Private ruling: Income Tax Exemption - Community Service Organisation
Published: April 2014
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2014

Ruling: Q1: Is the entity exempt from income tax pursuant to the provisions of section 50-1 on the basis that it falls under item 2.1 of the table in section 50-10 of the Income Tax Assessment Act 1997 ? | A1: Yes

Relevant facts and circumstances: The entity was established as a company limited by guarantee on dd/mm/yyyy and sought extension of their income tax exemption status. The establishment of the entity was the direct result of a legislative requirement. The entity adopted a new Constitution on dd/mm/yyyy. The changes followed the implementation of a unitary governance structure. The new structure merged the functions of the formerly separate Board and Council. Any changes between the superseded documents (Memorandum and Articles of Association and the Constitution) and the New Constitution are consequential, and as a result of the amalgamation exercise. The New Constitution did not make any significant changes to the following key clauses: • Objects - Clause 3 of the New Constitution/Clause 2 of the Memorandum of Articles and Association • Income and property - Clause 5 of the New Constitution/Clause 4 of the Memorandum of Articles and Association, and • Winding up - Clause 23.2(c) of the New Constitution/Clause 6 of the Memorandum of Articles and Association

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

Reasons for decision: Detailed Reasoning - Issue 1: Is the entity entitled to an income tax exemption status as a community service organisation? | Detailed Reasoning - Question 1: Is the entity exempt from income tax pursuant to the provisions of section 50-1 on the basis that it falls under item 2.1 of the table in section 50-10 of the Income Tax Assessment Act 1997 ? | Summary: The Constitution of the entity prevents it from distributing income to its members either during its operation or on winding up. The entity has a physical presence in Australia, and carries out its activities in Australia. The activities of the entity are carried out in accordance with its objects. The entity is exempt from income tax as it is a community service association. | Detailed Reasoning - Detailed reasoning: Item 2.1 of section 50-10 of the Income Tax Assessment Act 1997 (ITAA97) states that the income of a society, association or club established for community services purposes will be exempted from Income tax provided section 50-70 does not apply. Item 2.1 of the table in section 50-10 of the ITAA 1997, in conjunction with section 50-1 of the ITAA 1997, specifies that the total ordinary income and statutory income of a 'society, association or club established for community service purposes (except political or lobbying purposes)' is exempt from income tax. The special conditions in section 50-70 of the ITAA 1997 relevantly require that the entity is 'not carried on for the purpose of profit or gain of its individual members'. The entity is considered to have a community service purposes as its establishment was the direct result of a legislative requirement . The new Constitution of the entity prevents it from distributing income to its members either during its operation or on winding up. The entity has a physical presence in Australia, and carries out its activities in Australia. The objects of the entity have not changed materially since being initially granted exempt status. The activities are carried out in accordance with the objects. Therefore the entity meets the requirements of section 50-10 of ITAA97, and is exempt from income tax as a community service association.