Edited version of your written advice

Authorisation Number: 1012927827983

Date of advice: 14 December 2015

Ruling

Subject: Community Service Organisation: Income Tax Exemption Status

Question 1

Does the Entity have the status of being exempt from income tax on the basis that it is a society, association or club established for community services purposes as per item 2.1 of section 50-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

Question 2

If the Entity is a not an income tax exempt entity, does it need to lodge an income tax return for the income year ended 30 June 20XX?

Answer

Not applicable as the Entity is an income tax exempt entity.

This ruling applies for the following periods:

Income year ended 30 June 2014

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 20XX

Relevant facts and circumstances

The Entity is a non-profit organisation providing programs to the community in a non-English language.

The Entity is run on funds obtained from donations and community sponsorship. All workers are volunteers.

One of the objects of the Entity is to promote the non-English culture and language. It mainly provides older and new migrants with a service of contemporary information of interest to them in the non-English language, entertainment by way of music for all ages and to keep them company every day.

The Entity's main purpose is not lobbying or political. Its constitution provides that there is no affiliation with any political parties or organisations.

The Entity does not merely seek the common interests of its members. The demographics of the Entity's members are from various professions and occupations. The main audience consists of the wider community who understands the non-English language.

The Entity promotes and carries out its objectives through a number of varied programs conducted by medical practitioners, lawyers, social workers, language and cultural professionals, insurance and financial experts and various other fields of expertise to provide contemporary information to the general community. One target audience in the community for the Entity is the elderly migrants in the community who still speaks the non-English language. They are now in the latter part of their lives are less mobile and quite a number are in retirement or nursing homes and their only contact with the outside world is via the Entity's programs. The Entity also caters to the recent wave of migration of mainly well-educated young people to Australia. Some of them have started to assist in the Entity.

A sample of the programs provided by the Entity was supplied to the ATO in several areas:

a. Community Issues (local government issues, insurance matters, the environment, mental health issues, gardening, diet and health issues, women's issues, social security issues and legal issues)

b. Non-English Culture (regional cooking, migration news, non-English music and other news)

c. Music and Entertainment (non-English music- both traditional and modern day)

d. Sports and News (Australian and all over the world)

The Entity has trained a number of volunteers. The Entity provided a training course in which a number of volunteers participated each receiving a certificate of competence. The volunteers ranged from 12 years of age to mature age people thus satisfying most tastes in music and providing entertainment for all ages. All volunteers are unpaid and willingly give up their free time to prepare and produce their various programs.

The Entity exists, operates and incurs its expenditure solely and entirely in Australia. All of the Entity's income is also entirely derived from members, donors and sponsors from the local community.

The Entity confirms they have always complied with all the substantive requirements of its governing rules.

The Entity confirms that all its income and assets are applied solely for the purpose for which it is established.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 50-10 and

Income Tax Assessment Act 1997 section 50-45.

Reasons for decision

Issue 1

Question 1

Summary

The Entity has the status of being exempt from income tax on the basis that it is a society, association or club established for community services purposes as per item 2.1 of section 50-10 of the ITAA 1997.

Detailed reasoning

An organisation will be exempt from income tax and can self-assess its exemption if it meets the following requirements:

• it is a non-profit society association or club.

• it is established for community service purposes (except political or lobbying purposes).

• it is not a charity.

• it meets one of the three tests e.g. physical presence test in Australia, DGR test and prescribed bylaw test.

• it complies with all the substantive requirements in its governing rules.

• it applies its income and assets solely for the purposes for which it is established.

Non-profit society association or club

Entity W's constitution contained the relevant clauses for its, non-profit. Clauses provide that none of the profits should be distributed to its members (except to compensate them for services rendered or expenses incurred) whilst the association is on-going or when the association is wound up.

Community Service Purpose

A community service organisation is a non-profit society, association or club established for community service purposes except political or lobbying purposes.

The main purpose of the organisation must be community service purposes. This is supported by an organisation's constituent documents, activities, use of funds and history. Any other purposes of the organisation must be incidental, ancillary or secondary to the community service purpose.

The Entity's constitution contains its objects. These included to produce programs, the maintenance of the non-English language and culture and the social and cultural welfare of the non-English community, to foster closer ties between the non-English community and the Australian society at large, to represent the non-English community in any cultural events that promote multiculturalism and ethnic heritage and to train volunteers in producing programs in the non-English language.

Although there are some segments specific to the non-English culture e.g. music and cuisine, the majority of the programs relates to every day community relevant topics about living in Australia. The music, sport and news segments provide entertainment for the audience between the community topics.

The non-English community is a segment of the wider community. By providing programs in the non-English language, it does assist in maintaining the non-English language. However, there are other members of the community who may be learning the non-English language, interested in the non-English music or is speaking or learning to speak that non-English language who may also benefit from the Entity's programs in the non-English language. Hence, it does provide a service to the wider community (non-English speaking community and wider Australia) as it is possible to gain access to the Entity's programs in states across Australia.

Community service purposes are altruistic - that is, community service organisations are established and operated with regard to the wellbeing and benefit of others.

The Entity has provided a training course in which volunteers participated each receiving a certificate of competence. These volunteers willingly give up their free time to prepare and put various programs. This demonstrates the Entity's contribution to the community in providing training and passing on skills to individuals.

The Entity is a non- profit organisation operating with a view to provide programs to improve the well-being and benefit of others rather than to drum up interest in the products and services of its sponsors.

Community service organisations promote, provide or carry out activities, facilities or projects for the benefit or welfare of the community or any members who have a particular need by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances.

Although the Entity targets the non-English community as its main audience, the prime groups which it is trying to assist are elderly migrants and recently migrated young people for whom are the non-English language is their main language. These groups have a particular need due to their age or social economic circumstances and often find it more difficult to integrate into Australian society often due to an initial language barrier and lack of social networks. The programs cover a broad range of topics ranging from social services, legal advice, health segments, healthy eating, insurance topics, local government news, sports, current news and affairs. Some of the programmers are qualified professionals. These programs will aid these groups to integrate into Australian society by informing them of community related topics in a language they understand. These groups can often feel isolated because of their immobility due to age or being new to a foreign country. There are also other groups with particular need which may also be assisted by the Entity e.g. women who understand the non-English language will benefit from program on women's issues. Due to the stigma that can sometimes attach to people with mental health issues, the programs on mental health will assist with migrants with a qualified doctor speaking the non-English language to be more open about seeking help and coming forward.

Organisations that seek to advance the common interests of their members are not altruistic and so cannot be community service organisations. If an organisation's main purpose is lobbying or political, its income will not be exempt.

In the case of the Entity, the members (across a wide section of the community) are a subset of the wider community that they seek as their audience. The non-English community across Australia will greatly exceed the number of Entity W's members.

In Victorian Healthcare Association Ltd v FC of T 2010 ATC 10-141, BH Pascoe SM quoted at paragraph 22 when denying the Victorian Healthcare Association Ltd their income tax exemption status due it being unable to satisfy requirements under the income tax legislation.

"22. Notwithstanding the wording of the object of VHA in its constitution and in some of its publications which are likely to have had their origin in its attempt to satisfy the requirements of the statutes, I am satisfied that, being the peak body for its members and controlled by a board of directors made up of board members and executive of its members, its principal or dominant purpose is to provide services as directed and needed by its members. As with Navy health its operations may result in an improvement in community health as provided by its members but that is a by-product of its principal or dominant purpose, not any altruistic purpose for which it is established."

The topics covered by the program would appeal to a wide range of ages not just those currently in their working life (the majority of the Entity's members). Also, the aim of the Entity is to provide community relevant information and entertainment to groups of particular need e.g. the elderly migrant community and recently migrated young people as well as the wider non-English speaking community. Unlike the Victorian Healthcare Association Ltd case, the improvement in the wellbeing and benefit of the community is the Entity's dominant purpose and not a by-product of its work.

The Entity's main purpose is not lobbying or political.

Not a charity

The Entity is not a charity.

Meets one of three tests

The Entity exists, operates and incurs its expenditure solely and entirely in Australia. All of the Entity's income is also entirely derived from members, donors and sponsors from the local community.

Complies with all the substantive requirements in its governing rules

The Entity confirms that they have always complied with all the substantive requirements in its governing rules.

Applies its income and assets solely for the purpose for which it is established.

The Entity confirms that all its income and assets are applied solely for the purposes for which it is established. .

Therefore, the Entity has satisfied the status of being exempt from income tax on the basis that it is a society, association or club established for community services purposes as per item 2.1 of section 50-10 of the ITAA 1997.

Question 2

Summary

Not applicable

Detailed reasoning

The Entity has the status of being exempt from income tax on the basis that it is a society, association or club established for community services purposes as per item 2.1 of section 50-10 of the ITAA 1997. Hence, the question is not applicable.