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Authorisation Number: 1012014134151

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Ruling

Subject: IT exemption and Fringe Benefits Tax Rebatable Employer status

Question 1

Is the entity exempt from income tax under section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as a non-profit association established for the purpose of promoting the development of an Australian resource under section 50-40 of the ITAA 1997?

Answer

Yes

This ruling applies for the following periods:

Income year ended 30 June 2013

Income year ended 30 June 2014

Income year ended 30 June 2015

The scheme commences on:

1 July 2012

Question 2

Is the entity a rebatable employer for Fringe Benefits Tax purposes in accordance with paragraph 65(J)(1)(l) of the Fringe Benefits Tax Assessment Act 1986?

Answer

Yes

This ruling applies for the following periods:

FBT year ended 31 March 2013

FBT year ended 31 March 2014

FBT year ended 31 March 2015

The scheme commences on:

1 April 2012

Relevant facts and circumstances

The entity is a public company limited by guarantee, incorporated under the Corporations Act 2001.

The entity receives no government funding or subsidy.

The principal object of the entity is to promote the development of a particular resource.

The entity's Charter outlines its specific activities.

The entity's constitution includes clauses that prevent the distribution of its income or property to its members whilst in operation and on its winding up.

The principal activities of the entity have not changed significantly during the current or recent years. The entity continues to undertake its role as a marketing and logistics company.

The entity made some minor changes to its constitution in 2010. The changes relate to the administrative and governance aspects of the entity. The objects in the constitution and the activities outlined in the Charter have not changed.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 6-20(1)

Income Tax Assessment Act 1997 Section 11-5

Income Tax Assessment Act 1997 Section 50-1

Income Tax Assessment Act 1997 Section 50-40

Fringe Benefits Tax Assessment Act 1986 Paragraph 65J(1)(l)

Fringe Benefits Tax Assessment Act 1986 Subsection 65(J)(5)

Reasons for decision

Issue 1

The assessable income of a taxpayer is exempt under section 50-1 of the ITAA 1997 where the taxpayer falls within the description contained in item 8.2 of section 50-40 of the ITAA 1997: 

A society or association established for the purpose of promoting the development of any of the following Australian resources:

(a) Agricultural resources
(b) Horticultural resources
(c) Industrial resources
(d) Manufacturing resources
(e) Pastoral resources
(f) Viticultural resources
(g) Aquacultural resources
(h) Fishing resources 

...not carried on for the profit or gain of individual members.

To fall within item 8.2 of section 50-40 of the ITAA 1997, an association must be established principally or predominantly for the purpose of promoting the development of industrial resources. An essential element of the table in item 8.2 above is that it applies only to Australian resources.

The entity must satisfy the following requirements to be exempt from income tax:

The organisation is a non-profit association;

o the dominant purpose or principal purpose is promoting resource, aviation or tourism development;

o the resources whose development is being promoted are within the umbrella of the specified resources; and

o the resources are resources of Australia.

Non-profit association

A non-profit organisation must not be carried on for the profit or gain of its individual members whilst in operation or on winding up.

The entity's constitution has suitable non-profit and winding-up clauses.

It is also considered that the entity will continue to be regarded as an association since it does not intend to change its current structure from a company limited by guarantee or its membership structure.

This requirement is satisfied.

Dominant purpose

To be exempt from income tax under section 50-40 of the ITAA 1997 an association must be established principally or predominantly for the purpose of promoting resource development.

The Income tax guide for non-profit organisations states that "promoting development" can be by various means, including research, providing facilities, training, improving marketing methods, facilitating cooperating and similar activities.

The objects clause of the constitution states that the principal object of the entity is to promote the development of the resource industry.

The entity's objects are achieved through its key activities as listed in the Charter.

On the facts, it is considered that the entity is established for the dominant purpose of promoting a resource.

Resources of Australia

Taxation Ruling IT 2415 requires that the resources be used in the best interests of Australia.

The operations of the entity are in respect of an Australian resource within section 50-40 of the ITAA 1997.

Issue 2

Summary

The entity is entitled to the FBT rebate pursuant to subsection 65J(2A) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) on the basis that it is a rebatable employer pursuant to paragraph 65(J)(1)(l) of the FBTAA.

Detailed reasoning

FBT rebate

For the purposes of section 65J of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986), an employer is a rebatable employer for a year of tax if it is a non-profit society, or non-profit association, established for the purpose of promoting the development of the agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources of Australia.

Subsection 65(J)(5) of the FBTAA has an extended meaning of 'non-profit' association to only allow for such a status only if these two requirements are met:

1. the society, association or club is carried on otherwise that for the purposes of profit or gain to its individual members; and

2. it is not an incorporated or unincorporated company whose interests and rights are beneficially owned by the government or government authority.

It has already been established that the entity is a non-profit association established for the purpose of promoting the development of an Australian resource.

Accordingly, the entity is a rebatable employer as described in subsection 65J(1)(l) of the FBTAA and is entitled to the FBT rebate.