Issue
Is a company limited solely by shares owned beneficially by one or more government entities exempt from Commonwealth income tax pursuant to Division 1AB of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes, such a company is exempt from Commonwealth income tax pursuant to Division 1AB of the ITAA 1936.
Facts
Corporation A, was established by the XX Act, is a statutory body, and is subject to the control and direction of the Minister. Company C was formed by Corporation A and subsequently changed its name to Company D which is a private company limited solely by shares. All issued shares are beneficially owned by Corporation A. Corporation A was statutorily succeeded by Company E pursuant to the XXX Act. Company E is a statutory body and is also subject to the control and direction of the Minister.
Reasons for Decision
Division 1AB of the ITAA 1936 states that income of an STB is exempt from income tax unless it is an excluded STB or an SGIO. There are five ways in which a body can be regarded an STB. One way a body is an STB is if: (a) it is a company limited solely by shares; and (b) all the shares in it are beneficially owned by one of more government entities.
A 'government entity' is defined, under Division 1AB of the ITAA 1936, as a State, Territory or another STB that is not an excluded STB.
Company D is limited solely by shares and all those shares are beneficially owned by Company E. Company E is considered a government entity under Division 1AB of the ITAA 1936.
Company D is not an excluded STB nor are Corporation A (and now Company E).
Company D is an STB because it is a company limited solely by shares, all shares in it are beneficially owned by one or more government entities. It is also not an excluded STB or an SGIO nor are Corporation A (and now Company E).