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The Full Federal Court (Emmett, Gilmour and Gordon JJ) has dismissed the Commissioner's appeal from the decision of Perram J, who held that a company limited by guarantee (WDCL) that provided the premises, staff and equipment to an entity owned by Bendigo Bank for the conduct of its banking business in the New South Wales town of Wentworth was entitled to an exemption from tax under item 2.1 in the table in s 50-10 ITAA 1997, being a society, association or club established for community service purposes.

WDCL entered into the arrangement with Bendigo Bank after Westpac closed the only bank branch in Wentworth (apart from agencies) and the town went into economic decline. The Bendigo Bank was a great success, and the economic fortunes of the town and the lives of its citizens (particularly the elderly) improved significantly. With the bank's success, WDCL earned surpluses in the 2006 and 2007 income years which the Commissioner sought to tax.

On appeal, the Commissioner submitted that a consideration of WDCL’s objects and activities in the 2006 and 2007 income years showed that WDCL's main or dominant purpose was to conduct and manage a franchise branch of the Bendigo Bank. This was rejected by the Full Court. The Full Court said at para 37:

"The Commissioner’s description identifies the means – the management of the bank through the Management Agreement – rather than the main or dominant purpose (the end) for which WDCL carried out those activities in those years. That main or dominant purpose was the facilitation of the provision of face-to-face banking services in Wentworth."

As to whether the main or dominant purpose as identified was a community service purpose, the Full Court said at para 43:

"In our view, WDCL was within the exemption – the main or dominant purpose for which it was established was a community service. Here, the community service purpose was the facilitation of face-to-face banking services which provided a substantial benefit to the community of Wentworth that was both real and tangible. Contrary to the Commissioner’s submissions, there was no blurring of purpose and benefit and it was a 'service'. As the Commissioner submitted, 'service' imports delivery of some practical help, benefit or advantage: Victorian Women Lawyers’ Association at [163]. In the present case, WDCL provided practical help, benefit or advantage – as its Constitution provided, it entered into the Management Agreement with Bendigo Bank and one or more of its subsidiaries to enable WDCL to manage a franchised office of Bendigo Bank (Item 3.2 of Sch 1 of the Constitution...) and it conducted the shop front operations of Bendigo Bank on a not-for-profit basis by providing the premises, the staff and the equipment that were needed for the conduct by Bendigo Bank of its banking business in Wentworth."

The Commissioner's appeal was dismissed: FCT v Wentworth District Capital Limited [2011] FCAFC 42 (Full Federal Court; Emmett, Gilmour and Gordon JJ; 28 March 2011).


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