Private ruling: FBT Rebate for a rebatable employer
Published: March 2014
Ruling period: 1 April 2014 to 31 March 2015 | 1 April 2015 to 31 March 2016 | 1 April 2016 to 31 March 2017
Date scheme commenced: 1 April 2014

Ruling: Q1: Is the taxpayer entitled to a rebate of the fringe benefits tax payable on fringe benefits it provides to its employees pursuant to section 65J of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes.

Relevant facts and circumstances: You are a non-profit incorporated association for community service purposes. You are governed by a volunteer Board of Directors. You are registered in a state of Australia under the appropriate Act. You have a physical presence in Australia. You are not a charitable institution. You are not a public benevolent institution. You are not a body established for political or lobbying purposes.

Relevant legislative provisions: Section 65J of the Fringe Benefits Tax Assessment Act 1986

Reasons for decision: Summary: Subsection 65J(1) of the FBTAA states that an employer is a rebatable employer for a year of tax if the employer: (a) is exempt from income tax at any time during the year of tax under any of the provision set out in the following table, and (b) satisfies the special conditions (if any) set out in the following table. The table below is an extract of the rebatable employer table found after subsection 65J(1) of the FBTAA. | Detailed Reasoning - Special conditions: 5 a society, association or club: See subsection (5) of this section. (a) established for community service purposes (except political or lobbying purposes); and (b) covered by item 2.1 of the table in section 50-10 of the Income Tax Assessment Act 1997 (ITAA 1997). Section 50-10 of the ITAA 1997 provides the table below in respect to entities that have non assessable income under the Act: | Detailed Reasoning - Special conditions: 2.1 society, association or club established for community service purposes (except political or lobbying purposes) see section 50-70 Section 50-70 of the ITAA 1997 states that an entity covered by item 2.1 is not exempt from tax unless the entity is a society, association or club that is not carried on for the purpose of profit or gain of its individual members and: a) has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia; or b) is a society, association or club that meets the description and requirements in item 1 of the table in section 30-15; or c) is a prescribed society, association or club which is located outside Australia and is exempt from income tax in the country in which it is resident; and the entity satisfies the conditions in subsection (2). The entity must under subsection 50-70(2) of the ITAA 1997: 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. Subsection 65J(5) of the FBTAA states that a society, association or club is not covered by table item 4, 5, 8, 9, 10, 11 or 12 in subsection (1) of a year of tax if it is: (a) an incorporated company where all the stock or shares in the capital of the company is or are beneficially owned by: i. the Commonwealth, a State or Territory, or ii. an authority or institution of the Commonwealth, a State or a Territory, or (b) an incorporated company where the company is limited by guarantee and the interests and rights of the members in or in relation to the company are beneficially owned by: i. the Commonwealth, a State or Territory, or ii. an authority or institution of the Commonwealth, a State or a Territory. The phrase ' community service purposes' is discussed in part in paragraph 3 of Taxation Determination TD 93/190 which states: The term 'community service purposes' has a broader meaning than other purposes beneficial to the community which are also charitable". The Explanatory Memorandum to subparagraph 23(g)(v) confirms that the words 'community service purposes' are to be given a wide interpretation. 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. The words 'community service purposes' extend to a range of altruistic purposes that do not qualify as charitable purposes and would cover activities 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. An exclusion from the exemption will apply to bodies established for political or lobbying purposes. It is necessary therefore to look at both the objects and activities of the taxpayer which determine its defined and actual preoccupations. The objects of the taxpayer have not changed significantly since the previous ruling. The taxpayer's objects include advocacy, identification of needs, and the provision of information literature in the area of recreation for older persons in the state of Australia. The taxpayer's objects also consist of providing a liaison, education and resource service between personnel in the field and various agencies, training for officers/leaders in recreation and developing physical activity and physical activity programs. It has also been established that the activities of the taxpayer have not changed since the previous ruling. The activities include providing training courses, projects, resources, information and education in the area of promoting recreation to the community. Based on the above information, the taxpayer is a community service organisation established for the altruistic purpose of promoting active recreational and physical activity opportunities for the ageing population in that state of Australia. This is reflected in the objects of the taxpayer's constitution and its activities. The taxpayer does not confer private benefits on its members and its activities are not of a political or lobbying purpose. It is therefore considered that the taxpayer operates for altruistic community service purposes directed to members of the community in need. Based on the above information, the taxpayer is entitled to a rebate of the fringe benefits tax liability on benefits provided to its employees pursuant to subsection 65J(1) of the FBTAA.