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Edited version of your written advice
Authorisation Number: 1051228076603
Date of Advice: 31 May 2017
Ruling
Subject: Income Tax exemption as a public authority
Questions and answers
Is Company A, the trustee company for the Fund, income tax exempt pursuant to item 5.2 of the table in section 50-25 of the ITAA 1997 as a public authority constituted under an Australian law for the period 1 July 2017 to 30 June 2026?
Answer: Yes
This ruling applies for the following period
Year ended 30 June 2018
Year ended 30 June 2019
Year ended 30 June 2020
Year ended 30 June 2021
Year ended 30 June 2022
Year ended 30 June 2023
Year ended 30 June 2024
Year ended 30 June 2025
Year ended 30 June 2026
The scheme commenced on
1 July 2017
Relevant facts
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
1. Company A as trustee for the Fund was established by the Act to fund entitlements for employees in the scheme
2. Company A is registered as a public company limited by guarantee.
3. The Fund administers the Act.
4. The structure of the Fund is set out in the following constitutional documents:
● The Act
● Memorandum of Association and Articles of Association of Company A
● Trust Deed and Rules of the Fund
5. Under these constitutional documents, Company A collects contributions, manages the assets of the Fund, pursuing any shortfall in contributions and paying benefits to members of the Fund.
6. Amongst other things, the Act enables Company A to:
● Register employees engaged in the industry;
● Register employers engaged in the industry;
● Impose levies to fulfil its obligations under the scheme;
● Request registered employers supply records or information required to administer the scheme; and
● Undertake enforcement action against registered employers to recover amounts outstanding under the scheme.
Relevant legislative provisions
Income Tax Assessment Act 1997 (ITAA 1997) Section 50-25
Section 50-1 of the ITAA 1997 provides that the ordinary and statutory income of certain types of entities listed in the tables in subdivision 50 -A of the ITAA 1997 is exempt from income tax. In some cases the exemption is subject to special conditions.
Item 5.2 of the table in Section 50-25 of the ITAA 1997 applies to entities which are “a public authority constituted under an Australian law', there are no special conditions.
Public Authority constituted under a Commonwealth Law.
The term “Public Authority constituted under a Commonwealth Law” is not defined in the ITAA 1997. However the Commissioner has issued a public ruling on the meaning of the term in relation to income tax.
Taxation ruling IT 2632, which came into effect in April 1991, discusses the meaning of the term public authority and what is meant by the expression constituted under a law of the Commonwealth, State or Territory. The ruling, at paras 4-11 in particular, considers a number of court decisions which have been made in relation to “public authority” in paragraph 23(d) of the Income Tax Assessment Act 1936 as amended which is equivalent to section 50-25 of the ITAA 1997.
In Renmark Hotel Incorporated v FC of T (1949) 79 CLR 10, the High Court noted that a public authority constituted under any Commonwealth or State Act, or Territory law for the purposes of sec 23(d), (which is equivalent to sec 50-25) should:
1. Carry on some undertaking of a public nature for the benefit of the community or of some section of it;
2. Not make private profits for its corporators although there is no objection to profits made for the public benefit; and
3. Have power or authority conferred upon it by Commonwealth, State or Territory legislation to do acts in relation to the public which would otherwise be beyond its power or unauthorised
Company A undertakes activities of a public nature for a defined section of the community; being the collection, management, administration, and distribution of funds.
If any profits are made, and they are not required to meet liabilities, the profits are to be paid into the Fund. In the event of a winding up, any surplus will not be distributed amongst members, but rather will be given or transferred, by application to the Supreme Court, to other corporations that have the same type of objects as Company A.
The Act confers power and authority upon the Company with regard to the administration of the Fund. This includes the power to register employees and employers, the ability to impose charges and levies, the power to require the supply of any records or information, the furnishing of any returns and for the trustee to make payments under reciprocal arrangements with other states.
Under the Act Company A is vested with powers of a public nature not ordinarily possessed by members of the public. The responsibilities of the company under the Act are the only activities of the company. The Company is constituted as a public authority.
Consequently, Company A is a public authority for the purposes of item 5.2 of the table in section 50-25 of the ITAA 1997 and its income will be exempt from income tax pursuant to section 50-1 of the ITAA 1997.
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