Private ruling: Income tax exemption - local government body
Date of advice: 20 November 2020
Published: January 2021
Ruling period: 1 July 2020 to 30 June 2030
Date scheme commenced: 1 July 2020

Ruling: Q1: Is the ordinary income and statutory income of the Council exempt from income tax? | A1: Yes

Relevant facts and circumstances: The Council is a local government body located in XXX. The Council is registered on the Australian Business Register as a Local Government Entity. The XXX Government provides detailed information about the XXX local government sector which includes 128 local councils. The Council is a XXX local government council.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 50-1 | Income Tax Assessment Act 1997 section 50-25 | Income Tax Assessment Act 1997 section 995-1 | Income Tax Assessment Act 1997 Subdivision 50-A

Reasons for decision: Summary: The Council is exempt from income tax. | Detailed Reasoning - Detailed reasoning: Section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the total ordinary income and statutory income of the entities specified in Subdivision 50-A of the ITAA 1997 are exempt from income tax. Section 50-25 of the ITAA 1997 provides for the exemption of Government entities. Item 5.1 of the table in section 50-25 provides that the following are exempt entities: (a) a municipal corporation; or (b) a local governing body. There are no special conditions for income tax exemption for either of these entities. 'Local governing body' is defined by section 995-1 of the ITAA 1997 as 'a local governing body established by or under a State law or Territory law'. Broadly, it refers to a city, town, municipal or shire council. The Council was established as a local governing body under a State law. The Council is therefore a local governing body that is an exempt entity under section 50-25 of the ITAA 1997. Section 50-1 of the ITAA 1997 therefore applies to make the total ordinary and statutory income of the Council exempt from income tax.