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Edited version of private advice
Authorisation Number: 1051781454147
Date of advice: 20 November 2020
Ruling
Subject: Income tax exemption - local government body
Question
Is the ordinary income and statutory income of the Council exempt from income tax?
Answer
Yes
This ruling applies for the following period:
1 July 2020 to 30 June 2030
The scheme commences on:
1 July 2020
Relevant facts and circumstances
The Council is a local government body located in XXX.
The Council is registered on the Australian Business Register as a Local Government Entity.
The XXX Government provides detailed information about the XXX local government sector which includes 128 local councils. The Council is a XXX local government council.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 50-1
Income Tax Assessment Act 1997 section 50-25
Income Tax Assessment Act 1997 section 995-1
Income Tax Assessment Act 1997 Subdivision 50-A
Reasons for Decision
Summary
The Council is exempt from income tax.
Detailed reasoning
Section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the total ordinary income and statutory income of the entities specified in Subdivision 50-A of the ITAA 1997 are exempt from income tax.
Section 50-25 of the ITAA 1997 provides for the exemption of Government entities. Item 5.1 of the table in section 50-25 provides that the following are exempt entities:
(a) a municipal corporation; or
(b) a local governing body.
There are no special conditions for income tax exemption for either of these entities.
'Local governing body' is defined by section 995-1 of the ITAA 1997 as 'a local governing body established by or under a State law or Territory law'. Broadly, it refers to a city, town, municipal or shire council.
The Council was established as a local governing body under a State law. The Council is therefore a local governing body that is an exempt entity under section 50-25 of the ITAA 1997. Section 50-1 of the ITAA 1997 therefore applies to make the total ordinary and statutory income of the Council exempt from income tax.