Edited version of private ruling

Authorisation Number: 1011568433811

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Ruling

Subject: FBT rebatable employer

Question

Are you a rebatable employer for the purposes of paragraph 65J(1)(g) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)?

Answer: Yes

This ruling applies for the following periods:

Year ended 31 March 2011

Year ended 31 March 2012

Year ended 31 March 2013

The scheme commences on:

1 April 2010

Relevant facts and circumstances

You are a company limited by guarantee.

You adopted a new constitution some time ago.

You have previously received a private ruling stating you were exempt from income tax pursuant to the provisions of section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) on the basis that you fell under item 1.7 of the table in section 50-5 of the ITAA 1997.

You constitution provides that you were established for the purpose of the encouragement of science.

Your constitution also provides that your income and property cannot be used for the purpose of profit or gain of your members.

Relevant legislative provisions

Income Tax Assessment Act 1997 50-5 and

Fringe Benefits Tax Assessment Act 1986 65J.

Does Part IVA apply to this ruling?

Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.

We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.

Reasons for decision

Are you a rebatable employer for the purposes of paragraph 65J(1)(g) of the FBTAA 1986?

Subsection 65(J)(1) of the FBTAA 1986 provides that an employer is a rebatable employer if the following conditions are satisfied:

· the employer is not a public benevolent institution or a health promotion charity as described in subsections 57A(1) and 57A(5) of the FBTAA 1986 respectively and

· the employer is covered by any of the paragraphs listed under subsection 65J(1) of the FBTAA 1986.

As you have requested to be considered a rebatable employer under paragraph 65J(1)(g) of the FBTAA 1986 it is not necessary to consider whether you are a public benevolent institution or a charitable institution as described in subsection 57A(5) of the FBTAA 1986.

Paragraph 65J(1)(g) provides that a non-profit society, or non-profit association which is established for musical purposes, or for the encouragement of music, art, science or literature will be a rebatable employer.

In your situation you wish to be considered a rebatable employer that is a non-profit association established for the encouragement of science.

You have received previous private rulings which determined you were exempt from income tax pursuant to the provisions of section 50-1 of the ITAA 1997 under item 1.7 of the table in section 50-5 of the ITAA 1997.

Item 1.7 in the table in section 50-5 of the ITAA 1997 stipulates that an entity will be exempt from income tax if it is a society, association or club established for the encouragement of science provided that special conditions as listed under section 50-70 of the ITAA 1997 are met. One of these conditions requires that you are an association not carried on for the purpose of profit or gain of your individual members.

The conditions to be met under paragraph 65J(1)(g) of the FBTAA 1986 are the same as those under item 1.7 of the table in section 50-5 of the ITAA 1997. However, subsection 65J(5) of the FBTAA 1986 defines what is meant by "non-profit association" for the purposes of section 65J.

As your activities and constitution have not altered since you were last considered a non-profit association established for the encouragement for science for income tax purposes, you will be accepted as a rebatable employer under paragraph 65J(1)(g) of the FBTAA 1986 if you satisfy the requirements of subsection 65J(5) of the FBTAA 1986.

Subsection 65J(5) of the FBTAA 1986 provides that:

…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.

Therefore, you will not be a non-profit organisation if:

· you are carried on for the purposes of profit or gain to your individual members, or

· your stock or shares, or the interests and rights of your members are beneficially owned by the Commonwealth, a State, or a Territory or an authority of the Commonwealth, State or Territory.

Are you carried on for the purposes of profit or gain to your individual members?

We accept that an organisation is not being carried on for the purposes of profit or gain to individual members whereby under its constituent document or by operation of law it is prevented from distributing its profits or assets among members while it is operating or on its winding up. The constituent document must provide that on winding up any surplus after satisfaction of all liabilities will be transferred to another organisation with similar purposes that is not carried on for the purposes of profit or gain to its individual members. The organisation's actions must of course, be consistent with the prohibition.

Your constitution satisfies this requirement.

Is your stock or shares, or the interests and rights of your members beneficially owned by the Commonwealth, a State, or a Territory, or an authority of the Commonwealth, State or Territory?

Neither the stock nor shares in the capital of your organisation, or the interests and rights of the members in relation to your organisation are beneficially owned by the Commonwealth, a State or a Territory or an authority of the Commonwealth, a State or a Territory

Therefore, as you satisfy both of the non-profit requirements we consider you are a non-profit organisation.

Is your organisation an association?

The term 'association' is not defined in the FBTAA 1986. It is defined in the Shorter Oxford English Dictionary to be a 'body of persons associated for a common purpose; the organisation formed to effect their purpose'. The Macquarie Dictionary defines the term 'association' as being 'an organisation of people with a common purpose and having a formal structure'. Olsson J in Quinton & Quinton v. South Australian Psychological Board (1985) 38 SASR 523 stated that the term 'association' has come to be regarded as attaching to a body of persons associated for a common purpose.

Taxation Determination TD 95/56 states that for the purposes of section 65J of the FBTAA 1986, an organisation will not be an association where it has been formed by government, controlled by government and performs functions on behalf of government.

As you are a body of persons associated for a common purpose that was not formed by government and is not controlled or performing functions on behalf of government, we agree that you are an association.

Conclusion

As you satisfy the requirements of subsection 65J(5) of the FBTAA 1986 and have previously been considered exempt from income tax under item 1.7 of the table in section 50-5 of the ITAA 1997, we consider you are a rebatable employer for the purposes of paragraph 65J(1)(g) of the FBTAA 1986.

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