ATO Interpretative Decision
ATO ID 2004/965
Income Tax
Charitable institutions: provision of child care servicesFOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 an entity, which provides child care services on a non-profit basis, considered to have a charitable purpose when determining whether it is a charity as required for Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The entity has a charitable purpose for the purpose of determining whether it is a charity as required for Division 50 of the ITAA 1997.
Facts
The entity is established for the purpose of providing day care, long day care (full-time and part-time), casual care, before and after school hours care, vacation care and occasional care, and similar sorts of child care.
The child care services are provided on a non-profit basis.
Reasons for Decision
Division 50 of the ITAA 1997 exempts certain entities from income tax. Section 50-5 of the ITAA 1997 provides that charitable institutions will be exempt provided certain conditions are satisfied. One of these conditions is that the entity must have a charitable purpose.
Subsection 4(1) of the Extension of Charitable Purposes Act 2004 (ECPA) states that:
Without limiting what constitutes a charitable purpose, charitable purpose includes the provision of child care services on a non-profit basis.
Subsection 4(2) of the ECPA states that
This section applies:
Therefore section 4 of the ECPA applies for the purposes of determining whether an entity is a charity as required under Division 50 of the ITAA 1997.
Neither the ECPA nor the ITAA 1997 define what constitutes the provision of child care services for this purpose.
The meaning of child care in The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne, is given as:
The care or oversight of a child or children, especially by a creche.
The entity provides day care, long day care (full-time and part-time), casual care, before and after school hours care, vacation care and occasional care, and similar sorts of child care. These services are considered to be within the common usage of the term child care. The services are provided on a non-profit basis.
Accordingly the entity has a charitable purpose for the purpose of determining whether it is a charity as required for Division 50 of the ITAA 1997.
Year of income: Year ended 30 June 2005
Legislative References:
Extension of Charitable Purpose Act 2004
section 4
Division 50
section 50-5
Related Public Rulings (including Determinations)
Taxation Ruling TR 1999/D21
Keywords
Charitable organisations
Child care industry
Non profit entities
ISSN: 1445-2782
| Date: | Version: | |
| You are here → | 7 December 2004 | Original statement |
| 23 December 2005 | Archived |