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Edited version of private advice
Authorisation Number: 1052083437214
Date of advice: 16 March 2023
Ruling
Subject: Income tax exemption - local government body
Question 1
Is the Council exempt from income tax pursuant to section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as a local governing body as described in item 5.1 of section 50-25 of the ITAA 1997?
Answer
Yes
This ruling applies for the following periods:
Income tax year ending 30 June 20XX
Income tax year ending 30 June 20XX
Income tax year ending 30 June 20XX
Income tax year ending 30 June 20XX
Income tax year ending 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
- The Council is a local government body
2. The district became a local government area in 18XX when it was previously known as a municipality.
3. In 19XX, the district was enlarged with the addition of the northern half of the neighbouring suburb. Other districts broke away in 18XX to form the another municipality but were reunited in 19XX.
4. The Council has one office and employs over XX staff in fields as diverse as planning and development, customer service, community services, engineering, horticulture and waste collection.
5. The Council is registered on the Australian Business Register as a Local Government Entity.
6. The State Government provides detailed information about the relevant local government sector which includes a number of local councils. The Council is a local government council.
Relevant legislative provisions
Subdivision 50-A of the Income Tax Assessment Act 1997
Section 50-1 of the Income Tax Assessment Act 1997
Section 50-25 of the Income Tax Assessment Act 1997
Section 995-1 of the Income Tax Assessment Act 1997
Reasons for decision
Summary
The Council is a local governing body that is an exempt entity under section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997).
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.