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Edited version of private ruling
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Ruling
Subject: Fringe benefits tax: public benevolent institution - rebatable employer
Are you a public benevolent institution pursuant to section 57A of the Fringe Benefits Tax Assessment 1986 (FBTAA)?
Answer: No.
This ruling applies for the following period:
Year ended 31 March 2011
The scheme commences on:
1 April 2010
Relevant facts and circumstances
You are endorsed as a charitable institution for the purpose of paragraph 65J(1)(baa) of the FBTAA.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 Section 57A
Fringe Benefits Tax Assessment Act 1986 Subsection 65J(1)
Fringe Benefits Tax Assessment Act 1986 Subsection 123C(1)
Fringe Benefits Tax Assessment Act 1986 Subsection 123C(5)
Taxation Administration Act 1953 Division 426 of Schedule 1
Reasons for decision
Subsection 57A(1) of the FBTAA provides:
[Employer is a public benevolent institution] Where the employer of an employee is a public benevolent institution endorsed under subsection 123C(1) or (5), a benefit provided in respect of the employment of the employee is an exempt benefit.
Subsection 123C(1) of the FBTAA states:
Endorsement of an entity that is a public benevolent institution. The Commissioner must endorse an entity as a public benevolent institution if:
(a) the entity is entitled to be endorsed as a public benevolent institution (see subsection (2)); and
(b) the entity has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953.
Subsection 123C(2) sets out the conditions to be met by an entity to be considered a public benevolent institution as follows:
An entity is entitled to be endorsed as a public benevolent institution if the entity:
(a) is a public benevolent institution; and
(b) has an ABN; and
(c) is not an employer in relation to which step 2 of the method statement in subsection 5B(1E) applies.
Therefore to be entitled to be endorsed as a public benevolent institution an entity must be a public benevolent institution.
Guidance on what is a public benevolent institution can be found in Taxation Ruling TR 2003/5 Income tax and fringe benefits tax: public benevolent institutions.
Paragraphs 7, 8 and 9 state:
7. A public benevolent institution is a non-profit institution organised for the direct relief of such poverty, sickness, suffering, distress, misfortune, disability, destitution, or helplessness as arouses compassion in the community.
8. It is not sufficient that an organisation is 'benevolent' in merely dictionary terms, that its actions are socially worthwhile, that it is charitable in legal terms or that it is fully funded by government.
9. The ATO does not have a discretion to accept an organisation as a public benevolent institution when in reality it is not.
Paragraph 10 explains what is 'needs requiring benevolent relief':
10. The condition or misfortune that is relieved by a public benevolent institution will be such as to arouse pity or compassion in the community. Needs might be caused by poverty or lack of financial resources. Disability or sickness can also give rise to misfortune or helplessness. On the other hand, needs that are to be met by education, training or the promotion of cultural or social objectives will not normally arouse community compassion and call forth the giving of benevolent relief. However, they might do so where the needs arise from poverty or helplessness.
A public benevolent institution is distinct from a charitable institution. An institution with charitable activities, but not having as its principal objects the relief of poverty, sickness, suffering, distress, misfortune, destitution or helplessness, is not a public benevolent institution.
You have been endorsed as a charitable institution under subsection 123E(1) of the FBTAA which entitles you to claim a rebate of FBT under paragraph 65J(1)(baa).
If you consider that you are a public benevolent institution as explained in TR 2003/5 then you will need to apply for endorsement, as a public benevolent institution, in accordance with Division 426 of Schedule 1 of the Taxation Administration Act 1953.
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