The main purpose of a club

Identifying a club's main purpose

The main purpose of your club must be encouragement of a game, sport or animal racing. Any other purpose of the organisation must be incidental, ancillary or secondary to encouragement of the game or sport or animal racing.

Your club's constituent documents will help identify the purpose for which the club was set up and should be consistent with the aim of encouraging a game, sport or animal racing. Your club's activities in the year of income must then demonstrate that the club's main purpose is the encouragement of its game, sport or animal racing.

If your club's main purpose is providing social and recreational facilities and activities for its members, it will not be exempt. This is the case even if your club also gives money to encourage games, sports or animal racing.

Other club records which will help indicate your club's activities and purpose include:

• resolutions made by the persons controlling your club, such as the board, committee or directors
• minutes of meetings of the board, committee or directors
• business plans
• promotional material concerning your club's activities, and
• published reports about the club, such as its annual report.

If the main purpose of a club is the carrying out of non-sporting activities, the club is not exempt. This is the case even if your club also gives money to encourage games, sports or animal racing.

For many sporting clubs that mostly conduct activities directly related to their game, sport or animal racing, the club's main purpose will be clear.

The sale of a club's assets to fund its ongoing sporting commitments will not of itself disturb its encouragement of sport.

Clubs with multiple purposes

Difficulties in working out main purpose arise if a club conducts both sporting and non-sporting activities and the non-sporting activities are not incidental or ancillary to the sporting activities.

The following activities originally offered for the recreation of sporting members may become significant themselves when:

• operating bar and dining facilities for extended periods beyond game time
• having or operating significant gaming and other recreational facilities on club premises
• owning temporary accommodation available to members and non-members for holiday rental.

If your club conducts significant non-sporting activities in addition to its sporting activities, difficulties may arise in determining your club's main purpose. You will need to review if:

• the non-sporting activities the club engages in are merely incidental or ancillary to the encouragement of the club's game, sport or animal racing
• the club can justify to its members and the public that its main purpose is the encouragement of a game, sport or animal racing.

Further information is in the Schedule for multiple purpose clubs in Worksheet – Working out your club's income tax status.

Game or sport

The words 'game' and 'sport' are not defined in the tax law and take their ordinary meaning.

For income tax exemption purposes, 'game or sport' extends to:

• non-athletic games such as chess and bridge
• sports such as motor racing in which machines facilitate the competition of people
• non-competitive activities such as mountaineering.

The nature of the activity must also be considered in the context of determining the club's main purpose.

The participants must intend that the activities they perform are the activities of a particular game or sport and that the intention and activities must be shared by the other participants.

A common feature of a game or sport is a set of conventions, expectations and rules. This contributes to the element of organisation that is commonly indicative of a game or sport. The imposition of such rules and conventions in an organised group of participants can convert an otherwise ordinary leisure activity into a game or sport (for example hunting, fishing, and walking).

Competition is a very common feature although not essential. Competition is an important indicator where the activity is not obviously a game or sport.

Examples of games or sports

Athletic activity, including:

• aerobics (if competitive)
• amateur wrestling
• athletics, including hurdling
• jumping
• running and walking
• boxing
• dancing, such as ballroom dancing (if competitive)
• 'field games' such as  
  • discus, javelin, shot put and hammer throwing
  • martial arts such as judo, kung fu, ju-jitsu and karate
  • mountaineering, orienteering, rogaining
• water-based sports, including  
  • diving, swimming, surfing and surf lifesaving
  • synchronised swimming and water polo.

Games or sports played with ball or projectile such as:

• badminton, baseball and basketball
• bocce, bowling (tenpin) and bowls
• cricket, croquet and football (all codes)
• golf, handball, hockey, ice and under water hockey
• lacrosse, marbles and netball
• softball, squash, table tennis, tennis and volleyball.

Activities involving animals such as:

• equestrian
• polo or pony club
• rodeo.

Sports or activities that involve using equipment to achieve mobility such as:

• canoeing, kayaking and dragon boat racing
• drag racing, go-kart racing and hang-gliding
• motor-car racing (circuit, rally), motor cross and motorcycle racing
• cycling and mountain bicycle
• rowing and yachting.

Sports or activities that involve using other equipment such as:

• abseiling, wind surfing, water skiing and skateboarding
• target shooting, archery, darts and fencing
• gymnastics
• pool, billiards and snooker
• power lifting, weight-lifting and wood-chopping
• snow sports, including  
  • bobsled, luge and skiing
  • ski-jumping and snow boarding.

Contests involving combinations of activities such as:

• triathlons
• Highland Games
• Olympic Games.

Card and board games such as:

• bridge
• backgammon, chess and mah-jong.

Examples what are not games or sports

These include:

• bird-raising, bird-keeping and bird-watching
• body-building
• car owners, clubs and associations
• dancing as a social activity, including  
  • ballroom dancing
  • line dancing and square dancing
  • cultural dancing
• modelling of railways
• coin and stamp collecting
• playing of gaming or gambling machines
• breeding and showing of animals.

Animal racing

The income tax exemption includes:

• horse, trotting and greyhound racing
• the racing of other animals.

Defining 'encouragement'

The term 'encouragement' is not defined in the tax law and takes its ordinary meaning. It covers both directly carrying on activities and supporting them less directly.

Encouragement can occur directly by:

• forming, preparing and entering teams and competitors in competitions in the game, sport or animal racing
• coordinating activities
• organising and conducting tournaments including providing match officials
• preparing and maintaining the rules of a game, sport or animal racing
• improving the abilities of participants
• improving the standard of trainers, coaches and other sports officials
• providing or operating the venue for a game, sport or animal racing
• providing jerseys, uniforms, scarves and flags
• encouraging increased and wider participation and improved performance
• encouraging club members to be spectators at and to support the game, sport or animal racing
• organising raffles to fund club members' participation in a specific event in the game or sport in which the club's teams or competitors are involved.

Encouragement can occur indirectly:

• through marketing
• by initiating or facilitating research and development
• by providing accounting, legal and management services that directly facilitate the sporting activities.

Other examples of encouragement are:

• a club set up to run all aspects of the controlling club's sporting activities for juniors
• a supporters club associated with a football club that operates solely to take spectators to away games
• an association whose purpose is to carry out research into ways that new technologies can help in the preparation of playing surfaces
• an association whose purpose is to produce a radio program which airs on a community station during the season that provides extensive insight into the major competitions of the game and includes educational content particularly aimed at junior players
• an association established to promote a sport by running public events to publicise and fundraise for representative players or state or national sporting events.