Private ruling: Not for profit-charity
Date of advice: 29 April 2026
Published: 13 July 2026
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the Company exempt from income tax under section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as a registered charity under item 1.1 in the table in section 50-5 of the ITAA 1997? | A1: No. | Q2: Is the Company exempt from income tax under section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as a society, association or club established for community service purposes under item 2.1 of the table in section 50-10 of the ITAA 1997? | A2: No.

Relevant facts and circumstances: The Company was registered as a proprietary company limited by shares under the Corporations Act 2001 over a decade ago. The Company operates a contributory benefit business (the Contributory Fund) regulated under the relevant state legislation. The current Contributory Fund rules were adopted shortly after registration. The original Company constitution was adopted with effect from registration under the Corporations Act 2001 and applies for the initial years of the defined scheme period. The Company constitution was amended and approved during the defined scheme period and applies for the latter years of that period. A holding company (Holding Company) been the only shareholder in the Company since its inception and is the sole company member. The Holding Company is registered with the Australian Charities and Not-for-profits Commission as a charity. The Company is not registered as a charity with the ACNC and is not an ACNC type of entity. The Company is not a deductible gift recipient. The Company pursues its objectives and incurs its expenditure principally within Australia. The Company operates out of the Holding Company premises in an Australian city. Constitutions The Company constitution applicable for the initial years of the defined scheme period No statement of objects or purpose are defined or described in the Company constitution applicable in the initial years of the defined scheme period. Under the terms of this constitution the number of company members is limited, and shares may be issued by the directors. Company member meetings may be convened by directors or members and members with voting rights may vote at these meetings. Under this constitution the initial Company directors are determined by the persons specified in the Company's application for registration under the Corporations Act 2001. Subsequent directors are appointed by existing directors to a total that does not exceed a stated maximum number of directors. Company directors are remunerated as determined by the Company at a general meeting. Directors are empowered to manage the business of the Company under this constitution and may exercise all such powers as are not required under the Corporations Act 2001 to be exercised by the Company in a general meeting. The constitution provides for the appointment of a secretary by the directors. The terms of this constitution require the Company to keep and submit such accounting and other records as are required by the Corporations Act 2001. The extent and conditions applying to Company member access to these records are to be determined by the directors where not otherwise authorised under the Corporations Act 2001. This constitution requires minutes of Company member meetings and resolutions, and those of the directors and any director committees, to be entered into books as required under the Corporations Act 2001. These books are to be open for inspection by members. The register of members is also open to inspection by members. There are no not for profit provisions in this constitution. Provisions are made for the payment of dividends to members. The constitution provides for the division of the property among members on the dissolution of the Company. The Company constitution in effect for the latter part of the defined scheme period The stated objects of the Company under the constitution in effect for the latter part of the defined scheme period include the establishment and management of a contributory fund for the benefit of members, the operation of that scheme, and to carry out the activities inherent to the operation of that scheme and the provision of benefits to members including community education and the provision of information. One further provision is made for the provision of benefits to non-members who are in need. Specific powers to implement these objectives are given for the Company in this constitution. Under this constitution the income and property of the Company are only to be applied in promoting the Company's purpose, and no part may be paid, transferred, or distributed by way of dividend, bonus, or other profit distribution to members or board members. The Company constitution in effect for the latter part of the defined scheme period prohibits payment of fees to directors but allows payment of out-of-pocket expenses or remuneration for services provided in a professional or technical capacity. On the winding up or dissolution of the Company this constitution requires the transfer of assets remaining after satisfaction and debts and liabilities to another organisation with similar purposes and not for profit provisions. Under the terms of this constitution the Company is to have only one class of shares, ordinary shares, but with the consent of a majority of members the directors may issues any other class of shares. Member rights are only transferrable with the written consent of the majority of members. The constitution in effect for the latter part of the defined scheme period states that the board must keep a register of members. A specific provision in this constitution provides for the recognition of a written record of a single shareholder's resolution of decision as a resolution while the Company is a single shareholder company. Such written records are considered minutes and must be entered in a minute book. Under this constitution the Company must hold a general annual meeting within 5 months of the end of the financial year. A general meeting may be called by the board, a director, or a member. Resolutions at general meetings are passed on a majority of votes. Company directors are elected by members on the passing of a resolution at a general meeting of the company. A managing director, secretary, and treasurer are nominated by the members. The constitution requires directors to fulfill the duties of directors set out in Corporations Act 2001 and the Australian Charities and Not-for-profits Commission Act 2012. Under the constitution the directors are responsible for managing the Company's affairs and carrying out the purposes of the company. Board meetings are to be held at regular intervals throughout the year. The board or its delegate is required under the constitution to keep all records, books, documents and securities of the Company, including minutes books and financial records. These records are to be made available to members for inspection given a reasonable period of notice. Contributory Fund rules The Objectives of the Contributory Fund are set out in the Contributory Fund rules. These objectives include the provision of benefits to members, the creation of the facilities to provide those benefits, the sourcing of property to deliver the services related to those benefits. Other objectives include developing projects undertaken by the Holding Company and assistance to those in need where sufficient funds are available. The Contributory Fund rules state that the fund has been established primarily for the benefit of Holding Company members but membership is open to other nominated people of a certain religious denomination. Members must pay an entrance and an annual subscription fee. The fund has the power to approve or reject any new member nomination. Provision is made for financial assistance to those in need through the creation of special or temporary memberships. Special members must pay a nominal fee for their membership and the extent of the assistance provided is at the discretion of the directors of the fund. The Contributory Fund rules state that on dissolution of the contributory fund advice will be sought from legal sources or an actuary. Membership Applications for Contributory Fund membership can be obtained by contacting the Company's office bearers or through the Holding Company's community network. The Company does not advertise its services to the public and membership applications typically come through the Holding Company's network. There were several hundred members of the Contributory Fund members in the years of the defined scheme period. Activities Activities undertaken by the Company in the defined scheme period included providing benefits for members, contributor management and reporting, purchase of property rights to support member services, community education on those services, and non-financial assistance to those in need. Over XX% of the Company's expenditure and time allocated in these years was directed to benefits for members. Income and expenditure The income and expenditure of the Company in the defined scheme period was less than $XXX in each year of that period.

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 50-10 | Income Tax Assessment Act 1997 section 50-45 | Income Tax Assessment Act 1997 section 50-47 | Income Tax Assessment Act 1997 section 50-50 | Income Tax Assessment Act 1997 section 50-52 | Income Tax Assessment Act 1997 section 50-70 | Income Tax Assessment Act 1997 section 50-110 | Income Tax Assessment Act 1997 section 995-1 | Income Tax Assessment Act 1936 subparagraph 23(g)(v) | Australian Charities and Not-for-profits Commission Act 2012 subsection 25-5(5)

Reasons for decision: Summary: Section 50-1 of the 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. An entity's exemption from income tax as a registered charity under item 1.1 of section 50-5 of the ITAA 1997 is subject to the special conditions in sections 50-50 and 50-52 of the ITAA 1997. A registered charity is endorsed as such by the Australian Charities and Not-for-profits Commission (ACNC) and for the purposes of income tax, is defined in section 995-1 of the ITAA 1997: registered charity means an entity that is registered under the Australian Charities and Not-for-profits Commission Act 2012 as the type of entity mentioned in column 1 of item 1 of the table in subsection 25-5(5) of that Act. Section 50-50 of the ITAA 1997 provides that a registered charity is not exempt from income tax unless it has a physical presence in Australia, and to that extent incurs its expenditure principally in Australia. Section 50-52 of the ITAA 1997 stipulates that a registered charity is not exempt unless it meets the conditions for endorsement set out in section 50-110 of the ITAA 1997. An entity is entitled to be endorsed pursuant to section 50-110 of the ITAA 1997 if it has an ABN and meets the special conditions listed for item 1.1 in the table in section 50-5 of the ITAA 1997. | Detailed Reasoning - Application to your circumstances: As the Company is not registered as a charity with the ACNC it does not meet the requirements to be exempt from income tax under item 1.1 of the table in section 50-5 of the ITAA 1997. | Detailed Reasoning - Special conditions - sections 50-50 and 50-52 of the ITAA 1997: For the reasons detailed above it is not necessary to consider the special conditions in section 50-50 and section 50-52 of the ITAA 1997. | Detailed Reasoning - Conclusion: As discussed above the Company does not meet the requirements as a registered charity under item 1.1 in the table of section 50-5 of the ITAA 1997. Therefore, the Company will not be exempt from income tax under section 50-1 of the ITAA 1997. | Detailed Reasoning - Question 2: A society, association, or club established for community services (except political or lobbying purposes) is listed at item 2.1 in the table in section 50-10 of the ITAA 1997 and as such will be exempt from income tax subject to the special conditions set out in that table. These special conditions include those set out in section 50-70 of the ITAA 1997 and section 50-47 of the ITAA 1997. An entity is therefore exempt from income tax as a society, association or club established for community services if it: • is a society, association, or club, • is established for community services (except political or lobbying purposes) • satisfies the special conditions. | Detailed Reasoning - A Society, association, or club: The term society, association or club is not defined in the ITAA 1997. The term is therefore construed according to the ordinary meaning of the words. A society, association, or club is described in paragraph 7 of Taxation Ruling TR 2022/2 Income tax: the games and sports exemption as: A voluntary organisation of people associated together for a common or shared purpose. This description is consistent with the Macquarie Dictionary definition of each word: • Society '... an organisation of persons associated together for religious, benevolent, literary, scientific, political, patriotic or other purposes'. • Association '... an organisation of people with a common purpose and having a formal structure'. • Club '... a group of persons organised for a social, literary, sporting, political, or other purpose, regulated by rules agreed by its members'. In Douglas v. Federal Commissioner of Taxation 97 ATC 4722 reference was made by the court to the definitions contained in the Concise Oxford Dictionary for each of these terms. Society, association, or club was accepted by the court as referring to a voluntary organisation having members associated together for a common or shared purpose (at 4726). In Pro-campo Ltd. v. Commr of Land Tax (NSW) 81 ATC 4270 the court considered the meaning of 'society, club or association'. The court stated at 4279: In Theosophical Foundation Pty Ltd v. Commr of Land Tax (NSW) [1966] 67 SR (NSW)...Sugerman JA stated at 82: A society, in the relevant sense, is a number of persons associated together by some common interest or purpose, united by a common vow, holding the same belief or opinion, following the same trade or profession, etc; an association'... The meaning of 'society' as the Oxford English Dictionary definition shows can be the equivalent of 'association' and I do not think that any relevant distinction in nature exists between the two. It merely seems to have happened that some organisations are called 'associations', others are called 'societies' but no meaningful difference can be detected between the two...Although clubs can in some respects and in some instances be seen to be distinguishable by reason of their purposes from societies or associations, they nevertheless fall squarely within the dictionary definition of 'society' set out above. In short the three words are describing bodies made up of groups of persons who have come together to implement common purposes and objects... The meaning of society, association, or club as described above, emphasises a 'body of persons' and 'an organisation of people' with a 'common purpose'. The possibility of a company with one member being regarded as an association has been considered in case law. In Navy Health Ltd v Deputy Commissioner of Taxation [2008] FCA 931 ( Navy Health ) a not-for-profit company providing private health insurance for the families of members of the Australian Defence Forces contended that it was an association for the purposes of subparagraph 23(g)(v) of the Income Tax Assessment Act 1936 (ITAA 1936), the predecessor of the current section 50-45 of the ITAA 1997. While those who held health insurance policies with the insurer were considered fund members there was only one company shareholder and therefore one company member. On finding the company had only one member, another company, Jessup J came to the view that such a company could not be regarded as an association, and any such proposition was 'quite at odds with the natural meaning of the word, and with normal, everyday usage.' | Detailed Reasoning - Application to your circumstances: With one shareholding member, the Holding Company, the Company cannot be considered a society, association or club for the purposes of section 50-10 of the ITAA 1997 as it is not a voluntary organisation of people associated for a common or shared purpose. | Detailed Reasoning - Established for Community Services: The Commissioner's view on the meaning of community services, as the term is used in section 50-10 of the ITAA 1997, is discussed in Taxation Determination TD 93/190 Income tax: what is the scope of the exemption from income tax provided by subparagraph 23(g)(v) of the Income Tax Assessment Act 1936? While subparagraph 23(g)(v) of the Income Tax Assessment Act 1936 (ITAA 1936) has been replaced by the equivalent section 50-10 of the ITAA 1997, the discussion in TD 93/190 is also relevant to the application of the newer provision. For the purposes of section 50-10 of the ITAA 1997 this term is to be given a wide interpretation, but altruistic purposes are an essential element of this interpretation. As noted in paragraph 3 of TD 93/190: Those words extend to a range of altruistic purposes that are not otherwise charitable, such as promoting, providing, or carrying out activities, facilities or projects for the benefit or welfare of the community or any members of the community who have a particular need by reason of youth, age, infirmity or disablement, poverty, or social or economic circumstances. As discussed in paragraphs 4 and 5 of TD 93/190 the provision does not extend to organisations that are established within the community but do not have altruistic purposes or are not of an altruistic nature. Common association as such is not considered altruistic, or the non-profit nature of any such association. Only when the purposes of an association are altruistic can they considered community service purposes. The Explanatory Memorandum to Taxation Laws Amendment Bill (No 2) 1990, the legislation introducing subparagraph 23(g)(v) into the ITAA 1936, provides further information on when an organisation's purposes can be considered community services: When purposes are directed to the benefit or welfare of members of the community in particular need, that need must arise by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances. These causes of need are intended to be read broadly. Infirmity or disablement, for example, could be intellectual or physical, and could be congenital or the product of disease or of injury. Similarly, social or economic circumstances could include such varied matters are sex, living in a remote area, or inability to speak English. As stated in paragraph 7 of TD 93/190 'the purposes for which an organisation is established are demonstrated by its current operations and activities, which may show different purposes to those suggested by a cursory reading of its constitution'. Further guidance on determining the main purpose of an organisation when the stated objects serve more than one purpose can be found in case law. In considering this issue in Royal Australasian College of Surgeons v Federal Commissioner of Taxation 68 CLR 436Latham CJ observed that: ... the question-difficult or easy to answer-must always be-what is the true nature and the objects and activities of the particular society? If these objects and activities are of a mixed character then the question must be decided according to the prevalent or main character. On reviewing previous case law on the question, the court in this case adopted an approach that examined not only constitutional objects, but also the manner in which an organisation fulfills its objects, the sources of its income and how that income was used. This allowed for the determination of a main purpose and subsidiary purposes and the relative weight to be given to given to these purposes in coming to a decision on this question. In Navy Health Ltd v Deputy Commissioner of Taxation [2008] FCA 931 ( Navy Health ) the Federal Court considered the nature of a non-profit company providing private health insurance for the families of members of the Australian Defence Forces. The court found that the company was not providing a service to any person or group of people, as the term service as it is used in the phrase community service would imply a need for the altruistic provision of help, benefit, or advantage. While the insurance products sold by Navy Health were well tailored to the needs of defence personnel families fund members were considered to be consumers of health benefits paid for or subsidised by the fund., In paying premiums for this insurance defence personnel were choosing one from a number of available alternatives. As noted by Jessup J: 84. That brings me to the concept of "community". I accept, of course, that the word refers not only to the community as a whole but also to any identifiable section of the community, but it does not follow that the receipt of a service by any group of persons should be regarded as the receipt of that service by a section of the community. Those who actually received the applicant's services in years in questions were not a section of the community: they were those who, by their own consumer choices, purchased the applicant's products. | Detailed Reasoning - Application to your circumstances: In considering and determining the main purpose of the Company reference is made to their constitution that contained the governing rules and objects. Over XX% of these objectives are directed to the operation of a contributory fund for members, and the management and promotion of the Company in relation to those objectives. The other objective given in this constitution is directed to assistance to those in need. No objectives are given in the Company constitution in effect for the initial years of the defined scheme period. Under the Contributory Fund rules benefits can only be provided to fund members however these rules also allow assistance for non-members in need through the creation of special memberships. Activities undertaken by the company throughout the defined scheme period have included providing benefits for members, contributor management and reporting, the purchase of property rights to support member services, community education on those services, and assistance for non-members in need. While some time has been devoted to community education and assistance for non-members the greater part has been spent on the operation and management of the Contributory Fund for the benefit of. At no stage has financial assistance been provided to those in need. Community education and assistance to those in need are evidently incidental and ancillary to the main objective, the operation and management of the Contributory Fund and the provision of benefits for its members. Under the Contributory Fund rules provision of financial assistance to those in need is through inclusion in the Contributory Fund membership as special or temporary members. While any assistance to those in need is most likely well received any tangible benefits provided are provided, one way or another, to members. In the course of the defined scheme period all the financial assistance provided, and the great majority of the non-financial assistance, was provided to your members. As in Navy Health contributory members of the fund are a group of people choosing as consumers to purchase the benefits offered rather than a section of the community in need. As these people, being the members of the Contributory Fund, are ultimately receiving the benefits of their contributions they cannot be considered to be in receipt of altruistic services. Therefore, the Company, acting through the Contributory Fund is not considered to be an association providing community service as their activities are not altruistic in nature. | Detailed Reasoning - Special conditions - sections 50-47 and 50-50 of the ITAA 1997: For the reasons detailed above it is not necessary to consider the special conditions in section 50-47 and section 50-70 of the ITAA 1997. | Detailed Reasoning - Conclusion: As discussed above, the Company cannot be considered to be a society, association or club established for community service purposes as described in section 50-10 of the ITAA 1997. Furthermore, services provided by the Company in these years were primarily provided for its members and it cannot be considered to be a community service organisation under item 2.1 of the table in section 50-10 of the ITAA 1997 in these years. Therefore, the Company will not be tax exempt under section 50-1 of the ITAA 1997.