Published on 01 Jun 12
by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE
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.
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