Tax ruling for charities in doubt

The ATO has decided to appeal a Federal Court decision from November that would allow charitable organisations to run commercial operations while maintaining their income tax exemption.

The Commissioner of Taxation has applied to the High Court for special leave to appeal the Word Investments decision.

In the Word case, the Federal Court ruled that an organisation engaging in large-scale commercial activities could maintain its charitable status as long as the profits were used for a charitable purpose.

Although the case did not refer directly to aged care, it could have had significant implications for charitable care providers.

But the ATO’s attempt to appeal the decision means the case will not be decided until next year.

“It means that the ability for charitable organisations to take a more commercial, entrepreneurial approach to their fundraising and activities remains in doubt until the application is dismissed, or the appeal heard and decided,” said Andrew Caspar, a Senior Counsel with law firm Russell Kennedy.

At this stage, the grounds of a possible appeal are unknown.