Private ruling: exemption from income tax
Published: February 2012
Ruling period: 1 July 2011 - 30 June 2012 | 1 July 2012 - 30 June 2013 | 1 July 2013 - 30 June 2014
Date scheme commenced: 1 July 2011

Ruling: Q1: Is the entity exempt from income tax under section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as a society, association or club established for the encouragement of a sport pursuant to item 9.1(c) in the table in section 50-45 of the ITAA 1997? | A1: Yes

Relevant facts and circumstances: The entity was established to promote and encourage a particular sport. The entity's constitution includes non-profit and dissolution clause to prohibit the distribution of income and property to members while in operation and on winding up.

Relevant legislative provisions: Section 50-1 Income Tax Assessment Act 1997 | Section 50-5 Income Tax Assessment Act 1997 | Section 50-45 Income Tax Assessment Act 1997 | Section 50-70 Income Tax Assessment Act 1997

Reasons for decision: Summary: The entity is entitled to income tax exemption under section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as a society, association or club established for the encouragement of a sport pursuant to item 9.1(c) in the table in section 50-45 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Item 9.1(c) of section 50-45 of the ITAA 1997 exempts from income tax an entity that has been established for the encouragement of a game or sport. The tables referred to in section 50-1 of the ITAA 1997 are contained in sections 50-5 to 50-45 of the ITAA 1997. A society, association or club established for the encouragement of a game or sport is listed at item 9.1(c) in the table in section 50-45 of the ITAA 1997. The society, association or club must meet the special condition detailed in section 50-70 of the ITAA 1997. An entity is therefore exempt from income tax as a society, association or club established for the encouragement of a game or sport if it: § is a society, association or club, § is established for the encouragement of a game or sport, and § satisfies the special conditions. | Detailed Reasoning - Society, association or club: The term society, association or club is not defined in the ITAA 1997. The term is therefore construed according to the ordinary meaning of the words. Taxation Determination TD 95/56 refers to the definition of 'association' in paragraph 2 and states: The Shorter Oxford English Dictionary defines the term 'association' to be 'a body of persons associated for a common purpose; the organisation formed to effect their purpose'. The Macquarie Dictionary defines 'association' as being 'an organisation of people with a common purpose and having a formal structure'. Olsson J, in Quinton v. South Australian Psychological Board (1985) 38 SASR 523, also stated that the term 'association' has come to be regarded as attaching to a body of persons associated for a common purpose. The members of the entity are the members of the general public who wish to participate in the sport. The members of the entity voluntarily associate together for this common purpose and common interest. Therefore, the entity is considered an 'association, society or club'. | Detailed Reasoning - Established for the encouragement of a game or sport: Taxation Ruling TR 97/22 Income tax: exempt sporting clubs describes the circumstances under which a society, association or club is considered to be established for the encouragement of a game or sport. The entity's constitution refers to the promotion and encouragement of a particular sport. The entity conducts activities which are directly related to the sport such as organising and conducting competitions. The entity has changed its structure from an incorporated association to a company limited by guarantee. However, the objects of the entity are consistent with the objects of the original club. In conclusion, the activities of the entity directly encourage sport (as described in paragraph 11 of TR 97/22). The entity demonstrates features persuasive of the entity being for the encouragement of a game or sport (as listed in paragraphs 15 and 16 of TR 97/22). | Detailed Reasoning - Special condition: Section 50-70 of the ITAA 1997 states that an entity covered by item 9.1 is not exempt from income tax unless the entity is not carried on for the profit or gain of its members and has a physical presence in Australia and, to that extent it pursues its objectives and incurs its expenditure principally in Australia. The entity satisfies the special conditions, as the entity is located and carries on its activities in Australia and its constitution prohibits the distribution of profits an assets among members while in operation and on winding up. The entity is similar to those clubs and associations as described in the TR 97/22. Consequently, the entity is exempt from income tax pursuant to item 9.1(c) of the table in section 50-45 of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.