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Edited version of private ruling
Authorisation Number: 1011598216202
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Ruling
Subject: Exemption of tax on income received from interest
Question 1
Will the interest income derived by the Club be exempt from income tax?
Answer
Yes
Facts
The Club self assesses itself as an entity described in section 50-45 of the Income Tax Assessment Act 1997 (ITAA 1997) being an income tax exempt entity established for the encouragement of a game or sport.
Due to a natural disaster (storm/flooding) the Club received significant structural damage to its premises. A significant insurance claim was received by the Club for the construction of the new premises. Due to the lengthy nature of development and construction the monies have been held in bank accounts awaiting the development applications etc, to enable the Club's premises to be rebuilt.
The Club is going to receive a substantial amount of interest income from the bank accounts in which the insurance monies were deposited.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 50-1
Section 50-1 of the ITAA 1997 states:
The total *ordinary income and *statutory income of the entities covered by the following tables is exempt from income tax.
(* as defined in section 995-1 of the ITAA 1997)
The tables referred to in section 50-1 of the ITAA 1997 are contained in sections 50-5 to 50-45 of the ITAA 1997. A society, association or club established for the encouragement of a game or sport is listed at item 9.1(c) in the table in section 50-45 of the ITAA 1997.
The Club is an entity described in item 9.1 of section 50-45 of the ITAA 1997 as a sporting organisation.
Consequently, the income of the Club is exempt from income tax in accordance with section 50-1 of the ITAA 1997. This includes any interest income received by the Club, including interest derived on the insurance claim received by the Club.