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Ruling

Subject: State / Territory Body

Question 1

Is the entity a State / Territory body (STB) exempt from income tax pursuant to section 24AM of the Income Tax Assessment Act 1997 (ITAA 1997)?

Advice/Answers

Yes

This ruling applies for the following period

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2011

Relevant facts

The entity was formed by a state government.

The entity is a private company limited solely by shares and wholly owned by a state government.

Relevant legislative provisions

Income Tax Assessment Act 1936 - section 24AM

Income Tax Assessment Act 1936 - section 24AN

Income Tax Assessment Act 1936 - section 24AO

Income Tax Assessment Act 1936 - section 24AT

Reasons for decision

Issue 1

Question 1

Subdivision A of Division 1AB of the Income Tax Assessment Act 1936 (ITAA 1936) provides an income tax exemption for certain STB's in respect of income derived on or after 1 July 1994.

There are five different ways in which a body can be an STB under Division 1AB. Section 24AO of the ITAA 1936 provides the first way in which a body can be an STB.

    24AO A body is an STB if:

      o it is a company limited solely by shares; and

      o all the shares in it are beneficially owned by one or more government entities.

1) Is the entity an STB pursuant to section 24AO of the ITAA 1936?

(a) Company

The entity is a proprietary company limited by shares. The first requirement has been met.

(b) Shares beneficially owned by one or more government entities

Al the legal and beneficial interests in an STB which are exempt from income tax under section 24AO of the ITAA 1936 must be held only by one or more government entities.

All the shares in the entity are beneficially held by a state government.

Summary

Both requirements for the entity to be an STB pursuant to section 24AO of the ITAA 1936 have been met.

2. Is the entity an excluded STB as defined in section 24AT of the ITAA 1936?

Under section 24AM, the income of an STB is exempt from income tax unless section 24AN applies, that is, it is an excluded STB.

Section 24AT sets out the meaning of an excluded STB:

24AT In this Division:

Excluded STB means an STB that:

    o at a particular time, is prescribed as an excluded STB in relation to that time; or

    o is a municipal corporation or other local governing body (within the meaning of section 50-25 of the Income Tax Assessment Act 1997) or

    o is a public educational institution to which any of paragraphs 50-55(a) to (c) of the Income Tax Assessment Act 1997 applies; or

    o is a public hospital to which any of paragraphs 50-55 (a) to (c) of the Income Tax Assessment Act 1997 applies; or

    o is a superannuation fund

The entity is not included in the list of STB's under either schedules listed at Regulation 3 of the Income Tax (Excluded STB's) Regulations 1997. The entity is therefore not prescribed as an excluded STB.

It is clearly evident that the entity is not a public hospital, a public educational institution, or a superannuation fund. Furthermore, the entity is not a municipal corporation or local governing body.

Consequently, as the entity does not fall within any of the criteria for section 24AT to apply, it is not an excluded STB.

3. Is the income of the entity exempt form income tax pursuant to section 24AM of the ITAA 1936?

Section 24AM states:

    24AM. The income of a State / Territory body (an STB) is exempt from income tax unless section 24AN applies to the STB.

It has already been established that 24AN of the ITAA 1936 does not apply because the entity is not an excluded STB.

It has also been established that the entiy is an STB that meets the requirements of section 24AO because:

    o It is a company limited solely by shares

    o Its legal and beneficial interests are held by one or more government entities

As the entity is an STB that is not an excluded STB, its income is exempt from income tax pursuant to section 24AM of the ITAA 1936.

In summary, the entity:

    o Meets all the requirements of an STB under section 24AO of the ITAA 1936

    o Is not an excluded STB pursuant to section 24AT of the ITAA 1936

    o Is exempt from income tax pursuant to section 24AM of the ITAA 1936


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