Private ruling: Income tax exemption - Deductible Gift Recipient
Date of advice: 8 November 2017
Published: March 2018
Ruling period: 01 January 2017 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
Date scheme commenced: 1 January 2017

Ruling: Q1: If the entity implements the Proposed Policy will it cause it to cease being a tax exempt entity under Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No, providing the entity remains registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC). | Q2: If the entity implements the Proposed Policy, will it cause it to cease being a Deductible Gift Recipient (DGR) under Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A2: No, providing the entity remains registered as a ‘health promotion charity’ with the Australian Charities and Not-for-profits Commission (ACNC).

Relevant facts and circumstances: 1. The entity is registered as a ‘charity’ and a ‘health promotion charity’ with the Australian Charities and Not-for-profits Commission (ACNC). 2. The entity is currently endorsed as income tax exempt as a ‘registered charity’ under item 1.1 of section 50-5 of the ITAA 1997. 3. The entity is currently endorsed as a Deductible Gift Recipient (DGR) as a ‘registered health promotion charity’ under item 1.1.6 of section 30-20 of the ITAA 1997. 4. The entity has objects in its constitution consistent with a health promotion charity.

Relevant legislative provisions: Section 30-15 of the Income Tax Assessment Act 1997 | Section 30-20 of the Income Tax Assessment Act 1997 | Section 30-125 of the Income Tax Assessment Act 1997 | Section 50-1 of the Income Tax Assessment Act 1997 | Section 50-5 of the Income Tax Assessment Act 1997 | Section 50-50 of the Income Tax Assessment Act 1997 | Section 50-52 of the Income Tax Assessment Act 1997 | Section 995-1 of the Income Tax Assessment Act 1997

Reasons for decision: Summary: If the entity implements the Proposed Policy, will it cause it to cease being a tax exempt entity under Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997)? 1. An entity is exempt from income tax under section 50-1 of ITAA if it is covered by the tables in Subdivision 50-A. 2. The entity is registered as a charity with the Australian Charities and Not-for Profits Commission (ACNC) and therefore is covered by the item 1.1 ‘registered charity’ in the table in section 50-5. 3. A registered charity in section 50-5 must also comply with the special conditions in sections 50-50 and 50-52 of ITAA 1997. 4. Subsection 50-50(1) will be met by the entity if it has a physical presence in Australia, and to that extent incurs its expenditure and pursues its objects principally in Australia, or is a Deductible Gift Recipient (DGR) under item 1 in the table in section 30-15 of the ITAA 1997. 5. The entity is currently endorsed as an item 1 DGR, in the table in section 30-15, by meeting the description of a ‘registered health promotion charity’ under section 30-20 in Subdivision 30-B of the ITAA 1997. Therefore the entity meets the special condition in subsection 50-50(1) by virtue of being a DGR. (See Question 2 regarding the entity maintaining its DGR status under the Proposed Policy.) 6. Subsection 50-50(2) requires that an entity must comply with all the substantive requirements in its governing documents and apply all its income and assets solely for the purposes for which the entity is established. 7. On the facts provided, and the requirement that the entity would maintain its status as a charity registered with the ACNC under Proposed Policy (and therefore have a sole charitable purpose), there is nothing to indicate that the entity would cease to meet the special conditions under subsection 50-50(2). 8. Section 50-52 states that an entity covered by item 1.1 in the section 50-5 is not exempt from income tax unless it is endorsed as exempt under Subdivision 50-B. 9. To be entitled to be endorsed as exempt under Subdivision 50-B the entity must: ● be a charity registered with the ACNC, ● have an ABN, and ● meet the special conditions under sections 50-50 and 50-52 10. The entity currently meets all the requirements to be entitled to be endorsed. 11. On the facts provided, if the entity enters into the Proposed Policy it will still be entitled be endorsed provided that it continues to be registered as a charity with the ACNC. If the entity implements the Proposed Policy, will it cause the entity to cease being a Deductible Gift Recipient (DGR) under Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997)? 12. Under section 30-125 of the ITAA 1997 the entity is entitled to be endorsed as a DGR if: a) it has an Australian Business Number (ABN), b) t is an institution described in item 1, 2 or 4 of the table in section 30-15 of ITAA 1997, and c) meets the ‘special conditions’ relevant to the item of that table in which it is described. 13. The entity has an ABN and is currently endorsed as an item 1 DGR, in the table in section 30-15, by meeting the description of a ‘registered health promotion charity’ under section 30-20 in Subdivision 30-B of the ITAA 1997. 14. The only special condition relevant to this item is that the entity must be ‘in Australia’. Since the entity was established and is operated in Australia this requirement is met. 15. Under section 995-1 of ITAA 1997 a ‘registered health promotion charity’ is defined as: “an institution that is a) a *registered charity; and b) registered under the Australian Charities and Not-for-profits Commission Act 2012 as the subtype of entity mentioned in column 2 of item 14 of the table in subsection 25-5(5) of that Act. 16. The entity is currently registered with the ACNC as a ‘charity’ and a ‘health promotion charity’. 17. On the facts provided, if the entity enters into the Proposed Policy, it will still be entitled to be endorsed as a DGR provided that it continues to be registered as a ‘charity’ and a ‘health promotion charity’ with the ACNC.