Private ruling: Income tax exemption
Date of advice: 16 June 2016
Published: August 2016
Ruling period: Year ending 30 June 2017 to year ending 30 June 2021 inclusive
Date scheme commenced: The scheme has commenced.

Ruling: Q1: Is the Association exempt from income tax in terms of section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) pursuant to item 8.2 of the table in section 50-40 of the ITAA 1997? | A1: Yes.

Relevant facts and circumstances: A copy of the Rules of the Association, a copy of the Financial Statements for the year ended 30 June 2015, and a copy of the 2014-2015 Annual Report have been supplied.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 50-1 | Section 50-40 Item 8.2

Reasons for decision: Summary: The relevant law is item 8.2 of the table in section 50-40 of the ITAA 1997 and section 50-1 of the ITAA 1997. The Rules of the Association have been examined, particularly the objectives, the membership and the disposal of assets. In order to fully consider the objectives and hence whether the Association was established for the purpose of promoting the development of any of the Australian resources listed in item 8.2 in section 50-40 of the ITAA 1997 it is necessary to examine the activities which the Association undertakes in order to achieve its objectives. The activities of the Association as described in the Annual Report are discussed. It is contended that the activities assist the members of the Association to carry on their business more efficiently and that this promotes the development of the relevant Australian resources. On one hand this is because the members of the Association operate in rural areas. Thus there is a clear connection with agricultural resources, horticultural resources etc. as listed in item 8.2 of the table in section 50-40 which are located in rural areas. On the other hand Association members service urban areas where Industrial resources and manufacturing resources are located. Therefore, it is accepted that the Association was established for the purpose of promoting Australian resources as listed in item 8.2 of the table in section 50-40 of the ITAA 1997. The Rules of the Association contain an appropriate not for profit clause which prohibits the distribution of profits or property amongst members. Accordingly the Association meets the special condition in item 8.2 of the table in section 50-40. Ultimately it is concluded that the Association is exempt from income tax in terms of section 50-1 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: The Association is an incorporated association. Therefore the requirement that it be a society or association is met. Membership of the Association is open to any entity carrying on a relevant business in the State. The objectives of the Association are set out in the Rules. In order to fully consider these objectives and in turn whether the Association was established for the purpose of promoting the development of any of the Australian resources listed in item 8.2 in section 50-40 it is necessary to examine the activities in which the Association engages in order to achieve its objectives. Activities In the Annual Report of the Association the activities of the Association are described. The activities undertaken by the Association demonstrate the way in which the Association pursues its objectives. In so doing it assisted its members in carrying on their business more effectively and more efficiently. Members are located in rural areas where agriculture, horticulture, viticulture, pastoral and aquaculture businesses are common. Thus it is accepted that the pursuit and the achievement by the Association of its objectives promotes the development of the agriculture, horticulture, viticulture, pastoral and aquaculture resources in those businesses. Likewise the activities of the Association assist members which service urban areas in which industrial and manufacturing businesses are usually located. For urban businesses the activities of the Association promote the development of industrial resources and manufacturing resources in those businesses. In Taxation Determination TD 93/122 Income tax: are organisations which are established to promote tourism exempt from income tax under paragraph 23(h) of the Income Tax Assessment Act 1936? in relation to former paragraph 23(h) of the Income Tax Assessment Act 1936 ( which was similar to section 50-40 of the ITAA 1997) it was accepted that the principal or dominant purpose for which an organisation is established must be to promote the development of one or more of those resources themselves. In this case it is accepted that the Association was established for the purpose of promoting the development of any of the Australian resources as listed in item 8.2 of the table in section 50-40 of the ITAA 1997. Special condition The special condition that the Association is not carried on for the profit or gain of its individual members is accepted as being met in view of the rule relating to the disposal of assets. In that rule there is a prohibition against the distribution of its income and property amongst the members except for bona fide payment for services provided to the Association. The presence of this rule means that the Association is not for profit. Further, the financial accounts provided have been examined and that examination does not reveal any breach of the rule. | Detailed Reasoning - Conclusion: It is concluded that the Association is a not for profit association established for the purpose of promoting the development of any of the Australian resources listed in item 8.2 of the table in section 50-40 of the ITAA 1997 and therefore it is exempt from income tax in terms of section 50-1 of the ITAA 1997.