Edited version of private advice

Authorisation Number: 1051981423506

Date of advice: 11 May 2022

Ruling

Subject: Income tax

Question

Do the donations you received meet the definition of 'ordinary income' under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No

Question

Do the donations you received meet the definition of 'statutory income' under section 6-10 of the ITAA 1997?

Answer

No

Question

Are the donations you received assessable income?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20YY

Year ended 30 June 20YX

The scheme commences on:

20XX

Relevant facts and circumstances

This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are a company limited by guarantee.

You are not-for-profit.

You receive donations.

Donors do not receive anything in return for the donation.

The donations are applied solely towards your principal purpose to benefit specific communities.

Other than receiving donations you do not engage in any activity of size or scale.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-1

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 6-10

Reasons for decision

This is to explain how we reached our decision. This is not part of the private ruling.

All references made in these reasons for decision are to the Income Tax Assessment Act 1997 (ITAA 1997)unless otherwise stated.

Summary

The donations that you receive are not assessable income as they are not ordinary or statutory income.

Detailed reasoning

Assessable income is defined in subsection 6-1(1) as consisting of ordinary income and statutory income.

Section 6-5 provides that the assessable income of an Australian resident includes the ordinary income derived directly or indirectly from all sources. Ordinary income is defined to mean income according to ordinary concepts.

Section 6-10 defines statutory income as amounts that are not ordinary income but are included by some provision of the ITAA 1997.

Ordinary income

There is no single test to determine whether an amount is 'income according to ordinary concepts', however there are three principal categories in which income is considered ordinary income:

•                income from rendering personal services, including employment income

•                income from property, such as rent, interest and dividends, and

•                income from carrying on a business.

You have provided reasoning for why you believe the donations are not ordinary income:

•                the donations are not income from rendering personal services as you do not provide a service or thing to donors in exchange for their donations

•                the donations do not share the characteristics of the categories of income from property recognised at common law and are not a receipt of payment in consideration for the use of land, and

•                the donations are not income from the carrying on of a business or trading activity or derived for a profit-making purpose as your principal purpose is not one of profit and your main activity is the receipt and distribution of donations to meet this purpose.

The Commissioner agrees with the arguments provided in your private ruling application.

Statutory income

If the donation is not ordinary income, it is also necessary to consider whether it is included as statutory income by way of one of the provisions as listed in section 10-5.

The Commissioner agrees with your conclusion that there are no relevant provisions that could apply to the donations you received.

As the donations you received are neither ordinary nor statutory income, they are not assessable income.