Compton v Federal Commissioner of Taxation
(1966) 116 CLR 23340 ALJR 366
(Judgment by: Menzies)
COMPTON
v FEDERAL COMMISSIONER OF TAXATION
Judges:
Taylor J.
Kitto
MenziesOwen JJ.
Judgment date: 9 February 1966
Judgment by:
Menzies
MENZIES J. Appeals by the appellants against income tax assessments treating part of the income of F. H. Compton & Sons (Superannuation Fund) as assessable income and not as income exempt from taxation by virtue of s. 23 (j) of the Income Tax and Social Services Contribution Assessment Act were dismissed by Taylor J. on the ground that the portion of the income of the fund in question was not being applied for the purpose for which it was established, that is, "a provident, benefit or superannuation fund . . . for the benefit of employees". (at p247)
Upon this appeal from Taylor J. the emphasis shifted to an anterior question, namely, whether the fund was established as a provident, benefit or superannuation fund for the benefit of employees. This question has to be determined by an examination of the provisions of the deed establishing the fund. These are summarized in the judgment of Owen J., in which cl. 28 of the deed is set out verbatim. I agree with his Honour in thinking that this clause is not one for the benefit of employees ; it is clearly a provision for the benefit of the employers. A vital question requiring determination is whether the fund is nevertheless "a provident, benefit or superannuation fund . . . for the benefit of employees". (at p247)
The presence of cl. 28 in the deed does not require the conclusion that the fund is not "a provident, benefit or superannuation fund". Upon the terms of the deed as a whole, I think it clearly does establish a fund falling within that description. There is, however, a further question, viz. whether, notwithstanding cl. 28, it ought to be concluded that the fund was established for the benefit of employees. In construing s. 23 (j), I do not derive much assistance from cases dealing with what I regard as an essentially different problem - that is, whether a particular corporate body is a charitable institution notwithstanding that some of its incidental and ancillary objects, looked at by themselves, are non-charitable in character: see, for instance, Congregational Union of New South Wales v. Thistlethwayte (1952) 87 CLR 375 and Salvation Army (Victoria) Property Trust v. Fern Tree Gully Corporation (1952) 85 CLR 159 . Lloyd v. Federal Commissioner of Taxation (1955) 93 CLR 645 is perhaps closer in point than the decisions just cited because the ultimate question there was whether a gift was for "public educational purposes". The decision that it was, however, was reached by determining what was the true character of the Sea Cadet Corps: see Kitto J. (1955) 93 CLR, at p 676 . (at p248)
The particular problem of the construction of s. 23 (j) (i) must, of course, be undertaken having regard to the context of that provision, and I find s. 23 (j) (ii) and (iii) illuminating. It seems to me that if the income of a fund is to be exempt under s. 23 (j) (ii) or (iii), the fund must have been established for the purposes therein enumerated and for no other purpose so that, for instance, for the income of a fund established by will to qualify for exemption under s. 23 (j) (ii), it would be necessary that the whole of the fund should be held for public charitable purposes, with the consequence that if the trustees of a particular fund could apply some part of it for a purpose not of a public charitable character, the fund would not qualify for exemption from tax upon its income. The problem of the construction of s. 23 (j) (ii) is, I think, essentially the same as that which has arisen when it has had to be determined whether a gift is charitable when part of it could be applied to other purposes: see Halsbury's Laws of England, 3rd ed., vol. 4, at pp. 269-272, and Attorney-General for N.S.W. v. Adams (1908) 7 CLR 100 . The exclusiveness which I find in s. 23 (j) (ii) and (iii) without any express limiting provision suggests, I think, that a like exclusiveness is to be found in s. 23 (j) (i), in which a similar pattern of language is to be found. Another consideration pointing in the same direction is the impossibility of establishing any satisfactory criterion to determine the character to be attributed to a fund which is in part to be used for the benefit of employees and in part for other purposes. (at p248)
These considerations have reinforced my first impression that s. 23 (j) (i) applies to exempt the income of a fund only if the whole of the fund must be devoted to be benefit of employees. This construction of s. 23 (j) (i) would not, of course, deny its applicability to a fund containing provisions for the benefit of dependants of employees. To benefit the dependants of employees is one way of benefiting employees. Indeed, I think that a broad view of what does constitute "the benefit of employees" should be taken as long as there is to be found a connexion between the benefit of the employees and the whole of the fund after meeting the expenses of its administration. (at p248)
Having come to this conclusion about the meaning of s. 23 (j) (i), it follows that by reason of the character of c. 28, the income of the fund under consideration is not exempt income. The purpose for which the fund was established goes outside the benefit of employees. (at p248)
I think, therefore, on this ground the appeals should be dismissed and I do not find it necessary to consider the other contentions that were raised in argument. (at p249)