Private ruling: Division 426 of the Taxation Administration Act 1953 and revocation of endorsement - liquidation
Date of advice: 21 February 2018
Published: June 2018
Ruling period: Income year ended 30 June 20XX | Income year ended 30 June 20XX | Income year ended 30 June 20XX | Income year ended 30 June 20XX | Income year ended 30 June 20XX
Date scheme commenced: 23 April 20XX

Ruling: Q1: Will the Commissioner revoke the organisation’s current endorsements under subsection 426-55(1) of Schedule 1 (Sch 1) of the Taxation Administration Act 1953 (Cth) (TAA)? | A1: No | Q2: Are the Liquidators required to give the Commissioner written notice under subsection 426-45(1) of Sch 1 of the TAA? | A2: No | Q3: Are the Liquidators required to lodge income tax returns under section 161 of the Income Tax Assessment Act 1936 for any of the income years ending before or after their appointment? | A3: No

Relevant facts and circumstances: 1. The organisation has been registered as a charity under the Australian Charities and Not- for-Profits Commission Act 2012 ( Cth) since 3 December 20XX. 2. The organisation has been income tax exempt since 1 July 20XX. 3. The organisation has had GST concessions and the FBT rebate since 1 July 20XX . 4. The members of the organisation unanimously resolved that the organisation be wound up voluntarily and the Liquidators be appointed. 5. The Commissioner of the ACNC has been notified of the appointment of the Liquidators. 6. To date, the ACNC has not revoked the registration of the organisation. 7. The organisation has a physical presence in Australia and to that extent, incurred its expenditure and pursued its objectives principally in Australia. At all relevant times it has applied its income and assets solely for the purpose for which it is established, notwithstanding the appointment of Liquidators.

Relevant legislative provisions: Division 426 of the Tax Administration Act 1953 | Division 30 of the Australian Charities and Not-for-Profits Commission Act 2012 ( Cth) | Division 50 of the Income Tax Assessment Act 1997 | Section 65J of the Fringe Benefits Tax Assessment Act 1986 (FBTA Act) | Section 123E of the Fringe Benefits Tax Assessment Act 1986 (FBTA Act) | Division 176 A New Tax System (Goods and Services Tax) Act 1999

Reasons for decision: Summary: Section 426-55(1) of Sch 1 of the TAA states: The Commissioner may revoke the endorsement of an entity if: (a) at any time after the date of effect of the endorsement, the entity is not, or was not, entitled to be endorsed; or (b) the Commissioner has required the entity under section 426-40 to provide information or a document that is relevant to its entitlement to endorsement and the entity has not provided the required information or document within the time specified in the requirement; or (c) in the case of an entity endorsed under section 30-120 of the Income Tax Assessment Act 1997 - the entity has contravened Subdivision 30-CA of that Act (which requires the entity to ensure that certain things are stated in any receipts it issues for certain gifts). Section 426-55(2) of Sch 1 of the TAA states: The revocation has effect from a day specified by the Commissioner (which may be a day before the Commissioner decided to revoke the endorsement). None of the conditions specified in Section 426-55(1) of Sch 1 of the TAA currently apply to the organisation. | Detailed Reasoning - Income Tax: The organisation is a registered charity within the meaning of the Income Tax Assessment Act 1997 (ITAA 1997) and is endorsed under section 50-110 of the ITAA 1997 as exempt from income tax. The organisation currently satisfies all the relevant conditions for endorsement in section 50-110 of the ITAA 1997. Subsection 50-110(2) of the ITAA 1997 is satisfied because the organisation is covered by item 1.1 of the table in section 50-5 of the ITAA 1997 being a registered charity with the Australian Charities and Not-for-Profits Commission (ACNC). The organisation has satisfied subsection 50-110(3) 1TAA 1997 because it has an ABN. Subsection 50-110(5)(a) of the ITAA 1997 requires that an entity meets the relevant conditions referred to in the column headed “SpeciaI conditions” of item 1.1 of the table in section 50-5 of the ITAA 1997. The Special conditions refer to sections 50-50 and 50-52 of the ITAA 1997. However, subsection 50-110(6) of the ITAA 1997 provides that the condition in section 50-52 is not relevant for the purposes of subsection 50-110(5) of the ITAA 1997. The organisation has satisfied paragraph 50-50(1)(a) of the ITAA 1997 because it has a physical presence in Australia and, to that extent incurs its expenditure and pursues its objectives principally in Australia. The organisation has satisfied subsection 50-50(2) of the ITAA1997 because it complies with all the substantive requirements in its governing rules, and applies its income and assets solely for the purpose for which it is established. Subsection 50-110(5) ITAA 1997 also provides that if the entity is an ACNC type of entity it must satisfy section 50-47 1TAA 1997 . Subsection 50-110(5) of ITAA 1997 is satisfied because the organisation satisfies section 50-47 of the ITAA 1997 as it is a registered charity with the ACNC and is covered by item 1.1 of the table in section 50-5 of the ITAA 1997. The Australian Charities and Not-for-Profits Commission Act 2012 ( Cth) (ACNC Act) under Section 35-10 states as follows: (1) The Commissioner may revoke the registration of a registered entity if the Commissioner reasonably believes that any of the following conditions are met: (a) at any time after the date of effect of the registration, the entity is or was not entitled to registration; (b) the registered entity provided, in connection with its application for registration, information that was false or misleading in a material particular; (c) at any time after the date of effect of the registration: (i) the registered entity has contravened a provision of this Act, or it is more likely than not that the registered entity will contravene a provision of this Act; or (ii) the registered entity has not complied with a governance standard or external conduct standard, or it is more likely than not that the registered entity will not comply with such a standard; (d) the registered entity has: (i) a trustee in bankruptcy; or (ii) a liquidator; or (iii) a person appointed, or authorised, under an Australian law to manage the affairs of the entity because it is unable to pay all its debts as and when they become due and payable; (e) the registered entity has made a request to the Commissioner, in the approved form, that the Commissioner revoke the registration. The ACNC has not revoked the organisation’s registration as a charity. The Commissioner of Taxation will not revoke its current endorsements because the organisation currently meets all the relevant conditions. | Detailed Reasoning - GST endorsement: The A New Tax System (Goods and Services Tax) Act 1999 (GST Act) under subsection 176-1(2) provides that an entity is entitled to be endorsed as a charity if it is an “ACNC registered charity” and it has an ABN. An “ACNC-registered charity” is defined in section 195-1 GST Act as an entity that is registered under the ACNC Act as the type of entity mentioned in column 1 of item 1 of the table in subsection 25-5(5) ACNC Act. The organisation satisfies paragraph 176-1(2)(a) GST Act because it is a registered under the ACNC Act as a charity, and therefore registered as the type of entity mentioned in column 1 of item I of the table in subsection 25-5(5) ACNC Act. The organisation satisfied paragraph 176-1(2)(b) GST Act because it has an ABN. Therefore, the organisation has at all relevant times continued to be entitled to be endorsed by the Commissioner as a charity under subsection 176-1(2) of the GST Act. | Detailed Reasoning - FBT endorsement: The Fringe Benefits Tax Assessment Act 1986 (FBTA Act) under subsection 123E(2) provides that an entity is entitled to be endorsed as a registered charity covered by table item 1 of subsection 65J(1) FBTA Act if the entity: (a) is a registered charity covered by column 1 of that table item; (aa) satisfies the special conditions set out in that table item (other than the condition relating to endorsement under subsection 123E(1); and (b) has an ABN. A registered charity covered by table item 1 in subsection 65J (1) FBTA Act is a registered charity covered by item 1.1 of the table in section 50-5 ITAA 1997. Therefore, the organisation has at all relevant times been entitled to be endorsed by the Commissioner because it has satisfied subsection 123E(2). The Commissioner of Taxation will not revoke its current endorsements because the entity currently meets all the relevant conditions. | Detailed Reasoning - Question 2: Section 426-45(1) of Sch 1 of the TAA states: Before, or as soon as practicable after, an entity that is endorsed ceases to be entitled to be endorsed, the entity must give the Commissioner written notice of the cessation. The organisation currently retains its charity registration with the ACNC and satisfies the other special conditions therefore, it currently retains its endorsement status. However, if its circumstances change the Commissioner of Taxation must be notified. | Detailed Reasoning - Question 3: As the organisation currently retains its charity registration with the ACNC and consequently continues to be endorsed as income tax exempt it is not required to lodge income tax returns under section 161 of the ITAA 1936. For this reason, the Liquidators are not required to lodge income tax returns for any of the years prior to, or after, their appointment.