| Disclaimer This edited version has been archived due to the length of time since original publication.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 private ruling
Authorisation Number: 1011648858996
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Income Tax Exemption
Question 1
Is Entity A exempt from income tax pursuant to section 24AM of the Income Tax Assessment Act 1936 (ITAA 1936)?
Answer
Yes, Entity A is exempt from income tax pursuant to section 24AM of the ITAA 1936?
Relevant facts and circumstances
Entity A was formed by a state government. Entity A is a private company limited solely by shares and wholly owned by a state government.
Reasons:
1) Section 24AM of the ITAA 1936
Section 24AM states:
The income of a State/Territory body is exempt from income tax unless section 24AN applies to the STB.
There are 5 ways an entity can be a state/Territory body (STB) as described in sections 24AO to 24AS of the ITAA 1936.
2) Section 24AO of ITAA 1936
An entity is a State/Territory body, pursuant to section 24AO of the ITAA 1936 if it:
a) Is a company limited solely by shares, and
b) All the shares in it are beneficially owned by one or more government entities.
a) Company
Entity A is a proprietary company limited by shares.
The first requirement has been met.
b) Shares beneficially owned by one or more government entities
All the legal and beneficial interests in an STB under section 24AO of the ITAA 1936 must be held only by one or more government entities.
Government entity is defined in section 24AT of ITAA 1936 to include a state.
All the shares in Entity A are beneficially held by a state government.
Both requirements for Entity A to be a State/Territory body under section 24AO of the ITAA 1936 have been met.
3) Section 24AN of ITAA 1936
Section 24AN of the ITAA 1936 states:
Income derived by an STB is not exempt from income tax under this Division if, at the time that it is derived, the STB is an excluded STB.
An excluded STB is defined in section 24AT of the ITAA 1936.
excluded STB means an STB that:
a. at a particular time, is prescribed as an excluded STB in relation to that time; or
b. is a municipal corporation or other local governing body (within the meaning of
section 50-25 of the Income Tax Assessment Act 1997); or
c. is a public educational institution to which any of paragraphs 50-55(a) to (c) of the Income Tax Assessment Act 1997 applies; or
d. is a public hospital to which any of paragraphs 50-55(a) to (c) of the Income Tax
Assessment Act 1997 applies; or
e. is a superannuation fund.
Entity A is not included in the list of excluded STB because:
a) it is not included in either Schedule 1 in relation to the 1994-95 financial year or under Schedule 2 in relation to the 1995-96 and 1996-97 financial years of the Income Tax (Excluded STBs) Regulations and
b) it is not considered a municipal corporation or other local governing body under Section 50-25 of ITAA 1997
c) it is not a public educational institution under paragraphs 50-55(a) to 50-55(c) of ITAA 1997
d) it is not a public hospital under paragraphs 50-55(a) to (c) of ITAA 1997 and
e) it is not a superannuation fund.
As Entity A does not fit any of the five criteria for section 24AT of the ITAA 1936 to apply, it is not an excluded STB.
Conclusion:
Entity A meets all requirements as a State/Territory Body under section 24AO of the ITAA 1936, is not an excluded State/Territory Body, and therefore is exempt from income tax pursuant to section 24AM of the ITAA 1936.