Private ruling: Income tax exemption
Published: November 2012
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2011

Ruling: Q1: Is the Applicant exempt from income tax under section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as an association or club established for the encouragement of a game or sport as described under item 9.1(c) of section 50-45 of the ITAA 1997? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The Applicant was provided with two favourable rulings covering the previous number of years that it is exempt form income tax pursuant to item 9.1(c) of section 40-45 of the ITAA 1997. The Applicant's governing document contains a non-profit clause and dissolution clause. The Applicant aims to establish a fund and distribute the funds to support the growth and development of specific sport in Australia. Areas of support include scholarships and apprenticeships for identified athletes, medical, gymnasium and training equipment and player and sporting development. The overall object is to increase the strength and participation numbers of sporting players by being actively involved in development programs such as facility rent support, purchase of capital equipment and specialist medical and psychological programs for participants. The Applicant also stated the following in its application: · There have been no material changes to its activities or circumstances since the previous favourable private ruling. · The governing document has not changed. · The promotion and encouragement of sport continues to be its main purpose. Assumption: This ruling is given on the basis that there are no material variation to the Applicant's circumstances and operation since the decisions made in the previous private rulings. Any material variation from these facts will mean that the ruling will have no effect.

Relevant legislative provisions: Income Tax Assessment Act 1997 , section 50-1 | Income Tax Assessment Act 1997 , section 50-45 | Income Tax Assessment Act 1997 , section 50-70 Detailed reasoning | A society, association or club which has been established for the encouragement of a game or sport under section 50-45 item 9.1(c) is exempt from income tax under section 50-1 of the ITAA 1997. | The encouragement of sport is not only the participation in sporting activities. It also includes the direct involvement by the club in coaching, player development, player payments, providing team equipment, involvement in sport administration bodies, organising teams and providing referees or umpires and having awards for champion players. | For a club to be exempt from income tax under section 50-45 of the ITAA 1997, it need to satisfy three tests, and also the special conditions of section 50-70 of the ITAA 1997. The three tests are covered in Taxation Ruling TR 97/22 Income tax: exempt sporting clubs: | § It cannot be carried on for the purposes of profit or gain to its individual members | § It must be for the encouragement of a game or sport, and | § That encouragement must be the club's main purpose | The Ruling states at paragraph 8 that where a club does not satisfy all three requirements, it is not exempt from income tax under section 50-45 of the ITAA 1997. | Non-profit | Page 6 of the Income tax guide for non-profit organisations (the Guide) provides the following in relation to non-profit requirements: | The basic premise of a non-profit organisation is that it is not operating for the profit or gain of its individual members, whether these gains would have been direct or indirect. This applies both while the organisation is operating and when it winds up. | The Tax Office accepts an organisation as non-profit where its constituent or governing documents prevent it from distributing profits or assets for the benefit of particular people - both while it is operating and when it winds up. These documents should contain acceptable clauses showing the organisation's non-profit character. The organisation's actions must be consistent with this requirement. | A non-profit organisation can still make a profit, but this profit must be used to carry out its purposes. The profits must not be distributed to owners, members or other private people. | The Applicant's governing document contains an acceptable non-profit clause which prohibits distribution of income or property to its members. It also contains an acceptable winding up clause which requires that any surplus property on winding up to be transferred to another institution(s) that has or have similar objects, prohibits distribution of income and property to its members and its income is exempt under Division 50 of ITAA 1997. The Applicant meets the non-profit requirements. | Encouragement of a game or sport as main purpose | Taxation Ruling TR 97/22 Income tax: exempt sporting clubs provides the Commissioner's view on what constitutes an exempt sporting club. In particular, paragraph 11 states that it is essential that the encouragement of a game or sport is the main or dominant purpose of a club. | Paragraph 11 of TR 97/22 states that according to the Macquarie Dictionary, 'Encouragement' means 'stimulation by assistance'. Encouragement can occur directly by: | § forming, preparing and entering teams and competitors in competition in the game or sport | § coordinating activities | § organising and conducting tournaments and the like | § improving the abilities of participants | § improving the standards of trainers and coachers | § providing purchased or leased facilities for the activities of the game or sport for the use of Club Members and visitors; or | § encouraging increased and wider participation and improved performance and can occur indirectly by: | § through marketing; or | § by initiating or facilitating research and development | The Applicant's only aim is to promote their sport by providing financial support to specific sporting clubs in the region by fundraising programs. The funds raised will be utilised to provide financial support for the growth and development of the game through scholarships, apprenticeships and funding of equipment and facilities development. | The Applicant is considered to have a dominate purpose to encourage the game. | Special Condition | The Applicant incurs its expenditure and purses its objectives in Australia, hence, satisfies the special condition pursuant to paragraph 50-70(a) of ITAA 97 as it has a physical presence in Australia. | Conclusion | The Applicant satisfies the requirements to qualify as an organisation that has been established for the encouragement of a game or sport as described under item 9.1(c) of 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.