A mutual is a self-help organisation formed by
individuals or businesses to provide a service to
In Australia, mutuals come in many forms (trade unions, clubs, credit unions,
industry superannuation funds),
and are incorporated under a variety of legislation, both state and federal.
A co-operative is just one of a number of legal entities available for
people and businesses to form a mutual enterprise. Other entities include
companies and incorporated associations.
The Australian Taxation Office estimates that there are between
(Source: Federal Minister for Revenue,
Mutuality Principle to be Restored,
Media Release, 30 May 2005)
The mutuality principle is a legal principle established by common law. It is
based on the proposition that an organisation (commonly a legal entity) cannot
derive an income from itself.
The principle provides that where a group of
persons contribute to a fund created
and controlled for a common purpose and for
the mutual benefit of its members, any
surplus arising from the use of that fund for the
common purpose is not assessable as income, even if
distributed to the contributors.
The principle is that taxable income must be
derived by outside parties (a person cannot make a profit from him/herself).
Typically, the principle has
relevance with the activities between the entity
and its members (mutual activities), but not to
activities with non members for payment
Examples of mutuals
Credit unions are mutuals - only
depositors can be members, all depositors must be members and income is derived
investing member deposits.
Similarly, housing co-operatives are mutuals - only tenants may be
tenants must be members and income is derived from tenants.