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Member for Riverina welcomes restoration of mutuality principle.

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Media release 1 June 2005


The Nationals Member for Riverina, Kay Hull, today welcomed the Australian Government’s announcement to amend the income tax law to ensure certain not-for-profit organisations are not subject to tax on income as a result of a recent High Court decision. The Government’s actions will restore the long-standing benefits of the ‘mutuality principle’.

Mrs Hull said that this decision honours the Government’s commitment made during the election and that it addresses the concerns raised about the impact of judicial decisions arising from litigation between Coleambally Irrigation Mutual Co-operative Ltd and the Commissioner of Taxation.

“I have been working with Coleambally Irrigation Mutual Co-operative for a period of time to resolve this issue for them.

“I would like to thank Mal Brough, the Minister for Revenue and Assistant Treasurer, for all the time that he has given me to assist in restoring the intent of rule 75,” Mrs Hull said.

Under the mutuality principle, which has been established under the general law, membership subscriptions and receipts from other mutual dealings with members are exempt from income tax. Not-for-profit organisations that benefit from the mutuality principle include clubs, professional organisations and friendly societies.

On 27 May 2005, the High Court decided not to grant Coleambally Irrigation Mutual Co-operative Ltd leave to appeal a decision that the principle of mutuality cannot apply where the members of an organisation are prevented from obtaining the value of the assets on its winding up.

The amendment to the Income Tax Assessment Act 1997 will provide that the mutuality principle may apply to affected not-for-profit organisations even though the organisation is precluded from distributing to members on winding up. On winding up, any surplus would be required to be distributed to another not-for-profit organisation. The Tax Office estimates that around 200,000 to 300,000 organisations (largely RSL and social clubs) would potentially have become subject to tax on receipts that the Tax Office had previously considered to be excluded from assessable income under the mutuality



“Coleambally Irrigation has acted very professionally throughout this matter and this decision will deliver huge benefits to the community in the future works of Coleambally Irrigation Mutual Co-operative.

“I am thrilled that the Government has announced this decision.” Mrs Hull said.


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