Income tax exemption checklist – Community service organisations
Your organisation will be exempt from income tax, and can self-assess its exemption, if it meets all of the following requirements:
- it is a not-for-profit (NFP) society, association or club
- it is established for community service purposes (except political or lobbying purposes)
- it is not a charity
- it meets one of the 3 following tests
- physical presence in Australia test
- DGR test
- prescribed by law test
- it complies with all the substantive requirements in its governing rules
- it applies its income and assets solely for the purpose for which it is established.
If all of your organisation's purposes are charitable purposes for the public benefit and you do not have any independent non-charitable purposes, your organisation cannot self-assess as income tax exempt under this category. Your organisation will need to be registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC) and receive our endorsement to access an income tax exemption.
For more information on what is a charitable purpose, see the Australian Charities and Not-for-profits Commission's websiteExternal Link.
Society, association or club
A society, an association or a club is an entity made up of people who have come together to implement a common purpose.
An individual, or an incorporated body that has only one member, is not a society, association, or club. A fund which only holds money to support activities carried out by other entities is also not a society, association, or club.
The members of a society, association or club do not need to be natural persons. They can be an association of other entities.
Main purpose
The main purpose of the organisation must be community services. To work out your organisation's main purpose, look at your organisation's constituent documents, activities, use of funds and history. Any other purpose of the organisation must be incidental, ancillary or secondary to the community service purpose.
Community service purposes are altruistic. This means the entity is established and operated for the wellbeing and benefit of others.
Community service organisations promote, provide or carry out activities, facilities or projects for the benefit or welfare of the community or any members of the community who have a particular need by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances.
Community service organisations include:
- associations of Justices of the Peace
- associations of play groups
- traditional service clubs (for example, Rotary and Lions)
- community service clubs
- pensioner or senior citizens associations
- industry ombudsman.
Example 1: Organisation focused on community service – established for community service purposes
The Hill Community Club (the Club) is a NFP association that has been set up to improve the welfare of the community and provide its members with networking opportunities.
The Club's main activities are to provide co-ordinated support to a broad range of community activities such as sporting fixtures, charity events, and emergency services. The Club's weekly meetings focus on the co-ordination of the community activities they undertake. The Club occasionally hosts social networking events and leadership development seminars for its members and other NFP organisations are regularly invited to attend.
The Club's main purpose is to promote, provide or carry out activities, facilities or projects for the benefit or welfare of the community. It will qualify for the exemption.
End of exampleOrganisations that seek to advance the common interests of their members are not altruistic and cannot be community service organisations. If an organisation's main purpose is lobbying or political, its income will not be exempt.
Organisations that are not community service organisations include:
- clubs that promote public speaking or debating
- clubs that provide a social forum for retired or semi-retired businesspeople, senior public servants and similar groups
- clubs that provide a social forum for expatriates of a particular country
- pensioner associations that conduct significant political or lobbying activities
- military service unit organisations
- social clubs for newcomers to a particular residential area.
Example 2: Social club for retired persons – not established for community service purposes
Intellectual Interest Club (the Club) is a NFP company limited by guarantee that was established to advance the intellectual and cultural interests of its members, who must be retired professionals.
The Club holds monthly dinners for members to discuss their intellectual and cultural interests and to build social connections. The Club also conducts regular wine tasting nights and organises holiday trips for its members.
The Club’s main purpose is to provide a social forum for its members, who are retired professionals, to pursue their common interests.
The Club has not been established for community service purposes, as it does not have an altruistic purpose to promote, provide or carry out activities, facilities or projects for the benefit or welfare of the community or any members of the community who have a particular need by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances. It does not qualify for the exemption.
End of example
Example 3: Professional development of members – not established for community service purposes
Young Leaders Association (the Association) is a NFP association that was established to enhance the professional development and leadership skills of its members. It holds monthly leadership-themed professional development events and fortnightly networking events for its members.
The Association’s main purpose is to advance the professional interests of its members. The Association has not been established for community service purposes, as it does not have an altruistic purpose to promote, provide or carry out activities, facilities or projects for the benefit or welfare of the community or any members of the community who have a particular need by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances. It does not qualify for the exemption.
End of example
Example 4: Dinner club – not established for community service purposes
Culinary Club (the Club) is a NFP association that was established as a social forum for individuals who share a common interest in a particular type of cuisine. The Club holds monthly ticketed events for its members, during which they can try out new eateries that specialise in the particular cuisine and build social connections with fellow members.
The Club’s main purpose is to provide social activities for its members. The Association has not been established for community service purposes, as it does not have an altruistic purpose to promote, provide or carry out activities, facilities or projects for the benefit or welfare of the community or any members of the community who have a particular need by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances. It does not qualify for the exemption.
End of example
Example 5: Services to members – discounted hostel – not established for community service purposes
Cosy Quarters Association (the Association) is a NFP association that was set up to provide hostel accommodation, generally for short term holiday stays, for its members. Membership is open to the public. Its members can book accommodation in the hostel for a fee which is lower than the current market rate for the area. The hostel’s accommodation facilities cannot be booked by non-members.
The Association’s main purpose is to provide short term holiday accommodation for its members. The Association has not been established for community service purposes, as it does not have an altruistic purpose to promote, provide or carry out activities, facilities or projects for the benefit or welfare of the community or any members of the community who have a particular need by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances. It does not qualify for the exemption.
End of example
Example 6: Owners corporation/body corporate not established for community service purposes
Fawnsdale Corporation (the Corporation) is an owners corporation that was set up to manage and maintain a block of units in an apartment building.
The Corporation administers by-laws regarding the use of the units, and regularly collects amounts levied on the owners of the units. These levies are used for the general maintenance and repair of the units.
The Corporation operates to provide services and benefits to the owners of the units. It has not been established for community service purposes, as it does not have an altruistic purpose to promote, provide or carry out activities, facilities or projects for the benefit or welfare of the community or any members of the community who have a particular need by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances. It does not qualify for the exemption.
End of example
Example 7: Residents’ committee – not established for community service purposes
Duke Residents’ Committee (the Committee) was set up to represent the interests of residents of a local retirement village.
The Committee regularly consults with residents and the retirement village operator on residential complaints and the day-to-day running of the retirement village. From time to time, the Committee also organises social activities for village residents.
The Committee's main purpose to provide a communication channel between the residents and the retirement village operator and to promote the interests of the residents. The Committee has not been established for community service purposes, as it does not have an altruistic purpose to promote, provide or carry out activities, facilities or projects for the benefit or welfare of the community or any members of the community who have a particular need by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances. It does not qualify for the exemption.
End of exampleIf your organisation does not meet all the requirements for exemption for this category, you should check the other exemption categories in Types of income tax exempt organisations.