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Edited version of your written advice
Authorisation Number: 1012828616666
Date of advice: 1 July 2015
Ruling
Subject: "In Australia" condition.
Question 1
Does the entity satisfy the special condition in paragraph (a) of item 1 of the table in section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) for the period covered by this Ruling?
Answer
Yes.
Question 2
Does the entity satisfy the special condition for a registered charity to be exempt from income tax as specified in item 1.1 of the table in section 50-5 of the ITAA 1997 and outlined in section 50-50 of the ITAA 1997 for the period covered by this Ruling?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2015
The scheme commences on
1 July 2014
Relevant facts and circumstances
1. The entity was incorporated and has its registered office in an Australian State.
2. All the board and members live and work in Australia.
3. 100% of management of the entity is carried on by Australians within Australia.
4. The Australian Charities Not for Profits Commission (ACNC) has accepted that the entity carries on its activities in Australia.
5. The ACNC have registered the entity as a public benevolent institution (PBI)
6. The entity is endorsed as a deductible gift recipient on the Australian Business Register.
7. All the donors to the charity are persons living in Australia.
8. All non-donor revenue have their source in Australia.
9. Nearly all of the revenue received by the entity is sent overseas to well-known and locally government registered aid organisations.
10. All the activities funded by the entity's revenue are carefully monitored by the entity and its in-country partners.
11. There are minimal administrative or operational costs expensed in Australia.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 30-15
Income Tax Assessment Act 1997 section 30-17
Income Tax Assessment Act 1997 section 50-5
Income Tax Assessment Act 1997 section 50-50
Income Tax Assessment Act 1997 section 50-52
Reasons for decision
Question 1
Summary
It is considered that the entity meets the special condition in paragraph (a) of item 1 of the table in section 30-15 of the ITAA 1997 for the period covered by this Ruling.
Detailed reasoning
Under subsection 30-15(1) of the ITAA 1997, gifts or deductions made in the situations set out in the table in that section are deductible. Gifts or contributions to the entity will be deductible in the event that all of the requirements in item 1 of the table in subsection 30-15(1) are met.
The entity is covered by item 1 of the table as meets the description of 'a fund, authority or institution covered by an item in any of the tables in Subdivision 30-B of the ITAA 1997'. This is because the entity is covered by item 4.1.1 of the table in subsection 30-45(1) - it is a registered public benevolent institution.
The special condition in paragraph (a) of item 1 of the table in section 30-15 of the ITAA 1997 requires that 'the fund, authority or institution must be in Australia'.
It is accepted that the entity is an 'institution'.
The ATO view of where a fund, authority or institution is 'in Australia' is set out in its GiftPack publication. This is located on the ATO website at www.ato.gov.au at quick code QC 16414, where it states:
The 'in Australia' condition applies to all DGRs. This means the organisation must be in Australia. If it is not in Australia, it cannot be a DGR.
For funds, institutions and authorities to be in Australia, they must be established and operated in Australia.
The entity was incorporated in Australia and has all its board and members in Australia. 100% of its management is carried on in Australia. All donations made to the entity are made by Australian donors. Nearly all of the revenue received by the entity is sent overseas to well-known and locally government registered aid organisations.
It is considered that the entity was established and operates in Australia.
As a result, it is accepted that the entity meets the special condition in paragraph (a) of item 1 of the table in section 30-15 of the ITAA 1997 for the period covered by this Ruling.
Question 2
Summary
It is considered that the entity meets the special condition for a registered charity to be exempt from income tax as specified in item 1.1 of the table in section 50-5 of the ITAA 1997 and outlined in section 50-50 of the ITAA 1997 for the period covered by this Ruling.
Detailed reasoning
An entity will be exempt from income tax under item 1.1 of the table in section 50-5 of
the ITAA 1997 provided it is a registered charity and it meets the special conditions in
sections 50-50 and 50-52 of the ITAA 1997.
Subsection 50-50(1) of the ITAA 1997 states the special condition for item 1.1 as:
An entity covered by item 1.1 is not exempt from income tax unless 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 an institution that meets the description and requirements in item 1 of the table in section 30-15; or
(c) is a prescribed institution which is located outside Australia and is exempt from income tax in the country in which it is resident; or
(d) is a prescribed institution that has a physical presence in Australia but which incurs its expenditure and pursues its objectives principally outside Australia;
and the entity satisfies the conditions in subsection (2).
The entity satisfies the condition outlined in paragraph 50-50(1)(b) outlined above, as it meets the description and requirements in item 1 of the table in section 30-15 of the ITAA 1997. This is because:
• it is an institution covered by item 4.1.1 of the table in subsection 30-45(1);
• meets the 'in Australia' special condition in paragraph (a) of item 1 of the table in section 30-15 of the ITAA 1997; and
• satisfies section 30-17 of the ITAA 1997 - it is endorsed as a DGR.
Subsection 50-50(2) states:
The entity must:
(a) comply with all substantiative requirements in its governing rules; and
(b) apply its income and assets solely for the purpose for which the entity is established.
Subsection 50-50(2) requires the entity to comply with all substantiative requirements in its governing rules. Substantive requirements of governing rules are those things necessary to give effect to the governing rules. This would include, for example, preparation of financial statements, criteria for membership, maintenance of a register of members and rules relating to winding up of the entity. We have perused the Constitution and based upon information supplied with the application for a Private Binding Ruling it is considered that the entity complies with all the substantiative requirements in its governing rules.
Subsection 50-50(2) also requires the entity to apply its income and assets solely for the purpose for which the entity was established. The entity is considered to have met this requirement in partnership with its overseas partners by applying its income and assets solely for the purpose for which it was established.
The special condition for item 1.1 in section 50-52 requires the entity to be endorsed as exempt from income tax under Subdivision 50-B. As the entity is endorsed as being exempt from income tax it meets this requirement.
Therefore, as the entity meets the special conditions outlined in sections 50-50 and 50-52 of the ITAA 1997 it is entitled to be exempt from income tax under item 1.1 of section 50-5 of
the ITAA 1997 for the period covered by this Ruling.
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