Is your income exempt in accordance with section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) an association established for the purpose of promoting the development of Australian resources pursuant to item 8.2 of the table in section 50-40 of the ITAA 1997?
Yes This ruling applies for the following periods : Year ended 30 June 20xx to 20xx The scheme commences on: 1 July 20xx
You are a not-for-profit association. You have provided details of your aims and purposes along with your governing documents. Membership is open to any person who agrees with the objectives of the association, is not a paid employee of the association and has satisfied the procedure for membership. Your members include individuals, companies, not-for-profit groups, and educational institutions. You are run by a voluntary committee. You have provided details of your activities. You have provided information in relation to retained funds and copies of financial statements.
Income Tax Assessment Act 1997 section 50-1 Income Tax Assessment Act 1997 section 50-40 Income Tax Assessment Act 1997 section 50-47 Income Tax Assessment Act 1997 subsection 995-1(1)
Unless otherwise stated, all legislative references are to the Income Tax Assessment Act 1997 (ITAA 1997). Summary Your income is exempt under section 50-1 as it is an association established for the purpose of promoting the development of Australian resources pursuant to item 8.2 of the table in section 50-40. Detailed reasoning Section 50-1 provides that ordinary and statutory income is exempt for an entity that: is a society or association established for the purpose of promoting the development of specified Australian resources (item 8.2 of the table in section 50-40) is not carried out for the profit or gain of its individual members, and is not an ACNC type of entity or, if it is an ACNC type of entity, it is registered under the Australian Charities and Not-for-profits Commission Act 2012 (ACNC Act). Item 8.2 of the table in section 50-40 A society or association established for the purpose of promoting the development of any of the following Australian resources: (a) agricultural resources; (b) horticultural resources; (c) industrial resources; (d) manufacturing resources; (e) pastoral resources; (f) viticultural resources; (g) aquacultural resources; (h) fishing resources.
Special conditions - not carried on for the profit or gain of its members. Section 50-47 Special condition for all items An entity that: (a) is covered by any item; and (b) is an * ACNC type of entity; is not exempt from income tax unless the entity is registered under the Australian Charities and Not-for-profits Commission Act 2012. To qualify for exemption from income tax under item 8.2 of section 50-40, the principal or dominant purpose of the association must be to promote the development of one or more of the Australian resources specified under that item. Resources To qualify for exemption, the principal or dominant purpose for which an organisation is established must be to promote the development of one or more of those the resources listed in the table in section 50-40. Your activities relate to resources that fit within various categories of Australian resources in item 8.2 of section 50-40. Resources of Australia Your activities are directed to Australian resources. Promote the development of
The term 'development' is used in section 50-40 in a commercial or business sense. It comprehends all the elements which must be considered to ensure that the specified resources are best used. The meaning of 'development' was examined by the High Court in the case of Commissioner of Taxation v Broken Hill Pty Co Ltd [1968] HCA 16 where, in considering the phrase 'development of mining property' the majority of the High Court accepted the interpretation of Kitto J: In its ordinary English sense the word 'development' when used in relation to a property refers to the unfolding, the bringing out, of some latent capability of that property...It covers I think, any preparation, adaptation or equipment of the property for the exploitation of an inherent potentiality which cannot be exploited or fully exploited, without some such preliminary treatment. The promotion of development may be direct or indirect provided it is within the scope of item 8.2 of section 50-40. Promoting development can be by various means, including research, providing facilities, training, improving marketing methods, and facilitating cooperation and similar activities.
You undertake various activities indicate that you are involved in promoting the development of Australian resources. We consider that you promote the development of resources which come within the umbrella of specified Australian resources under item 8.2 under section 50-40. Dominant purpose To qualify as exempt from income tax under item 8.2 of section 50-40, an association must be established predominantly for the purpose of resource development. (Paragraph 7 of Taxation Ruling IT 2415 Income tax: associations promoting development of Australian resources) It is not sufficient that one of the association's purposes falls within the relevant provision. Nor is it sufficient that resource development is incidental to, involved with, or a consequence of an association's purpose. Determining the dominant purpose is a question of fact and degree and may involve a weighing of the various elements such as objects, activities, history, proposed directions, etc. One of your purposes is to promote the interests of the association and your members.
Whilst some services may promote the interests of your members, it is considered that many would add to member knowledge which assists with promoting the development of Australian resources. Additionally, some of those services are also provided to members of the public. Therefore, it is considered that the dominant purpose of RAIWA is to promote the development of Australian resources. Special Conditions - 'Not carried on for the Profit or Gain of its individual Members' The exemption under item 8.2 of section 50-40 is also subject to the special condition that the entity is not carried on for the purposes of profit or gain of its individual members. An association or society will fail the non-profit test if the members, in their individual capacity, are to receive any benefits. The Commissioner considers that to qualify, the entity must be prevented by law or its constitution documents from distributing its profits or assets among members, either while the entity is functional or on its winding up, and it must act consistently with those restrictions.
Your governing documents provide that property and income is to be applied solely towards the promotion of your objectives and that it cannot be paid to members, except in good faith in the promotion of those objectives. Financial statements indicate that funds have not been distributed to members. Therefore, it is considered that you are not carried on for the profit or gain of its individual members. Consequently, you satisfy this requirement. ACNC type of entity The final requirement to consider is section 50-47 whether you are an ACNC type of entity. Where an entity is an ACNC type of entity, it will not be exempt from income tax unless it is a registered charity. An 'ACNC type of entity' is defined in subsection 995-1(1) 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 ACNC Act. Column 1 of the table in subsection 25-5(5) of ACNC Act describes a charity. 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. You do not qualify as a charity therefore you are not an ACNC type of entity and not required to be registered with the ACNC. As you have satisfied the requirements of section 50-40 and are not an ACNC type of entity, your ordinary and statutory income will be exempt from income tax in accordance with section 50-1.