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Edited version of private ruling
Authorisation Number: 1011692791011
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Ruling
Subject: Liability for income tax on winding up
Question 1
Will the entity be liable for income tax on the disposal of assets on winding up?
Answer
No
Question 2
Will the entity have to complete tax return for the Year ended 31 December 2010?
Answer
No
This ruling applies for the following period:
Year ended 31 December 2010
The scheme commences on:
1 January 2010
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling
The Company is an Australian public company that will shortly cease operations in Australia. The Company plans to dispose of the entity's assets to another entity, an overseas corporation operating for public charitable purposes as defined by the US Internal Revenue Code 1986.
The Company is endorsed as a tax concession charity - charitable institution. The Company has held an income tax exemption since 01/07/2000.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 50.
Question 1
Summary
As the entity is endorsed as a charitable institution the ordinary and statutory income is exempt from income tax.
Detailed reasoning
Division 6 of ITAA 1997 details the concepts of assessable income and exempt income.
Subsection 6-5(1) states:
Your assessable income includes income according to ordinary concepts, which is called ordinary income.
Subsection 6-10(1) states:
Your assessable income also includes some amounts that are not ordinary income.
Subsection 6-10(2) states:
Amounts that are not ordinary income, but are included in your assessable income by provisions about assessable income, are called statutory income.
Subsection 102-5(1) states:
Your assessable income includes your net capital gain (if any) for the income year.
Subdivision 50-A of the Income Tax Assessment Act 1997 (ITAA 1997) details entities whose ordinary and statutory income is exempt from income tax.
Section 50-1 of ITAA 1997 states:
Entities whose ordinary income and statutory income is exempt
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.
As the Company is endorsed as a charitable institution the ordinary and statutory income is exempt from income tax.
Question 2
Summary
Entities endorsed as income tax exempt entities do not have to lodge income tax returns.
Detailed reasoning
THE Australian Taxation Office document GiftPack (NAT7967) makes the following statements at the start of page 72:
Income tax exempt charity endorsement gives your organisation important income tax concessions
GiftPack states on page 64:
From 1 July 2000 a charity that is not endorsed as an income tax exempt charity is subject to income tax if it is a:
· Charitable institution
· Charitable fund established by will before 1 July 1997 or the 'new trust' part of such a fund
· Charitable fund established in Australian by an instrument of trust.
If these charities are not endorsed as income tax exempt charities, they need to lodge income tax returns.
As the Company is endorsed as an income tax exempt entity, it will not have to lodge an income tax return.
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