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A parliamentary inquiry has heard claims the Church of Scientology leaves members to fund local charitable activities out of their own pockets, as it siphons donations to church officials overseas.

The Senate committee was formed after Independent Senator Nick Xenophon raised concerns about Scientology, and proposed changes to tax law that would require religions to pass a public benefit test in order to be exempt from income tax.

The Church of Scientology says the bill is being used as a platform to continue Senator Xenophon's "witch hunt on a recognised religion".

On Monday the inquiry heard from a roundtable of five former Scientologists, who said the organisation charged its members fees of hundreds of millions of dollars, but directed very little of the money to charitable projects.

One of the group, Paul Schofield, told the inquiry he was tasked with receiving money from a program in Nepal when he was the executive director of the church's drug rehabilitation program for Australia, New Zealand and the south Pacific region.

He says the program was sponsored entirely by its executive director, a retired police superintendent.

"I wanted to request that the International Association of Scientologists help this guy out, because he wasn't able to collect money from it. He had something like 65 addicts that he was trying to treat via the Narconon program," Mr Schofield told the committee.

"He was in severe financial distress and I attempted to get the International Association of Scientologists to actually fund this. After all, the International Association of Scientologists was part of Scientology, and Scientology was using this drug rehabilitation in Nepal as an example of their outreach programs.

"I was told there would be no way in the world they would help bail this guy out, he had to handle it himself."

Mr Schofield said the director was basically broke, but was being forced to continue the rehabilitation program at his own expense and pay a tithe to Scientology.

"He was supposed to pay me 10 per cent of his money for management expenses, which I then spent: sent some to Narconon International, I sent some directly to a church body called the Association for Better Living and Education, which is a Sea Org management unit in the church.

"Although he was a charity, there was no money going to be sent to him, unless it was raised by him or people with him, and he's working in one of the poorest countries of the world."

Mr Schofield agreed when committee chair Alan Eggleston asked if his main objection was that the church was siphoning off money.

'Unconstitutional'

In her opening statement to the committee, Scientology spokeswoman Virginia Stewart addressed Mr Schofield's claims.

"Specifically on the topic of Narconon I would like to also mention that in August-September 2009, the International Association of Scientologists gave a grant to Narconon Nepal of over $1 million to purchase and renovate facilities for the group," she said.

"In terms of funding for the social betterment and charitable activities that the church sponsors or supports, it is true that the funds that the church does ask [for], come from its parishioners, to donate to support these organisations and activities, which is what all charitable organisations do. Where else is the money going to come from, if not its members?"

When asked later about drug rehabilitation program funding, Scientology spokesman Michael Gordon said the organisation's books were prepared by accountants and were publicly available.

The spokesman said he would be happy to provide the committee with details of what funds were sent to the head organisation in the United States.

Louise McBride, who appeared as a taxation lawyer for the church, questioned whether the inquiry was unconstitutional, saying it was not appropriate for tax amendment bills to be initiated in the Senate.

She also said the proposed amendment would determine which religions were worthy of tax exemptions and which were not, which she said flew in the face of the constitution's provisions on religion.

Ms McBride referred to a 1983 case when the High Court of Australia ruled Scientology could legally claim to be a religion.

"All the judges say, basically to paraphrase, that when bureaucrats and the government get involved with deciding what is and what isn't religion, and enacting laws that impede on that, it does go to religious freedom," she said.

The Church of Scientology also provided a statement to ABC News Online outlining its charitable programs, which include drug education and prevention, disaster relief, and work to defend human rights and promote the UN's universal declaration of human rights.

Editor's note: This article initially stated that the Church of Scientology did not provide any official comment on Mr Schofield's allegations during the inquiry's hearings. The claims were in fact mentioned in Ms Stewart's opening address to the Senate Economics Committee. The article has been amended to reflect this.