The government has released its interim response to the High Court decision in Federal Commissioner of Taxation v Word Investments Ltd.

The government will amend the “in Australia” requirements in Div 50 of ITAA 1997 to ensure that parliament retains the ability to fully scrutinise those organisations seeking to pass money to overseas charities and other entities. This measure will have effect from the date of Royal Assent of the amending legislation.

The measure will reverse the decision that charities and other income tax exempt entities can direct funds to overseas projects outside the current restrictions. The measure will reinstate the principles underlying the current integrity rules.

With respect to the commercial activities of charities, the government intends to await the outcome of the Henry Review into Australia’s future tax system and the Productivity Commission’s inquiry into the contribution of the not-for-profit sector before further responding to the court’s decision.

While the government awaits the reports of the reviews, it has asked Treasury and the Tax Office to monitor the sector and advise it immediately should any adverse implications arise. The government is prepared to act sooner should any adverse implications arise.