On 28 October 2016, the Court of Appeal of the Supreme Court of Western Australia handed down its decision in City of Mandurah v Australian Flying Corps and Royal Australian Air Force Association (WA Division) Inc  WASCA 185, unanimously dismissing the City of Mandurah’s appeal against an earlier decision of the State Administrative Tribunal which had found that the Australian Flying Corps and Royal Australian Air Force Association (WA Division) Inc (RAAFA’s) use of land as a retirement village was exempt from local government rates.
The decision is relevant to all not-for-profit operators of retirement villages as it confirms that the charitable purpose of relief of the aged does not require that any accommodation and other services provided to aged persons be subsidised.
Jackson McDonald acted for RAAFA in the proceedings and can provide advice to all not-for-profit organisations operating in the aged care/retirement village sector as to whether or not, like RAAFA, they are entitled to a rates exemption.
The Court of Appeal case was a culmination of several years of proceedings between RAAFA and the City of Mandurah.
At all material times, RAAFA was a not-for-profit organisation, the income and profits of which were applied solely to the promotion of its objects and not paid directly or indirectly by way of pecuniary profit to any of its members.
RAAFA’s objectives included the provision of aged care accommodation and other services to retired, aged, pensioned and infirm persons and the provision of relief in the form of companionship, mutual activities and security of community living to counter the effects of the isolation and loneliness of old age.
From 2009 onwards, RAAFA lodged a number of objections with the City in respect of local government rates that had been levied on RAAFA’s retirement village known as ‘Erskine Grove’ (which comprised a number of independent living units (ILUs).
RAAFA asserted that the land was used exclusively for charitable purposes pursuant to section 6.26 (2) (g) of the Local Government Act 1995 (namely the relief of the aged), and so was not rateable land.
The City dismissed RAAFA’s objections to the rates record on the basis that the land was used to provide accommodation and services to residents at full cost with no subsidy, and therefore was not for a charitable purpose.
RAAFA applied to the State Administrative Tribunal (Tribunal) for a review of the City’s decision to refuse RAAFA’s objections.
In upholding RAAFA’s rates objections and setting aside the rates notices, the Tribunal concluded that:
- RAAFA’s provision of accommodation and other services to aged persons at Erskine Grove constituted use of that land for the charitable purpose of relief of the aged.
- The benefits which derive from the provision of accommodation at Erksine Grove had the requisite element of a public benefit which was necessary for the use of the land to constitute a charitable purpose.
- The fact that residents of Erskine Grove were required to purchase their right to occupy an ILU and pay fees, did not alter the charitable status of its use.
The City appealed against the Tribunal’s decision. The issues determined by the Court of Appeal were whether or not the charitable purpose of the relief of the aged, in the context of a retirement village, required that any accommodation and other services made available to the relevant aged persons residing at the retirement village be:
- for the benefit of the community as a whole; and
- of a kind that is not generally available in the community¹.
No requirement for accommodation and other services to be subsidised
The Court found that in the context of a retirement village, any accommodation and other services to aged persons was not required to be subsidised².
In making this finding, the Court of Appeal noted that:
- the burdens and disadvantages of the aged include the need for “fraternity, belonging, respect, mutual activities, interaction and security”;
- relief of the aged does not require an element of poverty and can be provided to aged persons who are “well-to-do and wealthy”;
- relief of the aged will not cease to be charitable because the persons receiving benefits or services make significant or substantial payments for those benefits or services – provided that the entity is a non-profit organisation, or any profits are retained by the entity for the purpose in question, and none can be distributed to the members of the entity or applied for a non charitable purpose.
The accommodation and other services were for the benefit of the community as a whole
The Court found that there was no material difference between “public benefit” and “beneficial to the community”, and that in the context of a retirement village, the purpose of the relief of the aged will only be charitable if that purpose is carried out directly or indirectly for the benefit of the public (that is, the community) or an appreciable section of the public³. The provision by RAAFA of accommodation and other services at Erskine Grove was found to be for the benefit of the public or the community or an appreciable section of the public or the community, because:
- the range of aged persons who may apply to become residents is not restricted in a manner which is inconsistent with the required element of public benefit and the cost of entry is not affordable only by the wealthy;
- aged persons are generally recognised as vulnerable members of society and there is a demand in WA for accommodation and other services of the kind made available at Erskine Grove, which demand will likely grow;
- a benefit to the community results from a reduction in the political and social pressure that would otherwise be imposed on government agencies, and the State, to provide similar facilities; and
- a further benefit to the community results from a reduction in the moral obligation of families to alleviate the burdens suffered by relatives which are attributable to the ageing process.
Availability of accommodation and other services
The Court of Appeal found that accommodation and other services provided by a retirement village for the purpose of relieving the aged does not need to be of a kind that is not generally available in the community4.
What is the impact of the decision?
This decision clarifies that a retirement village/aged care facility, operated by a not-for-profit organisation, does not need to offer subsidised accommodation and services in order for its purpose to be charitable and therefore exempt from the payment of rates.
Unless a retirement village restricts applications for residency in a manner inconsistent with the required element of public benefit (for example, making the service affordable only by the very wealthy), it is likely to be found to be for the benefit of the public or an appreciable section of the public.