Edited version of your written advice

Authorisation Number: 1012874209326

Date of advice: 4 December 2015

Ruling

Subject: Fringe Benefit Tax: Rebatable Employer

Question 1

Are you a rebatable employer for FBT purpose pursuant to item 5 of subsection 65J (5) of the FBTAA 1986?

Answer

No

This ruling applies for the following periods:

Year ended 31 March 2015

Year ended 31 March 2016

Year ended 31 March 2017

Relevant facts and circumstances

You are a body corporate incorporated under an Act of Parliament.

Your board comprises representatives of Government authorities.

You represent and provide services to the Government authorities that elect representatives to your board.

You provided your constitution and your strategic plan.

Relevant legislative provisions

Fringe Benefit Tax Assessment Act Subsection 65J(1)

Fringe Benefit Tax Assessment Act Subsection 65J(5)

Income Tax Assessment Act 1997 Section 50-10

Reasons for decision

Are you a rebatable employer pursuant to item 5 of subsection 65J (1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)

Item 5 of subsection 65J(1) of the FBTAA provides that an employer will be a rebatable employer for a year of tax if the employer:

(a) is exempt from income tax at any time during the year of tax under any of the provisions set out in the following table; and

(b) satisfies the special conditions (if any) set out in the following table:

Item	Type of employer	Special conditions
5	A society, association or club: (a) Established for community service purpose; (b) Covered by item 2.1 of the table in section 50-10 of the Income tax Assessment Act 1997	See subsection (5) of this section

Item 2.1 of the table in section 50-10 of the Income Tax Assessment Act 1997 (ITAA 1997) states:

Section 50-70 of the ITAA 1997 states:

50-70(1)  

An entity covered by item 1.7, 2.1, 9.1 or 9.2 is not exempt from tax unless the entity is a society, association or club that is not carried on for the purpose of profit or gain of its individual members and that:

(a) has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia; or

(b) …

50-70(2)  

The entity must:

(a) comply with all the substantive requirements in its governing rules; and

(b) apply its income and assets solely for the purpose for which the entity is established.

Subsection 65J(5) of the FBTAA states:

A society, association or club is not covered by table item 4, 5, 8, 9, 10, 11 or 12 in subsection (1) for a year of tax if it is:

(a) an incorporated company where all the stock or shares in the capital of the company is or are beneficially owned by:

(i) the Commonwealth, a State or a Territory; or

(ii) an authority or institution of the Commonwealth, a State or a Territory; or

(b) an incorporated company where the company is limited by guarantee and the interests and rights of the members in or in relation to the company are beneficially owned by:

(i) the Commonwealth, a State or a Territory; or

(ii) an authority or institution of the Commonwealth, a State or a Territory.

Therefore, to determine whether you are a rebatable employer pursuant to item 5 of subsection 65J(1) of the FBTAA it is necessary to consider the following questions:

(a) Are you exempt from income tax under any of the provisions set out in the table in subsection 65J(1) of the FBTAA?

(b) Are you a society, association or club?

(c) Were you established for community service purposes (except political or lobbying purposes)?

(d) Do you have a physical presence in Australia?

(e) Do you comply with all the substantive requirements in your governing rules?

(f) Do you apply your income and assets solely for the purposes for which you were established?

(g) Are you an incorporated company where all the stock or shares in the company is or is beneficially owned by the Commonwealth, a State or a Territory or an authority or institution of one of these?

(h) Are you an incorporated company limited by guarantee where the interests and rights of the members in or in relation to the company are beneficially owned by the Commonwealth, a State or a Territory or an authority of one of these?

These questions are considered below:

(a) Are you exempt from income tax under any of the provisions set out in the table in subsection 65J(1) of the FBTAA?

In considering this question in your application, you stated:

We can confirm that we are exempt from income tax as required by subsection 65J(1)(a) of the FBTAA.

While we agree that our records show that you are exempt from income tax, we do not agree with your contention that this fact by itself satisfies the requirements of paragraph 65J(1)(a). To satisfy the requirements of paragraph 65J(1)(a), it is necessary for the exemption to be provided by one of the provisions listed in the table in subsection 65J(1) of the FBTAA

The Explanatory Memorandum to Tax Laws Amendment (Fringe Benefits Tax Measures) Bill 1992 which amended the FBTAA to insert section 65J stated:

When this Bill was introduced into Parliament on 16 September 1992, the Treasurer announced that special arrangements would be provided for non-government organisations that are non-tax paying bodies which are currently subject to fringe benefits tax.

…

Also, the Bill will ensure that the meaning of a society, association or club does not include for the purposes of section 65J, an incorporated company which is beneficially owned by the Commonwealth, a State or a Territory or an authority or institution of the Commonwealth, a State or a Territory.

From this extract it can be seen that there was a clear intention to restrict the rebate to certain income tax exempt employers. It was never intended that every employer that is exempt from income tax would be a rebatable employer. In particular, the intention was to exclude government organisations from being a rebatable employer.

Our records list you as being exempt from income tax on the basis of being a Government entity. Although this listing was not directly addressed in your application, in contending that you come within item 5 of the table in subsection 65J(1) you made the following contentions:

• you are an association which although formed by government, is not controlled by government and does not perform functions on behalf of government;

• you are not an incorporated company where all the stock or shares in the company is or is beneficially owned by the Commonwealth, a State or a Territory or an authority or institution of one of these; and

• you are not an incorporated company limited by guarantee where the interests and rights of the members in or in relation to the company are beneficially owned by the Commonwealth, a State or a Territory or an authority of one of these.

In so doing, you did not consider whether you are exempt from income tax under section 50-25 of the ITAA 1997 or Division 1AB of Part III of the Income tax Assessment Act 1936 (ITAA 1936). If either of these provisions apply to you, you will not be able to be a rebatable employer as these provisions are not listed in the table in subsection 65J(1) of the FBTAA.

Do you come within section 50-25 of the ITAA 1997?

Section 50-25 of the ITAA 1997 provides that the following entities will be exempt from income tax:

• a municipal corporation;

• a local governing body;

• a public authority constituted under an Australian law; and

• a constitutionally protected fund.

Are you a municipal corporation or a local governing body?

In considering whether a company established by a local council was an exempt entity under item 5.1 of section 50-25 of the ITAA 1997, ATO ID 2004/757 considered the bodies that are a municipal corporation or a local governing body. In so doing, ATO ID2004/757 said:

'Municipal corporation' is not defined in the ITAA 1997 or the Income Tax Assessment Act 1936 (ITAA 1936).

In the High Court case of Federated Engine-Drivers and Firemen's Association of Australasia v. Broken Hill Pty Co Ltd (1911) 12 CLR 398, Barton J said that 'a municipal corporation is a part of the governmental power of the State.'

In the same case, Isaacs J in reference to municipal corporations said

...a corporation is constituted as a regulating agent for certain purposes, and for those purposes is entrusted with governmental powers

He described the Melbourne City Council as 'primarily constituted for the purposes of municipal government and, in respect of its functions of legislation and administration, may be said to be a subordinate local agent for the purposes of government.' He then said:

For the purpose of non-interference with their governmental functions, a municipal corporation might fairly claim to stand as ... "extending ... the shield of the Crown to what might more fitly be described as the public government of the country." But, on the other hand, corporate trading is none the less trading, and is on a wholly different plane. The difference is ineradicable.

The meaning of 'municipal corporation' was discussed in the Administrative Appeals Tribunal Taxation Appeals Division case, AAT No. 6709 Debit Tax Administration Act , by Mrs R.A. Balmford, the Senior Member, who concluded that:

....That expression, combined with "or other local governing body" is calculated to subsume any body, wherever it is situate within the Commonwealth, and under whatever legislation it is established, which, in terms of the decision in Tribe v Salt Lake City (paragraph 15 supra) "is a body politic and corporate created to administer the internal concerns of the district embraced with its corporate limits, in matters peculiar to such place and not common to the state at large". The words "municipal" and "local" in sub-paragraph (vii)(c) indicate that that provision is concerned with bodies operating in respect of a discrete district, region or area within a State or Territory.

Therefore, a municipal corporation must be constituted to exercise governmental functions and is considered to be part of the Government.

...

'Local governing body' is defined in section 74A of the ITAA 1936 as 'a local governing body established by or under a law of a State or Territory.' The company must be established by or under a law of a State or Territory for the purpose of being a local governing body.

Obviously, most entities which have legal status are constituted or established under a law of a state or territory. This does not mean that all entities so constituted are local governing bodies. Rather, the test requires that the body be constituted or established as a local governing body.

The formation of a company limited by shares owned partly by a local council and partly by others only shows that the company is incorporated. It does not mean that it is 'constituted as' a local governing body.

In the High Court case of Renmark Hotel Inc v. Federal Commissioner of Taxation (1949) 79 CLR 10; (1949) 9 ATD 106, Rich J said:

The word 'constituted' is not the same as 'incorporated'. For the purposes of s 23(d) it is conceivable that an unincorporated body might be constituted under a State Act so as to satisfy the exemption. On the other hand, mere incorporation under an Act does not constitute the body. The word 'constituted' immediately follows 'public authority'. It means constituted as a public authority....

The company has not been given the characteristics and powers of a local governing body under a law of a State. Neither the incorporation of an entity nor the mere ownership of a corporation by a local council means the corporation is established as a local governing body.

In applying this guidance, it is accepted that you are not a municipal corporation and you are not a local governing body.

Are you a public authority constituted under an Australian law?

Item 5.2 of section 50-25 of the ITAA 1997 provides that a public authority constituted under an Australian law will be exempt from income tax.

This wording is similar to paragraph (c) of the definition of 'exempt public body' in subsection 159GE(1) of the ITAA 1936 which states:

(c) a public authority:

(i) that is constituted by or under a law of the Commonwealth, a State or a Territory; and

(ii) the income of which is wholly exempt from tax;

Public authority

The term 'public authority' is not defined in the ITAA or the FBTAA.

The meaning of the term was considered by the High Court in Renmark Hotel Inc v Federal Commissioner of Taxation (1949) 79 CLR 10 (Renmark Hotel). The Court unanimously concluded that the Renmark Hotel Inc, which conducted a community hotel, was not 'a public authority constituted under any … State Act'.

Rich J at 16 said:

The words "public authority" are in frequent use, but they do not appear to have been the subject of any clear definition. It is an expression used as a very general designation of a diversified class of bodies concerned in carrying out public functions. We speak of a highway authority, a sanitary authority, a water supply authority, a lighting authority, a harbour authority, a tramway authority, a transport authority or a railway authority, and in relation to railways or tramways where a different body is charged with construction we speak of a construction authority. Without much consideration of what common characteristics all these possess or how much further the expression will go, we speak of public authorities to embrace these and many other bodies carrying on public functions. A well-known legal text book, Robinson on Public Authorities, takes its title from the term, but a definition of the term will not be found in the work. It would appear by inference, however, that the Crown itself is considered by the author to fall within the expression, that it extends to the Ministry of Health, to municipal corporations, to the Postmaster-General, to the guardians of the poor, to educational authorities, to the trustees of turnpike roads, to health authorities and to various local and municipal bodies.

Further at 18 Rich J said:

The characteristics of a public authority seem to be that it should carry on some undertaking of a public nature for the benefit of the community or of some section or geographical division of the community and that it should have some governmental authority to do so. … Coercive powers over the individual are given to many governmental authorities which could be called public authorities, but it is not an essential part of a conception of a public authority that it should have coercive powers, whether of an administrative or a legislative character. It may, however be an essential characteristic of the conception that it should have exceptional powers or authority, for instance a tramway board or trust has the exceptional authority of taking trams down a public street.

Guidance as to the meaning of 'public authority' in the context of the definition of 'exempt public body' is provided in Taxation Ruling No. IT 2632 Income tax: meaning of 'public authority' in definition of 'exempt public body' in Division 16D.

Paragraphs 4 to 14 of IT 2632 discuss the meaning of 'public authority'. Paragraph 14 in summarising the steps to be taken in deciding whether a body is a 'public authority' states:

The necessary steps in deciding in particular cases whether a body answers the description of a "public authority" within the Division 16D definition are to:

(a) Weigh all relevant circumstances, especially the nature of the functions of the body concerned, treating the question of the status of the body as essentially a question of fact and degree to be determined in the light of the particular facts of each case.

(b) Consider whether the body has one primary function or a variety of functions not all of which involve the exercise of powers and functions not possessed by the ordinary citizen and which have been conferred by statute and are essentially of a public nature.

(c) Examine all the characteristics of the body to determine whether it can be seen in general to conform to the common understanding of a public authority. To so conform a body would be expected to have public duties, functions or powers to perform and these would ordinarily be carried out under statutory authority for the benefit of the public. While not essential, a distinguishing characteristic is the possession of exceptional powers conferred by statute beyond those possessed by private individuals. However, the derivation of profits for distribution to shareholders or members would not ordinarily be a characteristic of a "public authority". The examination will involve a consideration of:

(i) the significance of any features of the body clearly alien to, or inconsistent with, the concept of what is a public authority; and

(ii) the relevant statutory context, namely, the overall statutory scheme and policy underlying Division 16D.

Further guidance on the application of item 5.2 of section 50-25 of the ITAA 1997 was provided in Class Ruling CR 2015/61 Income tax: Queensland Rural Fire Brigades - exempt entities; Public Authorities.

In considering the meaning of 'public authority' paragraphs 17 to 21 of CR 2016/61 state:

17. In The Incorporated Council of Law Reporting for the State of Queensland v. Federal Commissioner of Taxation (1924) 34 CLR 580 (Incorporated Council), Isaacs J, in the course of argument by counsel, made the following comments on the meaning of 'public authority':

I can only understand their constitution as a public authority by the exercise of some statutory power authorizing them to act on behalf of the public of the State. (at 585)

18. The comments of Isaacs J were followed by Webb J in Renmark Hotel Inc v. Federal Commissioner of Taxation (1949) 79 CLR 10 (at 24) (Renmark Hotel). Also in Renmark Hotel, Latham CJ made the following comments in deciding that the hotel was not a 'public authority':

...the appellant company is not given any power or authority by law in the form of a State statute to do any acts in relation to the public which otherwise would be beyond its power or unauthorized... In my opinion, the appellant company does not perform any statutory duties or exercise any public functions. (at 23)

19. McTiernan J in the same case stated:

It is necessary that an entity which claims to be a public authority for the purpose of this provision of the Income Tax Assessment Act should ... be given by statute powers or duties to be exercised for public objects. (at 23)

20. In Western Australia Turf Club v. Federal Commissioner of Taxation (1978) 139 CLR 288 (WA Turf), Stephen J provided the following observations on the meaning of 'public authority' (Barwick CJ and Jacobs J agreeing):

The Club has ever since been involved in this exercise of powers and functions not possessed by the ordinary citizen and which have been conferred by statute and are essentially of a public nature. Were these powers and functions vested in some State authority created for that purpose and having no other function it would, I think, clearly enough be a public authority for the purposes of section 23(d) of the Act. However, to confer a public function and powers exercisable in the public interest upon a body which has previously carried on, and will continue to carry on distinct activities not in themselves characteristic of a public authority may not suffice to confer upon its revenue the immunity which s. 23(d) affords. (at 294-295)

21. And at 297:

In the case of s. 23(d), the possession of some statutory duties or powers is not, I think, enough to attract the income of a body the exemption from income tax which the paragraph confers unless, upon examination of all characteristics, the body can be seen in general to conform to the common understanding of a public authority. In such an examination, in view of the indefinite nature of the term 'public authority', it will perhaps be profitable... to adopt an 'essentially negative method', looking for features clearly alien to the concept of what is a public authority and judging to what degree those features are pervasive and important. It will also be relevant to bear in mind the present statutory context...

Further guidance as to the meaning of authority and public authority was provided by Taxation Ruling SST 10 Sales tax: authorities and public authorities for the purposes of Items 126 and 127.

In discussing the meaning of 'authority', paragraphs 3.4 to 3.7 of SST 10 state:

3.4 The word 'authority' is an ordinary English word and it signifies a body that has the right or power to exercise authority or command. The Macquarie Dictionary (3rd ed) defines the word 'authority' to mean:

'1. The right to determine, adjudicate, or otherwise settle issues or disputes; the right to control, command, or determine. 2. a person or body with such rights.'

3.5 While the courts have, on a number of occasions, determined whether or not particular bodies are authorities or public authorities, no single test has emerged.

3.6 When considering whether or not a body is an authority for the purposes of the subitem, usually no one factor is determinative. Rather, there is a range of considerations that must be taken into account in order to determine the character of the body in question. Ultimately, the decision about the status of a particular body is a question of fact and degree depending upon the particular circumstances of that case.

3.7 A number of propositions have been derived from the courts. These were summarised by Hill J in the Bank of WA case:

• a private body, corporate or unincorporated, established for profit is not an authority;

• for a body to be an authority of a State or of the Commonwealth, the body in question must be an agency or instrument of government set up to exercise control or execute a function in the public interest. It must be an instrument of government existing to achieve a government purpose;

• the body in question must perform a traditional or inalienable function of government and have governmental authority for doing so;

• for a body to be an authority, it is not necessary that it has coercive powers and the possession of coercive powers does not of itself characterise a body as an authority;

• as a minimum, a body is required to possess exceptional powers. However, the possession of exceptional powers is not of itself sufficient to characterise a body as an authority. For example, a private utility that may have the legal right to enter premises would not be an authority solely because of that power; and

• incorporation by legislation is not a requirement for a body to be classed as an authority.

In discussing the meaning of 'public authority', paragraphs 4.2 to 4.4 of SST 10 state:

4.2 Many of the decided cases have considered the meaning of the word 'authority' in the context of the expression 'public authority'. Hill J in the Bank of WA case commented on the distinction between an 'authority' and a 'public authority':

'It is difficult, however, to see that the addition of the word "public" significantly alters the meaning of the word "authority", particularly where it is used, as in the present context, in relation to governmental authorities. To the extent that the word "public" does affect the meaning of the word "authority" it can only be in the emphasis upon the public character of the body, or the public nature of the activity with which the body is concerned rather than the intrinsic characteristics of the body itself.'

4.3 To be a public authority, the body in question should exercise control, power or command in its undertaking of a public nature for the benefit of the community or of some section or geographical division of the community and it should have governmental authority to do so.

4.4 Where a body has a variety of functions, the question of whether it is a public authority for the purposes of paragraph (b) of the subitem is one of fact and degree that often requires a balancing of the various features of the body concerned. This question should be approached by looking for features that are alien to the concept of what is a public authority and determining the importance of those factors to that body. It is the ATO's considered view that a body is not usually a public authority where:

• individuals have a financial interest in its profits or assets;

• its public functions are merely incidental or subordinate to its private pursuits; or

• its powers derive from a private or non-statutory source.

In applying this guidance to your situation, you were incorporated under the Act.

The Act provides that you have the objects and functions set out in your constitution.

Your objects are:

…

The initial powers on incorporation as set out in Schedule one of your Constitution are:

…

Your Strategic Plan advises that you are committed to advancing the vision for local Government and providing value to the Government Authorities.

In summarising these documents, you were established by the Government to:

• represent the Government Authorities in a range of matters;

• promote the Government Authorities;

• provide services to the Government Authorities;

• enhance the capacity of the Government Authorities to deliver services; and

• provide effective leadership on behalf of the Government Authorities.

To do this you were given powers not possessed by ordinary citizens.

In your application, you state:

We do not consider that we perform functions on behalf of government, nor is it an agent of the Government. This is particularly evident in the fact that no governmental control is exercised over its management …

In considering the points made in support of this statement, we accept that you are a separate legal entity from the Government that established you and that most of your funding comes from the Government Authorities who elect representatives for your board. However, while this may provide a degree of separation from the Government, it does not mean that you are not under the control of government and do not perform functions on behalf of government.

The Macquarie Dictionary Online defines government to mean:

1.  the authoritative direction and restraint exercised over the actions of people in communities, societies, and states; direction of the affairs of a state, etc.; political rule and administration: government is necessary to the existence of society.

2.  the form or system of rule by which a state, community, etc., is governed: monarchical government; episcopal government.

3. (sometimes upper case) (sometimes construed as plural) the governing body of persons in a state, community, etc.; the executive power; the administration: the government was defeated in the last election.

4. …

From this definition it can be seen that government is not restricted to the State and Federal Government.

Conclusion:

In applying the factors referred to by Rich in Renmark Hotel, we consider that you are a public authority as:

• in providing the services to the Government Authorities you are carrying on an undertaking of a public nature;

• as set out in your application the services you provide enable the Government Authorities to provide better community service offerings;

• you do not make private profits;

• you have governmental authority for providing the services; and

• although you do not have coercive powers, you have exceptional powers or authority to do what an ordinary private individual may not do.

Constituted under an Australian law

Subsection 995-1(1) of the ITAA 1997 defines an Australian law to mean:

a Commonwealth law, a State law or a Territory law.

Paragraphs 15 to 19 of IT 2632 discuss the meaning of 'constituted by or under a relevant law'. The discussion is summarised at paragraph 19 which states:

In its context in paragraph (c) of the definition of "exempt public body", the expression "constituted by or under" a Commonwealth, State or Territory law is therefore concerned with the manner in which a body is presently constituted, and not how it was originally constituted. The expression calls for a consideration year by year of whether the body is either set up, founded or established as a public authority by or under the relevant law or, at the relevant date, has acquired the qualities and attributes of a public authority.

In considering the meaning of 'constituted under', paragraphs 22 to 24 of CR2015/61 state:

22. In Renmark Hotel, Rich J, at first instance, gave the following commentary of the meaning of 'constituted':

The word 'constituted' is not the same as 'incorporated'. For the purposes of s.23 (d) it is conceivable that an unincorporated body might be constituted under a State Act so as to satisfy the exemption. On the other hand, mere incorporation under an Act does not constitute the body. The word 'constituted' immediately follows 'public authority'. It means constituted as a public authority. (at 19)

23. In WA Turf, Barwick CJ, after accepting that an unincorporated body may be constituted as a public authority under a statute, without having derived its existence from a statutory source, stated that:

... it must indeed be a rare that an unincorporated body becomes a public authority by reason of statutory powers or functions given to it. Rich J's remark that such a result was 'conceivable' rather suggests the rarity of the occasion. (at 290)

24. Also in WA Turf, Stephen J (Jacobs J agreeing) made the following comments on the meaning of 'constituted under':

It is clear ... that an entity need not from its origin have possessed those qualities which at the relevant date make it a public authority; it may acquire the necessary attributes subsequently and if it does so as a result of legislation it will thereupon have become a public authority. (at 293)

In applying this guidance, you are constituted under a State law as you were incorporated under the Act which provides your objects and powers.

Conclusion

As you are a public authority constituted under an Australian law you are exempt from income tax under section 50-25 of the ITAA 1997. As section 50-25 is not one of the listed provisions in subsection 65J(1) of the FBTAA, you will not be a rebatable employer as you do not satisfy the requirements of paragraph 65J(1)(a) of the FBTAA.

Although you do not satisfy the requirements of paragraph 65J(1)(a), the other requirements referred to in your application are considered below.

(b) Are you a society, association or club?

In your application you contend that you are an association.

In considering whether a health fund which was a company limited by guarantee with only one member was a community service organisation Jessup J in Navy Health Ltd v Federal Commissioner of Taxation [2007] FCA 931; 68 ATR 215; 2007 ATC 4568 (Navy Health) at ATC 4593 said:

On any natural reading of the word, "association" denotes a grouping or coming together, of two or more persons. relevantly for present purposes, the dictionary meaning of the word is "a body of persons who have combined to execute a common purpose or advance a common cause …" (OED, 2^nd Ed.).

In your application you referred to the definition of association in the third edition of the Concise Macquarie Dictionary which defines the term 'association' to be:

an organisation of people with a common purpose and having a formal structure

You then stated that you consider that you meet this definition, but do not provide any reasons for this conclusion. Rather, you then discussed whether Taxation Determination TD 95/56 Fringe benefits tax: can a body which is formed by government, is controlled by government and performs functions on behalf of government be an 'association' for the purposes of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? prevents you from being an association.

Given our conclusion above that you are a public authority constituted under an Australian law, we cannot agree with your contention that you were formed as a result of a group of people coming together to establish an association with a formal structure.

Rather, you are a public authority established by an Act of Parliament to carry on a function of government.

In considering whether you are an association established for community service purposes, or a public authority performing a function of government it is relevant to refer to the guidance provided by paragraphs 50 to 55 of Taxation Ruling TR 2003/5 Income tax and fringe benefits tax: public benevolent institutions. In distinguishing governmental bodies that perform functions of government from organisations that are public benevolent institutions even though they are funded by and accountable to government paragraphs 50 to 55 of TR 2003/5 state:

50. Purely governmental bodies performing the accepted functions of government operate to promote the welfare of the community generally and are unlikely to be public benevolent institutions. Even where they provide direct relief to those in need, it will be merely incidental to the performance of governmental functions and not public benevolence.

51. In Metropolitan Fire Brigades Board v. FC of T 91 ATC 4052; (1990) 21 ATR 1137 a fire brigade was constituted under legislation with the responsible Minister having important powers of control. Its operations were chiefly funded by taxes on property owners. The Full Federal Court held that the fire brigade was not a public benevolent institution because it was 'a body constituted, funded and controlled by government and performing functions on behalf of government'. The Court, at ATC 4056; ATR 1141, compared the relief provided by the fire brigade to government providing pensions: 'It is simply, like the appellant, using government funds to exercise a function of government.' This case was applied in Mines Rescue Board of New South Wales v. FC of T 2000 ATC 4191; (2000) 44 ATR 107 and on appeal at 2000 ATC 4580; (2000) 45 ATR 85. The degree to which the Board was governmental precluded it from being a public benevolent institution. Indicators of the Board being governmental included its establishment as a statutory body representing the Crown, governmental authority for funding, and the Minister's powers on directors, functions, planning and investment. It was not determinative that the Minister had not sought to exercise powers of control, that the funding came from coal mine owners, and that providing emergency rescue services at underground coal mines has not always been regarded as a governmental responsibility.^F3

52. Another example would be a drug and alcohol abuse unit of a State Health Department providing assistance as part of a wider organisational function directed to the general good of the community. The unit would not be a public benevolent institution as the relief was provided as a function of government.

53. However, there will be organisations that are funded by and accountable to government which are nonetheless public benevolent institutions.

54. An example is a legal aid provider that was established under statute and received over 70% of its funding from government. It was accepted as a public benevolent institution by the Victorian Administrative Appeals Tribunal. In distinguishing the Metropolitan Fire Brigades Board case Mr Gibson pointed to the fact that the legal aid service was only partly funded by government, was not subject to the same degree of government control and that its activities were not directed to the general community but to the more limited class who could not afford necessary legal assistance (see Legal Aid Commission of Victoria v. Commr of Pay-roll Tax 92 ATC 2053 at 2060-2062; 23 ATR 1148 at 1158-1159).

55. Search and rescue teams which consist of volunteers, and voluntary organisations such as bush fire brigades which have as their central purpose the provision of direct relief to persons in distress, may qualify as public benevolent institutions even where they are government sponsored. This will be so where they are not arms of government and subject to government control.

In applying this guidance to your situation, your circumstances are comparable to those of the Metropolitan Fire Brigades Board as:

• you are constituted under legislation;

• you cannot alter your constitution without the Minister's approval;

• you cannot change the objects or powers for which you were constituted without the approval of the Minister;

• your operations are funded by the Government Authorities; and

• you are controlled by representatives of the Government Authorities.

Therefore, you are a body constituted by the Government that performs functions on behalf of the Government. Although you are not funded or controlled by the Government, you are funded and controlled by the Government Authorities.

Your situation can be distinguished from the situation of a group of people who come together with a common purpose of providing a community service and receive funding from the government for which they are accountable.

Therefore, in applying TD 95/56 we do not accept that you are an association for the purposes of item 5 of the table in subsection 65J(1) as you were formed by government, are controlled by government and perform functions of government.

(c) Were you established for community service purposes (except political or lobbying purposes)?

Taxation Determination TD 93/190 Income tax: what is the scope of the exemption from income tax provided by subparagraph 23(g)(v) of the Income Tax Assessment Act 1936? considers the scope of the exemption from income tax that was provided by subparagraph 23(g)(v) of the ITAA for associations established for community service purposes (not being political purposes or lobbying purposes) prior to it being provided in section 50-10 of the ITAA 1997.

Paragraphs 2 and 3 of TD 93/190 in setting out the purpose of enacting subparagraph 23(g)(v) state:

2. The purpose of enacting subparagraph 23(g)(v) was to create a category of exemption for community bodies whose activities are not accepted as being charitable for the purposes of subparagraph 23(e), but which, nevertheless, conduct activities of benefit to the community. In other words, some organisations that do not qualify for exemption under subparagraph 23(e) may, nevertheless, be exempt under subparagraph 23(g)(v).

3. There are four heads of charitable purpose, one of which is other purposes beneficial to the community; but this is limited by the common law to those purposes which are also charitable within the meaning of the Statute, 43 Elizabeth, Ch. 4. The term 'community service purposes' has a broader meaning than other purposes beneficial to the community which are also charitable. The Explanatory Memorandum to subparagraph 23(g)(v) confirms that the words 'community service purposes' are to be given a wide interpretation. Those words extend to a range of altruistic purposes that are not otherwise charitable, such as promoting, providing or carrying out activities, facilities or projects for the benefit or welfare of the community or any members of the community who have a particular need by reason of youth, age, infirmity or disablement, poverty, or social or economic circumstances.

However, it is only when the purposes of an organisation are altruistic that they will be community service purposes. Paragraphs 4 to 6 of TD 93/190 state:

4. However, the provision does not give exemption from income tax to a broad range of organisations that are established within the community, but whose purposes are not of an altruistic nature. Altruistic purposes are an essential element of even the widest interpretation of 'community service purposes'.

5. It is not accepted that common association as such is altruistic. Neither the purposes of members, nor the purposes of their organisation, are altruistic merely because the members form a non-profit organisation to advance their common interests. Members who seek to advance their common interests are not therefore motivated by an unselfish regard for others, and neither is their organisation. It follows that an organisation established for the purposes of its members is not therefore established for community service purposes. Only when the purposes of the organisation are altruistic can they be community service purposes.

6. Political or lobbying activities often are said to be motivated by altruism. Even if this is so, organisations established for political or lobbying activities are excluded from exemption under the provision. Political or lobbying activities are not limited to party political activities; they include activities directed to influence changes to the law or its administration: cf National Anti-Vivisection Society v. Inland Revenue Commissioners [1948] AC 31.

In applying TD 93/190 to your circumstances, it is accepted that you carry on an undertaking that is for the benefit of the community as you are a public authority. As discussed above, Rich J. in Renmark Hotel at 18 said:

The characteristic of a public authority seem to be that it should carry on some undertaking of a public nature for the benefit of the community or of some section or geographical division of the community

However, as set out in paragraph 4 of TD 93/190 you will not come within the provision if your purposes are not of an altruistic nature.

The Macquarie Online Dictionary defines altruistic to mean:

adjective regardful of others; having regard to the wellbeing or best interests of others (opposed to egoistic).

In your application you referred to the decisions in Navy Health, Victorian Women Lawyers' Association Inc v Federal Commissioner of Taxation (2008) 70 ATR 138 and Wentworth District Capital Ltd v Federal Commissioner of Taxation [2010]FCA 862 (Wentworth District Capital) before stating:

we enable the Government Authorities to provide better community service offerings.

Our purpose is clearly altruistic in nature, and the activities undertaken are for the benefit and welfare of the community.

In support of these contentions you provided several examples.

The examples provided can be divided into three broad categories:

• activities that are governmental, but have a community service purpose;

• activities that are governmental and for the benefit of members; and

• activities that are for the benefit of members.

On the basis of this analysis we do not accept your contention that your purpose is clearly altruistic. Although it is accepted that some of the activities directly benefit the community and others can be seen to indirectly benefit the community through the provision of better Government, the activities are undertaken to fulfil the objects set by the Government.

In your application in referring to the decision in Wentworth District Capital, you contended that purposes reasonably connected to the delivery of community services are sufficient for the activities to be considered as being undertaken for community service purposes.

In considering this contention, it is noted that the Administrative Appeals Tribunal in National Council of Women of Tasmania v FC of T 98 ATC 2124; 38 ATR 1174 (Council of Women) concluded that an umbrella organisation bringing together representatives of other women's organisations (including the promotion of their activities and projects which were directed at the welfare of the community) was established for community service purposes.

In considering whether the Council was established for community service purposes the AAT referred to the Explanatory Memorandum to Taxation Laws Amendment Bill (No 2) 1990. At ATC 2126 the AAT said:

``Paragraph (b) of this clause will introduce subparagraph 23(g)(v) which will exempt from income tax the income of not-for-profit bodies established for community service purposes. The words `for community service purposes' are not defined but are to be given a wide interpretation. The words are not limited to those purposes beneficial to the community which are also charitable. They extend to a range of altruistic purposes. The words would extend to promoting, providing or carrying out activities, facilities or projects for the benefit or welfare of the community, or of any members of the community who have particular need of those activities, facilities or projects by reason of their youth, age, infirmity or disablement, poverty or social or economic circumstances. An exclusion from the exemption will apply to bodies established for political or lobbying purposes.

At ATC 2128 the AAT referred to this quote and said:

23. In our view it is very significant that, in the first paragraph that we have quoted from the explanatory memorandum in paragraph 8 above, the then Treasurer explained the intended meaning of the words ``community service purposes'' by reference not only to the providing or carrying out of activities, facilities or projects for the benefit or welfare of the community, but also to the promoting of such activities, facilities or projects. The Council is very much a promoter of its constituent organisations' activities, facilities or projects, more than it is a provider thereof. With few, if any, exceptions, the promoted activities, facilities and projects of the member organisations are very clearly for the benefit or welfare of the community.

A similar conclusion was reached by the Federal Court in Commissioner of Taxation v. Hunger Project Australia [2014] FCAFC 69; 2014 ATC 20-458 (Hunger Project). In considering whether an organisation that raised funds in Australia that were applied by an affiliated overseas entity can be a public benevolent institution within the meaning of subsection 57A(1) of the FBTAA, the Court at ATC 16168 said:

The ordinary contemporary meaning or understanding of a public benevolent institution is broad enough to encompass an institution, like HPA, which raises funds for provision to associated entities for use in programs for the relief of hunger in the developing world. The fact that such an institution does not itself directly give or provide that relief, but does so via related or associated entities, is no bar to it being a public benevolent institution. Such an institution is capable of being considered to be an institution organised or conducted for the relief of poverty, sickness, destitution and helplessness.

Although a similar principle may apply in relation to community service organisations, your situation can be distinguished from the situations considered in Council of Women and Hunger Project as the bodies that you assist are not a society, association or club established for community service purposes. They are public authorities and the assistance you provide is as a result of the objects set by legislation at the time you were constituted. It is not provided as a result of a group of individuals coming together for community service purposes.

(d) Do you have a physical presence in Australia?

It is accepted that you have a physical presence in Australia.

(e) Do you comply with all the substantive requirements in your governing rules?

It is accepted that you comply with all of the substantive requirements in your governing rules.

(f) Do you apply your income and assets solely for the purposes for which you were established?

It is accepted that you apply your income and assets solely for the purpose for which you were established.

(g) Are you an incorporated company where all the stock or shares in the company is or is beneficially owned by the Commonwealth, a State or a Territory or an authority or institution of one of these?

It is accepted that you are not an incorporated company.

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