Tunley v Federal Commissioner of Taxation

The case of *Tunley v Federal Commissioner of Taxation* concerned an appeal by William James Tunley against an assessment of income tax for the 1925-1926 year. The Commissioner of Taxation had added £75, representing dividends from 1,500 shares, to Mr. Tunley's assessable income. Mr. Tunley contended that this income was not his taxable income because he had created a declaration of trust over the shares for the benefit of religious and charitable institutions.

The central legal issue before the High Court was whether the declaration of trust was void under section 93 of the *Income Tax Assessment Act 1922-1925*. This section rendered void any contract, agreement, or arrangement made with the purpose or effect of defeating, evading, or avoiding any duty or liability imposed by the Act. The Commissioner argued that the terms of the trust allowed Mr. Tunley to retain the income for his own benefit, thus it remained part of his taxable income.

The Court reasoned that the declaration of trust effectively divested Mr. Tunley of the income from the shares. It held that the settlor retained only a power of selection among religious and charitable institutions, and that the words "think fit" and "decide" sufficiently bound him to distribute the income for religious purposes. The Court found that the settlement was not void under section 93 of the Act, and therefore the income from the shares was not part of Mr. Tunley's taxable income.

Consequently, the appeal was allowed, and the Court declared that the declaration of trust dated 19th February 1925 was not void under section 93 of the *Income Tax Assessment Act 1922-1925*.