How I can tell if my sporting club can be tax exempt

Your club will be exempt from income tax and can self-assess its exemption if during the year of income it is an entity that:

• is a not-for-profit society, association or club
• is established for the encouragement of a game, sport or animal racing
• is not a charity
• meets at least one of the 3 tests.

The type of entity my organisation is

An entity for the purposes of income tax exemption as a tax-exempt sporting club includes a:

• corporation
• unincorporated association
• trust
• partnership.

Income tax exemption will not apply to a group of entities collectively described as 'the club'. Each particular entity in the group must assess its own income tax exempt status.

The following features on their own will not be sufficient to show that your club is exempt where:

• control of your club by an exempt entity or entities
• common membership of the board of both your club and the exempt entity
• use of your club's surplus funds for exempt entities or their purposes
• the commitments of members of your club being related to those of an exempt entity or entities
• common motives inspiring your club and associated exempt entities
• the providing of free services to associated exempt entities
• the holding of property by your club on trust for exempt entities.

The consolidation regime, under which a consolidated group of entities is treated as a single entity for income tax purposes, does not apply to income tax exempt entities.

If my organisation is non-profit

To qualify for income tax exemption as a sporting organisation your club must be non-profit.

An organisation is non-profit if it is not carried on for the profit or gain of its individual members. This applies for direct and indirect gains and both while the organisation is being carried on and on its winding up.

The income tax law does not prescribe a form of words that a non-profit company must have in its constituent documents. The following example clauses would be acceptable, as long as other clauses were not contrary to them. The organisation's activities must be consistent with the clauses.

 

The following do not prevent a club from being non-profit such as:

• benefits received by members communally as members, such as use of club's facilities
• benefits received by members incidental to the pursuit of a club's objects, such as sports uniforms
• payment of reasonable remuneration to members for services they provide to the club.

A non-profit organisation can still make a profit, but this profit must be used to carry out its purposes and must not be distributed to owners, members or other private people.

What a society, association or club is

The term 'society, association or club' is not defined in the tax law and takes the ordinary meaning of the words. It can include incorporated bodies.

The 3 words describe bodies made up of people who have come together to implement common purposes and objects. Consequently:

• An individual is not a society, club or association and will not qualify as an exempt sporting club.
• An incorporated body having one member may also not be a society, association or club and not qualify as an exempt sporting club.
• The members of a society, association or club need not be natural persons. The term therefore includes associations of sporting clubs.
• An entity that is a fund is not considered a society, association or club.