| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1051513323515
Date of advice: 13 May 2019
Ruling
Subject: Income tax exemption, public authority constituted under an Australian law
Question 1
Is the Fund exempt from income tax as a public authority constituted under an Australian Law pursuant to item 5.2 in section 50-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer: Yes
Facts
The Fund was established by a state law and operates to confer and administer an entitlement for the benefit of members of a particular industry community.
The structure of the new scheme is set out in the following constituent documents:
● A state law
● Constitution of the trustee
● Trust Deed
● Rules of the Fund (‘Rules’).
The state law and the Fund’s constituent documents confer an authority on the Fund to enforce the administration of the entitlement.
The Fund's constituent documents prohibit benefiting its trustee.
Reasons for decision
Summary
The Fund is exempt as a public authority constituted under an Australian law pursuant to item 5.2 of the table in section 50-25 of the ITAA 1997
Detailed reasoning
Item 5.2 of s50-25 of the Income Tax Assessment Act 1997 (ITAA 1997) exempts from income tax a public authority constituted under an Australian law.
Public Authority constituted under an Australian Law
The term ‘public authority constituted under an Australian law' is not defined in the ITAA 1997. However, the Commissioner has issued a public ruling on the meaning of the term in relation to income tax.
Taxation Ruling IT 2632, which came into effect in April 1991, discusses the meaning of the term public authority and what is meant by the expression constituted under a law of the Commonwealth, State or Territory. Paragraphs 4-11 of IT 2632 in particular, consider a number of court decisions which have been made in relation to ‘public authority' in paragraph 23(d) of the Income Tax Assessment Act 1936 (equivalent to section 50-25 of the ITAA 1997).
In Renmark Hotel Incorporated v FC of T (1949) 79 CLR 10, the High Court expressed that a public authority constituted under any Commonwealth or State Act, or Territory law, for the purposes of section 23(d), should:
1. carry on some undertaking of a public nature for the benefit of the community or of some section of it
2. not make private profits for its corporators although there is no objection to profits made for the public benefit
3. have power or authority conferred upon it by Commonwealth, State or Territory legislation to do acts in relation to the public which would otherwise be beyond its power or unauthorised.
The trustee of the Fund exercises its control and power given to it through a state law with approval of the Governor by means of the Trust Deed, Rules of the Fund and its Memorandum and Articles of Association. It performs functions of a public nature for a defined section of the community; being the collection, management, administration, and distribution of funds relating to entitlements in the State.
The Trust Deed ensures that the trustee is not to benefit. Certain clauses of the Trust Deed govern the powers of the trustee in terms of the state law. The constitution of the trustee contains objects restricting the corporation to act only as a trustee of the fund, governed by the state law. Income and capital must be applied for the objects and a clause prevents income or property being transferred directly or indirectly by way of dividend, bonus or otherwise to the members or distributed to members. The document prevents private benefit on winding up.
The trustee of the Fund has authority conferred upon it by the Long Service Leave Act 1987 to enforce the employers’ obligations under the act.
The three elements of a public authority, described above, have been met. Consequently, the Fund is exempt from income tax as public authority constituted under an Australian law pursuant to item 5.2 of the table in section 50-25 of the ITAA 1997.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 50-25 Item 5.2.
Income Tax Assessment Act 1936 Section 23.