Edited version of private ruling

Authorisation Number: 1011835297554

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: rebatable employer status

Is the entity a rebatable employer under section 65J of the FBTAA?

Answer: Yes

This ruling applies for the following periods:

Year ended 31 March 2012

Year ended 31 March 2013

Year ended 31 March 2014

The scheme commences on:

1 April 2011

Relevant facts and circumstances

The applicant has stated that the request is made in line with the ruling already provided to an associated entity with similar objects.

In support of the application the applicant provided:

· A list of current activities

· List of Directors

· The Constitution of the entity

· Strategic business plan

· Latest annual report

· A newsletter issued by the entity

Relevant legislative provisions

FBTAA 65J.

Reasons for decision

Summary

The entity is a rebatable employer because it is a non-profit association established for the promotion of a game or sport

Detailed reasoning

Section 65J of the FBTAA provides a rebate of fringe benefits tax (FBT) for certain non-profit employers and subsection 65J(1) lists the types of non-profit employers eligible to receive the rebate.

In looking at this list, the name of the entity its objects it would be appropriate to look at whether paragraph 65J(1)(h) of the FBTAA covers this entity. Paragraph 65J(1)(h) of the FBTAA states:

A non-profit society, non-profit association, or non-profit club, established for the promotion of a game or sport.

Whether an entity is non-profit and established for the promotion of a game or sport has been addressed in Taxation Ruling TR 97/22 Income tax: exempt sporting clubs.

If we can conclude that the entity satisfies the view expressed in TR 97/22 (as well as the conditions set down in subsection 65J(5) of the FBTAA) it will be a rebatable employer for the purposes of the FBTAA.

Non-profit

Paragraphs 9 and 10 of TR 97/22 cover the non-profit requirements and paragraph 10 of TR 97/22 states:

A club's Memorandum and/or Articles of Association or other constituent documents should contain a prohibition against a distribution of profits and assets among members while the club is functional and on its winding-up. Alternatively, a club satisfies the test if the law governing its activities prevents the club from making distributions to members. The club's activities should conform to the prohibition

The entity's Constitution contain clauses which prevent distribution of profits and assets to members whist in operation and upon winding-up and therefore the entity is accepted as being non-profit.

Established for the promotion of a game or sport

Paragraphs 11 to 14 of TR 97/22 state:

Encouragement

'Encouragement' means 'stimulation by assistance', according to the Macquarie Dictionary . It is essential that the encouragement of a game or sport is the main or dominant purpose of a club. Encouragement can occur directly by:

· forming, preparing and entering teams and competitors in competitions in the game or sport;

· co-ordinating activities;

· organising and conducting tournaments and the like;

· improving the abilities of participants;

· improving the standard of trainers and coaches;

· providing purchased or leased facilities for the activities of the game or sport for the use of club members and visitors; or

· encouraging increased and wider participation and improved performance;

· and can occur indirectly:

· through marketing; or

· by initiating or facilitating research and development.

Game or sport

There is no special definition of what constitutes a game or sport for the purposes of section 50-45. Accordingly, the words should be given their ordinary meaning.

Main purpose

To be exempt, the main purpose of the club must be the encouragement of the relevant game or sport.

A club's main purpose can only be ascertained after objectively weighing all of the club's features, including those features described in paragraphs 15 and 16. The presence or absence of a feature may not conclusively determine that the club's main purpose is or is not the encouragement of a game or sport.

The documentation provided show that the entity's main purpose is the encouragement of sport.

Society, club or association

The FBTAA does not provide a definition as to what a society, club or association is and therefore it is necessary to use the common everyday meaning of these word.

Paragraph 2 of Taxation Determination TD 95/56 provides the following statement in respect of the term association:

Subsection 65J(1) of the FBTAA lists the categories of organisations which are rebatable employers. In paragraphs 65J(1)(f) to 65J(1)(l), 'association' is one of the terms used to describe the types of rebatable organisations. The Shorter Oxford English Dictionary defines the term 'association' to be 'a body of persons associated for a common purpose; the organisation formed to effect their purpose'. The Macquarie Dictionary defines 'association' as being 'an organisation of people with a common purpose and having a formal structure'. 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.

The documentation provided show that the entity is an association.

Subsection 65J(5) of the FBTAA

Subsection 65J(5) of the FBTAA provides for an extended meaning of a non-profit society, association and club for the purposes of the rebate.

The extended meaning excludes entities that are owned or beneficially owned by government.

An organisation is regarded as being owned or beneficially owned by government if all of its shares or membership interests are owned by or beneficially held for the Commonwealth, State or Territory governments or one of their authorities.

The entity is limited by guarantee and there is no evidence to suggest it is owned or beneficially owned by government.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).