Private ruling: Income tax exemption and fringe benefit tax exemption
Date of advice: 25 July 2017
Published: November 2017
Ruling period: ● 01 July 2016 to 30 June 2017 | ● 01 July 2017 to 30 June 2018 | ● 01 July 2018 to 30 June 2019 | ● 01 July 2019 to 30 June 2020 | ● 01 July 2020 to 30 June 2021 | ● 01 July 2021 to 30 June 2022 | ● 01 July 2022 to 30 June 2023 | ● 01 July 2023 to 30 June 2024 | ● 01 July 2024 to 30 June 2025 | ● 01 July 2025 to 30 June 2026
Date scheme commenced: 1 July 2016

Ruling: Q1: Is the income of the Entity exempt from income tax pursuant to section 24AM of the Income Tax Assessment Act 1936 (ITAA 1936) by virtue of the Entity being a State/Territory body? | A1: Yes

Relevant facts and circumstances: 1. The Entity is an Australian Proprietary Company limited by shares. 2. All of the Entity’s shares are owned by a government entity. 3. The Entity is not listed in the Income Tax (Excluded STBs) Regulations 1997 . 4. The Entity’s purpose is set out in the Entity’s constitution.

Relevant legislative provisions: Fringe Benefit Tax Assessment Act 1986 Section 65J(1), | Fringe Benefit Tax Assessment Act 1986 Section 65J(5), | Income Tax Assessment Act 1936 Section 24AM, | Income Tax Assessment Act 1936 Section 24AN, | Income Tax Assessment Act 1936 Section 24AO and | Income Tax Assessment Act 1936 Section 24AT.

Reasons for decision: Detailed Reasoning - Detailed reasoning: Section 24AM of the ITAA 1936 provides that the income of a State/Territory body (an STB ) is exempt from income tax unless section 24AN applies to the STB. An entity can be an STB in one of five ways described in sections 24AO to 24AS of the ITAA 1936. Based on the facts and circumstances, the relevant way for the Entity to be an STB is the first way in section 24AO of the ITAA 1936. Section 24AN of the ITAA 1936 provides that certain STBs are excluded from being income tax exempt under Division 1AB. | Detailed Reasoning - STB - Section 24AO: Under section 24AO of the ITAA 1936 a body is an STB if: (a) it is a company limited solely by shares; and (b) all of the shares in it are beneficially owned by one or more government entities. A company limited solely by shares The Entity is established under the Corporations Law as a proprietary company limited solely by shares. All of the shares are beneficially owned by one of more government entities Under section 24AT of the ITAA a government entity is defined as: (a) a State; or (b) a Territory; or (c) another STB that is not an excluded STB. Section 24AU further states: For the purposes of sections 24AQ, 24AR and 24AS, if the power to appoint, dismiss or direct the governing body is given to, or is held by: (a) a Governor of a State; or (b) a Minister of the Crown of a State; or (c) a Minister of a Territory; or (d) the head of a Department of a State or a Territory; or (e) any combination of paragraphs (a) to (d); the power is taken to be given to, or held by, a government entity. The shares are considered to be beneficially by a government entity. | Detailed Reasoning - Section 24AN: Section 24AN of the ITAA 1936 provides that certain STBs are not exempt from income tax under Division 1AB. The section states that: Income derived by an STB is not exempt from income tax under this Division if, at the time that it is derived, the STB is an excluded STB. Section 24AT of the ITAA 1936 defines the meaning of 'excluded STB' for this Division as an entity that: (a) at a particular time, is prescribed as an excluded STB in relation to that time; or (b) is a municipal corporation or other local governing body (within the meaning of section 50-25 of the Income Tax Assessment Act 1997 ); or (c) is a public educational institution to which any of paragraphs 50-55(a) to (c) of the Income Tax Assessment Act 1997 applies; or (d) is a public hospital to which any of paragraphs 50-55(a) to (c) of the Income Tax Assessment Act 1997 ) applies; or (e) is a superannuation fund. As the Entity has not been prescribed as an excluded STB in the Income Tax (Excluded STBs) Regulations 1997 and is not an entity described in paragraphs (b) to (e) of section 24AT of the ITAA 1936, the Entity is not an excluded STB. | Detailed Reasoning - Conclusion: The Entity is an STB exempt from Commonwealth income tax under the section 24AM of the Income Tax Assessment Act 1936 (ITAA 1936) as the Entity is considered to be an STB under section 24AO of the ITAA 1936 and is not an excluded STB. | Summary: The Entity is not entitled to a rebate under subsection 65J(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as it is not a rebatable employer. | Detailed Reasoning - Detailed reasoning: Certain not-for-profit entities can receive fringe benefit rebates. In order to qualify as a rebatable employer for fringe benefit tax purposes the not-for-profit entity must meet the criteria in section 65J(1) of the FBTAA, which states: Rebatable employer (1) 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 provisions set out in the following table; and (b) satisfies the special conditions (if any) set out in the following table: | Detailed Reasoning - Special conditions: 1 a registered charity covered by item 1.1 of the table in section 50-5 of the Income Tax Assessment Act 1997 The registered charity is not a rebatable employer for the year of tax if it: (a) is a registered public benevolent institution; or (b) is a registered health promotion charity; or (c) is an institution of the Commonwealth, a State or a Territory; or (d) has not been endorsed under subsection 123E(1); or (e) is not an institution. 2 a scientific institution covered by item 1.3 of the table in section 50-5 of the Income Tax Assessment Act 1997 The institution is not an institution of the Commonwealth, a State or a Territory unless it: (a) is an institution established by a law of the Commonwealth, a State or a Territory; and (b) is not conducted by or on behalf of the Commonwealth, a State or a Territory; and (c) is engaged solely in research into the causes, prevention or cure of diseases in humans. 3 a public educational institution covered by item 1.4 of the table in section 50-5 of the Income Tax Assessment Act 1997 The institution is not an institution established by a law of the Commonwealth, a State or a Territory unless it: (a) is not conducted by or on behalf of the Commonwealth, a State or a Territory; and (b) is a preschool or school (other than a tertiary institution). 4 a society, association or club: (a) established for the encouragement of science; and (b) covered by item 1.7 of the table in section 50-5 of the Income Tax Assessment Act 1997 See subsection (5) of this section. 5 a society, association or club: (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 See subsection (5) of this section. 6 an employer association or an employee association covered by item 3.1 of the table in section 50-15 of the Income Tax Assessment Act 1997 None. 7 a trade union covered by item 3.2 of the table in section 50-15 of the Income Tax Assessment Act 1997 None. 8 a society or association: (a) established for the purpose of promoting the development of: (i) aviation; or (ii) tourism; and (b) covered by item 8.1 of the table in section 50-40 of the Income Tax Assessment Act 1997 See subsection (5) of this section. 9 a society or association: (a) established for the purpose of promoting the development of any of the following Australian resources: (i) agricultural resources; (ii) horticultural resources; (iii) industrial resources; (iv) manufacturing resources; (v) pastoral resources; (vi) viticultural resources; (vii) aquacultural resources; (viii) fishing resources; and (b) covered by item 8.2 of the table in section 50-40 of the Income Tax Assessment Act 1997 See subsection (5) of this section. 10 a society or association: (a) established for the purpose of promoting the development of Australian information and communications technology resources; and (b) covered by item 8.3 of the table in section 50-40 of the Income Tax Assessment Act 1997 See subsection (5) of this section. 11 a society, association or club: (a) established for the encouragement of any of the following: (i) animal racing; (ii) art; (iii) a game or sport; (iv) literature; (v) music; and (b) covered by item 9.1 of the table in section 50-45 of the Income Tax Assessment Act 1997 See subsection (5) of this section. 12 a society, association or club: (a) established for musical purposes; and (b) covered by item 9.2 of the table in section 50-45 of the Income Tax Assessment Act 1997 See subsection (5) of this section. When determining if the Entity fits into any of the above employer types, consideration is given to the nature of the Entity and the Entity’s purposes. The Entity is an Australian Proprietary Company limited by shares. All of the Entity’s shares are owned by a government entity. The Entity’s purposes are laid out in the Entity’s constitution. The Entity’s purposes do not fit any of the items in the above table. | Detailed Reasoning - Conclusion: Therefore as the Entity’s purposes do not fit the requirements for any of the items in the above table the Entity is not a rebatable employer for the purposes of 65J(1) and cannot claim a fringe benefit tax rebate.

Question 1: Is the taxpayer entitled to a rebate under subsection 65J(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | This ruling applies for the following periods: ● 01 April 2016 to 31 March 2017 | ● 01 April 2017 to 31 March 2018 | ● 01 April 2018 to 31 March 2019 | ● 01 April 2019 to 31 March 2020 | ● 01 April 2020 to 31 March 2021 | ● 01 April 2021 to 31 March 2022 | ● 01 April 2022 to 31 March 2023 | ● 01 April 2023 to 31 March 2024 | ● 01 April 2034 to 31 March 2025