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Cooperative Bulk Handling Limited (CBH) is a tax exempt not for profit company which
started operations in 1933 in Western Australia for the purposes of establishing,
maintaining and conducting schemes or systems for the handling of wheat and other
grains in bulk.

Since then, its operations have expanded and its undertakings have been diversified but
they have remained true to their original objects of providing services to Western
Australian grain growers by doing such things as:

Ñc research and development of methods to determine grain contamination;

Ñc developing the Australian Grains Centre to undertake grain testing and analysis
for the industry nationally;
Ñc developing methods used for sealing and fumigating grain in storage.

It operates primarily for the Western Australian grain industry. Its services are available
to all Western Australian grain growers not just its members. Its customers pay for its
services. It has been endorsed by the Australian Taxation Office as tax exempt since
1971.

In the 2006 financial year CBH had a turnover of $321 million è c c  c c  !c
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#. In 2007 its gross income was $233 million with a loss of $47,000.

Two obvious questions arise:

1.c How can a ³not for profit´ derive such huge income and profits?
2.c Why shouldn¶t they pay tax on those profits?

The Commissioner of Taxation thought that after 73 years of operation they should pay
tax.

The Commissioner of Taxation went to the Full Federal Court to get an order that CBH
should not be tax exempt.

The Commissioner lost.

CBH had complied with all requirements set out by the Australian Tax Office as to what
and who should qualify as tax exempt. Before changing its structure or constituent
documents over the years, CBH sought ATO approval. Prior to 1971 CBH paid tax on the
basis that it was a co-operative. In 1971 the organisation restructured and sought the
Commissioner¶s advice as to whether it would qualify as tax exempt. The Commissioner
granted such tax exemption.
In 1996 CBH obtained a private ruling before alter ing its constitution and again the
Commissioner confirmed its tax free status. But subsequent legislative changes exposed
CBH to the potential that it is no longer qualified as tax exempt.

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CBH successfully defeated the Commissioners challenge and it remains tax exempt on
the basis that it is a † 

 

 
  
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The Full Federal Court considered what these terms meant and gave the words
³development of Australian agricultural resources´ a wide meaning. Their Honours
clarified and confirmed that the prohibition on members receiving profits or deriving a
gain DID NOT preclude the members from receiving any gain.

CBH management was always careful and before doing anything that could jeopardise
their tax exempt status they:

Ñc sought advice;
Ñc sought approval; and
Ñc planned their strategy.

No doubt CBH were always mindful of the statuto ry requirements imposed by tax
legislation when planning and implementing its business strategy and growth.

Staying true to its objects and statutory obligations meant it correctly retained its tax
free status.

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Tax free organisations exist to benefit the community. The bigger the profits the more
benefits these organisations can provide the community. We believe the outcome is
completely fair.

The Business Structures and Planning Team at redchip lawyers can advise and help your
clients on the establishment, endorsement and entitlements of not for profit
organisations.

Please contact Ian Tindale at iant@redchip.com.au or Emily Ponting at

emilyp@redhcip.com.au or on (07) 3852 5055 to arrange a confidential and obligation
free discussion.