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Edited version of private ruling
Authorisation Number: 1011598889521
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Ruling
Subject: Capital Gains Tax
Question
Is the transfer of shares from the Rotary Club to the Charitable Trust exempt from income tax pursuant to section 50-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer: Yes.
This ruling applies for the following period:
Income year ended 30 June 2010
The scheme commenced on:
1 July 2009
Relevant facts
The entity is not a charity.
The entity has self assessed itself as a tax exempt entity.
The entity owns shares that were bequeathed to it.
The entity is transferring the shares to another non profit entity.
Reasons for Decision
Capital Gains are "statutory income" and are listed in section 10-5 of the Income Tax Assessment Act 1997 (ITAA 1997) and are therefore assessable under section 6-10 of the ITAA 1997.
However, section 6-15(2) states:
If an amount is exempt income, it is not assessable income.
Furthermore, section 50-1 of the ITAA 1997 states:
The total ordinary income and statutory income of the entities covered by the following tables is exempt from income tax. In some cases, the exemption is subject to special conditions.
The tables that follow include organisations, amongst others, that are:
· Charitable institutions;
· Community service organisations;
· Religious institutions;
· Scientific institutions, etc.
Thus organisations that are listed in the tables and meet the special conditions (where applicable) are tax exempt and consequently are not required to pay tax on their capital gains.
An entity can also self assess its exempt status provided it is not also a charity and as a consequence would also not be required to pay tax on its capital gains.
Conclusion
The entity is not a charity and has self assessed itself as a tax exempt entity. Consequently, any capital gain that it incurs is exempt from income tax.
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