Private ruling: Eligibility to self-assess as tax exempt
Date of advice: 22 March 2018
Published: July 2018
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does the association meet the special conditions in section 50-55 of the Income Tax Assessment Act 1997 (ITAA 1997) for a scientific institution, as covered by item 1.3 of the table in section 50-5 of the ITAA 1997 so that it’s income is exempt from income tax under section 50-1 of the ITAA 1997? | A1: Yes

Relevant facts and circumstances: The Association is a public company limited by guarantee, registered in a state of Australia in the 1950’s. The Association is the state branch of the national association and affiliated with the international association. The Association is not registered as a charity under the Australian Charities and Not-for-profits Commission Act 2012. The Association is a not for profit association. The Association’s Memorandum and Articles of Association provides the Association’s governing rules and regulations. The Memorandum of Association lists the objects for which the Association was established. The Memorandum of Association also contains clauses regarding: ● the Association’s non-profit status – stating that the income and property of the Association shall be applied solely towards the promotion of the objects of the association in the Memorandum of Association and no portion shall be paid or transferred directly or indirectly, by way of dividend, bonus or otherwise by way of profit to the members of the Association; and ● winding-up or dissolution. ● The Articles of Association contain the regulations by which the Association is governed covering: ● the criteria for admission to membership ● the requirement for member details to be entered in a register ● the requirement to hold annual general meetings ● votes of members ● the powers of the directors ● the requirement to keep proper accounts and prepare and present financial reports and statements ● the requirement to appoint auditors. The Association has less than 50 members. The Association members are all qualified in the particular field of science and are members of the international association. Members come from a variety of professional backgrounds such as psychiatry, medicine, psychology or social work. Individual members of the Association offer analysis and analytic therapy to clients as well as offering clinical supervision for therapists and other health professionals. Many work in private practice; others in hospitals and mental health settings. The specific activities of the Association in relation to the particular field of science include training analysts, teaching analysis and the dissemination of ideas through public lectures, seminars, workshop and other outreach activities. These are open to all members of the community and to health professionals with varying levels of clinical training and experience. Current outreach programs of the Association include: ● an annual conference with a visiting guest speaker and presentations by members. The conference has sessions open to all members of the public ● seminars and talks held by members on particular topics or areas of interest ● a new course which will be helpful to psychiatrists, psychologists, social workers, GPs, nurse practitioners, organisational consultants and lawyers. As well as syllabus readings, participants are provided with a subscription to an online, international database which provides access to most journals in the particular field of science; and access to the Associations physical library ● small group seminars – group based regular meetings to explore or teach particular topic areas ● client assessments – accessed through referrals or directly by clients who complete an online application form. Assessments are carried out by Association members followed with a referral for treatment to a suitably qualified health professional ● Introduction course – offers clinicians a chance to deepen their therapy skills. Does not give a clinical qualification but many participants use the course as a foundation for further studies at the Association and other organisations. ● The Association’s tax professional has undertaken a review of the objects of the Association and its activities to date and assessed that the Association: ● has a physical presence in Australia and incurs its expenditure and pursues its objectives principally in Australia ● complies with all the substantive requirements in its governing rules; and ● applies its income and assets solely for the purpose for which the Association was established.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 50-1 | Income Tax Assessment Act 1997 section 50-5 | Income Tax Assessment Act 1997 section 50-55 | Income Tax Assessment Act 1936 section 161

Reasons for decision: Summary: For the ordinary and statutory income of an organisation to be exempt from income tax under Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997), that organisation must be an entity covered by the tables of exempt entities contained in subdivision 50-A of the ITAA 1997. Sections 50-1 and 50-5 of the ITAA 1997 provide an exemption from income tax for the ordinary and statutory income of scientific institutions. Under item 1.3 of the table in section 50-5 of the ITAA 1997 an entity will be exempt from income tax if it satisfies these requirements: 1) it is a scientific institution; and 2) it meets the special conditions contained in section 50-55. | Detailed Reasoning - 1) Scientific Institution: Whether an entity is an institution is indicated by a range of factors including activities, size, permanence and recognition. In this case, the Association was incorporated in the 1950’s and is still operating which is testament to its longevity and indicative of its permanency. The Association has less than 50 members but is part of a larger organisation. It is the state branch of the Australian association and affiliated with the International association. We are satisfied that the Association is an institution. For an institution to be a scientific institution it must be set up and operated primarily to advance science. This can be determined by the organisation's main objects and activity. Ways of advancing science include research, exploration, teaching and disseminating information. The results of the entity’s activities should be available to the community at large. Scientific institutions do not include organisations run for the profit of their members or professional associations primarily run for the professional or business interests of their members. As detailed in the facts, the Association advances science in the particular field by: ● disseminating information about relevant analysis through public lectures, seminars workshops and conference open days for therapists and other health professionals; and the public ● the training of analysts ● running courses for participants including not only psychiatrists, psychologists and social workers but medical GPs, nurse practitioners and lawyers ● providing course participants with a subscription to an online international database and physical library ● providing clinical supervision to therapists and other health workers ● promoting and participating in analytical research ● conducting group sessions where analytical ideas are explored ● conducting client assessments and referring clients for treatment to suitably qualified health professionals. The Association is a not for profit organisation. Members come from a variety of professional backgrounds including psychiatry, psychology, medicine and social work. All members are qualified analysts in the particular field of science and members of the international association. They offer analysis and analytic therapy in the particular field of science to their clients. Many work in private practice; others in hospitals and mental health settings. While the objects and activities of the Association are likely to build on members existing skills, which could advance them professionally, we consider this incidental and secondary to the Association’s object to advance the science of analysis in this field. We are satisfied that, to date, the Association is being carried on for the promotion of science and not for the promotion of the professional interest or advantage of the members. | Detailed Reasoning - 2) Special conditions: A scientific institution is not exempt from tax unless it satisfies at least one of the conditions in subsection 50-55(1) of the ITAA 1997 and satisfies both conditions in subsection 50-55(2) of the ITAA 1997. One of the conditions in subsection 50-55(1) of the ITAA 1997 is that the scientific institution has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia. The conditions in subsection 50-55(2) of the ITAA 1997 are that the scientific institution must at all times during an income year: a) comply with all the substantive requirements in its governing rules; and b) apply its income and assets solely for the purpose for which the entity is established. | Detailed Reasoning - Applying the Association’s circumstances: Subsection 50-55(1) of the ITAA 1997: The Association is an Australian public company physically present in Australia. For the whole of the income years for the ruling, the Association incurred its expenditure and pursued its objects 100% of the time in Australia. Subsection 50-55(2) of the ITAA 1997: a) The Association’s Memorandum and Articles of Association contains many of the Association’s governing rules including: ● objects (purpose) ● non-profit status – including that the derived income and property derived will be applied solely towards the promotion of the Association’s objects and no portion will be paid or transferred, directly or indirectly by way of dividend, bonus or otherwise to members ● winding up – including that upon the winding up or dissolution of the company any remaining property will not be paid to or distributed among the members ● criteria for admission to membership ● the requirement for member details to be entered in a register ● the powers of the directors responsible for managing the affairs of the institution ● the requirement to hold annual general meetings ● votes of members ● the requirement to keep proper accounts and prepare and present financial and statements ● the requirement to appoint auditors. The above are substantive requirements of the Association’s governing rules as they define the rights and duties of the Association. Throughout the income years for the ruling the Association operated in a manner consistent with all of the rules in the Memorandum and Articles of Association thereby complying with the substantive requirements listed above. b) For the whole of the income years for the ruling, the Association applied its income and assets solely, through its various activities, to educate people in relevant professions and interested general public about the particular field of science. We accept that the purpose for which the Association operated throughout the income years for the ruling is consistent with the purpose for which it was established in the 1950s. | Detailed Reasoning - Conclusion: For the period of this ruling, the Association is considered to be a scientific institution covered by section 50-5 of the ITAA 1997 and meets the special conditions in subsections 50-55(1) and 50-55(2) of the ITAA 1997. Further, the Association was not a charity throughout this period. Accordingly, the Association can self-assess as income tax exempt for the year ended 30 June 20XX and the year ended 30 June 20XX. | Detailed Reasoning - Other relevant comments: Please be aware of Note 2 to section 50-1 of the ITAA 1997 which states that even if you are an exempt entity the Commissioner can still require you to lodge an income tax return or information under section 161 of the Income Tax Assessment Act 1936 .