ATO Goes to High Court Over Charity 'Business' Tax Status

The Australian Tax Office has been granted special leave to appeal to the High Court over a Federal Court decision made last November that a charity could raise money through business without paying company tax.

The High Court appeal puts on hold any move by Australian charities to seek millions of dollars back from the Australian Taxation Office or plans for new charity business ventures.

Last year’s Federal Court ruling meant that charities could operate businesses while staying tax-exempt, as long as the charitable purpose is the only motive for making profit.

The Full Bench of the Federal Court ruling related to the case of a Melbourne funeral business called Bethel Funerals, which is run to raise money for the Not for Profit organisation Wycliffe Bible Translators to translate the Bible into hundreds of different languages.

The business was set up under the name of Word Investment Limited.

Wycliffe’s solicitor, Murray Baird of Moores Legal Services said at the time that the drying up of government funding for charities, combined with donor fatigue, meant that charities had to become more entrepreneurial to survive.

The Australian Tax Office took the view that they had crossed the line, that churches and charities must not be too entrepreneurial.

The ATO says it continue to apply the Tax Office view pending the outcome of the appeal to the High Court.