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Trustee obligations for the due administration of charitable trust funds


In FCT v Bargwanna, the High Court upheld the Commissioner of Taxation’s decision to disallow an application for endorsement of a trust fund as a charitable trust fund because a special statutory condition which requires that a trust fund be applied to its charitable purposes was not satisfied. This article examines the High Court decision in detail, and notes that it is an authority on the obligations of trustees to properly administer a trust fund, both under general law and income tax law. It also highlights that income tax exemption, once granted to a charitable trust fund, is not perpetual but requires an annual analysis by the trustees of whether the trust fund assets are actually being applied to its charitable purposes.

The decision reinforces the importance of having an appropriately drafted trust deed with clearly defined charitable objects and trustee powers, and the obligations that trustees have under general law to properly administer the trust.

Author profile

Dianne Sisak Penjalov CTA
Dianne is a Senior Associate in the business law practice area at Harwood Andrews. Dianne advises on all areas of tax laws, including income tax, capital gains tax and employment taxes. Dianne also has significant experience as a leading advisor to not-for-profit and charitable entities and has presented many seminars, published articles in the Taxation In Australia and other journals, and drafted submissions to Treasury on tax reforms related to the not-for-profit sector. Dianne has an extensive track record of providing practical and targeted advice on complex tax issues. In previous roles, Dianne was a Senior Associate in the tax group of a national law firm and a taxation officer at the ATO working in the Office of Chief Tax Counsel and Finance and Investment Centre of Expertise. Dianne is also a Member of the Law Institute of Victoria. - Current at 11 September 2015
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