Commissioner of Taxation v Bargwanna [2012] HCA 11

HIGH COURT OF AUSTRALIA

FRENCH CJ, GUMMOW, HAYNE, HEYDON AND CRENNAN JJ

THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA APPELLANT

AND

GRAHAM BARGWANNA & MELINDA BARGWANNA AS TRUSTEES OF THE KALOS METRON CHARITABLE TRUST RESPONDENTS

Commissioner of Taxation v Bargwanna [2012] HCA 11 29 March 2012 S284/2011

ORDER

1. Appeal allowed and the respondents' application for special leave to cross-appeal dismissed.

2. Set aside orders 2 and 3 of the orders of the Full Court of the Federal Court of Australia made 17 February 2011 and in place thereof order that the appeal to that Court be dismissed.

3. The appellant pay the respondents' costs in this Court.

On appeal from the Federal Court of Australia

Representation

D M J Bennett QC with K J Deards for the appellant (instructed by Maddocks Lawyers)

D B McGovern SC with J Horowitz for the respondents (instructed by Charles Hockey Solicitor)

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Commissioner of Taxation v Bargwanna

Taxation – Income tax – Exemption from income tax under Div 50 of Income Tax Assessment Act 1997 (Cth) – Charitable purpose – Whether fund was applied for the purposes for which it was established – Whether application of fund viewed as a whole sufficient to qualify for exemption.

Trusts – Trustees – Charitable trust – Breaches of trust – Mingling of trust monies with other monies – Use of trust monies by trustees in their personal capacity – Relevance of success on possible application under s 85 of Trustee Act 1925 (NSW).

Words and phrases – "charitable trust", "income tax exemption", "misapplication of trust monies", "purposes for which it was established".

Income Tax Assessment Act 1997 (Cth), Div 50. Trustee Act 1925 (NSW), s 85.