Edited version of private advice

Authorisation Number: 5010073247271

Date of advice: 05 February 2021

Ruling

Subject: Income tax exemption

Question

Is the ordinary and statutory income of the entity exempt from income tax pursuant to section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) on the basis that it is a society, association or club established for community services purposes under item 2.1 of section 50-10 of the ITAA 1997?

Answer

No

This ruling applies for the following period

1 July 20XX to 30 June 20XY

The scheme commences on

1 July 20XX

Relevant facts and circumstances

1.    The entity is Association under the Associations Incorporation Regulation 2010.

2.    The constitution states it is non-profit and provides services to the community.

3.    The entity provides education and training as part of its purpose.

Relevant legislative provisions

Income Tax Assessment Act 1997 (Cth) Section 50-1

Income Tax Assessment Act 1997(Cth) Section 50-47

Income Tax Assessment Act 1997(Cth) Section 995-1

Australian Charities and Not-for-profits Commission Act 2012 Section 25-5

Reasons for decision

Section 50-47 of the ITAA 1997 provides a special condition that if an entity that is covered by one of the items in subdivision 50-A is an 'ACNC type of entity', they will not be exempt from income tax unless they are registered under the Australia Charities and Not-for-profits Commission Act 2012.

'ACNC type of entity' is defined in subsection 995-1(1) of the ITAA 1997 as an entity that meets the description of a type of entity in column 1 of the table in subsection 25-5(5) of the Australian Charities and Not-for-profits Commission Act 2012. Column 1 of the table in subsection 25-5(5) of the Australian Charities and Not-for-profits Commission Act 2012 describes a charity. The Charities Act 2013 provides a definition of 'charity' that applies to all Commonwealth laws.

The definition of 'charity' in section 5 of the Charities Act 2013 provides that 'charity' means an entity:

a)    That is a not-for-profit entity; and

b)    All of the purposes of which are:

                      i.        Charitable purposes that are for the public benefit; or

                     ii.        Purposes that are incidental or ancillary to, and in furtherance or in aid of, purposes of the entity covered by subparagraph (i); and

c)    None of the purposes of which are disqualifying purposes; and

d)    That is not an individual, a political party or a government entity.

The entity's principal purpose may fall into one of the following categories listed under the Charities Act 2013 (Cth):

•                     advancing education

•                     other similar purposes 'beneficial to the general public'.

Accordingly, section 50-47 of the ITAA 1997 applies.

Conclusion

The total ordinary income and statutory income of the entity is not exempt from income tax pursuant to section 50-1 of ITAA 1997 as it is an ACNC entity type under section 50-47 of the ITAA 1997.