Private ruling: Income tax & fringe benefits tax - community service organisation
Date of advice: 22 May 2020
Published: July 2020
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 20XX

Ruling: Q1: Is your income (both statutory and ordinary) exempt from income tax pursuant to section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) on the basis that it: a) is a society, association or club; and b) is established for community services purposes (except political or lobbying purposes) under item 2.1 of the table in section 50 - 10 of the ITAA 1997? | A1: Yes | Q2: If your income (both statutory and ordinary) is exempt from income tax within the meaning of subsection 50-1 and 50-10 of the ITAA 1997, does it meet the special conditions in section 50-70 of the ITAA 1997? | A2: Yes Issue 2 | Q3: Are you a rebatable employer under section 65J of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) on the basis that you are a non-profit society, non-profit association or non-profit club, established for community service purposes under item 5 of the table in subsection 65J(1) of the FBTAA? | A3: Yes | Q4: If you are a rebatable employer within the meaning of subsection 65J(1) of the FBTAA, do you meet the special conditions within subsection 65J(5) of the FBTAA, in that your members' interests and rights are not beneficially owned by the Commonwealth, a State or a Territory or an authority or institution of the Commonwealth, State or Territory? | A4: Yes

Relevant facts and circumstances: You are a not-for-profit organisation incorporated as a company limited by guarantee. You are aimed at promoting the advancement of the social and public welfare of disadvantaged persons within a sector of the community. You have provided details of your objectives and activities, and of the sector of the community you are assisting.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 50-1 | Income Tax Assessment Act 1997 section 50-10 | Income Tax Assessment Act 1997 section 50-70 | Fringe Benefits Tax Assessment Act 1986 subsection 65J(1) | Fringe Benefits Tax Assessment Act 1986 subsection 65J(5)

Reasons for decision: Summary: Your activities and history are consistent with being an association established for community service purposes, not including political or lobbying purposes, in accordance with item 2.1 of the table in section 50-10 of the ITAA 1997. Therefore, your income is exempt from income tax pursuant to section 50-1 of the ITAA 1997. The special conditions for item 2.1 in the table in section 50-10 of the ITAA 1997 are found in section 50-70 of the ITAA 1997. Subsection 50-70(1) of the ITAA 1997: An entity covered by item 1.7, 2.1, 9.1 or 9.2 is not exempt from tax unless the entity is a society, association or club that is not carried on for the purpose of profit or gain of its individual members and that: (a) has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia; or (b) is a society, association or club that meets the description and requirements in item 1 of the table in section 30-15; or (c) is a prescribed society, association or club which is located outside Australia and is exempt from income tax in the country in which it is resident; and the entity satisfies the conditions in subsection (2). Under subsection 50-70(2) of the ITAA 1997: The entity must: (a) comply with all the substantive requirements in its governing rules; and (b) apply its income and assets solely for the purpose for which the entity is established. You meet the requirement of paragraph 50-70(1)(a) based on your constitution and the location of your activities. In relation to the requirement under subsection 50-70(2), you have used its funds in undertaking activities consistent with your principal objects. While you continue to apply your income and assets solely for its established purpose and complies with all the substantive requirements in its governing rules it is accepted that this condition is satisfied. Therefore, the special conditions in section 50-70 of the ITAA 1997 are satisfied. | Detailed Reasoning - Issue 2: Question 1 The type of employer included as a rebatable employer under item 5 of subsection 65J(1) of the FBTAA is: a society, association or club: See subsection (5) of this section. (a) established for community service purposes (except political or lobbying purposes); and (b) covered by item 2.1 of the table in section 50-10 of the Income Tax Assessment Act 1997 As you are an association established for community service purposes (except political or lobbying purposes) and is covered by item 2.1 of the table in section 50-10 of the ITAA 1997, you meet the requirements of item 5 of subsection 65J(1) of the FBTAA. | Detailed Reasoning - Question 2: An employer is not covered by item 5 of subsection 65J(1) of the FBTAA if subsection 65J(5) of the FBTAA applies to it: A society, association or club is not covered by table item 4, 5, 8, 9, 10, 11 or 12 in subsection (1) for a year of tax if it is: (a) an incorporated company where all the stock or shares in the capital of the company is or are beneficially owned by: (i) the Commonwealth, a State or a Territory; or (ii) an authority or institution of the Commonwealth, a State or a Territory; or (b) an incorporated company where the company is limited by guarantee and the interests and rights of the members in or in relation to the company are beneficially owned by: (i) the Commonwealth, a State or a Territory; or (ii) an authority or institution of the Commonwealth, a State or a Territory. As you are a company limited by guarantee and none of the interests and rights in or in relation to your members are beneficially owned by the Commonwealth, a State or a Territory or an authority or institution of the Commonwealth, State or Territory subsection 65J(5) of the FBTAA does not exclude you from being covered by item 5 of subsection 65J(1) of the FBTAA.