Private ruling: Income tax - exemption - deductible gift recipient (DGR) status
Date of advice: 12 April 2019
Published: June 2019
Ruling period: 1 July 2018 to 30 June 20AB | 1 July 2019 to 30 June 20AC | 1 July 2020 to 30 June 20AD | 1 July 2021 to 30 June 20AE | 1 July 2022 to 30 June 20AF | 1 July 2023 to 30 June 20AG
Date scheme commenced: 1 July 20AA

Ruling: Q1: Will the company continue to be entitled to be endorsed as income tax exempt entity pursuant to section 50-105 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes | Q2: Will the company continue to be endorsed as a deductible gift recipient (DGR) pursuant to section 30-120 of the ITAA 1997? | A2: Yes Issue 2 | Q3: Will the benefits provided in respect to the employment of employees of the company continue to be exempt benefits pursuant to subsection 57A(3) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) (noting that section 5B of the FBTAA operates to limit the exemption and also noting the cap for salary sacrificed meal entertainment and entertainment facility leasing expenses)? | A3: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are an Australian private company limited by shares. You are a registered charity with the Australian Charities and Not-for-profits Commission (ACNC) currently endorsed as a Deductible Gift Recipient (DGR) as a ‘public hospital’ under item 1.1.1 of subsection 30-20(1) of the ITAA 1997. You are currently endorsed as income tax exempt as a ‘registered charity’ under item 1.1 of section 50-5 of the ITAA 1997. Since your establishment you have continued to manage and control a public hospital and to be the employer of the staff at the hospital.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 5B | Fringe Benefits Tax Assessment Act 1986 subsection 57A(3) | Income Tax Assessment Act 1997 section 30-15 | Income Tax Assessment Act 1997 subsection 30-20(1) | Income Tax Assessment Act 1997 section 30-120 | Income Tax Assessment Act 1997 section 30-125 | Income Tax Assessment Act 1997 section 50-1 | Income Tax Assessment Act 1997 section 50-5 | Income Tax Assessment Act 1997 section 50-50 | Income Tax Assessment Act 1997 section 50-52 | Income Tax Assessment Act 1997 section 50-105

Reasons for decision: Summary: Unless otherwise stated, all legislative references are to the Income Tax Assessment Act 1997 . | Summary: The company is entitled to be endorsed as an income tax exempt entity pursuant to section 50-105 provided it continues to be registered as a charity with the ACNC and has DGR status. | Detailed Reasoning - Detailed reasoning: An entity is exempt from income tax under section 50-1 if it is covered by the tables in Subdivision 50-A. You are registered as a charity with the Australian Charities and Not-for Profits Commission (ACNC) therefore you are covered by the item 1.1 ‘registered charity’ in the table in section 50-1. A registered charity in section 50-5 must also comply with the special conditions in sections 50-50 and 50-52. Subsection 50-50(1) will be met if you have a physical presence in Australia, and to that extent incurs your expenditure and pursues your objects principally in Australia, or is a Deductible Gift Recipient (DGR) under item 1 in the table in section 30-15. You are currently endorsed as an item 1 DGR, in the table in section 30-15, by meeting the description of a ‘public hospital’ under subsection 30-20(1) in Subdivision 30-B. Therefore you meet the special condition in subsection 50-50(1) by virtue of being a DGR. Subsection 50-50(2) requires that an entity must comply with all the substantive requirements in its governing documents and apply all of its income and assets solely for the purposes for which the entity is established. Your constitution states that you must apply your assets and income solely towards promoting the Company Objects and no part of the Company's assets or income may be paid or transferred directly or indirectly by way of dividend, bonus or otherwise to members. On the facts provided considering the activities undertaken there is nothing to indicate that you do not meet the special conditions under subsection 50-50(2). Notably, section 50-52 states that an entity covered by item 1.1 in section 50-5 is not exempt from income tax unless it is endorsed as exempt under Subdivision 50-B. To be entitled to be endorsed as exempt under Subdivision 50-B MQ must: ● be a charity registered with the ACNC, ● have an ABN, and ● meet the special conditions under sections 50-50 and 50-52. You currently meet all these requirements to be entitled to be endorsed. On the facts provided, you are entitled to be endorsed as an income tax exempt entity pursuant to section 50-105 provided continue to be registered as a charity with the ACNC and has DGR status. | Summary: You will continue to be endorsed as a deductible gift recipient (DGR) pursuant to section 30-120 provided you continue to be a registered charity with the ACNC and a public hospital within subsection 30-20(1). | Detailed Reasoning - Detailed reasoning: Under section 30-125 MQ is entitled to be endorsed as a DGR if: a) it has an Australian Business Number (ABN), b) it is an institution described in item 1, 2 or 4 of the table in section 30-15, and c) meets the ‘special conditions’ relevant to the item of that table in which it is described. You have an ABN and are currently endorsed as an item 1 DGR, in the table in section 30-15, by meeting the description of a ‘public hospital’ under subsection 30-20(1) in Subdivision 30-B. The only special condition relevant to item 1 DGR, in the table in section 30-15, is that you must be ‘in Australia’. Since you were established and are operated in Australia this requirement is met. You are currently registered with the ACNC as a ‘charity’ with a sub-entity type of ‘advancing health’. On the facts provided, you are entitled to be endorsed as a DGR provided that you continue to be a registered charity with the ACNC and a public hospital within subsection 30-20(1). | Detailed Reasoning - Issue 2: Unless otherwise stated, all legislative references are to the Fringe Benefits Tax Assessment Act 1986 . | Summary: The benefits provided by the company to its employees are exempt benefits under subsection 57A(3). It should be noted however, that section 5B limits the exemption by providing that an FBT liability will arise if the value of certain benefits provided to an individual employee exceeds the specified amount. | Detailed Reasoning - Detailed reasoning: You will be entitled to Fringe Benefits Tax (FBT) exemption if it you are a public hospital. Section 57A provides that certain employers are generally exempt from FBT on benefits provided to their employees. Specifically subsection 57A(3) states: A benefit provided in respect of the employment of an employee is an exempt benefit if: (a) the employer of the employee is a public hospital; … Therefore, as a public hospital, benefits provided to your employees will be exempt benefits. However, subsection 5B(1D) provides that for a public hospital, the employer's fringe benefits taxable amount will include the employer's aggregate non-exempt amount. The method for calculating the employer's aggregate non-exempt amount is contained in subsections 5B(1E) to 5B(1L). These subsections provide that a public hospital will only be liable to pay fringe benefits tax on the amount by which the total grossed-up value of certain benefits provided to an individual employee exceeds $17,000 per annum. Subsection 5B(1E) also provides for a separate grossed-up cap of $5,000 for salary packaged meal entertainment. The benefits provided to your employees are exempt benefits under subsection 57A(3). These exempt benefits are limited however under the rules in subsection 5B(1E).