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Edited version of your written advice
Authorisation Number: 1012915928248
Date of advice: 20 November 2015
Ruling
Subject: Income Tax Exemption: Scientific Institution
Issue 1
Question 1
Is the entity a scientific institution under Item 1.3 of section 50-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
This ruling applies for the following periods:
Income year ended 30 June 2015
Income year ended 30 June 2016
Income year ended 30 June 2017
Income year ended 30 June 2018
The scheme commences on
1 July 2014
Relevant facts and circumstances
The entity is a company and is governed by a Constitution.
The primary aim of the entity is scientific.
The entity has scientific objects and an appropriate non-profit and winding up clause.
Relevant legislative provisions
Income Tax Assessment Act section 50-5,
Income Tax Assessment Act section 50-55.
ATO View Documents
ATO Guide: Income Tax Guide for Non-Profit Organisations
ATO Guide: Tax basics for non-profit organisations (NAT 7966)
ATO Guide: Income tax status review work sheet for self-assessing non-profit organisations (NAT 74141)
Reasons for decision
Issue 1
Question 1
Scientific Institution
A scientific institution as described in item 1.3 of the table in section 50-5 of the Income Tax Assessment Act 1997 (ITAA 1997), that satisfies the special condition detailed in section 50-55 of the ITAA 1997, will be exempt from income tax.
Institution
Whether a particular entity is an institution is indicated by a range of factors including activities, size, permanence and recognition.
The entity is a company. The entity is governed by a Constitution and has a Board of Directors. The entity will lead the establishment and operation of a centre for science, technology and innovation. The entity is an institution.
Non-profit requirement
The ITAA 1997 does not expressly set out a non-profit requirement in the terms of the scientific institution item. Notwithstanding this it is considered that the scheme of the Act requires that an entity must satisfy this requirement.
The Constitution of the entity has an appropriate non-profit and winding up clause. The Intellectual Property created by the entity will be made available to the public where it promotes its objects. The entity meets the non-profit requirement.
Scientific Institution
For an institution to be a scientific institution it must be established for the encouragement of science. This can be determined by the organisation's main object and activity which must be the promotion of scientific objects i.e. its dominant purpose must be to advance science. Any other objects of the organisation can only be incidental to its main purpose of advancing science.
The objects and primary aim of the entity state that it is established for the promotion or advancement of scientific knowledge. The entity will build a purpose built laboratory facilities. The activities and facilities of the entity are primarily scientific in nature.
The entity anticipates that its provision of services are the only incidental professional outcomes resulting from the main scientific objects and that most of this work is done on a cost recovery basis and contributes to the entity's stated objectives per the constitution.
The entity will still continue to devote the majority of its funds in scientific research and that the realisation of the commercial benefits from the innovation being secondary.
The entity is a scientific institution.
Special condition
The special condition in section 50-55 of the ITAA 1997 requires that the entity:
• has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia, or
• is a deductible gift recipient, or
• is a prescribed institution located outside Australia, exempt from income tax in its country of residence.
The entity is incorporated in Australia, incurs its expenditure and pursues its objects principally in Australia. The entity will satisfy the special condition.
Conclusion
The entity is a scientific institution described in Item 1.3 of section 50-5 of the ITAA 1997 and it will satisfy the special condition. The entity is exempt from income tax.