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Edited version of private advice
Authorisation Number: 1051635066022
Date of advice: 11 February 2020
Ruling
Subject: Income tax - state/territory bodies
Question
Is the Company a State/Territory body (STB) exempt from income tax under section 24AM of the Income Tax Assessment Act 1936 (ITAA 1936)?
Answer
Yes
This ruling applies for the following period:
1 July 20XX to 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The Company is a private company limited solely by shares.
The State of Victoria owns 100% of the issued shares in the Company.
On XX June 20XX the ATO issued a private binding ruling to the Company notifying it that it was exempt from income tax under section 24AM of the ITAA 1936 for the years ending 30 June 20XX, 30 June 20XX and 30 June 20XX. This was further extended for the three years ending 30 June 20XX and then for the three years ending 30 June 20XX.
The State of Victoria continues to own all shares in the Company and there have been no changes to the facts and circumstances of the previous rulings.
The purpose of this application is to seek a private binding ruling that income derived by the Company will continue to be exempt from income tax after 30 June 20XX under section 24AM of the ITAA 1936.
Relevant legislative provisions
Income Tax Assessment Act 1936 Division 1AB.
Income Tax Assessment Act 1936 Section 24AM.
Income Tax Assessment Act 1936 Section 24AN.
Income Tax Assessment Act 1936 Section 24AO.
Income Tax Assessment Act 1936 Section 24AT.
Reasons for decision
Section 24AM of the ITAA 1936 provides that the income of an STB is exempt from income tax unless section 24AN applies to the STB.
Section 24AN of the ITAA 1936 states that income derived by an STB is not exempt from income tax under division 1AB of the ITAA 1936 if, at the time that income is derived, the STB is an excluded STB.
Section 24AO of the ITAA 1936 provides that a body is an STB if:
(a) it is a company limited solely by shares; and
(b) all the shares in it are beneficially owned by one or more government entities.
Section 24AT of the ITAA 1936 defines the meaning of 'excluded STB', 'government entity' and 'territory', and provides that in this Division:
excluded STB is an entity that:
(a) at a particular time, is prescribed as an excluded STB in relation to that time; or
(b) is a municipal corporation or other local governing body (within the meaning of section 50-25 of the Income Tax Assessment Act 1997); or
(c) is a public educational institution to which any of paragraphs 50-55(a) to (c) of the Income Tax Assessment Act 1997 applies; or
(d) is a public hospital to which any of paragraphs 50-55(a) to (c) of the Income Tax Assessment Act 1997) applies; or
(e) is a superannuation fund.
government entity means:
(a) a State; or
(b) a Territory; or
(c) another STB that is not an excluded STB.
The Company is a company limited solely by shares and all of those shares are beneficially owned by the State of Victoria, which is a government entity within the meaning in section 24AT of the ITAA 1936.
Further, the Company does not fall within the categories of excluded STBs set out under section 24AT of the ITAA 1936.
Therefore, the Company is an STB exempt from income tax under section 24AM of the ITAA 1936.