A so-called charity that spent more than $1 million on luxury cars, overseas jaunts and gambling in the name of research has lost its appeal to keep its tax-free charitable status.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The Federal Court struck out an appeal from The Study and Prevention of Psychological Diseases Foundation (SPED), which was fighting the Australian Tax Office over the loss of its charity tax concessions and deductible gift recipient status for its work to study the "ideal human environment".
The Brisbane-based foundation, which was founded by James Salerno Snr, purchased a Rolls-Royce for about $695,000, a $100,000 Hummer, and a $300,000 Ferrari for what it claimed was research.
Other costs include travelling to India to attend a wedding and gambling as part of research into "understanding thought processes and addictive behaviour from engagement in games of chance".
In the late 1990s, Mr Salerno lived for three months with family members and a group of other volunteers in a remote part of Western Australia, as part of an experiment on the "ideal human environment".
The foundation's membership was stacked by members of Mr Salerno 's family, who paid their entire salaries into the foundation and therefore paid no income tax. Their everyday living expenses, such as housing, food and travel, were paid for by the foundation.
The court upheld an earlier decision by the Administrative Appeals Tribunal, which concluded the foundation was "neither a charitable institution nor a health promotion charity".
The tribunal was scathing of the foundation in its decision, saying "nothing has made its way into, or even been submitted to, any medical or other journal".
Federal Court Justice Andrew Greenwood said in his ruling that SPED's research only had educational value to "a very limited class of people".
"The research has little or no educational value to the community and, in any event, if benefits were produced by the research, those benefits were not available to the public or a sufficiently significant section of the public," he said.
A spokeswoman for the Australian Tax Office told Fairfax Media: "The decision helps protect the integrity of the not-for-profit sector by ensuring charity tax concessions are accessed only by those entitled to do so."
SPED could not be reached for comment.
SPED was founded to research crowded living, people who live alone, opulence and poverty across urban and regional Australia, and what effect this had on people.
SPED claimed its 21 members, 11 of whom shared Mr Salerno's surname, worked 24 hours a day, seven days a week as "research guinea pigs".
No members were required to hold any qualifications in social science research or psychology.
Its financial records for 2009 reveal that research expenses totalled $761,052 but no money was spent on study. At the time, it held total assets worth $10.6 million and liabilities of $3.1 million.
A spokesman for the Australian Charities and Not-for-profits Commission said the public should check its charity register to ensure their donations were going to genuine causes.
