Private ruling: Mutual income
Published: 29 June 2026
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the principle of mutuality apply so as to exclude entrance fees and annual subscription fees received by the Company from its members from its assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. The principle of mutuality will apply to entrance and subscription fees paid to the Company by members as they are contributions to a common fund for a common purpose. Any distribution of surplus after contributed funds have been applied to that common purpose will be a return of funds and will not be income or profit. As you cannot, in essence, derive any gain, and therefore income, from dealings with yourself these entrance and subscription fees will not be assessable income. | Q2: Will the principle of mutuality apply to the Company's fees for services to non-members or income from investments so as to exclude them from assessable income under section 6-5 of the ITAA 1997? | A2: No. Mutuality can only apply to contributions from members to a common fund. Income from external sources, such as income from services provided to non-members or bank interest from investments, does not come from members so mutuality does not apply. As such the income from non-members and income from investments paid to the Company will be ordinary income and assessable under section 6-5 of the ITAA 1997. | Q3: Will receipt of income from non-members preclude the Company from applying the principle of mutuality to receipts from members where receipts from members can be excluded from the income that is assessable under section 6-5 of the ITAA 1997? | A3: No. At their present level receipts from non-members and bank interest do not preclude the company from applying mutuality to receipts from members. Should trade for profit with non-members increase to such an extent that it could no longer be said that trading with non-members is merely an incident of providing services to members, mutuality will be displaced, and mutuality will no longer apply to receipts from Members.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5


The Company is incorporated as a public company limited by guarantee. | The Company is a not for profit incorporated association of small providers in a specific regulated industry that uses collective purchasing power to secure value in contracts for members, facilitate supplier arrangements, represent members within the industry, and provide support to members on these matters. | Company membership is restricted to providers that are registered under the legislation that regulates the industry. | There is only one class of membership. The Company has X members and also provides support and services to several non-members. | The Company objects given in the constitution are to provide members with commercially advantageous relationships and support services, to raise money and secure funds for this purpose, and to receive and distribute funds in a manner appropriate to these objects. | Membership is limited in the Company constitution to entities that are registered under the relevant industry legislation. Members pay entrance and annual subscription fees and each member has a right to one vote. Member subscription fees are to be calculated by a formula prescribed by the Board and may be reduced if a surplus is derived from services provided by non-members. | Under the Company constitution Directors are elected by members but existing Directors may also appoint Directors if the need arises. The number of elected Directors must exceed the number of appointed Directors for a Board meeting quorum. Directors may exercise all powers of the company as are not required by legislation or the Company constitution to be exercised by a general meeting of members. | The Company constitution prohibits the Company from paying or transferring Company income or property to any Member. On the dissolution of the Company, however, surplus property may be distributed to members after satisfaction of all debts and liabilities. | The Company offers and provides the same services to members and non-members. The services to be provided to non-members and the fees for those services are specified in their contracts. The agreement contracts with non-members do not confer any constitutional right of membership or right to share in the distribution of any surplus on the winding up or dissolution of the Company. | The formula for the annual member subscription fee takes into account the expected expenditure for the coming year less the surplus income from bank interest and non-member services. | The fees for non-members are negotiated from a starting point that is X% higher than the fees that are charged for members. Receipts for payments from members and non-members are recorded in separate accounts. | In the relevant financial years, the Company has negotiated and administered agreements on behalf of its members with partners and providers, and collected, analysed, and disseminated data for use in these activities and other support services provided to members. Provision of services to non-members contributes to and expands the data held in the Companie's data warehouse. This contributes to more effective negotiation on the terms of agreements with partners and providers. | In the 3 years before the relevant period fees from members made up approximately XX% of the Company's income. Fees from non-members contributed approximately XX%, and interest X%. The Company expects that each of these income sources will continue in similar proportions in the years covered by the relevant period. | The Company currently holds less than $X amount in surplus and is expecting an operating surplus of approximately $X amount for each of the financial years in the relevant period. Surpluses are primarily held by the Company as reserves to ensure the future viability of the Company. | In the X years prior to the relevant period the Company used surplus funds to reduce member fees and meet legal costs. In the relevant financial years the Company intends to use surplus funds these purposes and to extend the shared service model proved for member funds, enhance data and analytical services, and to upgrade information technology security.