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This edited version has been archived due to the length of time since original publication.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: 1051306123709

Date of advice: 9 November 2017

Ruling

Subject: State or territory body

Question 1

Is Entity M a state or territory body (STB) in accordance with section 24AO of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

Yes.

Question 2

Is the income of Entity M, a STB under section 24AO of the ITAA 1936, exempt from Commonwealth income tax under section 24AM of the ITAA 1936?

Answer

Yes.

Question 3

Is Entity M, a STB under section 24AO of the ITAA 1936 required to lodge an income tax under section 161 of the ITAA 1936?

Answer

No.

This ruling applies for the following periods

Income year ended 30 June 2018

The scheme commences on

1 July 2017

Relevant facts and circumstances

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.

Entity A and its wholly owned subsidiary, Entity M were established and formed a tax consolidated group at the time of the incorporation.

Entity A is a holding company and Entity M a subsidiary.

Entity A was wholly funded by way of share capital (equity).

Entity A had two shareholders at inception: Entity X and Entity Y.

Entity X acquired the all shares in Entity A from Entity Y, as a result, Entity A became a wholly owned subsidiary of Entity X.

Entity A is not under consideration for a new ownership.

Entity A and Entity M ceased to be a tax consolidated group.

Entity X is owned by Australian Government.

It is a tax exempt entity.

Entity X has not formed a tax consolidated group.

Relevant legislative provisions

Income Tax Assessment Act 1936 Division 1AB

Income Tax Assessment Act 1936 section 24AM

Income Tax Assessment Act 1936 section 24AN

Income Tax Assessment Act 1936 section 24AO

Income Tax Assessment Act 1936 section 24AT

Reasons for decision

These reasons for decision accompany the Notice of private ruling for Entity M.

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Unless otherwise stated, all legislative references are to the Income Tax Assessment Act 1936.

Question 1

Summary

Entity M is a state or territory body (STB) in accordance with section 24AO of the ITAA 1936.

Detailed reasoning

Section 24AM of the ITAA 1936 states that income of a State or Territory Body (STB) is exempt from income tax unless section 24AN of the ITAA 1936 applies to the STB.

Section 24AN of the ITAA 1936 states income derived by an STB is not exempt from income tax under Division 1AB of the ITAA 1936 if, at the time that income is derived; the STB is an excluded STB.

Further, sections 24AO to 24AS of the ITAA 1936 provide five ways in which a body can be regarded an STB. In particular, section 24AO of the ITAA 1936 provides that a body is an STB if:

Section 24AT of the ITAA 1936 defines the meaning of 'excluded STB', 'government entity’ and ‘territory’, and provides that in this Division:

excluded STB is an entity that:

government entity means:

In your circumstances, Entity M is a company limited solely by shares and all of those shares are beneficially owned by Entity X, which is a government entity within the meaning set out under section 24AT of the ITAA 1936.

Further, Entity M does not fall within the categories of excluded STBs set out under section 24AT of the ITAA 1936.

Therefore, it is considered that Entity M is a state or territory body (STB) in accordance with section 24AO of the ITAA 1936.

Question 2

Summary

Entity M, a STB under section 24AO of the ITAA 1936 is exempt from Commonwealth income tax under section 24AM of the ITAA 1936.

Detailed reasoning

As discussed above section 24AN of the ITAA 1936 does not apply as Entity M is not an excluded STB. Further, both the requirements for Entity M to be an STB under section 24AO of the ITAA 1936 have been met.

As Entity M is an STB under section 24AO of the ITAA 1936 that is not an excluded STB under section 24AT of the ITAA 1936, its income is exempt from income tax pursuant to section 24AM of the ITAA 1936.

Question 3

Summary

Entity M, a STB under section 24AO of the ITAA 1936 is not required to lodge an income tax under section 161 of the ITAA 1936.

Detailed reasoning

Subsection 161(1A) of the ITAA 1936 states:

Exceptions to the requirement to lodge an income tax return under Legislative Instrument 2017 covers a person described in Table O.

Table O includes:

As Entity M is an STB under section 24AO of the ITAA 1936 that is not an excluded STB under section 24AT of the ITAA 1936, its income is exempt from income tax pursuant to section 24AM of the ITAA 1936, is not required to lodge an income tax return as per Table O of the Legislative Instrument.

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).