Charitable institutions: provision of child care services

Is an entity, which provides child care services on a non-profit basis, considered to have a charitable purpose when determining whether it is a charity as required for Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. The entity has a charitable purpose for the purpose of determining whether it is a charity as required for Division 50 of the ITAA 1997.

The entity is established for the purpose of providing day care, long day care (full-time and part-time), casual care, before and after school hours care, vacation care and occasional care, and similar sorts of child care.

The child care services are provided on a non-profit basis.

Division 50 of the ITAA 1997 exempts certain entities from income tax. Section 50-5 of the ITAA 1997 provides that charitable institutions will be exempt provided certain conditions are satisfied. One of these conditions is that the entity must have a charitable purpose.

Subsection 4(1) of the Extension of Charitable Purposes Act 2004 (ECPA) states that: Without limiting what constitutes a charitable purpose, charitable purpose includes the provision of child care services on a non-profit basis.

Subsection 4(2) of the ECPA states that This section applies: (a) for the purposes of a provision of an Act or instrument; and (b) for the purpose of determining whether an institution or fund is, for the purposes of a provision of an Act or instrument, a charity.

Therefore section 4 of the ECPA applies for the purposes of determining whether an entity is a charity as required under Division 50 of the ITAA 1997.

Neither the ECPA nor the ITAA 1997 define what constitutes the provision of child care services for this purpose.

The meaning of child care in The Australian Oxford Dictionary , 1999, Oxford University Press, Melbourne, is given as: The care or oversight of a child or children, especially by a creche.

The entity provides day care, long day care (full-time and part-time), casual care, before and after school hours care, vacation care and occasional care, and similar sorts of child care. These services are considered to be within the common usage of the term child care. The services are provided on a non-profit basis.

Accordingly the entity has a charitable purpose for the purpose of determining whether it is a charity as required for Division 50 of the ITAA 1997. Note: This ATO ID does not cover all the requirements for exemption under Division 50 of the ITAA 1997. Refer Taxation Ruling TR 1999/D21.