Private ruling: Income tax exemption
Date of advice: 7 December 2015
Published: February 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2015

Ruling: Q1: Is the income of the Association exempt from income tax pursuant to section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) on the basis that it is an entity described in item 3.2 in the table in section 50-15 of the ITAA 1997? | A1: Yes

Relevant facts and circumstances: The Association was formally incorporated under the relevant act . The Association is the collective and representative voice of past and present professional participants of a sport in Australia. The Association was established to: • Safeguard the workplace rights of both present and past players; • Provide for and improve the welfare of its members; • Provide advice, services and assistance where deemed appropriate to its members; • Pursue initiatives that will ultimately benefit the membership; and • Promote the sport. The Association is not formally registered as a trade union but instead is registered as an incorporated association. The Objects of the Association are outlined in its Constitution and are substantially similar to the reasons for its establishment listed above. The Constitution contains a non-profit clause and a winding up clause. Since incorporation the Association has been working towards improving the remuneration and working conditions of its members. It has achieved documented agreements over its period of operation with the Governing Body of the sport. The Association has achieved various welfare programs and education and training programs. In relation to programs run by the Association a significant amount of revenue is sourced from the governing body pursuant to agreed terms The governing body has accepted that the Association is the representative body for professional players participating in the sport. Players rely on the Association and not their individual managers to protect their rights during Collective Bargaining Agreement negotiations.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 50-1. | Income Tax Assessment Act 1997 section 50-15.

Reasons for decision: Summary: Section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states: The total ordinary income and statutory income of the entities covered by the following tables is exempt from income tax. In some cases, the exemption is subject to special conditions. The tables referred to in section 50-1 of the ITAA 1997 are contained in sections 50-5 to 50-45 of the ITAA 1997. A trade union is listed at item 3.2 in the table in section 50-15 of the ITAA 1997. The trade union must meet the special conditions detailed in item 3.2. An entity is therefore exempt from income tax as a trade union if: • it is a trade union; and • it satisfies the special conditions. | Detailed Reasoning - Trade union: A trade union is not defined in the legislation. There must be a formal structure and not just a casual group of employees or workers, as held in Midland Cold Storage Ltd v Turner and others [1972] 3 All ER 773. The Australian Cricketers' Association (ACA) is an incorporated association pursuant to the relevant act , thereby satisfying this requirement. As the ITAA 1997 does not define the term trade union, the ordinary meaning, which is the dictionary meaning, has been adopted by the Courts. In the Victorian Employers' Federation v Federal Commissioner of Taxation (1957) 96 CLR 390, Kitto J stated: The Act contains no definition of "trade union". The expression is defined in the Oxford Dictionary as meaning "an association of the workers in any trade or in allied trades for the protection and furtherance of their interests in regard to wages, hours, and conditions of labour, and for the provision, from their common funds, of pecuniary assistance to the members during strikes, sickness, unemployment, old age, etc." In Norsemen Amalgamated Distress and Injustices Fund v FC of T 95 ATC 4227 , Lee J said: As the dictionaries confirm, it is still an essential part of the ordinary use of the term "trade union" that an organisation so described be one formed by workers to further the interests of workers in their employment and although part of the meaning of the term may include an organisation formed to provide financial aid to union members suffering adversity, the latter meaning is ancillary to, and dependent upon, the principal meaning described. It is accepted that the Association players are professional players. The occupation of the players is an employee and as such they can be described as workers. The Association is engaged in representing their conditions and terms of employment, which further supports their status as workers/employees. In the Trade Unions Act 1958 the term trade union is defined as 'any combination whether temporary or permanent for regulating the relations between workmen and employers or between workmen and workmen or between employers and employers or for imposing restrictive conditions on the conduct of any trade or business......' The Association has been established primarily for the protection of professionals and the terms and conditions of their employment. It is the collective voice of these players, in determining their interests as professionals. The Association actively implements its aims by negotiating the Collective Bargaining Agreements with the governing body. It is considered that these aims and activities confirm that the Association is a trade union, as that term is ordinarily understood. | Detailed Reasoning - Special conditions: The special conditions listed at item 3.2 of section 50-15 of the ITAA 1997 state that the trade union: (a) is located in Australia, and incurs its expenditure and pursues its objectives principally in Australia; and (b) complies with all the substantive requirements in its governing rules; and (c) applies its income and assets solely for the purpose for which the trade union is established. The operations of the Association are now and will be for the foreseeable future undertaken principally in Australia. It is accepted that special condition (a) is satisfied. Taxation Ruling TR 2015/1 Income tax: special conditions for various entities whose ordinary and statutory income is exempt considers whether certain entities, including those listed at item 3.2 of section 50-15 of the ITAA 1997, satisfy special conditions (b) and (c). TR 2015/1 explains at paragraph 106 that in most instances, an entity's governing rules are set out in writing. In the Association's case this takes the form of its Constitution. Paragraph 124 of TR 2015/1 provides examples of the substantive requirements which must be complied with: • Objects/purposes • Non-profit status • Powers and duties of directors/officers • Audit and accounts • Winding up The Association's Constitution contains all of the above clauses and in the absence of evidence to the contrary it is accepted that the Association complies with these requirements. Special condition (b) is therefore satisfied. The constitution states that it must apply its income and assets solely for the purpose for which it was established The activities adhere to this non-profit clause. That is, its role is to represent players in negotiations and to act as the agent of players in relation to industrial disputes or industrial situations. In addition, the Association manages a number of welfare and education programs. It is considered that the Association is applying its income and assets solely for the purpose for which it was established. Special condition (c) is therefore satisfied. | Detailed Reasoning - Conclusion: The income of the Association is exempt from income tax pursuant to section 50-1 of the ITAA 1997, as the income of a trade union, which satisfies the special conditions set out in item 3.2 of the table in section 50-15 of the ITAA1997.