In summary, Division 30 of the Income Tax Assessment Act 1997 (Cth) (“1997 Tax Act”) requires that deductible gift recipients must be ‘in Australia’. Division 50 of 1997 Tax Act also requires that certain income tax exempt entities must have ‘physical presence in Australia’ and ‘to that extent, incur their expenditure and pursue their objectives principally in Australia’.

The Ruling outlines the Commissioner’s interpretation of these legislative conditions and provides some useful examples.

The Ruling clarifies that a deductible gift recipient would satisfy the Division 30 ‘in Australia’ condition if it is established or legally recognised in Australia and if its strategic or operational decisions are made mainly in Australia.  Relevant factors in determining whether a deductible gift recipient meets this condition would include assessing the locations of its executives, members of the governing body, and meetings of the executives and the governing body.

In relation to determining whether an entity meets the Division 50 ‘in Australia’ condition, which applies to certain income tax exempt entities, the Ruling provides the following measuring factors: whether an entity could demonstrate its physical operations in Australia, whether the decision to pay is made principally in Australia, whether payment is to occur principally from an Australian source, whether distributions are made principally to recipients located in Australia and whether goods and services are consumed principally in Australia.  The Ruling also clarifies how an entity may treat certain distributions made to recipients overseas to be disregarded for the purposes of determining whether the entity meets the Division 50 ‘in Australia’ condition.

Click for a copy of TR 2019/6 from the ATO website.

If you require advice on:

• whether your organisation or its deductible gift recipient meets the Division 30 ‘in Australia’ condition;
• whether your organisation meets, or is required to meet, the Division 50 ‘in Australia’ condition; or
• how to treat certain distributions overseas to be disregarded for the purposes of the Division 50 ‘in Australia’ condition,

please contact Jae Yang at jyang@prolegis.com.au to discuss further.