Edited version of your written advice

Authorisation Number: 1012853155756

Date of advice: 5 August 2015

Ruling

Subject: Tax Exemption

Question 1

Does the Association meet the requirements to be exempt from income tax under the public educational institution provisions?

Answer

Yes

This ruling applies for the following periods:

1 July 2013 to 30 June 2014

The scheme commences on:

1 July 2013

Relevant facts and circumstances

The association has the following Objects:

The objects of the Company are set out in the First Schedule:

As a not-for-profit association, the Company will:

• Educate both the members, community and general public;

• Organise events, seminars, workshops, engage in public relations;

• Support research, teaching, promotion; and

• Work for preservation of species and their natural habit,

To undertake and pursue all such other similar, related or compatible objectives as may from time to time be considered appropriate by the Company.

The association has suitable clauses indicating its non-profit character.

The association has a physical presence in Australia.

The entity is not a charity

Relevant legislative provisions

Section 50-5 of the Income Tax Assessment Act 1997

Reasons for decision

Summary

The Association does not meet the characteristics of a public educational institution

Detailed reasoning

Section 50-1 of the ITAA 1997 provides that the ordinary and statutory income of certain entities is exempt from income tax.

Under Item 1.4 of the table in section 50-5 of the ITAA 1997, an entity will be exempt from income tax and can self-assess its exemption if:

1. it is a public educational institution

2. it is not a registered charity; and

3. it meets one of the three tests.

Public educational institution

Section 50-5 of the Income Tax Assessment Act 1997 (ITAA 1997) lists entities who are exempt from income tax. Listed at Item 1.4 is 'public educational institution':

In Lloyd v. Federal Commissioner of Taxation 1955) 93 CLR 645 Dixon CJ commented on the description of an organisation as being for 'public educational purposes:

It is a compound phrase and like most compound phrases its application cannot safely be ascertained by taking each separate word of which it is composed and then exploring the uses of which by itself the word is capable. No doubt the word 'educational' may be used with reference to any process of instruction direction or control to which the young are submitted, however intermittently, if it has a purpose or tendency, or supposed tendency, of developing some of the faculties or of forming character. Again the word 'public' is not incapable of a use which implies nothing more than that the thing to which it refers must not be 'private' either in the sense of being conducted for private profit or of being established for the private advantage of a class of individuals and not for the benefit of the public at large or a section of the public.

A public educational institution is an institution that is available or open to the public or a section of the public and whose sole purpose is providing education. Any other purpose of the organisation must be incidental or ancillary to providing public education. Education in this context does not extend to merely providing information or lobbying.

The constitution and activities of the association confirm it is an educational institution. As the association is being conducted for the for the benefit of the public at large and any benefits to members are ancillary. It meets the requirements of a public educational institution.

The association satisfies the 'institution' requirement due to its size, permanence and activities and clauses to satisfy the 'not for profit' requirement.

The remaining requirements that must be met are discussed in more detail below.

Charity

If a public educational institution is also a charity, it cannot self-assess its income tax status. The organisation must meet the requirements for charities to be income tax exempt.

The association is not a registered charity and therefore satisfies this requirement.

Three tests

For an educational organisation that is not a registered charity to be exempt from income tax, it must pass one of the following tests:

• physical presence in Australia test

• DGR test

• prescribed by law test.

If an organisation exists, operates and incurs its expenditure solely and entirely in Australia, it will meet the physical presence in Australia test.

The association passes the 'physical presence in Australia test'.

The following provides a more detailed explanation of the remaining requirements that must be met for an institution to be a public educational institution and how they apply in this case.

Sole or dominant purpose must be educational

For an institution to be a public educational institution, its sole or dominant purpose must be educational.

Based on the objects and activities undertaken by the association its dominant purpose is educational.

The purpose of advancement of its members is implied and considered to be an ancillary or incidental purpose as a consequence of its educational function.

The sole purpose test is satisfied.

Education is for the public or a section of it

The expression "the public" does not necessarily mean the whole community but may mean a section of the community or a section of the public. A body may be a public body, even though only persons of a certain class or qualification may be admitted, provided that their admission is not dependent upon the consent of the members of the body or some of those members, for example, a committee.

Paragraphs 49 to 50 of TR 2011/4 state that:

49. An institution set up to advance the interests of its members in their capacity as members cannot be charitable as it cannot satisfy the public benefit requirement. The members of such institutions do not, as members, constitute a section of the public in the relevant sense, and the benefits derived by the members are, as a result, private in nature.

50. However, an institution that benefits its members can still be charitable if:

• the member benefits are simply incidental or ancillary to the purpose of benefiting the community, or

• the institution is an open and non-discriminatory self-help group that is deemed to have a purpose that is for the public benefit under the Extension of Charitable Purpose Act 2004.

An association which exists to benefit the members of an association or profession is not benefiting the public in the required sense.

Membership of the association principally comprises professionals, students, business owners, managers and academics within the industry. This is considered to be a section of the public and broad enough to meet the public requirement.

It is considered that the association objects and activities are for the benefit of the community as a whole. Its educational activities benefit the public through the dissemination of information about animal medicine and any benefit to members is an indirect consequence of the public benefit.

Conclusion

It is considered to be a public educational institution and therefore is exempt from income tax under section 50-5 of the Income Tax Assessment Act 1997 (ITAA 1997)

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