Edited version of private advice

Authorisation Number: 1051700183903

Date of advice: 16 June 2020

Ruling

Subject: Registered charity

Question 1

In implementing the Proposal, will the Company continue to be entitled to be exempt from income tax on the basis that it is a registered charity under Item 1.1 of section 50-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

Question 2

In implementing the Proposal, will the Company continue to be endorsed as a charity by the Commissioner under section 176-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes

Question 3

In implementing the Proposal, will the Company continue to be a rebatable employer under section 65J of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

20XX

Relevant facts and circumstances

The Company is a registered charity that is endorsed as income tax exempt, endorsed for GST and a rebatable employer.

The Company wishes to implement a proposal (the Proposal) under which it will receive income as a result of the activities it is involved in.

The Company will receive the income either directly or by way of dividends from a subsidiary entity.

The Company has provided details of the Proposal and the Company Constitution.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 50-1

Income Tax Assessment Act 1997 section 50-5

Income Tax Assessment Act 1997 section 50-45

Income Tax Assessment Act 1997 section 50-50

Income Tax Assessment Act 1997 section 50-52

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

A New Tax System (Goods and Services Tax) Act 1999 section 176-1

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Fringe Benefits Tax Assessment Act 1986 section 65J

Fringe Benefits Tax Assessment Act 1986 section 123E

Reasons for decision

Question 1

The Company is a registered charity as defined in subsection 995-1(1) of the ITAA 1997:

an entity that is registered under the Australian Charities and Not-for-profits Commission Act 2012 as a type of entity mentioned in column 1 of item 1 of the table in subsection 25-5(5) of that Act.

As a registered charity the total ordinary and statutory income of the Company is exempt in accordance with section 50-1 of the ITAA 1997 if it meets the special conditions in sections 50-47, 50-50 and 50-52 of the ITAA 1997.

We concur with the arguments and submissions provided in your application that the Company will continue to meet these conditions after the implementation of the Proposal.

Therefore, in implementing the Proposal, the income of the Company will continue to be exempt from income tax on the basis that it is a registered charity under Item 1.1 of section 50-5 of the ITAA 1997.

Question 2

Under section 176-1 of the GST Act:

(1) The Commissioner must endorse an entity as a charity if:

(a) the entity is entitled to be endorsed as a charity (see subsection (2)); and

(b) the entity has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953.

(2) An entity is entitled to be endorsed as a charity if the entity:

(a) is an * ACNC-registered charity; and

(b) has an * ABN.

Section 195-1 of the GST Act defines ACNC-registered charity to mean:

an entity that is registered under the Australian Charities and Not-for-profits Commission Act 2012 as the type of entity mentioned in column 1 of item 1 of the table in subsection 25-5(5) of that Act.

The Company is entitled to be endorsed as it is an ACNC-registered charity as defined in section 195-1 of the GST Act and it has an ABN. It is currently endorsed in accordance with section 176-1 of the GST Act.

The implementation of the Proposal will not change this, and it will continue be endorsed under section 176-1 of the GST Act.

Question 3

Under subsection 65J(1) of the FBTAA an employer is a rebatable employer for a year of tax if the employer:

(a)  is exempt from income tax at any time of the year of tax under any of the provisions set out in the table in subsection 65J(1) of the FBTAA, and

(b)  satisfies the special conditions set out in that table.

Item 1 of the table is a registered charity covered by item 1.1 of the table in section 50-5 of the ITAA 1997.

The special conditions for item 1 set out in the table in subsection 65J(1) of the FBTAA are:

The registered charity is not a rebatable employer for the year of tax if it:

a)    is a registered public benevolent institution; or

b)    is a registered health promotion charity; or

c)    is an institution of the Commonwealth, State or a Territory; or

d)    has not been endorsed under subsection 123E(1); or

e)    is not an institution.

Under subsection 123E(1) of the FBTAA:

The Commissioner must endorse an entity as a registered charity covered by table item 1 in subsection 65J(1) if:

(a) the entity is entitled to be endorsed as a registered charity covered by table item 1 in subsection 65J(1) (see subsection (2)); and

(b) the entity has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953.

Subsection 123E(2) states that:

An entity is entitled to be endorsed as a registered charity covered by table item 1 in subsection 65J(1) if the entity:

(a) is a registered charity covered by column 1 of that table item; and

(aa) satisfies the special conditions set out in that table item (other than the condition relating to endorsement under subsection (1) of this section); and

(b) has an ABN.

The Company is exempt from income tax as a registered charity covered by item 1.1 of the table in section 50-5 of the ITAA 1997. As explained in our reasons for decision to question one this will continue to be the case on implementation of the Proposal.

The Company is currently endorsed under section 123E(1) of the FBTAA, therefore based on paragraph 123E(2)(aa) of the FBTAA it satisfies the special conditions set out for item I of the table in subsection 65J(1) of the FBTAA.

Therefore, on implementation of the Proposal, the Company will continue to be a rebatable employer under section 65J of the FBTAA.