Private ruling: Income tax exempt entity
Date of advice: 1 May 2026
Published: 13 July 2026
Ruling period: XXXX to XXXX
Date scheme commenced: XXXX

Ruling: Q1: Is the ordinary and statutory income of A Ltd exempt from income tax pursuant to section 50-1 of the Income Tax Assessment 1997 (ITAA 1997) on the basis that it is a public authority constituted under an Australian law pursuant to item 5.2 of the table in section 50-25 of the ITAA 1997? | A1: Yes. Section 50-1 of the ITAA 1997 exempts from income tax entities which are covered in the tables in Division 50 of the ITAA 1997. This includes an entity which is considered a public authority constituted under an Australian law under item 5.2 in section 50-25 of the ITAA 1997 as an exempt entity. We have concluded that A Ltd is a public authority constituted under an Australian law for the purposes of item 5.2 in section 50-25 of the ITAA 1997 for the following reasons: • A Ltd carries on some undertaking of a public nature for the benefit of the community, as a company limited by shares that operates the XXXX Irrigation Scheme, to supply water delivery and drainage services for the benefit of irrigators who are connected to the Scheme. The supply of water and drainage services is essentially of a public nature, and a function of government, and was previously carried out by the government prior to the transition to local management arrangements. • A Ltd operates as a not-for-profit entity and does not make private profits for its members. • A Ltd has legislative power to do acts in relation to the public which would otherwise be beyond its power, by virtue of being registered as service provider under the State/Territory water legislation; and • A Ltd does have exceptional powers of doing what an ordinary private individual may not do, by virtue of being registered as service provider under the State/Territory water legislation. As A Ltd has a non-charitable purpose, it is not capable of being a registered charity. A Ltd is therefore not an ACNC type of entity and section 50-47 of the ITAA 1997 is not applicable. A Ltd is an exempt entity and satisfies the requirements of section 50-1 of the ITAA 1997. A Ltd is exempt from tax income tax pursuant to section 50-1 of the ITAA 1997.

Relevant facts and circumstances: On XXXX, A Ltd was established as an irrigation entity for the purposes of transition of the XXXX Irrigation Scheme to local management. A Ltd is a company limited by shares that operates the XXXX Irrigation Scheme in a State or Territory within Australia to supply water delivery and drainage services. It operates on a not-for-profit basis with all surplus funds required to be retained by A Ltd. A Ltd is a designated service provider under the State or Territory water legislation. The XXXX Irrigation Scheme was established by the State or Territory government, and immediately prior to XXXX, it was owned and managed by B Ltd, a State or Territory government-owned corporation which is a bulk water infrastructure developer and manager, owning and operating a number of channel irrigation schemes throughout the State or Territory. In XXXX, the State Government established a project to consider the transition of channel irrigation schemes, including the XXXX Irrigation Scheme, to local management arrangements. On XXXX, the XXXX Irrigation Scheme was transferred by the State or Territory government to local management arrangements. The business, and the assets and liabilities of B Ltd relating to the XXXX Irrigation Scheme were transferred to A Ltd under the State or Territory water legislation. Eligible irrigators who applied for shares in A Ltd were issued with shares in A Ltd. The Constitution of A Ltd outlines the objects of A Ltd and also specifies that the assets and income of A Ltd shall be applied solely in furtherance of its above-mentioned objects and no portion shall be distributed directly or indirectly to its shareholders except as bona fide compensation for services rendered or expenses incurred on behalf of A Ltd. The Constitution of A Ltd also prohibits the payment of dividends to shareholders. The Constitution of A Ltd also specifies that on a winding up or dissolution of A Ltd, any surplus assets of A Ltd remaining after the payment of its debts may not be paid or distributed to a shareholder, but will be given or transferred, for no consideration, to some other body: • that has objects similar to or consistent with any or all of the objects of the Company; and • that has constituent documents that include provisions prohibiting the distribution of income and property, or surplus assets on a winding up, of the body among members except as bona fide compensation for services rendered or expenses incurred on behalf of the body. The latest annual report for A Ltd establishes that essentially all the revenue of A Ltd was derived from activities related to its designation as a service provider under the State or Territory water legislation.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 50-1 | Income Tax Assessment Act 1997 section 50-25 | Income Tax Assessment Act 1997 section 50-47 | Income Tax Assessment Act 1997 section 995-1(1) | Income Tax Assessment Act 1936 section 23(d)