Private ruling: Income tax exemption
Date of advice: 21 February 2017
Published: August 2017
Ruling period: 1 July 2016 to 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Under the Scheme proposed will there be a taxable capital gain under section 102-5 of the Income Tax Assessment Act 1997? | A1: No | Q2: Under the proposed scheme will the income derived by the proposed Trust be exempt from income tax under section 11-5 of the Income Tax Assessment Act 1997? | A2: Yes

Relevant facts and circumstances: 1. The trustees have decided to petition the Supreme Court to amalgamate the holdings of the two trusts. 2. The trusts are currently registered as charities with the Australian Charities and Not-for-Profits Commission and are endorsed by the Commissioner of Taxation as charities that are exempt from income tax under Division 50 of the Income Tax Assessment Act 1997 . Assumptions 1. The court will make a decision in respect of the scheme that the Trust as varied will continue as the proposed new Trust. 2. The court order will not result in the proposed Trust ceasing to be registered with the Australian Charities and Not-for-Profit Commission (ACNC). 3. The proposed new Trust satisfies the special condition in paragraph 50-70(2)(a) of the Income Tax Assessment Act 1997, specifically that the Trust will comply with all the substantive requirements in its governing rules.

Relevant legislative provisions: Income Tax Assessment Act 1997 , section 102-5 | Income Tax Assessment Act 1997 , section 11-5 Question 1 | Under the Scheme proposed will there be a taxable capital gain under section 102-5 of the Income Tax Assessment Act 1997?

Reasons for decision: Detailed Reasoning - Detailed reasoning: Under the proposed scheme the income derived from the Trust will be exempt from income tax if the Trust is registered with the ACNC as a charity and endorsed by the Taxation Commissioner as satisfying the special condition in paragraph 50-70(2)(a) of the Income Tax Assessment Act 1997.

Reasons for decision: Section 102-5 Income Tax Assessment Act 1997 states that assessable income includes capital gains. | However, under section 11-5 of the Income Tax Assessment Act 1997 income is exempt if derived from certain entities such as registered charities. | The Trust is registered with the Australian Charities and Not-for-Profits Commission (ACNC ) as a charity and is endorsed by the Taxation Commissioner as exempt from income tax under Division 50 of the Income Tax Assessment Act 1997 therefore any capital gains are also exempt.