Pro Bono Alert - Federal Court expands the meaning of 'charity' - an update

On 13 December 2007, we reported on the rulings of the Full Court of the Federal Court of Australia in the matter of Commissioner of Taxation v Word Investments Ltd [2007] FCAFC 171 (click here for full details).

Update: appeal of the Australian Taxation Office

Since the Full Court of the Federal Court ruling, the Commissioner of Taxation has applied for special leave to appeal to the High Court.  The Australian Taxation Office says it will continue to apply the Tax Office view pending the High Court's decision on the application for special leave to appeal and any subsequent decision should the application be granted.

This is a surprising position, as the law is currently not the Tax Office's view but rather is as stated by the Full Court of the Federal Court.  Provided the purpose of an activity is charitable then the proceeds from that activity ought not take the organisation outside the realm of 'charity'.  It is thought that the appeal may take some months before it is heard.

Conclusion

The decision of the Full Court of the Federal Court is reassuring for entrepreneurial charities as it recognises the increasing need of charities to expand beyond traditional fundraising methods.  It suggests that charities may be able to undertake business activities while maintaining a tax exemption, and also provides clear requirements for such a charity.  If the decision is upheld on appeal, it is likely to prompt more charities to engage in an expansion of their current fundraising activities.

For further information, please contact:

Nicolas Patrick, Pro Bono Director
Tel +61 2 9286 8378
nicolas.patrick@dlaphillipsfox.com