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Edited version of private advice

Authorisation Number: 1052030321269

Date of advice: 6 September 2022

Ruling

Subject: Income tax exempt

Question

Is the Company an income tax exempt entity under item 8.2 of section 50-40 of the Income Tax Assessment Act 1997 because it is established for the purpose of promoting the development of agricultural resources within Australia?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 October 20XX

Relevant facts and circumstances

You are a not-for-profit company limited by guarantee that was incorporated under the Corporations Act 2001 (Cth).

You were established to improve productivity, profitability, and sustainability in agriculture.

You have provided your constitution and details of your activities.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 50-1

Income Tax Assessment Act 1997 section 50-40

Income Tax Assessment Act 1997 section 50-47

Reasons for decision

All references made in these reasons for decision are to the Income Tax Assessment Act 1997 unless otherwise stated.

Summary

Your ordinary and statutory income is exempt in accordance with section 50-1 because it is established for the purpose of promoting the development of resources within the umbrella of specified Australian resources in item 8.2 of section 50-40.

Detailed reasoning

Section 50-1 provides that the ordinary and statutory income of certain entities is exempt from income tax. The entities are those listed in the tables contained in sections 50-5 to 50-45 of Subdivision 50-A.

Item 8.2 in the table in section 50-40 includes an entity that is a society or association established for the purpose of promoting the development of one or more of the Australian resources specified under that item.

The special condition attached to this item is that it is not carried on for profit or gain of its individual members.

Accordingly, to be exempt from taxation under section 50-1, you must meet the relevant conditions of item 8.2 in the table in section 50-40. In relation to resources the conditions are as follows:

Section 50-47 provides a further condition that if an entity that is covered by one of the items in Subdivision 50-A is an ACNC type of entity, they will not be exempt from income tax unless they are registered under the Australia Charities and Not-for-profits Commission Act 2012.

Broadly, an entity that can be registered as a charity is an ACNC type of entity. You do not have charitable purposes.

Society or association

The term society or association is not defined in the legislation. The term is therefore construed according to the ordinary meaning of the words.

You are an incorporated entity under the Corporation Act 2001 and has more than one member.

It is accepted that the Company is an association for the purposes of item 8.2 in section 50-40.

Established for the purpose of promoting the development of resources of Australia

To qualify for exemption, the principal or dominant purpose for which an organisation is established must be to promote the development of one or more of those the resources listed in the table in section 50-40.

The term development is used in section 50-40 in a commercial or business sense. It comprehends all the elements which must be considered to ensure that the specified resources are best used.

The meaning of development was examined by the High Court in the case of Commissioner of Taxation v Broken Hill Pty Co Ltd [1968] HCA 16 where, in considering the phrase 'development of mining property' the majority of the High Court accepted the interpretation of Kitto J:

In its ordinary English sense the word 'development' when used in relation to a property refers to the unfolding, the bringing out, of some latent capability of that property...It covers I think, any preparation, adaptation or equipment of the property for the exploitation of an inherent potentiality which cannot be exploited or fully exploited, without some such preliminary treatment.

The promotion of development may be direct or indirect provided it is within the scope of item 8.2 of section 50-40. Promoting development can be by various means, including research, providing facilities, training, improving marketing methods, and facilitating cooperation and similar activities.

We consider that your dominant purpose is promoting the development of resources which come within the umbrella of specified Australian resources under item 8.2 under section 50-40.

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