Murray, Ian --- "Charity Means Business Commissioner of Taxation v Word Investments Ltd" [2009] SydLawRw 12; (2009) 31(2) Sydney Law Review 309
[∗] Lawyer, Blake Dawson and Sessional Lecturer, Law School, Murdoch University. The author wishes to thank Sarah Murray for her comments on an earlier version of this article.
[1] [2008] HCA 55; (2008) 236 CLR 204 (‘Word Investments’).
[2] It is unclear exactly what ‘commercial’ means in this context. The authorities and regulators tend to be reluctant to apply the term to activities traditionally undertaken by charities, while in other instances it has been used pejoratively as a justification for finding that the test for charitable status has not been met: Scottish Burial Reform and Cremation Society Ltd v Glasgow Corporation [1967] UKHL 3; [1968] AC 138 (‘Scottish Burial’) at 147 (Lord Reid); Brighton College v Marriott [1926] AC 192 at 204 (Lord Blanesburgh). See also Australian Taxation Office, Taxation Ruling TR 2005/21: Income tax and fringe benefits tax: Charities, at [129]–[131]; Salvation Army (Vic) Property Trust v Fern Tree Gully Corporation [1952] HCA 4; (1952) 85 CLR 159 at 187 (Fullagar J).
[3] Commissioner of Taxation v Word Investments [2008] HCA 55; (2008) 236 CLR 204.
[4] The Australian Taxation Office indicated that it is assessing the impact of the decision: Australian Taxation Office, Non-Profit News Service No 0226 – Word Investments Ltd: High Court Dismisses Tax Office Appeal (Press Release, 3 December 2008) and has released a Decision Impact Statement relating to the decision: Australian Taxation Office, Decision Impact Statement: Commissioner of Taxation v Word Investments Ltd (2009) <http://law.ato.gov.au/atolaw/view.htm?DocID=LIT/ICD/M41/3008/00001> at 26 May 2009.
[5] Ian Murray, ‘Charitable Fundraising Through Commercial Activities: The Final Word or a Pyrrhic Victory?’ (2008) 11(2) Journal of Australian Taxation (forthcoming).
[6] Commonwealth of Australia, Australia’s Future Tax System Consultation Paper (Canberra: Treasury, 2008) at 162–4 (‘Henry Consultation Paper’). See also the terms of reference for the recently announced Productivity Commission review of the not-for-profit sector: Julia Gillard, Deputy Prime Minister; Chris Bowen, Assistant Treasurer and Ursula Stephens, Parliamentary Secretary for Social Inclusion and the Voluntary Sector, Productivity Commission to Review the Contribution of the Not-For-Profit Sector (Press Release, 17 March 2009).
[7] Senate Standing Committee on Economics, Parliament of Australia, Disclosure Regimes for Charities and Not-for-Profit Organisations (2008) at [8.46]; Attorney-General’s Department and Department of Families, Housing, Community Services and Indigenous Affairs, Discussion Paper: Optimising Benefits from Native Title Agreements (2008) at 15–17. See also Inquiry into the Definition of Charities and Related Organisations, Report of the Inquiry into the Definition of Charities and Related Organisations (2001).
[8] Australian Government, Australian Business Register <http://www.abr.business.gov.au> accessed 1 March 2009.
[9] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [20]–[21] (Gummow, Hayne, Heydon and Crennan JJ); Commissioner of Taxation v Word Investments Ltd (2006) 64 ATR 483 at [9]–[10] (Sundberg J).
[10] ITAA97 s 50-5 item 1.1.
[11] ITAA97 items 1.5 (established by will before 1 July 1997), 1.5A (additional assets given to a pre-1 July 1997 trust), 1.5B s 50-5.
[12] Central Bayside General Practice Association Ltd v Commissioner of State Revenue [2006] HCA 43; (2006) 228 CLR 168 (‘Central Bayside’) at fn 28 (Gleeson CJ, Heydon and Crennan JJ); Incorporated Council of Law Reporting of the State of Queensland v Federal Commissioner of Taxation [1971] HCA 44; (1971) 125 CLR 659 (‘Queensland Law Reporting case’) at 666–7 (Barwick CJ, McTiernan J agreeing) and 671 (Windeyer J); Victorian Women Lawyers’ Association Inc v Commissioner of Taxation [2008] FCA 983; (2008) 170 FCR 318 (‘Victorian Women Lawyers’ Association’) at [124] (French J). Although Central Bayside concerned a provision in the Pay-roll Tax Act 1971 (Vic), their Honours’ comments related to the use of ‘charitable’ in legislation more generally: [2006] HCA 43; (2006) 228 CLR 168 at [169] (Callinan J) and [76]–[119] (Kirby J).
[13] That is, in the manner discussed in Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531 at 573 (Lord Herschell, Lord Watson agreeing) and 583 (Lord Macnaghten, Lords Morris and Watson concurring) in light of the preamble to the Statute of Charitable Uses (1601) 43 Eliz I, c. 4.
[14] The last is a sweep-up category determined by analogy with judicial authorities or the Statute of Charitable Uses (1601) 43 Eliz I, c. 4.
[15] Re Elmore (dec’d) [1968] VicRp 49; [1968] VR 390 at 392–4 (Gowans J); Re Pinion [1965] Ch 85 at 107 (Harman LJ) and 107–8 (Davies LJ); The Royal National Agricultural and Industrial Association v Chester (1974) 48 ALJR 304 (‘Chester’s case’) at 305 (McTiernan, Menzies and Mason JJ).
[16] Thompson v Federal Commissioner of Taxation [1959] HCA 66; (1959) 102 CLR 315 at 321–3 (Dixon CJ, Fullagar and Kitto JJ agreeing); Re Income Tax Acts (No 1) [1930] ArgusLawRp 22; [1930] VLR 211 at 217 (McFarlane J) and 222–3 (Lowe J); Victorian Women Lawyers’ Association [2008] FCA 983; (2008) 170 FCR 318 at [133] (French J); Strathalbyn Show Jumping Club Inc v Mayes [2001] SASC 73; (2001) 79 SASR 54 at 74 (Bleby J).
[17] Extension of Charitable Purpose Act 2004 (Cth). This legislation deems that the provision of child care services on a non-profit basis and the provision of a rental dwelling (in certain circumstances) under the National Rental Affordability Scheme are charitable purposes. The legislation also deems an institution to be for the public benefit to the extent that it is an open and non-discriminatory self-help group, or a closed or contemplative religious order that regularly undertakes prayerful intervention at the request of members of the public. There are also State extensions (see, eg, Charitable Trusts Act 1962 (WA) s 5), although it is unclear whether these apply for the purposes of the ITAA97. See Taxation Ruling TR 2005/21, above n 2 at [99].
[18] For instance, the entity’s purpose cannot: (i) be objectionable for reasons of public policy (Re Lowin [1967] 2 NSWR 140 at 145–6 (Wallace P and Holmes JA); (ii) be for ‘political purposes’, although there is some uncertainty over the width of this factor (Bowman v Secular Society [1917] AC 406 at 442 (Lord Parker); Royal North Shore Hospital of Sydney v Attorney-General (NSW) [1938] HCA 39; (1938) 60 CLR 396 at 426 (Dixon J), 412-413 (cf Latham CJ), 419 (cf Rich J) and 420 (cf Starke J); (3) be governmental (although contrast Central Bayside [2006] HCA 43; (2006) 228 CLR 168).
[19] Taxation Ruling TR 2005/21, above n 2 at [129].
[20] Id at [128], [134].
[21] This has caused disquiet on occasion: Scottish Burial [1967] UKHL 3; [1968] AC 138 at 153 (Lord Upjohn).
[22] Central Bayside [2006] HCA 43; (2006) 228 CLR 168 at [116]–[117] (Kirby J); Scottish Burial [1967] UKHL 3; [1968] AC 138 at 147 (cf Lord Reid, Lord Guest agreeing) and 154 (Lord Wilberforce, Lord Guest agreeing); Tasmanian Electronic Commerce Centre Pty Ltd v Federal Commissioner of Taxation [2005] FCA 439; (2005) 142 FCR 371 at [37] (Heerey J).
[23] Central Bayside [2006] HCA 43; (2006) 228 CLR 168.
[24] Central Bayside [2006] HCA 43; (2006) 228 CLR 168 at [71], [142] (Kirby J) and [185] (Callinan J); see also at [39] (Gleeson CJ, Heydon and Crennan JJ).
[25] In re Cain (dec’d); The National Trustees Executors and Agency Co of Australasia Ltd v Jeffrey [1950] VicLawRp 1; [1950] VLR 382 at 387–8 (Dean J). See also GE Dal Pont and DRC Chalmers, Equity and Trusts in Australia (4th ed, 2007) at [29.240].
[26] Central Bayside [2006] HCA 43; (2006) 228 CLR 168 at [40]–[41] (Gleeson CJ, Heydon and Crennan JJ), [143]–[144] (Kirby J) and [185] (Callinan J).
[27] Central Bayside [2006] HCA 43; (2006) 228 CLR 168 at [11] (Gleeson CJ, Heydon and Crennan JJ).
[28] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [33] (Gummow, Hayne, Heydon and Crennan JJ), referring to: Stratton v Simpson [1970] HCA 45; (1970) 125 CLR 138 (‘Stratton’) at 158 (Gibbs J, Barwick CJ and Menzies J agreeing).
[29] Stratton [1970] HCA 45; (1970) 125 CLR 138 at 158 (Gibbs J, Barwick CJ and Menzies J agreeing), 144–6 (cf Windeyer J), 154–5 (cf Walsh J) — in the context of the construction of a testamentary bequest; Commissioner of Land Tax (NSW) v Joyce [1974] HCA 39; (1974) 132 CLR 22 at 27 (McTiernan J), 28 (Menzies J) and 32 (Stephen J, Gibbs and Mason JJ agreeing). See also Trustees of the Allport Bequest v Federal Commissioner of Taxation (1988) ATC 4436 at 4441 (Northrop J) — in the context of a public benevolent institution.
[30] ITAA97 s 50-50(a).
[31] The phrase used by Allsop J in the Full Federal Court decision: Commissioner of Taxation v Word Investments Ltd [2007] FCAFC 171; (2007) 164 FCR 194 at [14] (Stone J agreeing).
[32] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [17], [25], [26] (Gummow, Hayne, Heydon and Crennan JJ).
[33] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [19] (Gummow, Hayne, Heydon and Crennan JJ).
[34] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [19], [20] (Gummow, Hayne, Heydon and Crennan JJ).
[35] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [24] (Gummow, Hayne, Heydon and Crennan JJ).
[36] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [25] (Gummow, Hayne, Heydon and Crennan JJ).
[37] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [26] (Gummow, Hayne, Heydon and Crennan JJ).
[38] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [27] (Gummow, Hayne, Heydon and Crennan JJ).
[39] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [34] (Gummow, Hayne, Heydon and Crennan JJ).
[40] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [172] (Kirby J). Despite applying a similarly holistic characterisation test, the members of the Full Federal Court also focused on Word’s activities as confirming, rather than defining, its purpose: Commissioner of Taxation v Word Investments Ltd [2007] FCAFC 171; (2007) 164 FCR 194 at [44]–[48] (Allsop J, Stone J agreeing) and [94], [96] (Jessup J).
[41] See especially, Incorporated Council of Law Reporting for England and Wales v Attorney-General [1972] 1 Ch 73 at 86 (Russell LJ); Vancouver Society of Immigrant & Visible Minority Women v Minister of National Revenue 1999 CanLII 704 (SCC); [1999] 1 SCR 10 (‘Vancouver Society’) at [54] (Gonthier J, L’Heureux-Dubé and McLachlin JJ agreeing — in dissent in the result, but in agreement on the issue of activities versus purposes) and [152] (Iacobucci J, Cory, Major and Bastarache JJ agreeing). See also Maurice C Cullity, ‘The Myth of Charitable Activities’ (1990) 10 Estates & Trusts Journal 7; GE Dal Pont, Charity Law in Australia and New Zealand (2000) at 228.
[42] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [26] (Gummow, Hayne, Heydon and Crennan JJ).
[43] Scottish Burial [1967] UKHL 3; [1968] AC 138; Queensland Law Reporting case[1971] HCA 44; , (1971) 125 CLR 659; McGarvie Smith Institute v Campbelltown Municipal Council (1965) 11 LGRA 321 (‘McGarvie Smith’); Taxation Ruling TR 2005/21, above n 2 at [129].
[44] Queensland Law Reporting case [1971] HCA 44; (1971) 125 CLR 659.
[45] University of Western Australia v Commissioner of State Taxation (WA) (1988) ATC 4020; Dean Leigh Temperance Canteen v Commissioner of Inland Revenue (1958) 38 TC 315 (‘Dean Leigh’); Taxation Ruling TR 2005/21, above n 2 at [129].
[46] Charitable Collections Act 1946 (WA); Street Collections (Regulation) Act 1940 (WA); Charitable Collections Act 2003 (ACT); Charitable Fundraising Act 1991 (NSW); Collections Act 1966 (Qld); Collections for Charitable Purposes Act 1939 (SA); Fundraising Appeals Act 1998 (Vic); Veterans Act 2005 (Vic); Collections for Charities Act 2001 (Tas).
[47] For instance, in Western Australia: Gaming and Wagering Commission Act 1987 (WA) ss 51(2), 81(1), 95(2)(b) and 104(1a).
[48] The leading cases discuss incidental objects. However, the same analysis can be applied to activities or powers: Navy Health Ltd v Deputy Commissioner of Taxation [2007] FCA 931; (2007) 163 FCR 1 (‘Navy Health’) at [67] (Jessup J); Dean Leigh (1958) 38 TC 315 at 324 (Harman J); Commissioner of Inland Revenue v Carey’s (Petone and Miramar) Ltd [1963] NZLR 450 (‘Carey’s’) at 455–6 (Gresson P); Vancouver Society 1999 CanLII 704 (SCC); [1999] 1 SCR 10 at [157]–[158] (Iacobucci J, Cory, Major and Bastarache JJ agreeing).
[49] For instance, Congregational Union of NSW v Thistlethwayte [1952] HCA 48; (1952) 87 CLR 375 (‘Thistlethwayte’) at 441–2 (Dixon CJ, McTiernan, Williams and Fullagar JJ); Royal Australasian College of Surgeons v Federal Commissioner of Taxation [1943] HCA 34; (1943) 68 CLR 436 at 447 (Rich J), 448 (Starke J), 450–1 (McTiernan J) and 453–4 (Williams J) — although that case considered whether the college was a scientific institution, rather than a charitable institution; Navy Health [2007] FCA 931; (2007) 163 FCR 1 at [65]–[74] (Jessup J); Inland Revenue Commissioners v City of Glasgow Police Athletic Association [1953] UKHL 1; [1953] AC 380 at 397 (Lord Normand), 397–8 (Lord Oaksey), 400 (Lord Morton), 402–3 (Lord Reid) and 405–7 (Lord Cohen).
[50] Stratton [1970] HCA 45; (1970) 125 CLR 138 at 148 (Windeyer J); see also at 159–60 (Gibbs J, Barwick CJ and Menzies J agreeing).
[51] Thistlethwayte [1952] HCA 48; (1952) 87 CLR 375 at 442 (Dixon CJ, McTiernan, Williams and Fullagar JJ).
[52] Navy Health [2007] FCA 931; (2007) 163 FCR 1 at [65] (Jessup J).
[53] Vancouver Society 1999 CanLII 704 (SCC); [1999] 1 SCR 10 at [158] (Iacobucci J, Cory, Major and Bastarache JJ agreeing). The reference to ‘direct’ is somewhat misleading as Iacobucci J at [152] provided the following example of a direct activity: writing a letter to solicit donations.
[54] Vancouver Society 1999 CanLII 704 (SCC); [1999] 1 SCR 10 at [52], [56] (Gonthier J, L’Heureux-Dubé and McLachlin JJ agreeing).
[55] Hester v Commissioner of Inland Revenue [2005] 2 NZLR 172 at [83] (William Young and Chambers JJ); (leave to appeal refused in Hester v CIR [2005] NZSC 21; [2005] 2 NZLR 473).
[56] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [36] (Gummow, Hayne, Heydon and Crennan JJ).
[57] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [37] (Gummow, Hayne, Heydon and Crennan JJ).
[58] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [37] (Gummow, Hayne, Heydon and Crennan JJ).
[59] Word Investments [2007] FCAFC 171; (2007) 164 FCR 194 at [97] (Jessup J).
[60] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [38] (Gummow, Hayne, Heydon and Crennan JJ), referring to Baptist Union of Ireland (Northern) Corporation Ltd v Commissioners of Inland Revenue (1945) 26 TC 335 (‘Baptist Union’) at 348 (MacDermott J). Note, however, that McDermott J’s comments related to the characterisation of a trust’s objects, not whether a particular object, power or activity was incidental to another object.
[61] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [27] (Gummow, Hayne, Heydon and Crennan JJ); see also at [24] (Gummow, Hayne, Heydon and Crennan JJ).
[62] See, eg, Baptist Union Revenue (1945) 26 TC 335 at 348 (MacDermott J): ‘[o]n the cases it is permissible to look some distance beyond the expressed objects for the purpose of seeing where they lead. The trouble, as ever, is to draw the line in the right place and distinguish between what is and what is not too remote’.
[63] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [37] (Gummow, Hayne, Heydon and Crennan JJ).
[64] Compare MK Hunt Foundation Ltd v Commissioner of Inland Revenue [1961] NZLR 405 (‘Hunt’): the Foundation was found to be not charitable. Although, arguably Hunt must be confined to its facts as found by Hardie Boys J following Carey’s [1963] NZLR 450.
[65] Re Smith (dec’d): Executor Trustee and Agency Co of South Australia Ltd v Australasian Conference Association Ltd [1954] SASR 151 (‘Re Smith’). Particularly as Ligertwood J found that ‘[t]he motive behind the establishment of the Health Food Company was no doubt religious, and its profits were no doubt used exclusively in aid of the teachings, activities and purposes of the religious body’: at 159–60. The same comment could be made in relation to Glebe Administration Board v Commissioner of Pay-roll Tax (1987) 10 NSWLR 352 (‘Glebe Administration Board’).
[66] Murray, above n 5.
[67] The obtaining of private benefits would evidence an alternative motivation for the commercial activities. See, eg, Joseph Rowntree Memorial Trust Housing Association Ltd v A-G [1983] 1 All ER 288 at 298 (Peter Gibson J); McGarvie Smith (1965) 11 LGRA 321 at 328–9 (Else-Mitchell J); Queensland Law Reporting case [1971] HCA 44; (1971) 125 CLR 659 at 666 (Barwick CJ, McTiernan J agreeing) and 672 (Windeyer J); Navy Health [2007] FCA 931; (2007) 163 FCR 1 at [57] (Jessup J).
[68] The terms ‘necessary’ and ‘independently sufficient’ are taken from Fleming’s discussion of alternative sufficient causes: JG Fleming, The Law of Torts (9th ed, 1998) at 222–3. See also HLA Hart and AM Honoré, Causation in the Law (1959) at 106.
[69] See especially Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [22] (Gummow, Hayne, Heydon and Crennan JJ).
[70] See especially Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [20] (Gummow, Hayne, Heydon and Crennan JJ).
[71] Re Smith [1954] SASR 151.
[72] See, eg, Glebe Administration Board (1987) 10 NSWLR 352 at 365–6 (Priestley and McHugh JJA agreeing). It is harder to identify a separate object on the facts of R v The Assessors of the Town of Sunny Brae [1952] 2 SCR 76 (‘Sunny Brae’). However, as noted by the majority in Word Investments, the Canadian Supreme Court found on the facts that the relevant entity had mixed charitable and non-charitable objects: [2008] HCA 55; (2008) 236 CLR 204 at [27] (Gummow, Hayne, Heydon and Crennan JJ). In any event, the majority judges were influenced in their construction of the particular exemption from rates, by the existence of another exemption, specifically directed at the property of religious organisations ‘used exclusively’ for the religious work of the organisation: Sunny Brae [1952] 2 SCR 76 at 90–1 (Rand J, Locke J agreeing), 97–9 (Kellock J) and 106–8 (Estey J).
[73] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [42] (Gummow, Hayne, Heydon and Crennan JJ).
[74] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [43] (Gummow, Hayne, Heydon and Crennan JJ).
[75] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [44] (Gummow, Hayne, Heydon and Crennan JJ).
[76] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [72] (Gummow, Hayne, Heydon and Crennan JJ). This is reinforced by the caveat issued by the majority to its conclusion on the Commissioner’s first ground: at [34] (Gummow, Hayne, Heydon and Crennan JJ).
[77] Failing to comply with the entity’s constitution is likely to be a breach of duty on the part of the controllers. Further, excluding the situation in which property is provided to an entity under an express trust, there is support for the view that property given for the general purposes of an incorporated charity will be treated as giving rise to trustee (or ‘analogous’) obligations. Accordingly, if the entity or its controllers apply their property in breach of the purposes set out in its constitution, in many cases, this will be a breach of fiduciary obligations. When looking at commercial activities, the position for unincorporated associations is likely to be of less significance, as many bodies would incorporate to obtain the benefit of limited liability before carrying out such activities. See especially Dal Pont, above n 41 at 377 and 381–2; Cullity, above n 41 at 26–7. See also Sydney Homeopathic Hospital v Turner [1959] HCA 19; (1959) 102 CLR 188 at 221 (Kitto J); Sir Moses Montefiore Jewish Home v Howell & Co (No 7) Pty Ltd [1984] 2 NSWLR 406 at 416 (Kearney J); Australian Executor Trustees Ltd v Ceduna District Health Services Inc [2006] SASC 286 at [23] (Vanstone J); Aboriginal Hostels Ltd v Darwin City Council (1985) 75 FLR 197 at 208 (Nader J); HAJ Ford and WA Lee, Principles of the Law of Trusts (vol 2, 1990), at Update 31, at [20440]; Hubert Picarda, The Law and Practice Relating to Charities (3rd ed, 1999) at 406–8; Ian Dawson and John Alder ‘The Nature of the Proprietary Interest of a Charitable Company or a Community Interest Company in Its Property’ (2007) 21(1) Trust Law International at 3.
[78] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [70] (Gummow, Hayne, Heydon and Crennan JJ). See also Douglas v Federal Commissioner of Taxation (1997) ATC 4722 at 4727 (Olney J); Auckland Medical Aid Trust v Commissioner of Inland Revenue [1979] 1 NZLR 382 (‘Auckland Medical’) at 396–7 (Chilwell J); Taxation Ruling TR 2005/21, above n 2 at [190]. There are limited circumstances in which the court may look outside the trust deed: Auckland Medical [1979] 1 NZLR 382 at 395–7 (Chilwell J); Public Trustee v Attorney-General (NSW) (1997) 42 NSWLR 600 at 617 (Santow J). Further, conduct in breach of trust may cause the trust to lose its endorsement, on the basis that the trust fund is not being applied for the purposes for which it was established: ITAA97 s 50-60.
[79] See, eg, Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [70] (Gummow, Hayne, Heydon and Crennan JJ); Brookton Co-operative Society Ltd v Federal Commissioner of Taxation [1981] HCA 28; (1981) 147 CLR 441 at 451 (Mason J): the ‘purpose for which a company is established may change in the course of time’.
[80] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [46] (Gummow, Hayne, Heydon and Crennan JJ).
[81] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [47] (Gummow, Hayne, Heydon and Crennan JJ).
[82] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [74] (Gummow, Hayne, Heydon and Crennan JJ).
[83] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [73] (Gummow, Hayne, Heydon and Crennan JJ).
[84] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [73] (Gummow, Hayne, Heydon and Crennan JJ).
[85] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [72] (Gummow, Hayne, Heydon and Crennan JJ), referring to then ss 50-140 and 50-155 of the ITAA97 now contained in ss 426-40 and 426-55 of Sch 1 to the Taxation Administration Act 1953 (Cth).
[86] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [73] (Gummow, Hayne, Heydon and Crennan JJ). Contrast ITAA97 s 50-60(c).
[87] Compare Oliver LJ’s comment that the Crown's argument was a ‘startling one’, in that it would involve ‘the trustees of a grant-making charity, although they may discharge themselves as a matter of law by making a grant to another properly constituted charity, are obliged if they wish to claim exemption under the subsections to inquire into the application of the funds given and to demonstrate to the revenue how those funds have been dealt with by other trustees over whom they have no control and for whose actions they are not answerable. Anything more inconvenient would be difficult to imagine’: Internal Revenue Commissioner v Helen Slater Charitable Trust Ltd [1982] Ch 49 (‘Helen Slater’) at 56 (Oliver LJ, Waller and Fox LJJ agreeing).
[88] A recipient entity will not always be subject to s 50-50 ITAA97 (or a corresponding provision), as there may be no need for the recipient to be income tax exempt. For instance, if the distributions do not constitute assessable income, or if the entity has sufficient deductions to reduce any assessable income.
[89] Wycliffe appears to have been endorsed as an income tax exempt charitable institution, effective 1 July 2000: Australian Government, above n 8. As Wycliffe does not appear to have been prescribed in the ITAA97 under s 50-50(d), or to be a deductible gift recipient under s 50-50(b), it would be subject to s 50-50(a).
[90] ITAA97 s 50-75(1).
[91] See Australian Taxation Office, Taxation Ruling TR 2000/1, Income Tax: Endorsement of income tax exempt charities at [55]; Taxation Ruling TR 2005/13, above n 2.
[92] Taxation Ruling TR 2000/11, above n 91 at [16]–[17], [53].
[93] ITAA97 s 50-60.
[94] Taxation Ruling TR 2000/11, above n 91 at [21], [102]. See also Taxation Ruling IT 340, which has now been withdrawn.
[95] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [70] (Gummow, Hayne, Heydon and Crennan JJ).
[96] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [70] (Gummow, Hayne, Heydon and Crennan JJ).
[97] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [70] (Gummow, Hayne, Heydon and Crennan JJ).
[98] Trustees, Executors and Agency Co Ltd v Federal Commissioner of Taxation [1917] HCA 56; (1917) 23 CLR 576 at 586–7 (Isaacs J) and 588 (Gavan Duffy and Rich JJ).
[99] Mahoney v Commissioner of Taxation (1965) 39 ALJR 62 at 63 (Owen J); Compton v Commissioner of Taxation (1966) 39 ALJR 400 at 402 (cf Taylor J); Mahoney v Commissioner of Taxation (1967) 41 ALJR 232 at 235 (Taylor J) and 238 (Windeyer J); TACT v Commissioner of Taxation [2008] AATA 280; (2008) ATC 10-018 at [47]–[51] (Taylor SM). In the UK context, see Helen Slater [1982] 1 Ch 49 at 59 (Oliver LJ, Waller and Fox LJJ agreeing).
[100] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [107] (Kirby J).
[101] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [118]–[120], [125] (Kirby J).
[102] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [110] (Kirby J).
[103] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [126] (Kirby J).
[104] Income Tax Assessment Act 1997 (Cth) s 50-45, item 9.1(c). Cf Cronulla Sutherland Leagues Club Ltd v Federal Commissioner of Taxation (1990) ATC 4215; St Mary’s Rugby League Club Ltd v Federal Commissioner of Taxation (1997) ATC 4528.
[105] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [137] (Kirby J). See also the Commissioner’s argument, which was endorsed by Kirby J at [47].
[106] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [156], [159] (Kirby J).
[107] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [170], [173]–[174], [191] (Kirby J).
[108] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [177] (Kirby J).
[109] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [177] (Kirby J).
[110] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [178], [184] (Kirby J).
[111] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [180] (Kirby J). Compare the approaches achieved in England and Wales, Canada and the United States by legislative intervention.
[112] Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [180] (Kirby J) with reference to the Queensland Law Reporting case [1971] HCA 44; (1971) 125 CLR 659.
[113] Particularly since the Commissioner appeared to accept the primacy of the trust deed in the case of charitable trusts, and that the existence of a power in the trustee to ‘invest [trust] assets, or use them to carry on a business’ should not prevent the characterisation of the trust as being for charitable purposes: Word Investments [2008] HCA 55; (2008) 236 CLR 204 at [13] (Gummow, Hayne, Heydon and Crennan JJ).
[115] This is not a public trading trust.
[116] JD Colombo, ‘Commercial Activity and Charitable Tax Exemption’ (2002) 44 William and Mary Law Review 487 at 538–9.
[117] Id at 544–6; Charity Commission for England and Wales, CC35 — Trustees, Trading and Tax: How Charities May Lawfully Trade (Liverpool: Charity Commission, 2007) at section B <http://www.charity-commission.gov.uk/publications/cc35.asp> accessed 13 January 2009.
[118] See Colombo who notes this potential issue: above n 116 at 534–5. See also Raymond Dart ‘Charities in Business, Business in Charities, Charities and Business — Mapping and understanding the complex non-profit/business interface’ (2004) 18(3) The Philanthropist 181 at 190–1. Dart considered that quantitative evidence needed to be gathered to assess the issue.
[119] Dart notes that there have been concerns that public support may be reduced and perceptions impacted if charities conduct commercial activities, but suggests that some initial findings indicate that there is public support for charities carrying out certain revenue generating activities: id at 191.
[120] See Taxation Ruling TR 2005/21, above n 2 at [129].
[121] Henry Consultation Paper, above n 6; Senate Standing Committee on Economics, Parliament of Australia, Disclosure Regimes, above n 7; Attorney-General’s Department and Department of Families, Housing, Community Services and Indigenous Affairs, Discussion Paper, above n 7. Legislative models are provided by England and Wales, the United States and Canada. Each have different methods for income tax purposes to restrict, to a greater or lesser degree, the conduct of tax exempt commercial activities by charities.
[122] Henry Consultation Paper, above n 6 at 162. The Henry Consultation Paper discusses the first round of submissions received by the Australia’s Future Tax System Review Panel and calls for further submissions.
[123] Ibid.
[124]Id at 163–4.
[125] See especially Aid/Watch Inc v Federal Commissioner of Taxation (2008) ATC 2500 at 2501, 2503–4, 2508–9 (Downes P); Attorney-General v New South Wales Henry George Foundation Ltd [2002] NSWSC 1128 at [53]–[58], [63]–[65], [85] (Young CJ in Eq); Public Trustee v A-G (1997) 42 NSWLR 600 at 607–8, 617, 621 (Santow J); Victorian Women Lawyers’ Association[2008] FCA 983; , (2008) 170 FCR 318 at [128], [149] (French J). See also The Honourable Justice GFK Santow OAM, ‘Charity in its Political Voice — a tinkling cymbal or a sounding brass?’ (1999) 18 Australian Bar Review 225.
[126] See also TACT [2008] AATA 280; (2008) ATC 10-018 at [47]–[51] (Taylor SM).
[127] Assistant Treasurer Chris Bowen, ‘Government’s Interim Response to High Court’s Decision in Word Investments Case’ (Press Release, 12 May 2009).