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Edited version of your written advice
Authorisation Number: 1051501537267
Date of advice: 10 April 2019
Ruling
Subject: Income Tax - Deductible Gift Recipient - in Australia requirement
Question 1
Does the Entity satisfy, and will it continue to satisfy, the “in Australia” requirement as described in paragraph (a) of column 4 in item 1 of the table in section 30-15 of the Income Tax Assessment Act 1997 (ITAA 1997) and thereby is/will be entitled to DGR endorsement?
Answer
Yes
Question 2
If the answer to Question 1 is no, would there be any changes that need to be made for the Entity to be entitled to DGR endorsement?
Answer
Not applicable given the answer to Question 1.
Relevant facts and circumstances
1. The Entity was founded and operated in Australia as an incorporated association under the Associations Incorporation Reform Act 2012.
2. The Entity was registered as a charity with the Australian Charities and Non-for-profits Commission (ACNC) on 1 July XXXX, having all its bank accounts and business dealings within Australia.
3. The registered office of the Entity is located in Australia.
4. The Entity’s governing rules are largely provided by its Constitution.
5. The Entity’s Constitution provides the sole objective and purpose for which the Entity is established and includes the following:
To provide for the relief of XXXXXXX or helplessness by:
● XXXX
● XXXX
● XXXX
6. The Entity’s structure is comprised of X financial members; Y of them are elected as a Management Committee the majority of whose members reside in Australia.
7. The Management Committee is responsible for ensuring that the Entity complied with government legislation and is authorised to carry on all aspects of the Entity’s business, particularly with regards to beneficiaries to act in accordance with the Entity’s Funding Policy.
8. The Entity’s purpose is to assist needy people to be able to help themselves in whatever part of the world they are. However, to date, all disbursements have been to people in the poor areas of countries A, B and C. In future, the intention is to provide more assistance to the needy in Australia.
9. The Entity is voluntarily associated with international organisations based in country D.
10. The international organisation is a registered charity as a non-profit humanitarian relief Organisation which develop programs throughout the world and, where possible, encourage them to pass on their benefit to others, thereby creating a circle of ongoing benefits.
11. There are no legal, management or financial links between the Entity and the international organisation and the Entity, the relationship being cooperative one, based on a mutual desire to “help others to help themselves”. In practise, they operate independently.
12. A significant amount of the donations received by the Entity comes from anonymous donations placed in collection containers at facilities of the Church, but donations are also received directly from members of the public.
13. The Entity has a project whereby volunteer youths prepare greeting cards which are sold to provide funds for specific projects - usually for scholarships to higher education for disadvantaged youths. Aside from disbursements to help the needy.
14. Administration expenses comprise only government charges and costs of online or telephone meetings of the Management Committee. All Committee Members are volunteers. No remuneration of any kind is paid to any person. There are some expenses for the youth card project but they are minimal.
15. Funding Policy:
The Entity generally supports:
● XXXX
● XXXX.
● XXXX
● XXXX
● XXXX
● XXXX
● XXXX
● XXXX
16. Project Selection and Monitoring:
● The Entity works with the international organisation to identify the projects it wishes to be involved with by providing financial support. Regular reports and photographs of each undertaking are provided by the international organisation, thereby enabling the Entity to monitor the progress being made on each one.
● From time-to-time, the Entity may become aware of a particular project and initiate contact with the international organisation to offer its support, or suggest that it becomes the Entity’s project.
● The Entity may also consider projects they could undertake on its own account, but always works in cooperation with the international organisation in this regard.
● Projects are usually in less-developed countries where people have special needs. However requests to support projects in any country is considered on their merits, especially whether they offer practical assistance that will promote the well-being and self-sufficiency of disadvantaged people.
17. Approvals Process:
The Management Committee of the Entity, having identified projects which meet the policy guidelines recommends to its financial members that financial support be provided. A three- quarter (75%) majority of all the financial members is required before a recommended project can be supported.
18. The managerial and operational decisions concerning the Entity are made in Australia by the Management Committee in consultation with all financial members on every proposed project.
19. The Management Committee meets and carries out the day-day management in Australia.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 30-15
Reasons for decision
Question 1
Summary
For the periods that this Ruling applies to, the Entity satisfies, and it will continue to satisfy, the “in Australia” requirement as described in paragraph (a) of column 4 in item 1 of the table in section 30-15 of the ITAA 1997 and thereby is/will entitled to DGR endorsement.
Detailed reasoning
Special condition in paragraph (a) in item 1 of the table in section 30-15 of ITAA 1997 requires a DGR to “be in Australia”.
TR2018/D1 Income tax: the 'in Australia' requirement for certain deductible gift recipients and income tax exempt entities (TR2018/D1) applies the ordinary meaning of the phrase “be in Australia”: Accordingly, the Entity will be in Australia at a particular time if:
● it is established or legally recognised in Australia, and
● it operates in Australia at that time.
Being either established or legally recognised is sufficient. Legal recognition means being given status by the Australian legal system. It could include, for example, registration under the Australian Charities and Not-for-Profits Commission Act 2012, Corporations Act 2001, A New Tax System (Australian Business Number) Act 1999 or as an incorporated association under an Act of Parliament of a State or Territory.
The Entity was established in Australia in XXXX. It is an incorporation association, and also registered as a charity with ACNC. Therefore, the Entity is established and legally recognised in Australia.
According to the Entity’s Constitution, the Entity’s sole purpose is to provide for the relief XXXX by:
● XXXX
● XXXX
As explained above, the Entity’s sole purpose is to XXXX. However, to date, all disbursements have been to people in the poor areas of countries A, B and C. In future, the intention is to provide more assistance to the needy in Australia.
Example 1 of TR 2018/D1 deals with a non-for-profit organisation in Australia registered as a charity with ACNC. This organisation conducts charitable activities overseas, while its funds are held by a trustee that makes operational decisions concerning the fund in Australia. The organisation meets the “in Australia” condition.
Example 2 of TR 2018/D1 considers an Australian entity which has been set up by a global non-for-profit organisation founded in Japan. The funds raised by the organisation from the Australian public are controlled by an executive committee which is made up made up partly from members in Australia and partly from members in Japan. The executive committee meets regularly in Japan, and all operational decisions concerning the fund are made in Japan. The fund does not meet the “in Australia” condition because the managerial and operational decisions concerning the fund are not made in Australia.
Example 6 of TR 2018/D1 describes a situation where a charitable institution, being part of a global network with headquarters in the USA, is registered as a PBI with ACNC. The institution has an office in Sydney and a board of directors in Australia responsible for the day-to-day management of its operations. The global head entity in the USA acts on behalf of all the other worldwide entities to distribute funds in the most effective way. The distribution of funds occurs in partnership with local organisations. The institution in this example meets the DGR in Australia condition because it is established and legally recognised in Australia, and because the day-to-day management of its operations is in Australia.
The Entity has an office in Australia and has all its bank accounts and business dealings within Australia. The Management Committee of the Entity meets in Australia and carries out the day-to-day management while in Australia.
Therefore, the day-to-day operational and managerial decisions are made in Australia. The Entity’s association and cooperation with the international organisation and its charitable activities overseas should not change this position, as the Entity’s Management Committee and other financial members conduct the day-to-day management of the Entity in Australia. Specially, there are no legal, management or financial links between the Entity and the international organisation the relationship being cooperative one, based on a mutual desire to “help others to help themselves”. In practise, the Entity and international organisation operate independently.
Further, the fact that the Entity is associated with international organisations that are stationed outside Australia do not displace the Management Committee’s conduct of the day-to-day management of the Entity’s operations from within Australia.
As established above, the Entity satisfies the DGR “in Australia” requirement as it is established and legally recognised in Australia, and its day-to-day management is in Australia. Therefore, the Entity satisfies condition (a) in item 1 of the table in section 30-15 of ITAA 1997 and thereby the Entity is/will be entitled to DGR endorsement. It is not a requirement for DGR endorsement of the Entity that it has its purposes and beneficiaries in Australia.
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