Private ruling: assessable income
Published: December 2011
Ruling period: 1 July 2011 to 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Are donations received by an un-incorporated association assessable income under the provisions of Division 6 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.

Relevant facts and circumstances: This associaton was set up as an un-incorporated association and has less than twenty members. The association and its members are all domiciled in Australia. The purpose of the association is to raise money by donations for a religious work of faith which intends to provide a building for both religious and cultural education aimed at refugees and school children. The association has set up its own bank account and has received an ABN and TFN. The association intends to use volunteer labour provided by its members and all donations are to go towards it religious and cultural education purposes. No monies or items that are received by donation will be used for member gain or profit.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-1 | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10

Reasons for decision: Summary: The donations the association receives are not ordinary or statutory income and as such are not assessable income. | Detailed Reasoning - Detailed reasoning: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Assessable income includes income according to ordinary concepts, which is called ordinary income. Ordinary income has generally been held to include a number of factors, principally that of income from rendering personal services, income from property and income from carrying on a business. Other characteristics in determining income are receipts that are earned, expected or have an element of periodicity or regularity. You have stated that you are a not for profit un-incorporated association relying on donations to establish a building for both religious and cultural education overseas aimed at refugees and school children. It is a matter of judgement to determine whether a donation has sufficient connection to be income. Elements to consider are: · The motive of the donors in seeking to advance the purpose or activities of the recipient and not to receive material benefit for themselves. · The character of the activities of the not for profit entity. · Whether those activities are income producing. · If the donation is related to an income producing activity. In your case the only income will be donations and no business activity has been undertaken to generate income. The purpose of your association is that of providing a religious work of faith aimed at refugees and children. Therefore, the donations the association receives are not ordinary or statutory income and as such are not assessable income under the provisions of Division 6 of the ITAA 1997.

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