ATO Interpretative Decision

ATO ID 2004/965 (Withdrawn)

Income Tax

• This ATO ID is replaced by Taxation Ruling TR 2005/D6
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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:

(a)

for the purposes of a provision of an Act or instrument; and

(b)

for the purpose of determining whether an institution or fund is, for the purposes of a provision of an Act or instrument, a charity.

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

Related Public Rulings (including Determinations)
Taxation Ruling TR 1999/D21

Keywords
Charitable organisations
Child care industry
Non profit entities

Business Line:  Administration, Business and Personal Taxes Centre of Expertise

Date of publication:  10 December 2004

ISSN: 1445-2782