Case note: face to face banking a community service

In Commissioner of Taxation v Wentworth District Capital Limited [2011] FCAFC 42 the Full Court of the Federal Court dismissed an appeal by the Commissioner of Taxation from the trial judge’s decision that Wentworth District Capital (WDCL) is an association established for community service purposes within the meaning of Item 2.1 of s 50-10 of the Income Tax Assessment Act 1997 (Cth) and that the whole of its income is exempt from income tax.

WDCL, a company limited by guarantee, was incorporated to manage a franchised office of Bendigo Bank in Wentworth NSW after the last major bank closed. The success of the branch has been such that the fees received by it have generated a profit.

Although it was accepted that banking services to customers of a commercial bank were not a community service, the Court decided that WDCL was within the exemption : the main or dominant purpose for which it was established was a community service…the community service purpose was the facilitation of face-to-face banking services which provided a substantial benefit to the community of Wentworth that was both real and tangible.

” WDCL was not established to help Bendigo Bank. WDCL was incorporated to provide a solution to the problem of the absence of face-to-face banking services in Wentworth. As the Commissioner accepted at trial and on appeal, the purpose of WDCL was not to provide banking services in Wentworth and it did not do so. BBL Wentworth conducted the business of banking. ..
From the outset, WDCL was established to facilitate (without profit to the company or its corporators) face-to-face banking in Wentworth by making it commercially viable for Bendigo Bank to operate in Wentworth. …The facilitation of face-to-face banking in Wentworth remained its purpose in the 2006 and 2007 years, during which there was no bank in Wentworth other than Bendigo Bank. The conduct by WDCL of the shop front operations of Bendigo Bank on a not-for-profit basis continued its purpose of facilitating the provision of banking services in Wentworth. “

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