Edited version of your written advice

Authorisation Number: 1051339308632

Date of advice: 20 February 2018

Ruling

Subject: Income tax Exemption

Question 1

Is the entity a ‘society, association or club established for community service purposes (except political or lobbying purposes)’ as per item 2.1 of the table in section 50-10 of the Income Tax Assessment Act 1997 (ITAA 1997), thereby qualifying for income tax exemption pursuant to section 50-1 of the ITAA 1997?

Answer

No

Question 2

Is the entity subject to tax on its taxable income as a non-profit company?

Answer

Yes

Question 3

Does section 59-35 of the ITAA 1997 apply to treat minimum membership contribution amounts received by the entity as non-assessable non-exempt income?

Answer

No

Question 4

Are gifts made by a member of the entity assessable income to the entity under either sections 6-5 or 6-10 of the ITAA 1997?

Answer

No

Question 5

Are gifts made by a non-member of the entity assessable income to the entity under either sections 6-5 or 6-10 of the ITAA 1997?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2015

Year ended 30 June 2016

Year ended 30 June 2017

Year ended 30 June 2018

The scheme commences on:

1 October 2014

Relevant facts and circumstances

The entity is a not-for-profit association and is incorporated under State based incorporated associations legislation.

The entity was established for the sole purpose of providing financial assistance to the employees (and their dependents) of an organisation that work in a particular geographical region, who are experiencing financial distress due to circumstances beyond their control.

The entity has appropriate non-profit and dissolution clauses preventing benefits being provided to members while the entity is in operation and on its winding up.

The entity is a member based organisation. Members are required to pay a minimum membership contribution into the entities bank account.

The entity is managed by a management committee elected by its members.

Membership and payment of membership contributions to the entity does not grant an entitlement to receive financial assistance in accordance with the entities objects.

Applications for financial assistance must be lodged with the management committee using an ‘approved form’

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 subsection 6-5(1)

Income Tax Assessment Act 1997 section 6-10

Income Tax Assessment Act 1997 section 10-5

Income Tax Assessment Act 1997 section 50-1

Income Tax Assessment Act 1997 section 50-5

Income Tax Assessment Act 1997 section 50-10

Income Tax Assessment Act 1997 section 59-35

Income Tax Assessment Act 1997 subsection 995-1(1)

Income Tax Assessment Act 1936 section 6

Income Tax Assessment Act 1936 subparagraph 23(g)(v)

Income Tax Act 1986 paragraph 3(1)(a)

Income Tax Act 1986 subsection 5(3)

Income Tax Act 1986 section 6

Income Tax Rates Act 1986 subsection 23(6)

Reasons for decision

Question 1

Summary

The entity is not entitled to income tax exemption pursuant to section 50-10 of the ITAA 1997 as it is not a ‘society, association or club established for community service purposes’.

Detailed reasoning

Section 50-1 of the ITAA 1997 exempts from income tax the total ordinary and statutory income of an entity covered by section 50-10.To be exempt from income tax under Item 2.1 of the table in section 50-10 of the ITAA 1997, an entity must be a society, association or club established for community service purposes (except political or lobbying purposes).

The words 'society', 'association' or 'club' are not defined in the ITAA 1997 and have their ordinary meaning. In Douglas v. Federal Commissioner of Taxation 36 ATR 532; (1997) 77 FCR 112; 97 ATC 4722, the court stated that ‘society, association or club’ could be construed as referring to a ‘voluntary organisation having members associated together for a common or shared purpose’.

Taxation Determination TD 93/190 Income Tax: what is the scope of the exception from income tax provided by subparagraph 23(g)(v) of the Income Tax Assessment Act 1997 (TD 93/190) sets out the circumstances under which a society, association or club is regarded as being established for community service purposes and explains (at paragraph 2) that the purpose of enacting subparagraph 23(g)(v) of the ITAA 1936 (being the predecessor to item 2.1 of the table in section 50-10 of the ITAA 1997) was to create a category of exemption for community bodies whose activities are not accepted as being charitable, but which nevertheless conduct activities of benefit to the community

Paragraph 3 of TD 93/190, like the Explanatory Memorandum to subparagraph 23(g)(v) of the ITAA 1936, confirms that the words 'community service purposes' are to be given a wide interpretation, and

extend to a range of altruistic purposes that are not otherwise charitable, such as promoting, providing or carrying out activities, facilities or projects for the benefit or welfare of the community or any members of the community who have a particular need by reason of youth, age, infirmity or disablement, poverty, or social or economic circumstances.

However, paragraph 4 of TD 93/190 notes that subparagraph 23(g)(v) of the ITAA 1936

does not give exemption from income tax to a broad range of organisations that are established within the community, but whose purposes are not of an altruistic nature. Altruistic purposes are an essential element of even the widest interpretation of ‘community service purposes’.

Only when the purposes of the organisation are altruistic can they be community service purposes. This is in contradistinction to an organisation established for the purposes of advancing the common interests of its members (paragraph 5 of TD 93/190), or organisations designed to provide a social forum for expatriates of a particular country (see examples in TD 93/190). Where there is an incidental benefit derived by members of an organisation, it will not be a disqualifying attribute if it can be shown that the organisation is established mainly to provide benefits to the community.

In Navy Health Ltd v Deputy Federal Commissioner of Taxation (2007) ATC 4568, Jessup J referred to the Explanatory Memorandum and accepted that it was clear that the words of the exemption were not limited to charitable purposes. He said at 83 that:

Although a composite expression, I consider that the essence of 'community service' is that a service is provided to the community, or a section of the community. Here the word 'service' is used in the sense of 'health, benefit or advantage', particularly 'the action of serving, helping or benefiting, conduct tending to the welfare or advantage of another' (OED 2^nd Ed).

His Honour held the term "community" to refer not only to the community as a whole but also to any identifiable section of the community. However, it did not follow that the receipt of a service by any group of persons should be regarded as the receipt of that service by a section of the community.

The purposes for which an organisation is established are demonstrated by its current operations and activities, which may show different purposes to those suggested by a reading of its constitution: see Royal Australasian College of Surgeons v. Federal Commissioner of Taxation (1943) 68 CLR 436 (paragraph 7 of TD 93/190).

The purposes of a body must be examined in each income year to determine if it is ‘established’ for community service purposes: see FC of T v Wentworth District Capital Ltd (2011) ATC 20-253, 2010 ATC 20-202.

Application to the facts

The entities balance sheets reflect its stated purpose in its recorded liabilities.

The entity ensures financial assistance is provided in accordance with its objects by undertaking an assessment of an applicant’s financial circumstances, including collecting supporting evidence of financial distress.

While it is accepted that the provision of financial assistance for the purpose of relieving financial distress is consistent with of an altruistic purpose as contemplated by section 23(g)(v) of the ITAA 1936 the limited class of beneficiaries that are the subject of the entities objects; namely employees and their dependents of a single employer in a proscribed geographical area is not the provision of a service to an identifiable section of the community as elucidated in Navy Health Ltd v Deputy Federal Commissioner of Taxation (2007) ATC 4568.

Therefore it is not accepted that the entity is established for community service purposes.

Conclusion

Based on the above the entity is not covered by item 2.1 of the table in section 50-10 of the ITAA 1997 and is not eligible for income tax exemption under section 50-1 of the ITAA 1997 for the relevant income years.

Question 2

Summary

The entity is subject to tax on its taxable income as a non-profit company

Detailed reasoning

Section 50-1 of the ITAA 1997 provides that the ‘total ordinary income and statutory income of the entities covered by the following tables is exempt from income tax’. The following sections of the ITAA 1997 provide tables of categories that entities must fall into in order to be income tax exempt. The categories are:

● Charity, education and science (section 50-5);

● Community service (section 50-10);

● Employees and employers (section 50-15);

● Government (section 50-25);

● Health (section 50-30);

● Mining (section 50-35);

● Primary and secondary resources, and tourism (section 50-40); or

● Sports, culture and recreation (section 50-45).

The Income Tax Act 1986 (ITA 1986) provides for the imposition of income tax at the relevant rates declared by the Income Tax Rates Act 1986 (ITRA 1986). Section 4 of the ITA 1986 incorporates the Income Tax Assessment Act 1936 (ITAA 1936), reading the Act as one with the ITAA 1936.

The term Non-profit company is defined in paragraph 3(1)(a) of the ITA 1986 as follows;

a company that is not carried on for the purposes of profit or gain to its individual members and is, by the terms of the company's constituent document, prohibited from making any distribution, whether in money, property or otherwise, to its members

Company is defined in section 6 of the ITAA 1936 as having the meaning given by subsection 995-1(1) of the ITAA 1997;

company means:

(a) a body corporate; or

(b) any other unincorporated association or body of persons;

but does not include a partnership or a ^*non-entity joint venture.

Subsection 5(3) of the ITA 1986 operates to exclude the imposition of income tax upon the taxable income of a non-profit company where that taxable income does not exceed $416.

Application to the facts

The entity is not entitled to an income tax exemption under any provision within Division 50 of the ITAA 1997.

It is not a registered charity and therefore cannot claim an exemption under section 50-5 of the ITAA 1997 as a charity.

It is not an entity established for community services purposes under section 50-10 of the ITAA 1997. Nor does it meet the requirements of any other income tax exempt entity so described within Division 50.

The entity is established as a non-for-profit incorporated association; therefore it meets the definition of a non-profit-company as defined in paragraph 3(1)(a) of the ITA 1986.

Conclusion

The taxable income of the entity that exceeds $416 is taxed, in accordance with the rate payable under subsection 23(6) of the ITRA 1986.

Question 3

Summary

Minimum membership contributions paid by members to the entity are not mutual receipts therefore they are not treated as non-assessable non-exempt income under section 59-35 of the ITAA 1997.

Detailed reasoning

Sections 6-5 and 6-10 of the ITAA 1997 provides that assessable income of a taxpayer includes income according to ordinary concepts (ordinary income) and statutory income.

Principle of Mutuality

Whether a receipt is income depends upon its quality in the hands of the recipient per Scott v Federal Commissioner of Taxation (1966) 117 CLR 514.

The term income is not defined in the ITAA 1936 or ITAA 1997.

In The Bohemians Club v The Acting Federal Commissioner of Taxation [1918] 24 CLR 334, Griffith CJ stated at 337-338:

A man is not the source of his own income, though in another sense his exertions may be so described. A man’s income consists of moneys derived from sources outside himself. Contributions made by a person for expenditure in his business or otherwise for his own benefit cannot be regarded as his income unless the Legislature expressly so declares.

The exposition by Griffith CJ has formed the basis of the principle of mutuality as it applies to Australia. As such, a receipt by a taxpayer will not have the quality of ordinary income if the mutuality principle applies to it.

The essence of the mutuality principle is that you cannot derive any gain, and therefore income, from dealings with yourself. The mutuality principle provides that where a number of people associate for a common purpose and contribute to a common fund in which they are all interested, any surplus of those contributions remaining after the fund has been applied to the common purpose that is then distributed to the contributors, is a return of funds and not income or profit per Social Credit Savings and Loans Society Ltd v Federal Commissioner of Taxation (1971) 125 CLR 560.

The mutuality principle was described by McTiernan J in Revesby Credit Union Cooperative Ltd v Federal Commissioner of Taxation (1965) 112 CLR 564 (Revesby Credit Union) at 574-575:

The principle of mutuality seems to me to be settled. Where a number of people contribute to a fund created and controlled by them for a common purpose any surplus paid to the contributors after the use of the fund for the common purpose is not income but is to be regarded as a mere repayment of the contributor's own money…Incorporation of the fund is not relevant…What is required is that the fund must have been created for the common purpose and owned or controlled wholly by the contributors. If it is owned or controlled by anyone else the principle cannot apply…Furthermore any contributions to the fund derived from sources other than the contributors' payments, such as interest from the investment of part of the fund, or income from a business activity conducted by the members, cannot be taken into account in computing the surplus…Also the cases establish that the principle cannot apply unless at any given point in time the contributors to the fund are identical with the beneficiaries of the distribution of the surplus.

The principle of mutuality is not limited in its application to situations where a refund of surplus contributions is distributed to the contributors. In Coleambally Irrigation Mutual Co-Operative Ltd v FC of T (2004) ATC 4835 (Coleambally) the Full Federal Court was not concerned with a refund of overpaid contributions to the contributors. The question was whether the contributions made by members to Coleambally Irrigation Mutual Co-Operative Ltd (CIMCL) were income in the hands of CIMCL. Beaumont, Merkel and Hely JJ held at 4842:

The authorities establish that the mutuality principle is not confined in its operation to the situation in which the surplus contributions made by a contributor to a common fund are returned to the contributor. In The Bohemians Club v Acting Federal Commissioner of Taxation (1918) 24 CLR 334 the receipt by a social club of annual subscriptions from its members was held not to be income of the club even though, for tax purposes, the club was a separate entity from its members. Griffith CJ held (at 337) that the contributions were, in substance, advances of capital for a common purpose which were expected to be exhausted in the year in which they were paid. They were not income of the club any more than calls made by members of the company upon their shares are income of the company.

Existence of a common fund controlled by the contributors for a common purpose

For the principle of mutuality to apply there must be a common fund. It can be described as a fund established by contributors for a common purpose in which contributing members as a class have rights. The fund must be owned or controlled wholly by the contributors. If it is owned and controlled by anyone else the principle cannot apply: Revesby Credit Union Cooperative Ltd v Federal Commissioner of Taxation (1965) 112 CLR 564 at 574-575 .

In Sydney Water Board Employees’ Credit Union v FCT (1973) ATC 4129 (Sydney Water Board) the taxpayer unsuccessfully argued that interest paid by borrowing members of the credit union constituted a common fund paid for the common purpose of enabling the credit union to meet its administrative and operating expenses, with any surplus refundable to borrower members. Interest paid was not maintained as a common fund in which the borrowing members as a class had any rights. Interest was paid by borrowers in discharge of their legal obligations and became part of the general funds of the credit union. It was not paid as a contribution to the mutual liabilities on behalf of the borrowers. Mason J. noted at 4136 that the borrowing members did not have any right to a refund of part of the interest which they have paid; on the contrary:

…the interest so paid forms part of the funds of the taxpayer… the borrowing members are entitled to participate in a distribution of the surplus which results from the taxpayer’s use of the general funds.

Identity between the contributors and the participants

The principle of mutuality is dependent upon the existence of an ‘identity’ between contributors to the fund and those who are entitled to participate in it. The mutuality principle may be displaced where there is a difference of identity between those who contribute and those who can receive a distribution of surplus, or where the distribution of surplus is disproportionate to the amount contributed.

In Coleambally, Beaumont, Merkel and Hely JJ said at 4842:

The identity required is not an identity between individuals, but an identity between classes, and all that is required is a reasonable relationship between what a member contributes, and the member's expected participation in the common fund: Sydney Water Board Employees Credit Union (supra) at ATC 4135; CLR 457; Social Credit Savings & Loans Society Ltd (supra) at ATC 4238-4239; CLR 571-572. For the mutuality principle to apply, in one way or another (“in meal or in malt”) the contributing members must be entitled to recoupment or refund of any surplus so that in the result the body corporate does not make a profit from them: Jones v South-West Lancashire Coal Owners Association Ltd [1927] AC 827 at 832. In Social Credit Savings & Loans Society Ltd (supra) at ATC 4240-4241; CLR 576, Gibbs J held that a power in the Society to apply the surplus in a fund in favour of employees of the Society was sufficient to negate the proposition that the fund “belonged” to the contributors.

Furthermore, Beaumont, Merkel and Hely JJ said at 4844:

…if the amounts standing to the credit of the sinking fund truly ‘belonged’ to the contributors, with CIMCL no more than a convenient vehicle, the members would have a choice as to whether any surplus would come back to the members in the event of a winding up. The denial of that choice by CIMCL's constitution demonstrates that the amounts contributed to the sinking fund do not truly belong to the member contributors. When the members make, and CIMCL receives, a contribution, the contributing members have no right to participate in any surplus of the members' contributions over what may be expended in carrying out the common purpose.

In order for mutuality to exist there must be a reasonable relationship between contributions made by members and what they can expect to benefit from the fund. The return of surplus to contributors need not occur on an annual or other scheduled basis, nor must the surplus be returned in any particular form. Even the application of contributions to build up reserves need not displace the presence of mutuality: Faulconbridge v. National Employers’ Mutual General Insurance Association Ltd [1952] 33 TC 103.

Membership

The relevance of membership to the principle of mutuality was considered by Lord MacMillian in the case Inland Revenue Commissioners v Ayrshire Employers Mutual Insurance Association Ltd (1946) 1 ALL ER 637 at 640 where he indicated:

It is not membership or non-membership which determines immunity from or liability to tax; it is the nature of the transactions’. If the transactions are of the nature of (in this case) mutual insurance, the resultant surplus is not taxable whether the transactions are with members or non-members…There is nothing to prevent a mutual insurance company entering a contract of mutual insurance with a person who is not a member of the company.

This approach was adopted in Royal Automobile Club of Victoria (R.A.C.V) v Federal Commissioner of Taxation (1973) ATC 4153 (RACV), where the taxpayer was a company limited by guarantee that provided certain services and facilities in relation to motor vehicles. They received payments from a number of sources including both members and non-members in relation their services and facilities, together with commissions, interest on investments and rent from property. The court looked at each activity to determine if it had the quality of mutuality. It was held that mutual dealings and business dealings had to be distinguished and apportionment applied. Activities relating to business dealings were considered in the nature of trade and assessable, while activities that were mutual in nature, were mutual receipts even if only some members took advantage of the facility.

If the dealing is mutual, then it is immaterial whether that transaction is with a member or not. Where there is a mutual transaction between an association and a non-member, ‘the non-member may be regarded pro tempore as in effect a member of a somewhat wider organisation involving himself and the association’ RACV at 4157. However, for this to occur, the necessary element of mutuality must be present, which is the contribution to and if a surplus, entitlement from the common fund.

Application to the facts

In order for the mutuality principle to apply to membership contributions paid to the entity they must be properly characterised as; contributions to a fund, created and controlled by the contributors, for a common purpose.

Common fund for a common purpose

The first issue to consider is whether the dealing is to a common fund for a common purpose. The entities constitution permits the following types of contributions into the Fund:

● Compulsory minimum membership contributions paid by members

● Voluntary contributions from members that are in excess of the minimum membership contribution amount and;

● Voluntary contributions from non-members

Members are not entitled to benefits by reason of their membership. Therefore minimum membership contributions are not dealings made into a fund for a common purpose.

Control of common fund

The second issue to consider is whether control of the common fund is held by the contributors. A common fund must be owned and controlled wholly by the contributors. If it is owned and controlled by anyone else the principle cannot apply.

Only members of the entity are eligible to become an elected officer of the fund, members vote for nominees for the Management Committee and the Management Committee is responsible for considering and approving applications for assistance.

Therefore members of the entity have control of the common fund into which they contribute.

Ownership of common fund

Members do not have ownership of the common fund. Members are not entitled to a refund of contributions made nor are they entitled to participate in the surplus assets of the fund in the event it is dissolved or wound up.

Identity between contributors and participants

The final issue to consider is whether there is ‘identity’ between the contributors and participants in the common fund. Pursuant to the entities constitution the provision of financial assistance is not limited to members. In the pursuit of its objects the entity may provide benefits to members and non-members alike.

Therefore, there is not the required identity between contributors and participants for the purposes of mutuality.

Application of section 59-35 of the ITAA 1997

Under section 59-35 of the ITAA 1997, what would be a mutual receipt of an entity but for a provision in its constituent document preventing the distribution of surplus to members is deemed to be not assessable income and not exempt income.

Section 59-35 of the ITAA 1997 thus effectively preserves the mutual treatment of such receipts where it would otherwise be excluded by a constitutional bar on distributions

The entities constitution prevents the distribution of income or property to its members, either during its operation or upon a winding up.

However, as there is no common fund for common purposes and no identity between contributors and participants the prohibition on distributions to the members is irrelevant for section 59-35 of the ITAA 1997 purposes.

Conclusion

Minimum membership contributions are not mutual receipts under the principle of mutuality Therefore they are not treated as non-assessable non-exempt income under section 59-35 of the ITAA 1997.

Question 4

Summary

A gift to the entity by a member is not ordinary or statutory income and therefore is not assessable income under either sections 6-5 or 6-10 of the ITAA 1997. It is a non-assessable windfall gain.

Detailed reasoning

Two issues need to be considered to determine whether the gift is assessable income in the hands of the entity;

● whether the transfer of money is properly construed as a gift

● whether there is a connection between gift and the income-producing activity of the entity.

What is a gift?

Taxation Ruling TR 2005/13 Income tax: tax deductible gifts - what is a gift (TR 2005/13) states that the term ‘gift’ is not defined in the ITAA 1997 therefore it takes on its ordinary meaning. The courts have described a gift as having the following characteristics:

a) there is a transfer of the beneficial interest in property;

b) the transfer is made voluntarily;

c) the transfer arises by way of benefaction; and

d) no material benefit or advantage is received by the giver by way of return

In determining whether a transfer is a gift it is necessary to consider the whole set of circumstances surrounding the transfer and this may include consideration of parties other than the giver and the recipient. It is the substance and reality of the transfer that has to be ascertained. It is therefore necessary to take account of those acts, transactions, arrangements and circumstances that provide the context and the explanation for the transfer

Transfer of the beneficial interest in property

The making of a gift involves the transfer of a beneficial interest in property to a recipient. It is a requirement that identifiable property has in fact been transferred.

Paragraph 18 and 19 of TR 2005/13 states that for there to be a transfer, the property which belonged to the giver must become the property of the recipient. A gift is effectual only where the giver has done everything that is necessary, in accordance with the relevant laws governing the transfer of that kind of property, to transfer ownership.

Voluntary transfer

In order for a transfer of property to be a gift, it must be made voluntarily, that is, it must be the act and will of the giver, and there must be nothing to interfere with or control the exercise of that will

Transfer arises by way of benefaction

Paragraph 27 of TR 2005/13 states an essential attribute of a gift is that benefaction is intended and in fact conferred on the recipient. Conferring benefaction means that the recipient is advantaged in a material sense, to the extent of the property transferred to them, without any countervailing detriment arising from the terms of the transfer.

Material benefit or advantage is received by the giver by way of return

Paragraph 37 of TR 2005/13 states that in order to constitute a gift, the giver must not receive a benefit or an advantage of a material nature by way of return. It does not matter whether the material benefit or advantage comes from the recipient or another entity.

It is a question of fact in each case whether any benefit or advantage is considered material. A benefit or advantage can be material if there is a link between the benefit and the transfer, and the benefit is sufficiently significant in relation to the value of the transfer.

Each of these is not a material benefit or advantage:

● one that has no link with the transfer;

● one that is insignificant in relation to the value of the transfer;

● one that does not create any rights, or confer any privileges or entitlements;

Assessability of gifts to the entity

ATO ID 2002/644 Income Tax: Assessability of Prize states that a prize or gift will be assessable income if it is:

● income in the ordinary sense of the word (ordinary income) ; or

● an amount or benefit that through the operation of the provisions of the tax law is included in assessable income (statutory income).

Under subsection 6-5(1) of the ITAA 1997 an amount is assessable income if it is income according to ordinary concepts (ordinary income).

Generally, a gift or prize is regarded as a personal windfall gain and not as ordinary income unless the taxpayer has received the prize or gift because of, in respect of, or in relation to any income-producing activity of the taxpayer.

ATO ID 2002/644 sets out the principles the courts have established to determine whether a prize or gift is ordinary income by virtue of its connection to the income producing activity of the recipient.

Consideration of the whole of the circumstances is necessary; important factors in relation to gifts made to not-for-profit entities include:

● the motive of the donors in seeking to advance the purposes and activities of the entity and not to receive material benefits for themselves;

● the character of the activities of the altruistic non-profit;

● whether any of those activities are income-producing; and

● whether and how the gift is related to the income-producing activities

Application to the facts

The entities activities are directed towards the relief of financial distress for altruistic purposes. The pursuits of the entities purposes through these activities cannot be properly characterised as its income producing activities.

A gift made by a member in support of these purposes where there is no material advantage by way of return is not sufficiently connected with an income producing activity to be treated as assessable income.

Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. Section 10-5 of the ITAA 1997 lists those provisions. Gifts to the entity that meet the requirements of a gift as outlined in TR 2005/13 are not considered assessable income by the operation of any provision under section 10-5 of the ITAA 1997.

Conclusion

A gift to the entity by a member is not ordinary or statutory income and therefore is not assessable income under either section 6-5 or section 6-10 of the ITAA 1997.

Question 5

Summary

A gift to the entity by a non-member is not ordinary or statutory income and therefore is not assessable income under either section 6-5 or section 6-10 of the ITAA 1997. It is a non-assessable windfall gain.

Detailed reasoning

Gifts to the entity from non-members are not considered assessable income in accordance with the reasoning provided at question 4 above.