.
Aid/Watch describes itself as an independent membership-based watchdog on aid, trade and debt, working with communities in the Global South.
But in October 2006, the Commissioner of Taxation revoked Aid/Watch’s endorsements as a charitable institution for income tax, fringe benefits tax and GST.
The group appealed and in 2008, the Administrative Appeals Tribunal held that Aid/Watch was a charitable institution, even though it sought to influence government policy through its activities.
The full court of the Federal Court allowed an appeal by the tax commissioner, ruling that Aid/Watch activities necessarily involved criticism of government activities and policies.
That meant its main purpose was political and it could not be categorised as a charitable institution.
In its submission to the High Court, Aid/Watch said its generation of public debate on relief of poverty through foreign aid contributed to the public welfare and did not exclude it as a charitable activity.
In a dissenting decision, Justice Dyson Heydon said Aid/Watch, which describes itself as an activist group, did not have the goal of relieving poverty, providing no funds, goods or services to the poor and neither did it raise funds to be distributed to the poor by others.
‘The purpose of providing aid to improve infrastructure might relieve poverty, but the appellant opposed infrastructure which damaged the environment,’ he said.
‘One of its goals was to ‘demand’ a complete phase-out of support for extractive industries.
‘These industries often damage the environment, but they also often bring wealth to many who would otherwise be poor.’
The Australian Council for International Development said the High Court’s decision reflected contemporary understanding of charitable work.
Council director Marc Purcell said advocacy on behalf of the poor and disenfranchised was charitable work.
‘It is part of the normal work plan and operations of almost all charitable and aid delivery organisations in contemporary Australia,’ he said in a statement.
‘Such advocacy is a public good which raises awareness of inequality and sheds light on the actions which can be taken to overcome it.’