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Edited version of private advice
Authorisation Number: 1012652450265
Ruling
Subject: Amendment to constitution
Question 1
Does a clause if passed by special resolution and included in the Constitution of the entity negatively impact on its deductible gift recipient (DGR) endorsement?
Answer
No
Question 2
Does the clause if passed by special resolution and included in the Constitution of the entity negatively impact on its eligibility for tax concessions?
Answer
No
This ruling applies for the following periods:
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
The scheme commences on:
June 2014
Relevant facts and circumstances
In an email to the ATO from a solicitor advice was sought advice from the Australian Charities and Not-for-profits Commission (ACNC) and the Australian Taxation Office (ATO) on the implications of a state authority requirement to amend their constitution.
A letter from the state authority to the Chief Executive Officer of the endorsed entity required it to amend its constitution to specifically state that community assets will be transferred on winding up in accordance with a state Act.
A proposed clause has been drafted by the solicitor for the entity.
The private binding ruling (PBR) applicant requested a ruling on whether the amendment would negatively impact their DGR status and eligibility for tax concessions.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 30-45
Income Tax Assessment Act 1997 Section 30-125
Fringe Benefits Tax Assessment Act 1986 Subsection 57A(2)
A New Tax System (Goods and Services Tax) Act 1999 Section 176-1
Reasons for decision
Section 30-125 of the Income Tax Assessment Act 1997 (ITAA 1997) sets out the conditions that an entity must satisfy in order to be endorsed as a deductible gift recipient (DGR).
In accordance with section 30-125 of the ITAA 1997, an entity that is seeking to be endorsed as a DGR is entitled to endorsement if the following conditions are satisfied:
a) the entity has an ABN;
b) the entity is described in a category set out in item 1, 2 or 4 of the table in section 30-15 of the ITAA 1997;
c) the entity is not listed by name in Subdivision 30-B of the ITAA 1997;
d) the entity satisfies any special conditions for the category in which it is described; and (e) the entity satisfies the windup requirements.
Requirement (e) - the entity satisfies the dissolution/revocation requirements
Section 30-125(6) of the ITAA 1997 requires that an entity must transfer all remaining gifts, deductible contributions and money received in relation to such gifts and contributions to another deductible fund, authority or institution on winding up or on revocation of endorsement.
The clause in the entity's Constitution (The Income and Property of Company if Company Wound up or Ceases to be endorsed) is in accordance with the requirements of the ATO publication GfitPack QC 16414.
The inclusion of the proposed additional clause as required by the state authority will not negatively impact on the entity's DGR endorsement because it only applies to community assets. Any other surplus assets will continue to be transferred in accordance with the Income and Property of Company if Company Wound up or Ceases to be endorsed clause in the Constitution.
Conclusion - Deductible gift recipient (DGR) - Public benevolent institution (PBI)
The entity is entitled to maintain its endorsement as a deductible gift recipient pursuant to Section 30-125 of the ITAA 1997 on the basis that it continues to have a suitable winding up/revocation clause as required under condition (e).
Question 2
Does the additional clause if passed by special resolution and included in the Constitution of the entity negatively impact on its tax concessions?
Detailed reasoning
The ACNC advised the ATO that the wording in the additional proposed clause to be included in the entity's constitution would be appropriate for ACNC purposes. As the entity's charity status is not affected eligibility for tax concessions will continue to be maintained.