Private ruling: Entitlement of a not-for-profit organisation to tax exemption, GST concessions and fringe benefits tax rebates
Date of advice: 29 June 2018
Published: September 2018
Ruling period: 1 July 2018 to 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Questions and answers | 1. Will the Commissioner continue to endorse The Organisation as income tax exempted under Subdivision 50-B of the Income Tax Assessment Act 1997? | Yes, providing it maintains its ACNC registration. | 2. Will the Commissioner continue to endorse The Organisation as a GST concession recipient under Section 176 of the A New Tax System (Goods and Services Tax) Act 1999? | Yes, providing it maintains its ACNC registration. | 3. Will the Commissioner continue to endorse The Organisation as a registered charity under section 123E of the Fringe Benefits Tax Assessment Act 1986? | Yes, providing it maintains its ACNC registration.

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. 1. The Organisation is a registered public company. 2. The Organisation is and intends to continue as a registered charity with the Australian Charities and Not-for-profits Commission (ACNC). 3. The Organisation is endorsed as exempt from income tax under Subdivision 50-B, subject to section 50-5 item 1.1 of the Income Tax Assessment Act 1997 (ITAA 1997). 4. The Organisation is endorsed as a registered charity covered by table item 1 in subsection 65J(1) of the Fringe Benefits Tax Assessment Act 1986 under section 123E of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986). 5. The Organisation is also endorsed as a charity under section 176 of the New Tax System (Goods and Services Tax) Act 1999 (GSTA 1999). 6. The purpose of The Organisation is to promote human rights. 7. The Organisation will continue to pursue significant activities in Australia in accordance with its charitable purpose. A vast majority of The Organisation’s activities and expenditure will continue to take place principally in Australia. 8. The Organisation will continue to comply with the substantive requirements in its governing documents and apply its income and assets solely for the purpose for which it was established. 9. The Organisation intends to pursue its purposes in countries other than Australia. 10. The Organisation has amended the objects of its constitution to remove the specification that its purpose is to protect human rights “in Australia”. 11. The new pursuits will be limited to contractual relationships with organisations with similar purposes overseas and sharing relevant knowledge and materials for use in that country. 12. The Organisation intends to license its name and other intellectual property for use by the partner organisations it contracts with. 13. The Organisation on occasions expects employees or representatives to travel to other countries and liaise with the partner organisations it contracts with. 14. The Organisation anticipates the activities in countries other than Australia will not exceed 10% of The Organisation’s total activities and expenditure.

Relevant legislative provisions: Section 176 A New Tax System (Goods and Services Tax) Act 1999 | Subdivision 50-B of the Income Tax Assessment Act 1997 Section 123E of the Fringe Benefits Tax Assessment Act 1986 | Section 65J of the Fringe Benefits Tax Assessment Act 1986 | Section 123E of the Fringe Benefits Tax Act 1986 | Subsection 50-50(1)(a) of the Income Tax Assessment Act 1997 | Section 50-52 of the Income Tax Assessment Act 1997 | Division 426 in Schedule 1 of the Taxation Administration Act 1953

Reasons for decision: Detailed Reasoning - Reasons for Decision: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. | Summary: The Organisation will remain endorsed by the Australian Tax Office as exempt from income tax providing it maintains its ACNC registration. | Detailed Reasoning - Detailed reasoning: To be exempt from income tax as a registered charity under item 1.1 of the table in section 50-5 of the Income Tax Assessment Act 1997 (ITAA 1997) an entity must be endorsed as exempt from income tax under section 50-105 of the ITAA 1997. To be endorsed under section 50-105 of the ITAA 1997, section 50-110 of the ITAA 1997 relevantly requires that the entity is covered by item 1.1 (that is, it is a registered charity), The Organisation has an ABN, and the entity satisfies the special conditions in item 1.1 of the table in section 50-5 of the ITAA 1997. Covered by item 1.1 The Organisation is registered as a charity with the ACNC and has an ABN. As such, The Organisation is a “registered charity” for the purposes of Item 1.1 of the table in section 50-5 of the ITAA 1997. | Detailed Reasoning - Special conditions: The special conditions at item 1.1 of the table in section 50-5 of the ITAA 1997 are found in sections 50-50 and 50-52 of the ITAA 1997 (although subsection 50-110(6) of the ITAA 1997 states that the condition in section 50-52 is not a relevant condition for the purposes of section 50-110). Subsection 50-50(1)(a) of the ITAA 1997 says: (1) an entity covered by item 1.1 will not be exempt from income tax unless the entity: a) it has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives ‘principally’ in Australia; or… This requirement needs to be met for each income year due to the periodic operation of Division 50 of the ITAA 1997. Subsection 50-50(2) of the ITAA 1997 says: (2) 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. The Organisation is endorsed as exempt from income tax, and currently satisfies the special conditions in section 50-50 of the ITAA 1997. Whether The Organisation remains endorsed by the Commissioner as exempt from income tax is dependent on The Organisation’s level of activities in countries other than Australia. The Organisation has only had a physical presence in Australia until now. The Organisation intends to continue to operate from its head office in Australia. The Organisation’s expenditure and pursuit of objectives must also remain principally in Australia. The term ‘principally’ is not defined in the ITAA 1997 and takes its ordinary meaning. ‘Principally’ means mainly or chiefly. Whilst it is not possible to specify a particular percentage, less than 50% of expenditure is not considered ‘principally’. The documentation provided with the ruling application states that The Organisation does incur its expenditure and pursue its objectives principally in Australia and will continue to do so to the extent of 90%. The Organisation intends to continue its registration as a charity with the ACNC. Its objectives and expenditure will not be pursued in countries other than Australia to an extent greater than 10% of its activities. By virtue of this limitation it will not negate the special conditions in paragraph 50-50(1)(a) of the ITAA 1997. The Commissioner accepts that The Organisation will continue to meet the conditions in subsection 50-50(2) of the ITAA 1997 following the changes to its activities provided that it continues to be registered as a charity. If the Organisation continues to be registered as a charity with the ACNC, their entitlement to endorsement as exempt from income tax will not be affected following the proposed activities overseas. The Organisation will continue to satisfy the requirements for endorsement in under Subdivision 50-B of the ITAA 1997. | Detailed Reasoning - Question 2: The Organisation is endorsed as a charity by the Commissioner of Taxation under subsection 176(1) of the GSTA 1999 that states: Endorsement by Commissioner as charity (1) The Commissioner must endorse an entity as a charity if: (a) the entity is entitled to be endorsed as a charity (see subsection (2); and (b) the entity has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953 . (2) An entity is entitled to be endorsed as a charity if the entity: (a) is an * ACNC-registered charity; and (b) has an * ABN. The Organisation is a registered charity with the ACNC and has an ABN. Provided the Organisation continues to be a registered charity with the ACNC, it will meet the requirements for endorsement under section 176 of the GSTA 1999. | Summary: The Organisation will continue to be endorsed by the Commissioner under section 123E of the FBTAA and entitled to fringe benefits tax rebates under section 65J of the FBTAA 1986 providing it maintains its ACNC registration. | Detailed Reasoning - Detailed reasoning: Endorsement Section 123E of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) provides: (1) [Endorsement of entity] The Commissioner must endorse an entity as a registered charity covered by table item 1 in subsection 65J(1) if: a) The entity is entitled to be endorsed as a registered charity covered by table item 1 in subsection 65J(1) (see subsection(2)); and b) The entity has applied for that endorsement in accordance with Division 426 in Schedule 1 of the Taxation Administration Act 1953. (2) [Conditions] An entity is entitled to be endorsed as a registered charity covered by table item 1 in subsection 65J(1) if the entity: a) Is a registered charity covered by column 1 of the table item; and aa) satisfies the special conditions set out in that table item (other than the condition relating to endorsement under subsection (1) of this section); and b) Has an ABN. FBT rebate Subsection 65J(1)(a) of the FBTAA 1986 provides: (1) An employer is a rebatable employer for a year of tax if the employer: a) Is exempt from income tax at any time during the year of tax under any of the provisions set out in the following table; and b) Satisfies the special conditions (if any) set out in the following table. The relevant item in the table is item 1 that provides a registered charity covered by item 1.1 of the table in section 50-5 of the ITAA 1997 is subject to the following special conditions: The registered charity is not a rebatable employer for the year of tax if it: a) Is a registered public benevolent institution; or b) Is a registered health promotion charity; or c) Is an institution of the Commonwealth, State or a Territory; or d) has not been endorsed under subsection 123E(1); or e) is not an institution The Organisation is currently endorsed under section 123E of the FBTAA, and meets the requirements under section 123E. The Commissioner accepts that the Organisation will continue to satisfy the special conditions in table item1 of subsection 65J(1) of the FBTAA following the changes to its activities provided that it continues to be registered as a charity. If the Organisation continues to be registered as a charity with the ACNC, its entitlement to endorsement under section 123E of the FBTAA tax will not be affected following the proposed activities overseas. | Detailed Reasoning - Conclusion: Providing The Organisation maintains registration as a charity with the ACNC, its current entitlement to endorsements will remain unchanged.

These reasons for decision accompany the Notice of private ruling for The Organisation.