Exemption from income tax and lodgment of returns

Whether a company carrying out the functions of a public authority is exempt from income tax in terms of section 50-25 of the Income Tax Assessment Act 1997 ('ITAA 1997') and the requirement to lodge income tax returns unless specifically requested to do so.

It is considered the income of the company is exempt from the payment of income tax under section 50-25 of the ITAA 1997. Accordingly, it will not be necessary to lodge returns of income unless specifically requested to do so at a future time.

The taxpayer, a non profit company, was established by two other companies involved in a joint venture. An overwhelming proportion of the company's income is derived from services and rate charges of a municipal nature with all income and property to be applied to the objects of the company.

While the joint venturers are profit making companies this does not detract from the taxpayer's status as a public authority. The company derives its authority from an ordinance with ultimate authority from a State/ Territory Act and gave statutory sanction to an agreement which provides the authority to carry out the function of a public authority.

In Renmark Hotel Incorp. v. FC of T 79CLR 10 Rich J stated in relation to a 'public authority' : 'The characteristics of a public authority seem to be that it should carry on some undertaking of a public nature for the benefit of the community or of some section or geographical division of the community and that it should have some governmental authority to do so..'

With regard to the 'public authority constituted under an Australian law' in terms of Item 5.2 of section 50-25 of the ITAA 1997, the company derives its authority from a particular ordinance with ultimate authority from a State/Territory Act which gave statutory sanction to a specific agreement and provides the authority for the taxpayer to carry out its function as a public authority.

It is considered the taxpayer company is a public authority within this meaning with the function it carries out in fulfilling its objects being virtually identical to those carried out by any typical municipal or shire council in Australia.