Co-operatives

Co-operatives are a democratic, separate legal entity business structure run by the members for their own benefit. The key features of a co-operative business structure are:

• • a focus on democratic control;
• • open membership;
• • distributions to members based on the extent of their dealings with the co-operative; and
• • limited return on capital.

There are two forms of co-operatives. Pure co-operatives are trading or non-trading entities registered under one of the state or territory Co-operatives Acts. Hybrid co-operatives are companies registered under the Corporations Act 2001 (Cth), but operate on co-operative principles.

Subject to meeting the criteria set out in the Income Tax Assessment Act 1936 (Cth) a favourable tax treatment can operate for co-operatives, including the availability of special deductions not usually available to other entities or business structures. The special deductions available to qualifying co-operatives include deductions for:

• • rebates or bonuses paid to members based on business done by members with the co-operative: s 120(1)(a), Income Tax Assessment Act 1936 (Cth); and
• • interest or dividends paid to members: s 120(1)(b), Income Tax Assessment Act 1936 (Cth).

See Co-operatives.