Income tax exemption checklist for sporting 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 the purpose of encouragement of either of the following
- a game or sport
- animal racing
- 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.
Taxation Ruling TR 2022/2 Income tax: the games and sports exemption provides detailed guidance for clubs seeking additional information to determine whether they are entitled to self-assess as income tax exempt.
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 the society, association or club must be encouragement of a game, sport or animal racing. To work out your organisation's main purpose, look at its:
- constituent documents
- activities
- use of funds
- history.
Any other purpose of the organisation must be incidental, ancillary or secondary to encouragement of the game, sport or animal racing.
For instance, if your organisation's main purpose is providing social and recreational facilities and activities, it won't be exempt. This is the case even if your organisation also gives money to encourage games, sports or animal racing.
Example 1: not for the encouragement of a game or sport
An NFP club's main operations are providing dining, gaming and leisure facilities at its clubhouse. It gives a yearly grant to an associated rowing club but is not involved in rowing itself.
It is not exempt.
Example 2: car appreciation club (not encouraging a game or sport)
Classic Car Club (the Club) is an NFP association that holds events for enthusiasts of a particular make of car. The Club’s events are focused on providing attendees with information on how to maintain their cars and opportunities to build networks with each other.
The Club’s main purpose is to promote a common interest in a particular make of car, as opposed to encouraging a game or sport. It doesn't qualify for the exemption.
Example 3: recreational fishing activities (not encouraging a game or sport)
The One That Got Away Club (the Club) provides services and amenities for people who like to fish in the bay near the clubhouse and in surrounding watercourses. The services provided include weather and boating information, guest speakers and a bar and canteen which open daily. Members-only competitions are held once a month.
While a fishing competition can be a sport, the Club's main purpose is to provide services and amenities for members to do recreational fishing. The Club was not formed for the main purpose of encouraging a game or sport.
Example 4: club with sporting facilities occasionally conducting sporting activities for members (not encouraging a game or sport)
Our Community Club (the Club) is an NFP association which was initially established for networking purposes, but now also provides dining, entertainment, gym and sporting facilities for its members. Occasionally, the Club organises member-only sporting competitions using its sporting facilities.
Whilst the Club occasionally organises sporting competitions for its members, the Club’s main purpose is to provide a broad variety of services and facilities to its members and encourage social and networking activities among its members. It doesn't qualify for the exemption.
Example 5: services to members with incidental sporting activities – ski lodge (not encouraging a game or sport)
Super Ski Club (the Club) is an NFP association which owns and operates a ski lodge. It was originally established to provide accommodation for its members to regularly participate in recreational skiing and snowboarding. When the Club’s lodging facilities are not fully used by its members, they are made available to the public on a commercial basis.
The Club is affiliated with an association (the Association) which regularly holds snow sports competitions. The Club allows the Association to use its lodging facilities for meetings and equipment storage on an inconsistent basis. The Club also makes its lodging facilities available at discounted rates to individuals competing in the Association’s competitions, provided they are not already reserved by its members. The Club doesn't enter any teams into any sporting competitions itself.
The Club’s main purpose is the provision of accommodation to its members. The substantial and prioritised member usage of the Club’s lodging facilities, inconsistent support provided to the Association and lack of direct involvement in any sporting competitions indicates the encouragement of a game or sport is not the Club’s main purpose. It doesn't qualify for the exemption.
End of exampleGame or sport
The terms 'game' and 'sport' are not defined and take their ordinary meaning. Games and sports extend to athletic games or sports (such as football and swimming) and non-athletic games (such as chess and bridge). They don't extend to:
- stamp-collecting
- keeping and showing pets
- making model railways
- maintaining vintage cars
- various social and recreational pursuits.
Encouragement of the games or sports extends to less direct means such as:
- research or testing
- developing referees
- providing sporting facilities.
Example 6: for the encouragement of a game or sport
An NFP association's purpose is to provide a sports ground for use by the local hockey, soccer and cricket clubs.
The association will be exempt if it is not a charity and also meets the other requirements.
Example 7: rallying and track racing club (encouraging a game or sport)
Riverstone Rally Club (the Club) is an NFP association that holds rallying and track racing activities. It is managed by a committee of members that actively participate in competitive rallying and track racing.
The Club owns and maintains a local motorsport circuit, which is available for public usage. It regularly hosts rallying and track racing contests on its circuit and participates in state and national-level competitions.
The Club’s main purpose is to encourage a game or sport. It will qualify for the exemption.
Example 8: ski club (encouraging a game or sport)
Aussie Alps Ski Club (the Club) is an NFP association. The Club’s governing document states it has been set up to promote snow sports. The Club’s management committee consists of former snow sports athletes.
The Club owns and operates a snow sports lodge and training and conditioning facility, which are available to the public, at commercial rates, and to a development snow sports squad selected by a national snow sports body, at no cost. The Club also regularly hosts skiing competitions. The Club consistently uses most of its profits to cover the training, accommodation and travel fees of skiing athletes representing Australia in the Olympics.
The Club’s main purpose is to encourage a game or sport. It will qualify for the exemption.
End of exampleMore information can be found by going to Income tax exemption and sporting clubs.
Animal racing
The income tax exemption includes horse racing, trotting and greyhound racing, and the racing of other animals.
If 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.