Income tax exemption checklist – Cultural organisations
Your organisation will be exempt from income tax, and can self-assess its exemption, if it meets all of the following requirements:
- it's a not-for-profit society, association or club
- it's established for either of the following purposes
- the encouragement of art, literature or music
- musical purposes
- it's not a charity
- it meets one of the three 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, association or 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 your organisation must be the encouragement of art, literature or music, or for musical purposes. To work out your organisation's main purpose, look at your organisation's constituent documents, activities, use of funds and its history. Any other purpose of the organisation must be incidental, ancillary or secondary to the musical purposes or encouragement of art, literature or music.
For income tax exemption, art includes drama and ballet as well as painting, architecture and sculpture. It doesn't include exhibition of stamps by philatelic clubs and associations.
Literature includes a wide range of written or printed works. It includes works in different languages, on particular subjects or by particular authors.
Music includes the performance of vocal or instrumental works, and covers various styles (for example, classical, jazz, popular and liturgical).
Encouragement can include:
- training
- performing
- displaying
- providing information
- studying
- judging and critiquing.
Professional associations set up to advance the common interests of their members (for example, artists or performers) do not have the required purpose.
Example 1: cultural organisation to encourage literature
A NFP society is set up to give people access to the writings of a specific author. It lends books to members, runs a reading circle and helps people doing tertiary study on the author.
The society is established to encourage literature.
Example 2: cultural organisation established for musical purposes
A NFP association is set up to perform Indian music written by contemporary Queensland composers. It liaises with composers, gets instruments and performs the music.
The association is established for musical purposes.
End of exampleIf your organisation's main purpose is providing social and recreational facilities and activities it will not be exempt. This is the case even if your organisation also gives money to encourage the arts, literature or music.
Example 3: social knitting club (not encouraging art)
The Knitters’ Club (the Club) is a NFP association. The Club regularly hosts ‘knitting night’ events for its members to bond over their shared interest in knitting. At these events, members are also encouraged to knit plain scarves to be donated to local charities.
The Club’s main purpose is to bring members together to share their interest in knitting as a hobby or recreational pursuit, as opposed to encouraging art. It does not qualify for the exemption.
Example 4: social book club (not for the encouragement of literature)
True Crime Club (the Club) is a NFP association. The Club holds a weekly true crime discussion group for its members. A large part of each event is set aside for social interaction and sharing food and drinks. The main purpose of the event is to enjoy the company of other members and share their interest in true crime.
The Club's main purpose is to enhance the social lives of its members, as opposed to encouraging literature. It does not qualify for the exemption.
End of exampleIf your organisation doesn't meet all the requirements for exemption for this category, you should check the other exemption categories in the Types of income tax exempt organisations.