Private ruling: Income tax exemption for a public educational institution
Date of advice: 14 June 2016
Published: July 2016
Ruling period: 1 July 2014 to 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Does the association meet the special conditions in section 50-55 of the Income Tax Assessment Act 1997 (ITAA 1997) for a public educational institution, as covered by item 1.4 of the table in section 50-5 of the ITAA 1997, so that its income is exempt from income tax under section 50-1 of the ITAA 1997? | A1: Yes

Relevant facts and circumstances: You have provided copies of the following documents for the association which should be read in conjunction with and form part of the scheme of this ruling: • Certificate of Registration of a Company • Constitution • Profit and Loss Statement for the year ended 30 June 2015. The association is an Australian registered public company limited by guarantee. The association is not registered as a charity under the Australian Charities and Not-for-profits Commission Act 2012. The association is a not for profit association of professionals in a particular industry established for the purpose of providing education. Members include professionals in the particular industry from private practice, government and universities. The association's Constitution provides its governing rules. Provided in the Constitution, the objects for which the association was established are: (a) As a non-for-profit association of professionals in the particular industry: 1. educate both its professional community and general public; 2. organise events, seminars, workshops, engage in public relations; 3. support research, teaching, promotion about various aspects of the industry. (b) to undertake and pursue all such other similar, related or compatible objectives as may from time to time be considered appropriate by the association. In addition to the objects, the Constitution includes governing rules regarding: • non-profit status - including that the derived income and property of the association will be applied solely towards the promotion of the objects in the Constitution and no proportion will be paid or transferred, directly or indirectly by way of dividend, bonus or otherwise to Members • winding up - including that upon the winding up or dissolution of the company any remaining property will not be paid to or distributed among the Members • criteria for admission as a member • the requirement for member details to be entered in a register • the powers of the company and its directors • the requirement to hold annual general meetings • votes of members • the requirement to keep accounting records and prepare and present financial reports and statements • the requirement to appoint auditors. For the whole of the year ended 30 June 2015 the association: • operated in a manner consistent with all of the rules in the Constitution • carried out the same educational activities to achieve its objects • incurred its expenditure and pursued its objects 100% of the time in Australia • used its income and assets solely for the purpose for which it is established. Profit and Loss Statement for the year ended 30 June 2015 shows income from brochure sales, membership fees, interest received and other revenue and profit of less than $5,000.00.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 50-1 | Income Tax Assessment Act 1997 section 50-5 | Income Tax Assessment Act 1997 section 50-55

Reasons for decision: Summary: The association meets the special conditions in section 50-55 of the ITAA 1997 for a public educational institution, as covered by item 1.4 of the table in section 50-5 of the ITAA 1997, so that its income is exempt from income tax under section 50-1 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) exempts from income tax the total ordinary and statutory income of an entity covered by section 50-5 of the ITAA 1997. To be exempt from income tax under Item 1.4 of the table in section 50-5 of the ITAA 1997, an entity must: • be a public educational institution; and • meet the special conditions specified in section 50-55 of the ITAA 1997. | Detailed Reasoning - Public educational institution: A public educational institution is an institution that is available or open to the public or a section of the public and whose sole purpose is providing education. Any other purpose of the organisation must be incidental or ancillary to providing public education. Education in this context does not extend to merely providing information (see Educational organisations on the ATO website, ato.gov.au - search using quick code QC 46314). | Detailed Reasoning - Applying the association's circumstances: The object/purpose of the association is solely to provide education. Members comprise a broad range of occupations in the particular professional community and education is provided to both professionals in that community and the general public. The association's educational activities extend beyond providing information. For example the association holds events, seminars, workshops; engages in public relations; supports research into and teaches about various aspects of the particular industry. The association has carried out these educational activities throughout the year ended 30 June 2015. We accept that the association meets the meaning of a public educational institution for the year ended 30 June 2015. | Detailed Reasoning - Special conditions: A public educational institution is not exempt from tax unless it satisfies at least one of the conditions in subsection 50-55(1) of the ITAA 1997 and satisfies both conditions in subsection 50-55(2) of the ITAA 1997. One of the conditions in subsection 50-55(1) of the ITAA 1997 is that the public educational institution has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia. The conditions in subsection 50-55(2) of the ITAA 1997 are that the public educational institution must at all times during an income year: (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. Applying the association's circumstances Subsection 50-55(1) of the ITAA 1997 The association is a public company registered and physically present in Australia. For the whole year ended 30 June 2015 the association incurred its expenditure and pursued its objects 100% of the time in Australia. Subsection 50-55(2) of the ITAA 1997 (a) The association's Constitution provides it's governing rules including: • objects/purpose • non-profit status - including that the derived income and property of the association will be applied solely towards the promotion of the objects in the Constitution and no proportion will be paid or transferred, directly or indirectly by way of dividend, bonus or otherwise to Members • winding up - including that upon the winding up or dissolution of the company any remaining property will not be paid to or distributed among the Members • criteria for admission as a member • the requirement for member details to be entered in a register • the powers of the company and its directors • the requirement to hold annual general meetings • votes of members • the requirement to keep accounting records and prepare and present financial reports and statements • the requirement to appoint auditors. The above are substantive requirements of the association's governing rules as they define the rights and duties of the association. For the whole of the year ended 30 June 2015 the association operated in a manner consistent with all of the rules in the Constitution thereby complying with the substantive requirements listed above. (b) For the whole of the year ended 30 June 2015, the association applied its income and assets solely, through its various activities, to educate both the particular professional community and the general public about the field; being the purpose/object for which the association is established. The association's Profit and Loss Statement for the year ended 30 June 2015 supports the association's continuing not for profit status. In accordance with the relevant governing rule in the Constitution, derived income and property will be applied solely towards the promotion of the association's objects and no proportion will be paid or transferred, directly or indirectly by way of dividend, bonus or otherwise to Members. We accept that the purpose for which the association operated throughout the year ended 30 June 2015 is consistent with the purpose for which it was established on registration. Accordingly, for the year ended 30 June 2015, the association satisfies the special conditions in subsections 50-55(1) and 50-55(2) of the ITAA 1997 that must be met by a public educational institution. | Detailed Reasoning - Conclusion: Therefore, as the association is a public educational institution covered by section 50-5 of the ITAA 1997 and meets the special conditions in section 50-55 of the ITAA 1997 its income will be exempt from income tax under section 50-1 for the year ending 30 June 2015.