| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051191473701
Date of advice: 21 February 2017
Ruling
Question 1
Under the Scheme proposed will there be a taxable capital gain under section 102-5 of the Income Tax Assessment Act 1997?
Answer
No
Question 2
Under the proposed scheme will the income derived by the proposed Trust be exempt from income tax under section 11-5 of the Income Tax Assessment Act 1997?
Answer
Yes
This ruling applies for the following periods:
1 July 2016 to 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
1. The trustees have decided to petition the Supreme Court to amalgamate the holdings of the two trusts.
2. The trusts are currently registered as charities with the Australian Charities and Not-for-Profits Commission and are endorsed by the Commissioner of Taxation as charities that are exempt from income tax under Division 50 of the Income Tax Assessment Act 1997.
Assumptions
1. The court will make a decision in respect of the scheme that the Trust as varied will continue as the proposed new Trust.
2. The court order will not result in the proposed Trust ceasing to be registered with the Australian Charities and Not-for-Profit Commission (ACNC).
3. The proposed new Trust satisfies the special condition in paragraph 50-70(2)(a) of the Income Tax Assessment Act 1997, specifically that the Trust will comply with all the substantive requirements in its governing rules.
Relevant legislative provisions
Income Tax Assessment Act 1997, section 102-5
Income Tax Assessment Act 1997, section 11-5
Question 1
Under the Scheme proposed will there be a taxable capital gain under section 102-5 of the Income Tax Assessment Act 1997?
Reasons for decision
Section 102-5 Income Tax Assessment Act 1997 states that assessable income includes capital gains.
However, under section 11-5 of the Income Tax Assessment Act 1997 income is exempt if derived from certain entities such as registered charities.
The Trust is registered with the Australian Charities and Not-for-Profits Commission (ACNC ) as a charity and is endorsed by the Taxation Commissioner as exempt from income tax under Division 50 of the Income Tax Assessment Act 1997 therefore any capital gains are also exempt.
Question 2
Under the proposed scheme will the income derived by the proposed Trust be exempt from income tax under section 11-5 of the Income Tax Assessment Act 1997?
Answer
Yes
Detailed reasoning
Under the proposed scheme the income derived from the Trust will be exempt from income tax if the Trust is registered with the ACNC as a charity and endorsed by the Taxation Commissioner as satisfying the special condition in paragraph 50-70(2)(a) of the Income Tax Assessment Act 1997.