Edited version of private ruling

Authorisation Number: 1011494949391

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Ruling

Subject: Rebatable employer status

Question

Is the trustee for the Trust (the trustee) a rebatable employer pursuant to paragraph 65J(1)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer: No

This ruling applies for the following period(s):

Year ending 31 March 2005

Year ending 31 March 2006

Year ending 31 March 2007

Year ending 31 March 2008

Year ending 31 March 2009

Year ending 31 March 2010

The scheme commences on:

1 April 2004

Relevant facts and circumstances

The taxpayer is the trustee for the Trust. The Trust is a Reserve Trust, established by Section 92 of the Crown Lands Act 1989 (the CL Act). Section 92 authorises the Minister to appoint a Trust Board as Trustee. It also authorises the Minister to dissolve a Trust.

The Trust is a body that as Trustee holds the Title Deeds to the Land and is charged with the care, control and management of the Reserve.

The trust receives no funding from Government, nor does it provide from its activities any funds to Government.

Trust Board Members receive no remuneration and are selected members of the public.

The Trust is required to fund maintenance of the Reserve from the conduct of activities that are consistent with the dedicated use of the Reserve. In the case of the trust, it was established under the Public Parks Act in 1885 for the purposes of public recreation. Crown lands are now administered and managed under the CL Act.

The Trust employs persons and provides certain fringe benefits for these employees.

Upon request for further information, the following was stated:

· The Trust is not constituted by a Trust Deed.

· The relevant constituent document is the CL Act.

· The Trust is a Crown Land Reserve Trust appointed and constituted under, and its activities are governed by, the relevant provisions of the CL Act (particularly Sections 78 to 128 in Part 5), and the Crown Lands Regulation 2006 (NSW) (Crown Lands Regulations).

· The CL Act and Crown Lands Regulations define permitted activities.

· The Trustee's objective is the care, control and management of the Reserve.

· The Trustee is non-profit, with all the income derived from its activities being retained for maintenance of and improvements to the Reserve.

· Under the CL Act, the minister may appoint or resolve a Reserve Trust.

· On the issue of how assets of the Trustee are distributed upon dissolution, that is covered in section 111 of the CL Act. Essentially, except for the Reserve Land which remains Crown Land, any property vested in the Trustee may be disposed of by the relevant New South Wales Minister for Lands (responsible for administration of the CL Act) in such manner as the Minister considers appropriate.

Extensive information regarding the Trust, its activities and the members of the Board of Trustees is available in the trust's 2009 Annual Report. The main points are:

· The Trust's mission is to administer the affairs of the Trust so that the Trustees effectively and efficiently fulfil their assigned responsibilities for the care, control, and management of trust land in a professional, competent and accountable manner.

· In terms of the licence agreement with other bodies, the trust is the employer for personnel and industrial relations purposes. At 30 June 2009 there were seven permanent staff, three permanent part-time staff and 20 casual staff employed by the Trust.

· Staff numbers are supplemented by over 300 additional casuals who assist at functions and activities.

· Financial Reports are audited by the State Audit Office in their role as auditor of public sector agencies.

Crown lands are now administered and managed under the CL Act. Sections 10 and 11 set out the objects of the CL Act and the principles of crown land management as follows:

10 Objects of Act

The objects of this Act are to ensure that Crown land is managed for the benefit of the people of New South Wales and in particular to provide for:

(a) a proper assessment of Crown land,

(b) the management of Crown land having regard to the principles of Crown land management contained in this Act,

(c) the proper development and conservation of Crown land having regard to those principles,

(d) the regulation of the conditions under which Crown land is permitted to be occupied, used, sold, leased, licensed or otherwise dealt with,

(e) the reservation or dedication of Crown land for public purposes and the management and use of the reserved or dedicated land, and

(f) the collection, recording and dissemination of information relating to Crown land.

11 Principles of Crown land management

For the purposes of this Act, the principles of Crown land management are:

(a) that environmental protection principles be observed in relation to the management and administration of Crown land,

(b) that the natural resources of Crown land (including water, soil, flora, fauna and scenic quality) be conserved wherever possible,

(c) that public use and enjoyment of appropriate Crown land be encouraged,

(d) that, where appropriate, multiple use of Crown land be encouraged,

(e) that, where appropriate, Crown land should be used and managed in such a way that both the land and its resources are sustained in perpetuity, and

(f) that Crown land be occupied, used, sold, leased, licensed or otherwise dealt with in the best interests of the State consistent with the above principles.

Section 12 of the CL Act makes the relevant Minister responsible for achieving the stated objectives.

Part 5 of the CL Act provides for the formation of reserve trusts. The Minister has the authority to establish and dissolve reserve trusts and to appoint and remove trustees. Reserve trusts are constituted as corporations and have the functions conferred on them by or under the CL Act. Reserve trusts are charged with the care, control and management of any reserve for which they have been appointed as trustees.

Division 5 of Part 5 of the CL Act specifies that a reserve trust requires the approval or consent of the Minister to:

purchase, lease, or acquire for the benefit of easement, land required in connection with the reserve;

· expend trust money for to improve or provide access, facilities or amenities for visitors;

· make donations to organisations which in the opinion of the Minister will benefit the reserve or the community; and

· sell, lease, mortgage or grant an easement or license in respect of reserve land.

Division 6 of Part 5 of the CL Act provides that the Minister can either prepare a draft plan of management for a reserve or direct a reserve trust to prepare such a plan. Plans prepared by the reserve trust may be altered by the Minister as the Minister thinks fit.

Once a plan is adopted the reserve trust must only carry out operations that are in accordance with the plan.

In the event of a reserve trust being dissolved, property of the trust is to be disposed of in accordance with section 111 of the CL Act which states:

111 Dissolution of trust disposal of property

(1) If a reserve trust is dissolved, any real or personal property vested in the trust (except the reserve land) may be disposed of by the Minister in such manner as the Minister considers appropriate.

(2) For that purpose, land purchased by the trust may be dealt with by the Minister as if it were Crown land.

(3) The Minister may execute conveyances and instruments and do all such other things as may be necessary for the effectual exercise of the Ministers functions under this section.

(4) The proceeds of disposal of the property shall be dealt with in accordance with the Ministers direction.

ATO systems information indicates that the trust is registered as a Government entity and has self-assessed as being income tax exempt.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Section 65J.

Summary

The trust is not considered to be a reabatable employer pursuant to section 65J of the FBTAA.

Detailed reasoning

Paragraph 65J(1)(i) of the FBTAA states:

REBATE FOR CERTAIN NON-PROFIT EMPLOYERS ETC.

(1) Rebatable Employer For the purposes of this section, an employer is a rebatable employer for a year of tax if the employer is not a public benevolent institution, is not a health promotion charity and is covered by any of the following paragraphs at any time during the year of tax:

Section 65(J)(i) is relevant:

a non-profit society, non-profit association or non-profit club, established for the encouragement or promotion of animal races

The meaning of "non-profit society", "non-profit association" or "non-profit club" is defined by Section 65J(5):

(5) For the purposes of this section, a society, association or club is a non-profit society, non-profit association or non-profit club, as the case may be, if, and only if:

(a) the society, association or club is carried on otherwise than for the purposes of profit or gain to its individual members; and

(b) the society, association or club is neither:

(i) an incorporated company where all the stock or shares in the capital of the company is or are beneficially owned by:

(A) the Commonwealth, a State or a Territory; or

(B) an authority or institution of the Commonwealth, a State or a Territory; nor

(ii) an incorporated company where the company is limited by guarantee and the interests and rights of the members in or in relation to the company are beneficially owned by:

(A) the Commonwealth, a State or a Territory; or

(B) an authority or institution of the Commonwealth, a State or a Territory.

Section 65J(5):

The terms 'association' and 'society' are not defined. They have their ordinary meaning. They can include incorporated bodies: Theosophical Foundation v. Commr of Land Tax (1966) 67 SR (NSW) 70 at 82-83.

The Shorter Oxford English Dictionary defines 'association' to be 'a body of persons associated for a common purpose; the organization formed to effect their purpose'.

The Macquarie Dictionary defines it as 'an organisation of people with a common purpose and having a formal structure'. 'Society' has an equivalent meaning (Pro-campo Ltd v. Commr of Land Tax (NSW) 81 ATC 4270 at 4279; (1981) 12 ATR 26 at 35). This is the approach of Taxation Determination TD95/56, at paragraph 2 which states:

'Olsson J, in Quinton v. South Australian Psychological Board (1985) 38 SASR 523, also stated that the term "association" has come to be regarded as attaching to a body of persons associated for a common purpose.'

These approaches emphasise 'body of persons' and 'organisation of people'. There is the forming of a purpose of various people; for there to be a 'common purpose' there needs to be more than one person. Accordingly, a single entity, without more, could not constitute an association or society. There isn't a group or body or the forming of any common intention.

Tax Determination TD 95/56 is relevant in regards to whether a body which is formed by government, is controlled by government and performs functions on behalf of government can be an 'association' for the purposes of section 65J of the FBTAA. Paragraph 3 and 4 of TD 95/56 state:

3. A body which is formed by government, is controlled by government and performs functions on behalf of government is clearly not formed to effect the purposes of the members of that body but is formed to effect the purposes of government. Combined with the fact that the members do not create the body (or have the power to dissolve it) and that the members do not have ultimate control over the functions of the body, such a body cannot be said to be an association.

4. Bodies which are formed by government, are controlled by government and perform functions on behalf of government would include:

· most bodies formed by the federal, state or territory Governments;

· most statutory authorities (including those set up to market, regulate or promote agricultural or other products);

· local government councils.

Section 24AQ of the Income Tax Assessment Act 1936 (ITAA 1936) states that a body can be a State or territory body where:

(a) it is established by State or territory legislation; and

(b) it is not a company limited by shares; and

(c) the legislation gives the power to appoint or dismiss its governing person or body only to one or more government entities.

The trust is established by the CL Act, a NSW State Government Act. It is not a company limited by shares and the CL Act gives the power to appoint and dismiss the trust board to the relevant Minister.

Therefore, the trust qualifies as a State body under section 24AQ of the ITAA 1936. No exclusions apply. This outcome is confirmed by ATO systems information that indicates that the trust is registered as a Government entity and has self-assessed as income tax exempt.

TD 95/56 provides an example of a body which is formed by government, is controlled by government and performs functions on behalf of government. It states:

Example 1

The Agricultural Authority was created under the State Agriculture Act and is authorised by statute to buy and export Australian produce for sale overseas. The Agriculture Authority is controlled, on a day to day basis, by 6 non-government persons who were appointed by the relevant State minister. While the Minister is not generally involved with the day to day running of the Authority, the State Agriculture Act gives him the ultimate authority over the Board. The Authority is formed by government, is controlled by government and performs functions on behalf of government and, as such, is not an association for the purposes of section 65J of the FBTAA.

The trust was created under a State Act, and is controlled by a trust board appointed by the State Minister. Whilst the trust board controls the day to day running of the trust, the CL Act gives the Minister ultimate control over the trust board.

The ultimate control is established because:

· Section 12 of the CL Act makes the relevant Minister responsible for achieving the stated objects.

· Part 5 of the CL Act provides for the formation of reserve trusts. The Minister has the authority to establish and dissolve reserve trusts and to appoint and remove trustees. Reserve trusts are constituted as corporations and have the functions conferred on them by or under the CL Act . Reserve trusts are charged with the care, control and management of any reserve for which they have been appointed as trustees.

· Division 5 of Part 5 of the CL Act specifies that a reserve trust requires the approval or consent of the Minister to:

o purchase, lease, or acquire for the benefit of easement, land required in connection with the reserve;

o expend trust money for to improve or provide access, facilities or amenities for visitors;

o make donations to organisations which in the opinion of the Minister will benefit the reserve or the community; and

o sell, lease, mortgage or grant an easement or license in respect of reserve land.

The Trust's mission is to manage and administer the affairs of the Trust so that the trustees effectively and efficiently fulfil their assigned responsibilities for the care, control and management of the trust land in a professional, competent and accountable manner. Pursuant to section 92(4) of the CL Act , those functions are conferred upon it by a Government Act.

Conclusion.

In accordance with TD 95/56, it is our view that the trust does not satisfy the conditions under paragraph 65J(1)(i) of the FBTAA for a non profit association established for the encouragement or promotion of animal races. A body cannot be an 'association' for the purposes of section 65J of the FBTAA where it is held to be formed by government, is controlled by government and performs functions on behalf of government.

For the reasons outlined above, the trust is not considered to be a rebatable employer pursuant to section 65J of the FBTAA.

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