The Commissioner of Taxation (CTH) v Bargwanna & Bargwanna: Trusts and Tax Exemptions

Thursday 29 March 2012 @ 5.28 p.m. | Taxation

Today, the High Court of Australia handed down a decision in The Commissioner of Taxation of the Commonwealth of Australia v Bargwanna & Bargwanna (As trustees of the Kalos Metron Charitable Trust) [2012] HCA 11 upholding an appeal that the administration of a trust was not within the requirements for a tax exemption under s 50-60 of the Income Tax Assessment Act 1997.

The appellant was was granted special leave to appeal to the High Court. The primary issue on appeal was the construction and operation of Div 50 of Pt 2-15 of the Act, and in particular the meaning of "the fund is applied for the purposes for which it was established" in s 50-60.

The Court considered that the relevant provisions of the Act direct attention to the terms of the instrument of trust by which the fund is established in Australia for public charitable purposes. Section 50-60 requires that the fund be "applied" for those purposes, and is not to be understood as requiring only that the fund be "substantially" or "on the whole" applied for those purposes.

This case brings into question the administration of trusts for charitable purposes in Australia and the test which has been established to apply to their operation.

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