Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1051257179382

Date of advice: 25 July 2017

Ruling

Subject: Income tax exemption and fringe benefit tax exemption

Issue 1

Question 1

Is the income of the Entity exempt from income tax pursuant to section 24AM of the Income Tax Assessment Act 1936 (ITAA 1936) by virtue of the Entity being a State/Territory body?

Answer

Yes

This ruling applies for the following periods:

The scheme commences on:

1 July 2016

Issue 2

Question 1

Is the taxpayer entitled to a rebate under subsection 65J(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

No

This ruling applies for the following periods:

The scheme commences on:

1 April 2016

Relevant facts and circumstances

Relevant legislative provisions

Fringe Benefit Tax Assessment Act 1986 Section 65J(1),

Fringe Benefit Tax Assessment Act 1986 Section 65J(5),

Income Tax Assessment Act 1936 Section 24AM,

Income Tax Assessment Act 1936 Section 24AN,

Income Tax Assessment Act 1936 Section 24AO and

Income Tax Assessment Act 1936 Section 24AT.

Reasons for decision

Issue 1 Question 1

Summary

Detailed reasoning

Section 24AM of the ITAA 1936 provides that

An entity can be an STB in one of five ways described in sections 24AO to 24AS of the ITAA 1936. Based on the facts and circumstances, the relevant way for the Entity to be an STB is the first way in section 24AO of the ITAA 1936.

Section 24AN of the ITAA 1936 provides that certain STBs are excluded from being income tax exempt under Division 1AB.

STB - Section 24AO

Under section 24AO of the ITAA 1936 a body is an STB if:

A company limited solely by shares

The Entity is established under the Corporations Law as a proprietary company limited solely by shares.

All of the shares are beneficially owned by one of more government entities

Under section 24AT of the ITAA a government entity is defined as:

Section 24AU further states:

the power is taken to be given to, or held by, a government entity.

The shares are considered to be beneficially by a government entity.

Section 24AN

Section 24AN of the ITAA 1936 provides that certain STBs are not exempt from income tax under Division 1AB. The section states that:

Section 24AT of the ITAA 1936 defines the meaning of 'excluded STB' for this Division as an entity that:

As the Entity has not been prescribed as an excluded STB in the Income Tax (Excluded STBs) Regulations 1997 and is not an entity described in paragraphs (b) to (e) of section 24AT of the ITAA 1936, the Entity is not an excluded STB.

Conclusion

The Entity is an STB exempt from Commonwealth income tax under the section 24AM of the Income Tax Assessment Act 1936 (ITAA 1936) as the Entity is considered to be an STB under section 24AO of the ITAA 1936 and is not an excluded STB.

Issue 2 Question 1

Summary

The Entity is not entitled to a rebate under subsection 65J(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as it is not a rebatable employer.

Detailed reasoning

Certain not-for-profit entities can receive fringe benefit rebates. In order to qualify as a rebatable employer for fringe benefit tax purposes the not-for-profit entity must meet the criteria in section 65J(1) of the FBTAA, which states:

Rebatable employer

Item

Column 1

Type of employer

Column 2

Special conditions

1

a registered charity covered by item 1.1 of the table in section 50-5 of the Income Tax Assessment Act 1997

The registered charity is not a rebatable employer for the year of tax if it:

(a) is a registered public benevolent institution; or

(b) is a registered health promotion charity; or

(c) is an institution of the Commonwealth, a State or a Territory; or

(d) has not been endorsed under subsection 123E(1); or

(e) is not an institution.

2

a scientific institution covered by item 1.3 of the table in section 50-5 of the Income Tax Assessment Act 1997

The institution is not an institution of the Commonwealth, a State or a Territory unless it:

(a) is an institution established by a law of the Commonwealth, a State or a Territory; and

(b) is not conducted by or on behalf of the Commonwealth, a State or a Territory; and

(c) is engaged solely in research into the causes, prevention or cure of diseases in humans.

3

a public educational institution covered by item 1.4 of the table in section 50-5 of the Income Tax Assessment Act 1997

The institution is not an institution established by a law of the Commonwealth, a State or a Territory unless it:

(a) is not conducted by or on behalf of the Commonwealth, a State or a Territory; and

(b) is a preschool or school (other than a tertiary institution).

4

a society, association or club:

(a) established for the encouragement of science; and

(b) covered by item 1.7 of the table in section 50-5 of the Income Tax Assessment Act 1997

See subsection (5) of this section.

5

a society, association or club:

(a) established for community service purposes (except political or lobbying purposes); and

(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.

6

an employer association or an employee association covered by item 3.1 of the table in section 50-15 of the Income Tax Assessment Act 1997

None.

7

a trade union covered by item 3.2 of the table in section 50-15 of the Income Tax Assessment Act 1997

None.

8

a society or association:

(a) established for the purpose of promoting the development of:

(i) aviation; or

(ii) tourism; and

(b) covered by item 8.1 of the table in section 50-40 of the Income Tax Assessment Act 1997

See subsection (5) of this section.

9

a society or association:

(a) established for the purpose of promoting the development of any of the following Australian resources:

    (i) agricultural resources;

    (ii) horticultural resources;

    (iii) industrial resources;

    (iv) manufacturing resources;

    (v) pastoral resources;

    (vi) viticultural resources;

    (vii) aquacultural resources;

    (viii) fishing resources; and

(b) covered by item 8.2 of the table in section 50-40 of the Income Tax Assessment Act 1997

See subsection (5) of this section.

10

a society or association:

(a) established for the purpose of promoting the development of Australian information and communications technology resources; and

(b) covered by item 8.3 of the table in section 50-40 of the Income Tax Assessment Act 1997

See subsection (5) of this section.

11

a society, association or club:

(a) established for the encouragement of any of the following:

    (i) animal racing;

    (ii) art;

    (iii) a game or sport;

    (iv) literature;

    (v) music; and

(b) covered by item 9.1 of the table in section 50-45 of the Income Tax Assessment Act 1997

See subsection (5) of this section.

12

a society, association or club:

(a) established for musical purposes; and

(b) covered by item 9.2 of the table in section 50-45 of the Income Tax Assessment Act 1997

See subsection (5) of this section.

When determining if the Entity fits into any of the above employer types, consideration is given to the nature of the Entity and the Entity’s purposes.

The Entity is an Australian Proprietary Company limited by shares. All of the Entity’s shares are owned by a government entity.

The Entity’s purposes are laid out in the Entity’s constitution.

The Entity’s purposes do not fit any of the items in the above table.

Conclusion

Therefore as the Entity’s purposes do not fit the requirements for any of the items in the above table the Entity is not a rebatable employer for the purposes of 65J(1) and cannot claim a fringe benefit tax rebate.


Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).