| Disclaimer You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private advice
Authorisation Number: 1052225788570
Date of advice: 27 February 2024
Ruling
Subject: CGT - transfer of property
Question
Will the transfer of the Properties by Society A to Society B result in Society A being required to pay any income tax in the financial year in which the transfer occurs?
Answer
No.
This ruling applies for the following period:
Income year ending 30 June 2025
The scheme commenced on:
1 July 2023
Relevant facts and circumstances
- Society A is an Australian company limited by guarantee.
- Society A is registered with the Australian Charities and Not-for-profit Commission (ACNC) as a registered charity and is endorsed as a Public Benevolent Institution (PBI).
- Society A has DGR endorsement and has been granted income tax exemption by the ATO as a charity.
- Society A is part of the operating entities which advance the good works of the local community organisation. Society A holds title to various assets, including real property in the local community (the Properties). Society B is also involved in the operations of the local community organisation, together with Society A (the Group).
- Society B is also an Australian company limited by guarantee and is also a registered charity with the ACNC and is endorsed as a PBI.
- As part of rationalising and simplifying the structure of the Group, it is proposed that Society B will acquire title to the Properties from Society A.
Relevant legislative provisions
Section 11-5 of the Income Tax Assessment Act 1997
Section 50-1 of the Income Tax Assessment Act 1997
Section 50-5 of the Income Tax Assessment Act 1997
Subsection 104-10(1) of the Income Tax Assessment Act 1997
Section 108-5 of the Income Tax Assessment Act 1997
Reasons for decision
Issue 1
Question 1
Summary
Although a capital gain may arise from the disposal of the property, Society A will not be liable to income tax on the sale, as all of Society A's income is exempt under section 11-5 of the Income Tax Assessment Act 1997 (ITAA 1997).
Detailed reasoning
Section 11-5 of the ITAA 1997 lists entities that are exempt, no matter what kind of ordinary or statutory income they have. Section 50-1 provides that the total ordinary and statutory income of certain listed entities is exempt from income tax and this includes registered charities endorsed by the Commissioner, as described in item 1.1 of section 50-5 of the ITAA 1997.
CGT event A1 occurs if a taxpayer disposes of a CGT asset under subsection 104-10(1) of the ITAA 1997. A 'CGT asset' is defined in section 108-5 of the ITAA 1997 and includes any kind of property. Therefore, any capital gain made on the sale of the property would be statutory income of Society A.
However, although a capital gain may arise, as all of Society A's ordinary and statutory income is exempt by virtue of section 11-5 of the ITAA 1997, there will be no tax payable on the transfer of property.