The Federal Court decision in Coleambally Irrigation Mutual Co-Operative Ltd v Commissioner of Taxation created a controversy when it decided that the co-operative was not a mutual (and therefore its income was taxable) because its constitution prohibited the distribution of surplus assets to members on a winding-up.

The ATO has long insisted on the clause as a prerequisite for income tax exemption for not-for-profits.

Mark Lyons discusses the case from a public policy perspective here.

The decision is on appeal.