Income tax exemption checklist – Scientific organisations
Your organisation can self-assess its income tax exemption if it meets all of the following requirements:
- it is one of the following types of organisations
- a scientific institution
- a not-for-profit society, association or club established for the encouragement of science
- a fund established to enable scientific research to be conducted by or with a public university or public hospital
- it is not a charity
- it complies with all the substantive requirements in its governing rules
- it applies its income and assets solely for the purpose for which it is established
- it meets further conditions for exemption.
Scientific institutions are set up and operated primarily to advance science. Common ways of advancing science include research, exploration and teaching. Disseminating information will often be involved.
Scientific institutions do not include:
- organisations run for the profit of their individual owners or members
- professional associations primarily run for the professional or business interests of their members.
Example 1: Scientific institution
An institution is set up to hold conferences and meetings on an aspect of engineering. Any professional advantage the engineer members gain is only through the institution's advancement of science.
The institution is a scientific institution.
Example 2: Not a scientific institution
A not-for-profit organisation is set up to carry out scientific research. All research is carried out under contract, with the client owning the intellectual property and the organisation bound not to disclose any information about the research.
The organisation is not a scientific institution.End of example
The main purpose of the not-for-profit society, association or club must be the encouragement of science. Recreational or hobby clubs do not qualify. The main purpose must not be promoting the professional or business interests of members.
Example 1: Scientific association
A group of frog enthusiasts sets up an NFP society to observe frogs in the district and record changes in their types, numbers and habits.
The society is established for the encouragement of science.
Example 2: Not a scientific association
A not-for-profit organisation is set up to advance the profession of surveying, raise professional standards and represent the profession to government and industry.
The organisation is not a scientific association.End of example
Scientific research funds
The organisation must only be a fund with sufficient links with public universities or public hospitals. The fund itself does not conduct the scientific research. The research is conducted by the university or hospital, or by other bodies in conjunction with the university or hospital. The fund may enable the research by various means, including providing money or facilities.
Example: Scientific research funds
A fund's sole object is to provide money to a public university for it to carry out medical research. The fund's investment income is given to the university under an agreement requiring it to be used only for medical research.
The fund can qualify for income tax exemption if it meets the other conditions.End of example
Scientific institutions and scientific associations
For a scientific institution or scientific association that is not a charity to be exempt from income tax, it must pass one of the following:
- physical presence in Australia test
- deductible gift recipient (DGR) test
- prescribed by law test.
If your organisation exists, operates and incurs its expenditure solely and entirely in Australia, you meet the physical presence in Australia test. You do not need to read anything further about the three tests.
If your organisation does not exist, operate and incur its expenditure solely and entirely in Australia, see the Explanation of the three tests to work out if you meet any of them.
Scientific research funds
For a scientific research fund that is not a charity to be exempt from income tax, the fund must be applied for the purposes for which it was established. If it is being applied for other purposes it will not be exempt.
The scientific research fund must also meet at least one of two conditions.
One condition is that the fund is a DGR. DGRs are entitled to receive income tax deductible gifts.
To meet the other condition, the fund must:
- be established to enable the scientific research to be conducted principally in Australia by, or in conjunction with, the public university or public hospital
- be located in Australia
- incur its expenditure principally in Australia.
In working out if expenditure is principally incurred in Australia, the fund can disregard any distributions it makes of amounts it received as gifts or government grants.
If your organisation does not meet all the requirements for exemption for this category, you should check the other exemption categories in the Types of income tax exempt organisations.Scientific organisations are scientific institutions, science associations and scientific research funds.