Private ruling: Special Conditions and Division 50 of the Income Tax Assessment Act 1997
Date of advice: 30 June 2016
Published: August 2016
Ruling period: 30 June 200X to 30 June 20XX
Date scheme commenced: 30 June 200X

Ruling: Q1: Has the applicant continuously satisfied the special conditions under Division 50 of the Income Tax Assessment Act 1997? | A1: Yes

Relevant facts and circumstances: 1. The applicant is a peak sporting association 2. It is a company limited by guarantee. 3. It has suitable non-profit clauses in its constitution 4. A member of the applicant has similar sporting objects and is not for profit. 5. The applicant received a government grant to construct new purpose-built premises. This grant covered the total cost of the building. 6. The applicant entered into a long lease with the member (who also promoted a similar sport). 7. In the lease agreement it was agreed that would make available a parcel of land of upon which the applicant would construct its new premises. 8. As a condition of the lease the applicant would construct the building and it would pay rent per annum indexed annually. 9. At the expiry of the lease agreement the applicant's occupancy of the land and building ceases.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 50

Reasons for decision: Summary: Taxation Ruling 97/22 Income Tax: exempt sporting clubs states as follows: | Detailed Reasoning - Non-profit requirement: Section 50-45 requires that a club is not to be carried on for the purposes of profit or gain of its individual members. Where members, in their individual capacity, are to receive benefits from a club, the club fails the non-profit test. However, benefits received by members communally as members (e.g., by using the club's facilities) and incidental to the pursuit of a club's objects do not prevent the club from passing the non-profit test nor does the payment of reasonable remuneration to members for services they provide to the club. We accept a club as being non-profit where, by operation of law (for example, a statute governing a club's activities) or by its constituent documents, the club is prevented from distributing its profits or assets among members while the club is functional and on its winding-up. The club's actions must, of course, be consistent with the prohibition. The applicant and the member's constitutions contain suitable non-profit clauses. The applicant and the member have entered into a mutual arrangement for the purpose of promoting the sport. The arrangement has mutually assisted both entities achieving their purpose to promote the sport. Any benefit to the member as a result of the construction of the building will be in support of the common purpose of both the applicant and the member, to promote the sport, rather than in its capacity as a member of the applicant. Any benefit provided to the member under this specific arrangement is considered in the same way as a provision of a grant by the applicant to the member for the promotion of a sport and will not breach the special conditions in Division 50 of the ITAA 1997. The income and assets of the applicant have solely been applied for the purpose of promoting the sport. | Detailed Reasoning - Conclusion:: Any benefit arising from the construction of the building on property belonging to the member will not breach the special conditions in Division 50 of the ITAA 1997. Both the member and the applicant are non-profit organisations established for the encouragement of a sport as required by section 50-45 of the ITAA 1997. Under the specific circumstances of this mutual arrangement any benefit to the member is considered to be a contribution made for the promotion of a sport and not a benefit to the member in its capacity as an individual member.