ARTICLE · 28 JUNE 2011

TR2005/22DA puts NFP subsidiary entities on the Hit List

Moore Australia

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Discusses income tax exemptions under new government reforms.

AustraliaTax

Stephen O'Flynn

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We recently wrote an article commenting on the Consultation Paper – "Better targeting of Not for Profit tax concessions' recently released by the Government. The ATO released today TR 2005/22DA – Taxation Ruling Draft Addendum which includes an Education example and a Club example that takes a pretty tough view of the availability of the income tax exemption, considering the decision in Word Investments. We were not expecting this.

The examples are too simplistic and if anything, are weighted far too heavily in favour of protecting the revenue. If the fact pattern changed slightly, which is the more common example in practice, then the opposite outcome would be achieved. What it does show is that the ATO has not rolled over on Word Investments and has the taxation of subsidiary entities and in particular the Not for Profit Clubs clearly in its sights.

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