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The Federal Court (Sundberg J) has dismissed the Commissioner's appeal from a decision of the AAT, which had held that a company was exempt from tax as a charitable institution, being an organisation established and maintained for the advancement of religion. Specifically, the Court held that the company "has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia", within the meaning of s 50-50(a) of ITAA 1997, notwithstanding that it paid the money it raised through its fund raising activities to another company which used the funds predominantly overseas. The Court considered the fact that the money was paid to the other company in Australia was decisive. Ironically, the other company was itself endorsed by the Commissioner as an Income Tax Exempt Charity under sub-division 50-B of ITAA 1997.

The Court also held that the company was a charitable institution during a period when it conducted a funeral business, allowing the taxpayer's appeal from this aspect of the AAT's decision which had denied charitable status during this period. The Court said, at para 59: "It was only the manner of raising the money that changed; the purpose for doing it remained the same".

FCT v Word Investments Ltd [2006] FCA 1414 (Federal Court, Sundberg J, 3 November 2006).

For a copy of the decision, go here

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