Edited version of private ruling

Authorisation Number 90815

This ruling is a private ruling for the purposes of Division 359 of Schedule 1 of the

Taxation Administration Act 1953.

What this ruling is about:

(1) Is the entity exempt from income tax under section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) being a community service organisation as described in item 2.1 in the table of section 50-10 of the ITAA 1997?

(2) Is the entity exempt from income tax under section 50-1 of the ITAA 1997 being a charitable institution as described in item 1.1 in the table of section 50-5 of ITAA 1997?

Ruling:

(1) Is the entity exempt from income tax under section 50-1 of the ITAA 1997 being a community service organisation as described in item 2.1 in the table of section 50-10 of the ITAA 1997?

Yes.

(2) Is the entity exempt from income tax under section 50-1 of the ITAA 1997 being a charitable institution as described in item 1.1 in the table of section 50-5 of ITAA 1997?

Yes, however endorsement by the Commissioner is required to meet all special conditions of item 1.1 in section 50-5 of the ITAA 1997.

Year(s) of income or period(s) to which this ruling applies:

Year ended 30 June 2009

The scheme that is the subject of the ruling:

Constitution

The entity is a not for profit company limited by guarantee.

Appropriate non-profit and dissolution clauses contained in Constitution.

Main Objects:

· To promote the interests and welfare of Australians in Australia.

· To provide goods and services, conduct activities, and coordinate projects for the benefit of Australians in Australia.

Activities

· Providing representation for Australians.

· Conducting and initiating research into issues and influences that impact on the lives of the Australians.

· Providing relevant information to senior Australians and encouraging positive perceptions of Australians through both its own publications and effective use of the broader media.

· Maintaining and supporting its branch structure which is engaged in improving the circumstances of Australians.

· Undertaking commercial activities to support the broader goals of the association but also to use those activities to drive change in the marketplace in areas where age-based discrimination occurs.

Further details regarding each of these activities are included in the Private Ruling Application and appendices. These include a program which gives Australians an opportunity to put their skills into use by being involved in community projects, a magazine which provides information on issues relevant to Australian and the various research topics on issues important to Australians.

Relevant provisions:

Income Tax Assessment Act 1997 Section 50-110.

Income Tax Assessment Act 1997 Section 50-5.

Income Tax Assessment Act 1997 Section 50-50.

Income Tax Assessment Act 1997 Section 50-52.

Income Tax Assessment Act 1997 Section 50-10.

Explanation: (This does not form part of the notice of private ruling)

(1) Community Service Organisation

As per page 14 of the Income tax guide for non-profit organisations (NAT 7967-03.2007) (ITG), in order for a community service organisation to be exempt from income tax and to self-assess its exemption, it must be a:

· non-profit society, association or club

· established for community service purposes, except political or lobbying purposes

· it is not a charity, and

· it meets one of three tests.

Each of these elements will be considered below.

Non-profit society, association or club

As per page 6 of ITG, the Tax Office accepts an organisation as non-profit where its constituent or governing documents prevent it from distributing profits or assets for the benefit of particular people - both while it is operating and when it winds up. These documents should contain acceptable clauses showing the organisation's non-profit character. The organisation's actions must be consistent with this requirement.

The entity's Constitution contains an appropriate non-profit clause and dissolution clause. Its objects and activities appear to be consistent with these requirements.

Page 6 further explains that a non-profit organisation can still make profit, but this must be used to carry out its purposes and must not be distributed to owners, members or other private people. The entity has advised that they have some commercial activities - these are insurance and travel services. However these activities are undertaken to generate funds to support the broader goals of the association and also to drive change in the marketplace in areas where age-based discrimination occurs.

It is therefore accepted that the entity is a non-profit organisation.

Established for community service purposes, except political or lobbying purposes

The main purpose of the organisation must be community service purposes. The constituent document, activities, use of funds and history indicate that it is for these purposes. Any other purpose must be incidental or ancillary or secondary to the community purpose.

The entity provides representation for Australians to governments, business and the broader community on various issues which affect them. The entity seeks to advance the welfare of all Australians. Furthermore, it is open to all Australians to participate in. These representation activities are not considered to be a significant political or lobbying activity but an incidental activity in achieving their main purpose, which is to promote the interest and welfare of Australians in Australia.

It is not a charity

As specified on page 14 of ITG, many community service organisations will also be charities.

The entity is considered to be a charity based on the following points:

· Page 32 of ITG discusses what a charity is. A charity must be an entity (the entity is a company limited by guarantee). Charities are altruistic and exist for the benefit of the community. While the entity limits those who can benefit from its activities, it is still a charity as those limits are to better enable it to carry out its charitable purpose.

· Of the charitable purposes described on page 33 of the ITG, the entity's purpose falls under 'the relief of the needs of the aged' and 'other purposes beneficial to the community'.

This is supported by paragraph 199 of Taxation Ruling TR 2005/21 Income tax and fringe benefits tax: charities which, in relation to the relief of the needs arising from old age, states that relief can take many forms including companionship, mutual activities and the security of community living to counter the effects of the isolation and loneliness.

· Charities are non-profit (this has been addressed above).

· The sole purpose of the entity must be charitable. The entity does not have an independent non-charitable purpose. Its sole purpose is to look after the interests and welfare of Australians. This is reflected in its objects and activities.

· As per page 35 of the ITG an entity is not charitable if its purpose is advocating a political party or cause, attempting to change the law or government policy, or promoting a particular point of view. However, if an entity's purpose is otherwise charitable, the presence of political, lobbying or promotional activity that is incidental to the charitable aims will not prevent it being a charity. As discussed above, the entity's representation activities are incidental to its charitable purpose.

· Page 36 states that charities can carry out commercial and business-like activities where they are only carried out for the sake of, or in aid of, or in furtherance of the charitable purposes. In the entity's case, their commercial activities are carried out in furtherance of its charitable purpose.

It meets one of three tests

The entity meets the 'physical presence in Australia' test as it exists, operates and incurs its expenditure principally in Australia.

Conclusion

Based on the above, the entity is similar to those societies or associations described in the Taxation Determination TD 93/190 and is considered a community service organisation. Therefore it is exempt from income tax under section 50-1 of the ITAA 1997 being an association established for community service purposes under item 2.1 in section 50-10 of the ITAA 1997.

However the entity is also considered as a charity but it must meet special requirements to be income tax exempt (as discussed under (2) below) under section 50-1 of the ITAA 1997.

(2) Charitable Institution

Page 50, Chapter 4 of the ITG specifies that there is a system of endorsement under which charities can apply to the Tax Office to be exempt from income tax.

The following requirements are conditions which a charity must satisfy if it wants to be endorsed as income tax exempt:

· Your organisation must have an ABN;

· Your organisation must meet the requirements of a Charitable Institution.

ABN

The entity has an appropriate ABN.

Charitable Institution

As explained on page 50 of ITG, your organisation will be a charitable institution if it is an establishment, organisation or association that is instituted to advance or promote charitable purposes. As established above, the entity is an organisation which has been established for charitable purposes.

Furthermore, the entity is a company limited by guarantee, with under ten current directors. Given its activities, size, permanence, purpose and recognition, the entity is considered to be an institution.

Charitable institution tests

Page 51 states that a charitable institution can be entitled to income tax exempt charity endorsement if it meets at least one of three tests.

These tests are the:

· physical presence in Australia test

· deductible gift recipient test, or

· prescribed by law test.

As identified above, the entity meets the 'physical presence in Australia' test as it exists, operates and incurs its expenditure solely in Australia.

Conclusion

Based on the above, the entity is similar to those entities described in the TR 2005/21and meets the requirements of a charitable institution for the purpose of item 1.1 in section 50-5 of the ITAA 1997. However section 50-52 of ITAA 1997 states that an entity covered by item 1.1 is not exempt from income tax unless the entity is endorsed as exempt from income tax under Subdivision 50-B. As such, for the entity to be exempt from income tax under section 50-1 of the ITAA 1997 it must apply for endorsement as a tax concession charity by submitting an Application for endorsement as a tax concession charity or income tax exempt fund.

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