Private ruling: Continuation of endorsement after implementing proposed changes

Ruling: Q2: Will the implementation of the proposed changes impact on the Company's current endorsement as an income tax exempt charity as a charitable institution as described in item 1.1 of the table in subsection 50-5 of the ITAA 1997? An entity is entitled to be endorsed pursuant to section 50-110 of the ITAA 1997 as an income tax exempt charity if it: · has an ABN; · is covered by item 1.1 of the table in section 50-5 of the ITAA 1997; and · satisfies the special condition in section 50-50 of the ITAA 1997. An entity described in item 1.1 of the table in section 50-5 of the ITAA 1997 is a charitable institution. Draft Taxation Ruling TR 2011/D2 Income tax and fringe benefits tax: charities set out the Commissioners views on the meaning of 'charitable institution'. An entity is a charitable institution if: · it is an institution, · its sole purpose is charitable, · it exists for the public benefit or the relief of poverty, and · it is non-profit. The special condition in section 50-50 of the ITAA 1997 requires that: · the entity has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia, or · is a deductible gift recipient, or · is a prescribed institution. The Company has a physical presence in Australia as it has been established, and pursues its objectives, in Australia. The special condition in section 50-50 of the ITAA 1997 has been met. As the Company is currently endorsed as an income tax exempt charity as a charitable institution described in item 1.1 of the table in section 50-5 of the ITAA 1997, it is necessary to determine whether the proposed changes will have any effect on its entitlement to endorsement. It is an institution As discussed under question 1, the Company has been established to aid certain persons in need. From its activities, size, and permanence, there is sufficient to indicate that it is an institution. As well, there is nothing to indicate a structure controlled and operated by family members and friends and so the institution requirement has been met and will continue to be met. Sole purpose is charitable Draft Taxation Ruling TR 2011/D2 Income tax and fringe benefits tax; charities states at paragraph 25: An institution is charitable if: · its only, or its 'main or predominant or dominant' purpose is charitable in the technical legal sense; and · it was established and is maintained for that charitable purpose. The Company has been established to provide shelter to certain persons at risk of violence or abuse, who are unable financially to provide for their own accommodation. The Company provides secure, supervised, short-term accommodation and care for those in our community most vulnerable who are unable financially to provide for their own accommodation. Once the proposed changes are implemented the Company will still be providing safe, secure, supervised accommodation and assistance when they face violence or abuse. It is therefore considered that this requirement has been met and will continue to be met. Exists for the public benefit or poverty TR 2011/D2 states at paragraph 17 that the benefit of a charitable purpose need not be for the whole community; it is sufficient that is for an appreciable section of the public. The objects of the Company state they provide aid to certain persons in need, who are at risk of violence or abuse, and who are unable financially to provide for their own accommodation. Currently the benefits that the Company provides are provided to persons of a certain age group uffering from the effects of homelessness, they are provided without discrimination. It is proposed that it should be changed to allow the provision of accommodation without the age constraint. It is considered that this requirement has been met. It is non-profit The Company covers non-profit at clause 5 of the Memorandum of Association. The dissolution clause is contained in clause 10 of the Memorandum of Association. The Company has adequate clauses indicating non-profit character which prohibits the distribution of its income, assets or property to members either while operating or on winding-up. This requirement has been met. The Proposed Changes will not affect the Company's entitlement to endorsement; the Company will continue to satisfy the requirements of section 50-110 of the ITAA 1997 and will continue to be entitled to be endorsed as an income tax exempt charity as a charitable institution.




Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Subject: Continuation of endorsement after implementing proposed changes: Continuation of endorsement as a deductible gift recipient (DGR) as a public benevolent institution (PBI) as an income tax exempt charity as a charitable institution (CI) with the proposed changes. | As the Company is currently endorsed as a DGR on the basis it is a PBI, it is necessary to determine whether the proposed changes will have any effect on its entitlement to endorsement. | Subsection 30-125(1) of the ITAA 1997 provides that an entity is entitled to be endorsed as a DGR if it: | · is a fund, authority or institution described in item 1, 2 or 4 of the table in section 30-15 of the ITAA 1997 which satisfies any relevant special conditions; and | · has suitable rules in relation to the transfer of gifts, contributions and other money received because of such gifts or contributions upon winding up and revocation of DGR endorsement. | The Company has an ABN and has suitable rules in relation to transfer of gifts, contributions and other money received because of such gifts or contributions upon winding up and revocation of DGR endorsement. | Item 1 of section 30-15 includes a PBI as described in item 4.1.1 of subsection 30-45(1) of the ITAA 1997. There are no special conditions for this item. | The characteristics of a PBI are as follows: | · it is set up for needs that require benevolent relief; | · it relieves those needs by directly providing services to people suffering from them; | · it is carried on for the public benefit; | · it is an institution; and | · its dominant purpose is providing benevolent relief. | Each of these characteristics are discussed in turn. | Is the Company set up for needs that require benevolent relief?: In Perpetual Trustee Co Ltd v. FC of T (1931) 45 CLR 224, Evatt J states at 235-236: | Such bodies vary greatly in scope and character. But they have one thing in common: they give relief freely to those who are in need of it and who are unable to care for themselves. | Those who receive aid or comfort in this way are the poor, the sick, the aged and the young. Their disability or distress arouses pity and the institutions are designed to give them protection. They are very numerous - the nobler a soul is the more objects of compassion it hath - and they have come to be known as benevolent institutions. | The Company has been established to provide shelter to certain disadvantaged persons, who are unable financially to provide for their own accommodation. The Company provides secure, supervised, short-term accommodation and care for those in our community most vulnerable. It does this through financing and maintaining properties, where those at risk can find safe, secure accommodation and assistance. | Homelessness and escaping the threat of violence and abuse is clearly accepted by the community to be a situation of suffering, destitution and/or helplessness which requires benevolent relief. It is also accepted to be a condition or misfortune that is such as to arouse pity or compassion in the community. This Company is established for the purpose of directly relieving those suffering from such adversity. | The proposed changes to the Company's activities include the selling of the properties currently owned by the Company. This will be achieved by firstly selling of one property and having available the interest on capital from the sale. These funds will enable the residents to either obtain or remain in safe, secure and supervised accommodation that they would otherwise be unable to either obtain or remain in due to financially being unable to provide for themselves. The proposed changes have the potential to assist more of these particular persons in benevolent need. The selling of the property and using the interest on the capital to subsidise rental arrangements will assist a larger number of homeless persons. | The Company is set up for needs requiring benevolent relief and will continue to be after the proposed changes are effectuated. | Is the organisation for the direct relief of poverty, sickness, suffering, distress, misfortune or helplessness?: Taxation Ruling TR 2003/5 Income tax and fringe benefits tax: public benevolent institutions at paragraph 56 states that it is not sufficient that an organisation operation's be directed towards categories of people who could be in need of relief, it must also be for the relief of poverty, sickness, suffering, distress, misfortune, disability, destitution or helplessness experiences by those people. | The Company has been established to provide assistance in the form of safe and secure shelter for particular young persons, experiencing destitution, suffering, misfortune and helplessness due to being homeless and being threatened by violence or abuse. To ensure, under the proposed changes, that the resident's rent is used to pay for accommodation, the Company may at the direction of the resident, pay the rent to the landlord. It is submitted that the fact the rent may not be paid directly to the resident, will not disqualify the Company. The funds enable the residents to either obtain or remain in safe, secure and supervised accommodation that they would otherwise be unable to either obtain or remain in due to financially being unable to provide for themselves. | Is it carried on for the public benefit?: Paragraph 18 of TR 2003/5 states: | A public benevolent institution is organised to confer benevolence upon an appreciable needy class in the community. Organisations are not public in the required sense where: | · they are carried on for the profit or gain of particular persons including the organisation's individual members; | · benefits are not provided to the public or a section of it, but rather on such grounds as personal relations, membership of a voluntary association, or an employment relationship; or | · benefits are provided on a discriminatory basis, not primarily because of need. | The objects of the Company state they provide aid to certain groups in society in need. Currently the benefits that the Company provides are provided to young particular persons of certain age groups suffering from the effects of homelessness, they are provided without discrimination. It is proposed that it should be changed to allow the provision of accommodation for certain persons, without the age constraint. It is considered that this requirement has been met and will continue to be met. | Is it non-profit?: The Company has an appropriate non-profit at clause 5 of the Memorandum of Association. | The dissolution and revocation clause is contained in clause 10 of the Memorandum of Association and is sufficient to meet the requirements of sub-sections 30-125(6) and (7) of the ITAA 1997 for endorsement as a deductible gift recipient. | Is it an institution?: Page 32 of GiftPack (NAT 3132-12.2007) states an institution can have different legal forms. It may be a trust established by will or instrument of trust. It may have the legal structure of an unincorporated association or a corporation. However, incorporation is not enough, on its own, for an organisation to be an institution. What it does - activities, size, permanence, recognition - is also relevant. | An organisation that is established, controlled and operated by family members and friends would not normally be an institution. | Predominantly for benevolent relief.: To qualify for public benevolent institution status, the direct relief of persons recognisably in need of benevolence must be the predominant purpose of the organisation with any other purposes being incidental or of minor extent and importance. | The predominant purpose of the Company is to provide shelter to young persons at risk of violence or abuse, who are unable financially to provide for their own accommodation. The Company provides secure, supervised, short-term accommodation and care for those in our community most vulnerable who are unable financially to provide for their own accommodation. It currently achieves this through financing and maintaining properties, where those at risk can find safe, secure accommodation and assistance when they face violence or abuse. Once the proposed changes are implemented the Company will still be providing safe, secure, supervised accommodation and assistance when they face violence or abuse. | The Company is currently endorsed as a DGR as a PBI described in item 4.1.1 of the table in subsection 30-45(1) of the ITAA 1997. | The proposed changes will not affect the Company's current endorsement as a DGR as a PBI.