ATO Interpretative Decision
ATO ID 2004/798
Income tax
Income Tax: change from a co-operative to a companyFOI status: may be released
-
This ATO Interpretative Decision has been amended to correct a legislative reference and update references to related ATO Interpretative Decisions.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxpayer the same 'entity' for all purposes under the Income Tax Assessment Act 1997 (ITAA 1997) after the conversion from an incorporated co-operative to a company?
Decision
Yes. The taxpayer's registration as a company under the Corporations Act 2001 (Cth) (Corporations Act) does not create a new legal entity. Therefore it is the same 'entity' for all purposes of the ITAA 1997 as defined in section 960-100 of the ITAA 1997.
Facts
The taxpayer is a co-operative incorporated under the Co-operatives Act 1992 (NSW) (Co-op Act). The taxpayer is treated as a body corporate pursuant to its incorporation under the Co-op Act.
The taxpayer will transfer its incorporation under the Co-op Act to become a company registered under the Corporations Act. It will continue to be regarded as a body corporate pursuant to its registration under the Corporations Act.
The taxpayer is regarded as the same entity with the same rights under the relevant provisions of the Co-op Act (subsections 316(1) and 321(1), sections 317 and 342) and the Corporations Act (subsection 601BM(1)).
Reasons for Decision
The co-operative incorporated under the Co-op Act is a body corporate under that Act and at general law.
Section 995-1 of the ITAA 1997 defines an 'entity' to have the meaning in section 960-100 of the ITAA 1997. An 'entity' is defined to mean any of the following:
- (a)
- an individual;
- (b)
- a body corporate;
- (c)
- a body politic;
- (d)
- a partnership;
- (e)
- any other incorporated association or body of persons;
- (f)
- a trust;
- (g)
- a superannuation fund.
In addition, section 995-1 of the ITAA 1997 defines a 'company' to mean:
- (a)
- a body corporate; or
- (b)
- any other unincorporated association or body or persons; but does not include a partnership . . .
Relevant to both definitions is the meaning of 'body corporate' which takes its meaning at general law. However, for the purposes of the ITAA 1997, the taxpayer as incorporated under the Co-op Act is an 'entity' as defined in paragraph 960-100(1)(b) of the ITAA 1997. It is also a 'company' as defined in section 995-1 of the ITAA 1997.
After the taxpayer's registration under the Corporations Act, it will continue to be a 'body corporate', 'company' and 'entity' as relevantly defined in the ITAA 1997. Notwithstanding the taxpayer's transfer of incorporation to a separate Act, the taxpayer preserves its identity and continues to be the same legal entity.
The provisions in the Co-op Act and the Corporations Act both provide for the continuation of the taxpayer as the 'same entity as the body corporate' which was the co-operative, and the act of registration under a different Act of itself will not create a 'new legal entity' (subsection 321(1) of the Co-op Act and paragraph 601BM(1)(a) of the Corporations Act).
In addition, the assets, rights and liabilities of the taxpayer vest in and are preserved when the taxpayer is registered under the Corporations Act without the need for any 'conveyance, transfer or assignment or assurance' (subsection 342(2) of the Co-op Act). This indicates that the identity of the body corporate is preserved and continues with the same assets, rights and liabilities, albeit as a company by registration.
Therefore, the taxpayer is the same body corporate and 'entity' for the purposes of the ITAA 1997 both before and after it completes its transfer of incorporation.
Date of decision: 28 June 2004Year of income: Year ended 30 June 2004
Legislative References:
Income Tax Assessment Act 1997
section 995-1
section 960-100
paragraph 960-100(1)(b)
section 601BM
subsection 601BM(1)
paragraph 601BM(1)(a) Co-operatives Act 1992 (NSW)
Section 316
Section 317
Section 321
Section 342 Related ATO Interpretative Decisions
ATO ID 2002/257 (Withdrawn)
ATO ID 2002/808
ATO ID 2002/816 (Withdrawn)
ATO ID 2003/254
ATO ID 2004/978
Keywords
Bodies corporate
Company law
Co-operatives
Entities & taxpayer groups
Incorporation
Taxpayer identification
ISSN: 1445-2782