Income tax exemption checklist – Scientific organisations
Your organisation can self-assess its income tax exemption if it meets all of the following requirements:
- it is one of the following types of organisations
- a scientific institution
- a not-for-profit society, association or club established for the encouragement of science
- a fund established to enable scientific research to be conducted by or with a public university or public hospital
- it's not a charity
- it complies with all the substantive requirements in its governing rules
- it applies its income and assets solely for the purpose for which it is established
- it meets further conditions for exemption.
For these purposes, science has its ordinary meaning. It is not limited to the physical sciences and includes the human and applied sciences.
If all of your organisation's purposes are charitable purposes for the public benefit and you do not have any independent non-charitable purposes, your organisation cannot self-assess as income tax exempt under this category. Your organisation will need to be registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC) and receive our endorsement to access an income tax exemption.
For more information on what is a charitable purpose, see the Australian Charities and Not-for-profits Commission's websiteExternal Link.
Scientific institutions
Scientific institutions are set up and operated primarily to advance science. Common ways of advancing science include research, exploration and teaching. Disseminating information will often be involved.
Scientific institutions don't include:
- organisations run for the profit of their individual owners or members
- professional associations primarily run for the professional or business interests of their members.
Example 1: scientific institution
An institution is set up to hold conferences and meetings to share knowledge and exchange ideas on an aspect of engineering. Any professional advantage the engineer members gain is only through the institution's advancement of science. The institution's main purpose is to extend the area of knowledge in this field of engineering.
The institution is a scientific institution.
Example 2: research entity which makes its results freely available (scientific institution)
Clean Energy Research Collective (the Association) is a NFP association that was established to carry out research into clean energy sources. The Association’s members have an interest in clean energy sources. Additionally, there are entities that make financial contributions to the Association to enable it to do its research activities. As part of the funding arrangement the financial contributors receive some benefits commensurate with their contributions.
The Association has complete control over the research findings and makes them freely available to the public on its website.
While the Association does provide some benefits to its research contributors, its main purpose is to advance science. This is indicated by how its research findings are made freely available to the community. It will qualify for the exemption.
Example 3: research entity providing services to members (not a scientific institution)
Grain Research Association (the Association) was set up to carry out research to improve the yield of a certain grain crop. The Association’s members are entities that have an interest in the development of the grain crop.
Members make financial contributions to the Association to enable it to do its research activities. In return, members receive exclusive access to the intellectual property produced by the Association and can commercialise it in their own businesses. The Association’s research findings are not made available to the public.
The Association’s main purpose is to provide services to its members. The Association is not a scientific institution because it hasn't been established with the main purpose of advancing science, as indicated by how its research findings are not made publicly available. It doesn't qualify for the exemption.
Example 4: professional association promoting professional interests of members (not a scientific institution)
Astronomers Alliance (the Alliance) is a NFP association. Its rules state that it has been established to protect the astronomy profession and advance the interests of its members.
The Alliance regularly holds webinars, seminars and podcasts on observational and computational astronomy techniques which are exclusively available to its members. The Alliance also holds member-exclusive networking events, to help its members broaden their professional networks. The Alliance does not conduct any research of its own and does not maintain a scientific journal.
The Alliance’s main purpose is to promote the professional interests of its members, as opposed to advancing science. It does not qualify for the exemption.
End of exampleInstitution
An institution is an establishment, organisation or association, instituted for the promotion of an object, especially one of public or general utility. It is a body called into existence to translate a defined purpose into a living and active principle.
An institution does not need to take any particular legal structure. It may be constituted in different ways including as a corporation, unincorporated association or trust.
Whether an institution exists will depend on the circumstances. It involves more than mere incorporation and does not mean a 'mere fund' or 'mere trust' whose only activities are to manage funds and make distributions. Relevant factors include an entity's activities, size, permanence, and recognition.
A structure with a small and exclusive membership that is controlled and operated by family members and friends and undertakes limited activities is not an institution.
Scientific associations
The main purpose of the not-for-profit society, association or club must be the encouragement of science. Recreational or hobby clubs do not qualify. The main purpose must not be promoting the professional or business interests of members.
Example 5: scientific association
A group of frog enthusiasts sets up a NFP society to observe frogs in the district and record changes in their types, numbers and habits.
The society is established for the encouragement of science.
Example 6: not a scientific association
A NFP organisation is set up to advance the profession of surveying, raise professional standards and represent the profession to government and industry.
The organisation is not a scientific association.
End of exampleSociety, association or club
A society, association or club is an entity made up of people who have come together to implement a common purpose.
An individual, or an incorporated body that has only one member, is not a society, association or club. A fund which only holds money to support activities carried out by other entities is also not a society, association or club.
The members of a society, association or club do not need to be natural persons. They can be an association of other entities.
Scientific research funds
The organisation must only be a fund with sufficient links with public universities or public hospitals. The fund itself doesn't conduct the scientific research. The research is conducted by the university or hospital, or by other bodies in conjunction with the university or hospital. The fund may enable the research by various means, including providing money or facilities.
Example 7: scientific research fund
A fund's sole object is to provide money to a public university for it to carry out medical research. The fund's investment income is given to the university under an agreement requiring it to be used only for medical research.
The fund can qualify for income tax exemption if it meets the other conditions.
End of exampleFurther conditions
Scientific institutions and scientific associations
For a scientific institution or scientific association that is not a charity to be exempt from income tax, it must pass one of the following:
- physical presence in Australia test
- deductible gift recipient (DGR) test
- prescribed by law test.
If your organisation exists, operates and incurs its expenditure solely and entirely in Australia, you meet the physical presence in Australia test. You don't need to read anything further about the 3 tests.
If your organisation doesn't exist, operate and incur its expenditure solely and entirely in Australia, see the Explanation of the three tests to work out if you meet any of them.
Scientific research funds
For a scientific research fund that is not a charity to be exempt from income tax, the fund must be applied for the purposes for which it was established. If it is being applied for other purposes it won't be exempt.
The scientific research fund must also meet at least one of two conditions.
One condition is that the fund is a DGR. DGRs are entitled to receive income tax deductible gifts.
If the fund is not a DGR it must meet the second condition, being all of the following:
- established to enable the scientific research to be conducted principally in Australia by, or in conjunction with, the public university or public hospital
- located in Australia
- incur its expenditure principally in Australia.
In working out if expenditure is principally incurred in Australia, the fund can disregard any distributions it makes of amounts it received as gifts or government grants.
If your organisation doesn't meet all the requirements for exemption for this category, you should check the other exemption categories in the Types of income tax exempt organisations.