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Edited version of your private ruling
Authorisation Number: 1012387180541
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Ruling
Subject: Income Tax Exemption - Scientific Institution
Question
Is the Applicant exempt from income tax pursuant to section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) on the basis that it is an entity as described in item 1.3 of the table in section 50-5 of the ITAA 1997 and meets the special conditions as described in section 50-55 of the ITAA 1997?
Answer
Yes. The Applicant is exempt from income tax pursuant to section 50-1 of the ITAA 1997 on the basis that it is an entity as described in item 1.3 of the table in section 50-5 of the ITAA 1997 and meets the special conditions as described in section 50-55 of the ITAA 1997.
This ruling applies for the following periods:
Year ended 30 June 2013
Relevant facts and circumstances
The Applicant, a company limited by guarantee, has applied for a private binding ruling (PBR) to confirm that it is a 'scientific institution' as described in item 1.3 of the table in section 50-5 of the Income tax Assessment Act 1997 (ITAA 1997).
The Applicant's constitution provides objects which are consistent with promoting science.
1. Objects
(a) The principal objects of the Company are:
(i) to advance science …by undertaking, promoting and funding scientific research…
(ii) to make the results of that research available for the benefit of the Australian… community and the Australian public at large.
The Applicants constitution contains clauses which prohibit the distribution of income or property to its members and provide that all income and property must be applied towards its objects.
The Applicant's constitution provides appropriate clauses which direct that upon winding up or dissolution of the Applicant, all remaining funds, after satisfaction of any debts, will not be distributed amongst members but will be given or transferred to another scientific institution which is non-profit and prohibits members benefiting upon winding up or dissolution.
The results of all research undertaken by the Applicant will be made available to the public. The methods by which results will be made available include the following:
(a) posting of results on the Applicant's website;
(b) providing copies of reports to members of the general public who request them
(c) publication of results in scientific journals, where accepted for publication;
(d) presentation of results at seminars and workshops, where papers are published.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 50-1,
Income Tax Assessment Act 1997 Section 50-5 and
Income Tax Assessment Act 1997 Section 50-50.
Reasons for decision
A scientific institution, as described in item 1.3 of the table in section 50-5 of the ITAA 1997, that satisfies the special condition detailed in section 50-55 of the ITAA 1997, will be exempt from income tax.
Institution
The term 'institution' is not defined in the ITAA 1997. It is a term that has its meaning decided in common law. It has been established in common law that an institution is "…an establishment, organisation or association, instituted for the promotion of some object, especially one of public or general utility".
Whether a particular applicant is an institution is indicated by a range of factors including activities, size, permanence and recognition. All relevant factors need to be considered and whether an institution exists will depend on its particular facts.
The Applicant is a company limited by guarantee. It has a board of management and a constitution by which it is bound.
It carries out activities in keeping with the objects in its constitution; namely, to advance science by undertaking, promoting and funding scientific research and to make the results of the research available. Its size, permanence and recognition as an institution promoting science are such that it meets the requirements as described above.
It is considered that the Applicant is an institution.
Scientific Institution
For an institution to be a scientific institution it must be established for the encouragement of science. This can be determined by the organisation's main object and activity which must be the promotion of scientific objects i.e. its dominant purpose must be to advance science. Any other objects of the organisation can only be incidental to its main purpose of advancing science.
The objects of the Applicant as stated in its constitution are as follows:
(a) The principal objects of the Company are:
(i) to advance science…by undertaking, promoting and funding scientific research…; and
(ii) to make the results of that research available for the benefit of the Australian community and the Australian public at large.
The Applicant's activities which advance science include funding to institutions for core projects, providing contestable funding to public and private organisations as well as seeking funding for post doctoral fellowships.
The Applicant promotes science by making available to the public all research it is involved in by:
a) posting of results on the Applicant Ltd's website;
b) providing copies of reports to members of the general public who request them
c) publication of results in scientific journals, where accepted for publication;
d) presentation of results at seminars and workshops, where papers are published.
The objects and activities of the Applicant indicate it is established for the promotion or advancement of scientific knowledge and it is therefore a scientific institution.
Special condition
The special condition in section 50-55 of the ITAA 1997 requires that the entity:
a) has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia, or
b) is a deductible gift recipient, or
c) is a prescribed institution located outside Australia, exempt from income tax in its country of residence.
The Applicant has a physical presence, incurs its expenditure and pursues its objectives principally in Australia. The Applicant meets the special constitution described in section 50-55 of the ITAA 1997
Conclusion
The Applicant is an entity as described in item 1.3 of the table in section 50-5 of the ITAA 1997 and meets the special conditions as described in section 50-55 of the ITAA 1997. It is therefore entitled to income tax exemption.
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