P Gerber DP

Administrative Appeals Tribunal

Decision date: 22 September 1992

Dr P Gerber (Deputy President)

These applications for review concern four years of income (1988-1991). The applicant is the Tweed Heads Bowls Club (``the Club''). (Since the facts would have disclosed the identity of the applicant, the Club preferred to have its name included in the decision rather than the decision not be published.) The Club is situated in Tweed Heads near the Queensland border. Its principal source of revenue is latterly derived from poker machines (used predominantly by visitors), to the point where the respondent concluded that in the years now before me the encouragement or promotion of bowls had ceased to be the Club's main object. The question therefore to be determined is whether the applicant is liable to pay income tax on certain income derived by it. The respondent looked at the receipts of the Club derived from its sales of meals, drinks and poker machines and other non-bowling activities and, excluding an amount calculated as having been derived from members which was considered not to be income by reason of the ``mutuality principle'', taxed the balance, ``by applying a formula which the Club had been made aware of by an ATO letter to its accountants dated 17 June, 1985''.

2. The Club, in contending that none of its income is liable to income tax, relies on sec 23 of the Income Tax Assessment Act 1936-1991 (``the Act'') which exempts from income tax, inter alia:

"(g) the income of a... club which is not carried on for the purposes of profit or gain to its individual members and is-

  • (iii) a... club established for the encouragement or promotion of a game or sport;" (prior to 1 July 1989, the section required "an athletic game or athletic sport in which human beings are the sole participants") [emphasis added]

3. Since the Crown relies on the majority decision in
Cronulla Sutherland Leagues Club Ltd v FC of T 90 ATC 4215 ("Cronulla") and as I have concluded that the facts in Cronulla are readily distinguishable from the facts in this case, it will be necessary to set out the background to this Club, its activities in the years under review, as well as the degree of its current dedication to bowls (it being common ground that bowling constituted an ``athletic sport'' for purposes of sec 23(g)(iii)).

4. An affidavit of one John David Ohlin, the General Manager/Secretary of the Club, dated 12 August 1992 was tendered and admitted into evidence subject to some minor objections, which were readily conceded. So far as relevant, he states:

``4. History of the Club

4.1 The Club was originally established as the Coolangatta Tweed Heads Bowls Club, an unincorporated association in 1921. On 18th October, 1972 the Club became incorporated as a Company Limited by Guarantee.

4.2 In 1970 the Club purchased land at Florence Street, Tweed Heads and in 1975 moved to the current site from its former premises at Coral Street, Tweed Heads. The purchase price of the land was $61,200.00. During the next four years plans were formulated to construct a new Clubhouse and bowling green on this property. The total cost of the undertaking was $715,000.00.

4.3 In 1975, minor extensions were made to the Club building which incorporated a sportsman bar, cold room, additional toilets and a sauna. The cost approximated $100,000.00. With the objective of improving the facilities available to members, an approach was made to the Tweed Shire Council to lease the land at the rear of the Club for an additional car park.

4.4 Towards the end of 1979, steps were put in motion to increase the bowling facilities available to members and as a result plans were commissioned for the construction of a full sized indoor bowling green. As the area devoted to the new indoor green supplemented most of the space previously allocated to other Club facilities including poker machines, a new area was constructed adjacent to the indoor bowling green on the first floor of the Club. The administration offices were expanded and resited on the lower level and a small auditorium and bistro were added.

4.5 Between 1988-1992 the Club, in accordance with its masterplan undertook

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major renovations and extensions of the Club as follows:

Stage 1 : New members dining room, upgraded air-conditioning and related facilities, new entrance and foyer and new bistro on level 3.

Stages 2 and 3 : Complete renovation of the members' bowling areas on levels 1 and 2 including new committee rooms for male and female bowlers, bowls administration area, fitting out of the members' dining room, new members' sports lounge, fitting out of terrace bistro and bowling members' locker rooms.

4.6 With the exception of level 3 of the Club's building, all other areas of the Club's building and property are confined to the use of the Bowling members and any guests who may play the game of bowls.

5. Company Structure of the Club

5.1 The Club is a company limited by guarantee and not having a share capital. The Club is not carried on for the purposes of profit or gain to its individual members. The Club was incorporated on 18th October, 1972 under the then Companies Act, 1961.

5.2 The objects for which the Club are established, where relevant to its assertion that the principal object of the Club is the playing or promotion of the game of bowls, include:

  • (a) To take over the assets and assume the liability and premises now in possession and occupation of the Tweed Heads Bowling Club.
  • (b) To purchase, lease or otherwise acquire and hold any other freehold or leasehold property or any rights or privileges which the Club may think necessary or convenient for its purposes.
  • (c) To promote the game of bowls and such other sports, games, amusements, entertainments and recreations as the Club may deem expedient.
  • (d) To construct and maintain such bowling greens, courts and grounds as the Club may determine and to construct, furnish and maintain clubhouse pavilions and other buildings in connection therewith containing such accommodation and convenience as the Club may from time to time determine.
  • (e) To establish, conduct and carry out any sports, tournaments or amusements or to co-operate with any company or companies person or body or bodies of persons or individuals upon such terms and conditions generally as the Club may determine.
  • (f) To carry on the business of caterers for the purpose of supplying refreshments liquid or solid to persons using or to visitors to the Clubhouse and premises.
  • (g) To accumulate a reserve fund out of the income or otherwise for the purpose of the Club and to appropriate the same or any part thereof or any of the Club's assets to specific purposes.
  • (h) To provide for members and members' guests a social and sporting club with all the usual facilities of a Club including residential and other accommodation, liquid and other refreshments, libraries and provision for sporting, musical and educational activities and other social amenities.
  • (i) To carry on all such activities as may be necessary or convenient for the purposes of the Club or any of them.
  • (j) To do all such acts, deeds, matters and things to enter and make such agreements as are incidental or conducive to the attainment of the objects of the Club or any of them.

5.3 The Club, either in its unincorporated or incorporated form has been engaged in the playing or promotion of the game of bowls for over 71 years.

5.4 As a company limited by guarantee, Clause 3 of the Company's Memorandum of Association provides as follows:

`The income and property of the Club whencesoever derived shall be applied solely towards the promotion of the objects of the Club as set forth in this Memorandum of Association and no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise, howsoever by way of profit to or amongst the members of the Club...'

Upon winding up or dissolution of the Club, the Club's assets are not to be distributed

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amongst the members of the Club but to an institution with similar objects to the Club.

6. Control of the Club

6.1 An elected Board of Directors controls and manages the Club. Article 13 provides as follows:

`The management and control of the affairs of the Club shall be vested in a Board of Directors which shall be elected annually by such members who hold bowling membership in accordance with these articles and such board shall consist of a Chairman, a Deputy Chairman and seven (7) Directors but no member shall be entitled to hold a position of Chairman or Deputy Chairman unless he has served at least one (1) term as a member of the Board. All members of the board must, during the whole of their terms as Directors be Bowling members of the Club and must have held such membership for a continuous period of not less than one (1) year prior to their appointment.'

6.2 Article 14(a) provides that only those persons who are financial Bowling members are eligible to propose or second a nominee who must also be a Bowling member for election to the Board of Directors. Article 3(a) provides that Bowling members shall be the only class of membership having the right to attend and vote at meetings and to hold office on the Board of Directors.

6.3 Annexed hereto and marked `B' is an organisation chart of the Club showing the Board of Directors as the governing body of the Club with Mens Bowls and Ladies Bowling Sub-Clubs reporting to the Board of Directors and a General Manager/ Secretary as the chief executive officer of the Club with all other staff reporting to that General Manager who in turn reports directly to the Board of Directors.

7. Masterplan

7.1 As early as 1980 the Club drew up a masterplan in conjunction with an architectural firm with a view to establishing the Club as one of the world's leading bowls clubs.

7.2 The plan was to provide facilities to enable the Club over a number of years, to build clubhouse amenities able to cater for the promotion of major bowls events.


7.4 A further masterplan was presented to Club members in March, 1987 and was accepted and sent to Council for development approval which was granted in 1988. This plan consisted of six stages - three of which have been completed at this time. (Refer to paragraph 4.5 herein)

7.5 Further stages 4 to 6 may be undertaken as the need arises and funds become available e.g. extra outdoor bowling greens and ancillary facilities, further additions to carparking facilities, improved spectator facilities for major bowling events, provision for facilities suitable for Junior Bowling members.

8. Membership of the Club

8.1 The Club consists of the following classes of Ordinary membership under the Registered Clubs Act:

  • - Bowling members
  • - Non-Bowling members.

8.2 In addition the Club has the category of Life members and is also permitted, pursuant to the Registered Clubs Act, to admit persons as Honorary and Temporary members of the Club. The current membership breakup is as follows:

  • - Bowling members - a total of 830 comprising 530 male and 300 female Bowling members. (Article 3[a])
  • - Non-Bowling members - a total of 170 members (who generally are persons who no longer bowl or are the spouses of Bowling members).
  • - Life members - 4

8.3 Bowling members are the only category of membership (apart from Life members) who have the right under the Articles to participate in the control and management of the affairs of the Club. (See Article 3[a])

8.4 Bowling members are the only members entitled to be elected to the Board of Directors, to nominate members for election to the Board of Directors, to vote upon the election of the Board of Directors and to vote upon any other resolution at General Meetings of the Club. The other classes of

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membership do not have such rights. (See Article 13)

8.5 The Club has a compulsory procedure to be followed for persons to become Bowling members of the Club. This procedure has been followed since 1980.

To become a Bowling member of the Club a person must make application and the person must be either an accredited bowler registered with another bowling club or undertake the procedures as set out below. Further with respect to accredited bowlers the Club requires that they be observed in their playing of the game of bowls prior to admission to the Club.

Procedure for the Admission of Non- Bowlers

  • (i) A person wishing to obtain membership and who has never previously played bowls is required to enrol for tuition with the Club coaches on the Club's indoor green. When that person who, in the opinion of the head coach, has reached the standard of proficiency required to play with accredited bowlers on the indoor green only then is that person issued with a proficiency certificate.
  • (ii) Having achieved the above certificate, if that person then wishes to become a member of either the Tweed Heads Mens Bowls Club or the Tweed Heads Ladies Bowling Club, sub-clubs of the Club then that person shall be required to have further tuition on the outdoor green by coaches of the Club. This second round of coaching is designed to ensure that the said person has the desired level of skill so as to enable him/her to play a game of bowls and understand the basic rules relating to same. A person is then instructed in the rules of etiquette of the game. The Club has issued a book entitled `The Etiquette of Bowls and The Etiquette of Marking in Lawn Bowls'. Having obtained the desired level of proficiency on outdoor greens the prospective member is now eligible to be nominated for membership of either the Mens or Ladies Sub-Club.
  • (iii) Following on from the above, the procedure in place for a person to obtain membership of the Club involves the person being nominated and seconded by a Bowling member on the prescribed form and this being lodged with the Secretary of either the Mens or Ladies Bowls Clubs. These bodies in accordance with their respective constitutions may recommend such a person to [the] Board of the Club for consideration for an interview. The Board of Directors then vote on the issue of inviting the person to attend for interview at a full board meeting. If the vote is in favour of the applicant then the applicant completes an application for membership form and the same is displayed on the notice board for fourteen days. Within this period, members have the ability to lodge an objection against the application. If no objections are lodged then at the next Board Meeting the said application for membership of the Club is the subject of a vote to determine if the member is accepted.
    • - Procedure for obtaining membership of the Club as a Bowling member if the applicant is an accredited bowler.
    • - if a person is already a member of another bowls club and wishes to join Tweed Heads Bowls Club Limited, then such person must satisfy the following criteria:
      • - reside within 27 kilometres of Tweed Heads Bowls Club.
      • - Applicant must be prepared to resign from the previous Club.
      • - Be a registered and financial member of the State Bowling Association of which their prior Club was a member.
  • Having satisfied the above, the applicant must then go through the nomination/ invitation procedure as outlined above at 8.5(iii).
  • Once a person becomes a member of either the Mens or Ladies Bowls Club they are then required to adhere to the respective Club's rules.

9. Communication with Members

9.1 The Club has an internal quarterly magazine - `Rapport' - which is forwarded to the members of the Club

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outlining the principal activities of the Club and future significant events.

10. Club Facilities

10.1 The Club's facilities in 1988 by reference to floor location and access rights by members or visitors were as follows:

  • - Lower Ground Floor - Accessible only by members and guests of members. This area includes:
    • - Members snack bar
    • - Small meeting room and billiard room
    • - Locker room and toilet block
    • - Extended bar room
    • - Cold rooms
  • - Ground Floor of Club and Outdoor area - With the exception of the foyer, only members and staff are allowed access [to] these areas which include:
    • - Foyer entrance
    • - Administrative office and Directors' Board room
    • - Members' meeting room and adjoining bar
    • - Members' viewing area to outside bowling greens
    • - Four full size bowling greens and car parking facilities.
    • - Mezzanine Floor - Access to this area is available to members and visiting bowlers from other Clubs and the facilities comprise:
    • - Full size indoor bowling green which is available for day and night use.
    • - Small bar and sitting area which incorporates some poker machines
  • - Top Floor - This area is used extensively by members and is the principal place where visitors are entertained. It incorporates a number of facilities which cater for the social pursuit of members and visitors to the Club. The top floor houses:
    • - An auditorium which may be used for meetings, showing films and small live shows.
    • - Poker machine room with adjoining bar and sitting area
    • - Dining Room and restaurant.

10.2 The Club's facilities in 1992 by reference to floor location and access rights by members or visitors are as follows:

  • - Lower Ground Floor - Accessible only by members and guests of members. This area includes:
    • - servery kitchen connected by service lift to ground floor and Level 1 kitchen
    • - Function room suitable for birthday parties, weddings or various other members functions - seating 160
    • - members locker rooms male and female
    • - extended bar and cellar
    • - various cold rooms and deep freeze room
    • - various storage rooms
    • - Club laundry
    • - Club staff lounge, eating area, toilets and showers, rest room facilities, plant rooms.
  • - Ground Floor of Club and Outdoor Area - With the exception of the foyer, only members and staff are allowed access to these areas which include:
    • - Foyer entrance
    • - Administrative offices and Directors Board Room, Chairman's office
    • - Male and female meeting rooms and offices
    • - Members and Guests bistro and dining room - seating 120
    • - Sports lounge - members - seating 40
    • - Members bowls lounge - seating 280
    • - Kitchen and servery (morning and afternoon teas for bowlers)
    • - Members viewing area to outdoor bowling greens
    • - Members bottle shop
    • - First aid room
    • - Goods receiving area and loading dock
    • - Four (4) full sized bowling greens, each of eight rinks

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    • - Three (3) car parking areas approximately 350 cars
    • - Undercover carpark for members - sixty cars
    • - Greenkeepers - machinery shed - soil shed - work shop, showers and toilets
    • - Members toilet area (bowlers)
    • - Members shelter area
    • - Carpenters workshop and main- tenance area
    • - Electrical sub-station
    • - Maintenance electrical switch- board room
    • - Emergency generator
    • - Garbage compactor and storage area
  • - Mezzanine Floor - Access to this area is mainly bowlers and visiting bowlers from other Clubs. This area includes:
    • - Full sized indoor bowling green - eight rinks available for day and night use.
    • - Bar and lounge area
    • - poker machine area
    • - match committee and bowls selector's office
    • - Male and female toilets
    • - Storage rooms, bowls equipment etc.
  • - Top Floor - This area is used extensively by members, is also the principal area used by visitors. It incorporates a number of facilities which cater for dining and entertainment of members and guests. The area includes:
    • - Auditorium seating 500, used for small live shows, meetings, bingo
    • - Lounge - can be used for various functions
    • - Poker machine area
    • - Small lounge (seating 60)
    • - A-la-carte restaurant - seating 120
    • - Bistro - seating 200
    • - Bar facilities
    • - Male and female toilets
    • - Storage areas.

11. Bowling Facilities

11.1 Outdoor:

  • - Four (4) full sized 8 rink tift dwarf bowling greens complete with surrounds and gardens.
  • - Players seating around all greens complete with sunshades
  • - Each green has 16 scoreboards, two for each rink. Total 64 in all.
  • - 16 mats and 8 jacks are also required for each green.
  • - Movable aluminium grandstand seating.

11.2 Indoor

  • - 1 (one) full sized 8 rink Greentex carpet synthetic green with spectator seating for approximately 500 people with 16 scoreboards.
  • - Fully air-conditioned area and including special lighting to enable T.V. coverage of championship events.
  • - 16 bowling mats and special imported steel jacks are needed in this facility.

11.3 Outdoor Maintenance

  • - The Club employs 3 full time green keepers and one full time gardener to maintain outdoor bowling facilities. To keep all areas in good playing condition a comprehensive maintenance program is required, particularly during the growing season (September to April) when each green is usually either top dressed, drilled or in some cases completely stripped and re-sown. It is necessary to treat all greens periodically with chemicals of various types and during dry periods, watering is also necessary. Whilst in play, each green has to be cut, mown, rolled and line marked daily.

11.4 Indoor Maintenance

  • - Club cleaning staff are required to regularly vacuum the playing surface and surrounds. A large commercial vacuum cleaner is used for this purpose. Regular maintenance is also required by the electrician on the over 250 lights needed to service this area.

11.5 Members Lockers

  • - Each Bowling member of the Club is provided with a locker big enough to

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    contain bowls equipment and gear necessary for each member to participate. These lockers are situated in two separate rooms for males and females.
  • - Both Mens and Ladies Clubs have their own committee rooms set up with table and chairs to seat 15 to 20 people. In addition they both have a bowls office fully equipped to enable all administration and clerical work to be carried out efficiently. The Mens office and committee room is set up in such a way to make it easily convertible to an efficient and well equipped media room during major events.
  • - There is also a match committee and selectors office or room in which bowls officials are able to view and control pennant games and championship events as well as social matches.
  • - In addition to the foregoing facilities the Club has a fully equipped Board room and Chairman's office and a large administration office area.

11.6 Indoor Green

  • - The indoor complex is used annually for the staging of the Australian Indoor Bowls Championships. The winners of this event go on to represent Australia in the World Championships which are held annually in the United Kingdom.
  • - The complex has also been used extensively to complete major outdoor events which have been disrupted by bad weather. These events consist of Club sponsored events such as the Golden Nugget, Australian Bowls Council Events, the Trans-Tasman Test Match Australia -v- New Zealand, Royal Queensland Bowls Association events and Gold Coast Tweed District events such as the Worlds Biggest Bowls event (in terms of numbers of entries) - the Winter Carnival.
  • - The fact that the Club has the indoor complex was a major factor in the Club being selected to stage the re- introduction of Australia's leading bowls event - the Mazda International from which the T.V. series (`Jack High') is filmed. This series is featured for a period of 20 weeks on National 9 T.V.
  • - In addition to the above, the indoor complex is used extensively for coaching of new bowlers and current bowlers. The Club has approximately 20 qualified coaches who are very active in this area.
  • - New bowlers or visiting bowlers are able to hire bowls and bowls shoes from the indoor bowls office which is staffed during opening hours. The Club has a stock of 110 pairs of shoes and 30 sets of bowls of various sizes to suit all needs.

12. Organisation of the Game of Bowls in the Club

12.1 Lawn Bowls

  • (i) The participation by Bowling members in the game of lawn bowls which is conducted on the Club's outside lawn rinks, is controlled and organised by the Mens Bowls Club and the Ladies Bowling Club through their elected committees.
  • The Committees organise the game of bowls both for social, intra club championship, inter club championships and district and state championships.
  • The Games Director also plays an important role in organising the game of bowls on a day to day basis.
  • (ii) The Club has hosted a number of major state, national and international championships and tournaments in recent years and continues to do so on an ongoing basis as follows:
    • - Golden Nugget Singles - Mens and Ladies (annual)
    • - Australian Indoor Championships (annual)
    • - `Jack High' International (annual)
    • - Gold Coast Tweed District Winter Carnival - Mens (annual)
    • - Inter-District or Association games
    • - Gold Coast Tweed District Winter Carnival - Ladies (annual)
  • (iii)...
  • (iv) The Club has a very high participation rate in the playing of bowls by Bowling members. The Club has a total of 830 Bowling members (530 male and 300 female).
  • (v) Both the Mens Bowls Club and the Ladies Bowling Club submit annual

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    budgets to the Board of the Club for approval. These budgets are the approved allocated funds by the Club for all of the activities and the Committees in the conduct of the game of bowls in the Club.

12.2 Indoor Bowls

  • (i) The Club has a full sized indoor bowls facility. (See paragraph 11.2 for details).
  • (ii) The indoor bowls facility is used for an extensive range of local bowls tournaments.
  • (iii) A number of major indoor tournaments are also conducted on the indoor facility as follows:
    • - Australian Indoor Championships - Singles (annual)
    • - District Selection trials (annual)
    • - Pro-Am prior to Australian Indoor (Bowls Australia)
    • - Pro-Am prior to Winter Carnival (GCTDB Association)
  • (iv) In addition, the indoor bowls facility is used as a `backup' facility when major tournaments are held on the outside greens in case of wet weather. The `Jack High' series in 1992 which was televised had the indoor green as a backup facility.
  • The indoor green is also used as a backup facility when bowls tournaments are held at other Clubs on the Gold Coast.

13. Promotion of the Game of Bowls by the Club

13.1 The Game of bowls is promoted in the Club by the following activities:

  • (i) The conduct of intra and inter club bowls tournaments and championships.
  • (ii) Conduct of major bowls tournaments on a national and international basis including:
    • - Test Match Australia -v- England 1983
    • - introduction of the Pacific Bowls Championship in 1985 and ongoing.
    • - Golden Nugget Championships - since 1986
    • - Bicentennial Tournament 1988
    • - Australian Indoor Championship (annually)
    • - `Jack High' tournament.
  • (iv) The Club will tender at the hearing video recordings of major tournaments as follows, conducted at the Club between 1987-1988:
    • - 1987 Golden Nugget invitation singles
    • - F.A.I. Bicentennial tournament 1988
    • - AGC Indoor Championships 1988
  • These videos will be played to the Tribunal during the hearing as part of the Club's evidence in matter No. QT92/35.

14. Analysis of the Financial Structure of the Club in Relation to the Game of Bowls.


14.2 As at 30th June, 1988 the assets split of the Club was as follows:

-- Current Assets     $10,336,003

-- Fixed Assets        $8,704,800

14.3 Included in the current assets were $9,760,000 of cash investments. Same was expended upon Club extensions and improvements in the various extensions of the Club (see paragraph 4.5).

14.4 Fixed Assets included the following:

-- Buildings and Structural
   Improvements          $4,123,278

-- Land holdings         $2,997,774

-- Poker machines          $539,000

-- Plant and Equipment   $1,044,748

14.5 Buildings and Structural Improvements, the asset value applicable to same is $4,123,278. The top floor of building is the principal area used by visitors. (See paragraph 10.2.) Of total floor space, this area accounts for 34.5%. The remaining 65.5% or $2,700,747 of the assets is applied to bowls/promotion of bowls.

14.6 Land Holdings, the asset value applicable to same is $2,997,774. Total area involved is 25,825 sq. mts. The Clubhouse accounts for 5,143 sq. mts, but included in this measurement is 2,370 sq. mtrs relating to the indoor green. Therefore the Clubhouse area itself is 2,773 sq. mtrs, this in turn represents 10.7% of total land area. The remaining 89.3% or $2,677,012 is

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applied to bowls/promotion of bowls. (See paragraphs 10.2 and 11.1.)

14.7 Plant and Equipment, the asset value applicable to same is $1,044,748. Floor area applied to Bowls/bowls promotion is 65.5% of total area (see paragraph 14.5). Application of that usage component to this asset will result in $684,310 being applicable to bowls/promotion of bowls.

14.8 By combining the amounts applicable to bowls/bowls promotion in the paragraphs listed above (14.5, 14.6 and 14.7), it will be noted that of the total fixed asset value of $8,704,800 there was applied to bowls/ bowls promotion an amount of $6,062,069 or 70%.

14.9 As at 30th July 1992, the assets split of the Club was as follows:

-- Current Assets       $570,721
-- Fixed Assets      $25,016,464

14.10 Fixed Assets included the following:

-- Bldgs & Structural
   Imprvmts          $13,805,395
-- Land Holdings      $4,025,365
-- Poker Machines       $875,650
-- Plant and
   Equipment          $6,310,054

14.11 Buildings and Structural Improvements, the asset value applicable to same is $13,805,395. The top floor of the building is the principal area used by visitors (see paragraph 10.2). Of the total floor space, this area accounts for 30.7%. The remaining 69.3% or $9,567,139 of the asset is applied to bowls/promotion of bowls.

14.12 Land Holdings, the asset value applicable to same is $4,025,365. Total area involved is 27,391 sq. mts. The Clubhouse accounts for 5,143 sq. mtrs but included in this measurement is 2,370 sq. mtrs relating to the indoor green. Therefore, the Clubhouse area itself is 2,773 sq. mtrs, this in turn represents 10.1% of total land area. The remaining 89.9% or $3,618,803 is applied to bowls/promotion of bowls (see paragraphs 10.2 and 11.1).

14.13 Plant and Equipment, the asset value applicable to same is $6,310,054. Floor area applied to bowls/bowls promotion is 69.3% of total area (see paragraph 14.11). Application of that usage component to this asset will result in $4,375,051 being applicable to bowls/bowls promotion.

14.14 By combining the amounts applicable to bowl/bowls promotion in paragraphs listed above (14.11, 14.12 and 14.13), it will be noted that of the total fixed asset value of $25,016,464, an amount of $17,560,993 or 70% was applied to bowls/bowls promotion.''

5. Mr Ohlin was called as a witness and produced the video tape referred to in his affidavit and taken in 1987 on the occasion of a major bowls feature known as the Gold Nugget Championship, including the opening and closing ceremony of the new indoor green, installed at a cost of $2M. This green is said to be in constant use for coaching players as well as for special events such as the Australian Indoor Championship and other large tournaments. The witness informed the Tribunal that the Club is run by a board which has delegated the authority to conduct the game of bowls, in the case of men and mixed bowls to the Men's Bowls Club, and in the case of ladies, to the Ladies' Bowling Club. These committees have the responsibility of organising the social bowls with an obligation to report to the board for approval of their activities. The board assumes responsibility for such sponsored events as the Gold Nugget.

6. The Club's annual reports for the years 1988-1992 were tendered. Taking 1990 as a typical year, it revealed losses from the auditorium ($452,410), dinner bar trading ($27,459), auditorium ($452,000), lawn bowls ($469,943) and indoor bowls ($74,073). The only profits were derived from poker machines - $4,619,387 - and the bar - $136,000. In addition, the Club derived income of some $1.8M from investments. The Club paid some $200,000 in wages to staff directly connected with the Club's bowling activities. On the non- bowling side, it spent some $229,000 for artists' fees, $71,000 for artists' travel, $279,000 for ``wages staff/band/ballet'' and nearly $900,000 on wages relating to the poker machine operation. Members meals are subsidised to the tune of $16,000 p.a.

7. The witness informed the Tribunal that the Club has three floors. Level 1 is restricted to club members and their invited guests, the

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``biggest percentage of Level 2 was again used for members, mainly bowling activities'', containing the indoor green, the administration area as well as the main foyer. Level 3 is mainly used by visitors, containing the entertainment area, the poker machines and the catering facilities. When asked to estimate the areas used predominantly by members as against visitors, the witness thought that approximately one third of the Club premises were dedicated to visitors and two thirds to Club Members qua bowlers. Although the Club admits non-bowling members, charging them an annual membership fee of $10, the Club has some 830 playing members who pay some $15 per annum.

8. The witness readily conceded that in excess of 400,000 visitors come to the Club each year, predominantly to play the poker machines and to enjoy the facilities and entertainment (live shows four days a week, regular bingo etc) which the Club provides. Nor is it denied that the Club goes out of its way to attract such visitors, as evidenced by the fact that it subsidises coach companies ($202,443 in 1990) to lure such visitors to the Club at nominal transport cost to them. The Club also advertises its entertainment in the press. It was also conceded that no more than a mere handful of such visitors might use the bowling greens; indeed, no evidence was led to suggest that non-members can use these facilities. In short, a whole new ``industry'' has sprung up within the Club to organise and tap this new-found lode.

9. Given that the Club derives a fortune from one arm bandits while operating its raison d'être - bowling - at a significant loss, one can therefore readily understand the Commissioner, like Cassius, looking lean and hungry at this pirate's gold.

10. As already noted, the Constitution and Rules of the Club lay down the qualification for membership and provide that the objects of the Club shall be ``to promote and encourage the Game of Lawn Bowls and good fellowship among its members''. Only ordinary members are entitled to vote at annual or other meetings of the Club and are the only class of member entitled to hold office within the Club. Rather quaintly, clause 20, headed GAMBLING, DISPUTES, ETC , provides that: ``No political or religious subject shall be discussed or displayed on Club premises, nor shall gambling, betting on matches, obscene or abusive language or unseemly conduct be allowed''. However, no point was taken during the hearing that poker machines constituted ``gambling'' and/or an activity specifically rendered illegal by the Club's Constitution. The Club issues its own magazine - Rapport - which includes items of news relating to bowling, such as who won what event, words of wisdom, such as that a litre of vinegar is heavier in Winter than in Summer, and that ``when a woman sits at a spinning wheel these days she's probably in a Casino'' (or, one is tempted to suggest, at a bowls club).

11. One Albert Mewett, the Club's Executive Director, swore an affidavit the thrust of which is that lawn and indoor bowls are one of the highest participation sports in Australia, that there are 2,229 bowling clubs in this country catering for some 500,000 bowlers. It seems that the Club ``features one of the finest indoor stadiums in the world and it is here that the Indoor Championships are played out with the winner qualified to play in the world championships in the U.K.''. The Board of the Club has agreed to sponsor the Australian Indoor Championships for a period of three years with a further three year option. Mewett also states that: ``Following the success of the Pacific Championships the Tweed Heads Bowls Club established the Golden Nugget, an international event for men and women which continues as an annual event attracting many of the world's best players and is held at the Tweed Heads Bowls Club''. The deponent was not required for cross-examination.

12. A further affidavit by one Robert Eric Porter, the senior Vice President of the Club, deposed:

``Organisation of the Game of Bowls

The Executive of the Mens Bowls Club prepares a full agenda for the operation of the mens bowls each year, including internal and external tournaments to be held at the Club.

The Mens Bowls Club is allocated use of the Club's external greens on Tuesday afternoon, Wednesday, Friday, Saturday and shares the greens with the Ladies Club on Sunday.

On Wednesdays I estimate that an average of 150 bowlers would attend playing pairs competition. On Fridays I would estimate that an average of 126 bowlers would

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attend playing in triples competitions. On Sundays which are mixed days even larger numbers of bowlers will use the available greens and with 530 male bowlers and approximately 350 female bowlers it is difficult for visitors to the Club to be accommodated on the Club's four external greens.

Although the Club has four external greens, generally one green is spelled at any one time so that generally there are only three greens available.

The Executive arranges the bowls tournaments in conjunction with the Gold Coast Tweed District Bowls Association, listing all tournaments for the Club for the forthcoming year.

Becoming a Bowling Member where the person is already an established Bowler

There is strong demand for persons to become Bowling members of the Club and there is a waiting list of at least three months prior to a person becoming a member.

The procedure for a person to become a Bowling member of the Club is that they must be nominated and seconded by an existing Bowling member of the Club upon the appropriate form which is provided to the Secretary of the Mens Bowls Club. The applicant will already have been observed playing the game of bowls as a visitor to the Club so that the committee can form a view as to the persons suitability as a bowler prior to a recommendation being made to the Board of the Club that the person be admitted as a member.

The Board of the Club then interviews the person who completes an application form in accordance with the requirements of the Registered Clubs Act which includes advertising the person's name on the notice board of the club for a period of not less than two weeks. The Board of the Club has in the past decided not to admit certain persons who have made application for membership of the Club.

A person therefore cannot become a Bowling member of the Club unless that person is a registered bowler either of another Club, or after qualifying through the required training as detailed below with the Tweed Heads Bowls Club.

Prospective new Member - Non Bowler

Where a person who is a non bowler makes application to become a Bowling member of the Club, the person will be referred to the Head Coach who, in conjunction with the Club's existing seven coaches, all of whom are qualified by the Australian Coaching Council will carry out the following procedures.

The prospective new member will undertake training on the Club's indoor bowling green under the guidance of one of the Club's coaches until the person is deemed proficient and is then issued with a proficiency certificate. At this point the person is then entitled to be coached further on the outdoor greens where the person is coached in the rules and the etiquette of the game of bowls.

The Club presently has eight coaches including a head coach who is classified as level two with the other coaches classified as level one. All coaches are qualified and are required to maintain their knowledge so as to retain their coaching qualification. A level 2 coach is required to undertake a TAFE course conducted through the Australian Bowls Council prior to being qualified.

The average time taken for a non bowler to qualify as a bowler is six lessons of two hours on the indoor green and six lessons of one hour on the outdoor greens.''

The affidavit further states that out of some 920 members at the date of swearing his affidavit, 830 were ``bowling members''.

Mr Porter was not required for cross- examination.

13. For the sake of completeness, I propose to include extracts from the affidavit of Eileen Christiansen, the past Secretary of the Ladies Bowling Club, who states, inter alia that:

``Organisation of the Game of Bowls

The Executive of the Ladies Bowling Club prepares a full agenda for the operation of the Ladies Bowls each year, including internal and external tournaments to be held at the Clubs.

The lady bowlers use the greens on Tuesdays and Wednesday mornings and

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Thursdays and have mixed bowls on Sundays.

Membership Procedure

The Executive of the Club together with a number of other selected members are responsible for the admission of ladies as members of the Ladies Bowling Club.

If a person is already a registered bowler she will be required to attend the Club as a visitor to be observed by the Executive in the manner in which that person plays bowls. If the person is a non bowler then that person will be required, prior to making application for membership, to undertake training on both the internal and external greens of the Club.

The prospective member will be coached by the female coaches (five in number) on the skills of the game and the rules and etiquette of the game. Once the person has reached a sufficient standard they are provided with the proficiency certificate and may then be recommended by the Ladies Club to the Board of the Club for admission as a lady Bowling member.

Membership Participation

Presently there are approximately 300 lady bowling members of which 250 are active bowling members playing in some cases, three times per week.

Calendar of Events

The Executive of the Ladies Bowling Club organises the calendar of events both for intra club and inter club tournaments in conjunction with the Gold Coast Tweed District Bowling Association.

Major Events

The Club participates and promotes a number of bowling tournaments including the Mazda International Jack High and in other years other commercially sponsored tournaments.

The Ladies Bowling Club actively assists in the organisation of those tournaments by providing voluntary assistance in the conduct of these tournaments.

Coaches and Umpires

The Ladies Bowling Club has a number of qualified national umpires and coaches, who all act in an honorary capacity to assist in the operation of the game of bowls within the Club. The umpires are required to resit for examination periodically as are the coaches to maintain the level of competence required.''

14. On the whole of the evidence, I am satisfied that the Club, from its very inception, has been - and is - dedicated to a very substantial degree to the promotion of lawn bowls and, latterly, to indoor bowls. True it is that some elements of the Club's activities - leaving the poker machines aside for the moment - are social and cannot, as such, be characterised as ``promoting the athletic game of bowls'', but that is true of virtually all sports clubs. Be that as it may, I am left in no doubt that the Club has, as its main or dominant purpose, the promotion and encouragement of the bowling.

15. That leaves the issue of the poker machines, which earn substantial revenue, only a relatively small proportion of which was, in the years now before me, used for bowling. In the vernacular, the Club has money pouring out of its ears and doesn't know what to do with it all. So what? Provided its main object is the promotion of bowls, the fact that it also produces repetitive strain injury (``RSI'') in some 400,000 non-bowling poker machine players whilst at the same time emptying their pockets seems to me to be utterly irrelevant.

16. What, then, distinguishes this case from Case W114 (Grand United Port Macquarie West Bowling Club v FC of T),
89 ATC 891, which the Commissioner did not take on appeal? As far as I can see, nothing. The facts are indistinguishable save that this Club is richer and more lavish.

17. Mr Hack, of learned counsel for the Commissioner, in a most instructive argument, placed much reliance on the decision in Cronulla (supra). Alas, not even Mr Hack can make bowls without plastic.

18. Cronulla involved a leagues club (``the leagues club'') consisting of some 13,000 members. It provided extensive social activities and entertainment, such as discos and variety shows, as well as a large video screen for viewing television programs, including ``Sky'' television via satellite. It also provided table tennis, snooker tables and other similar sporting facilities. The league club was incorporated in 1957 and had as one of its objects the promotion and development of rugby league football.

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19. Enter the Cronulla-Sutherland District Rugby League Football Club (``the football club'') which was formed as a separate club in 1963 to administer football activities. The football club supports the entry of a team into the first grade competition (organised by the New South Wales Rugby League). The football club depended almost entirely on the leagues club for its funding.

20. In a short judgment, Hill J held at first instance (
Cronulla-Sutherland Leagues Club Limited v FC of T 89 ATC 4936) that it was quite unreal to regard the social activities of the leagues club, with all its entertainment facilities, as being activities engaged in solely for the purpose of providing funds for the football club. In the result, he held that the social activities of the leagues club were not merely concomitant and incidental to the promotion or encouragement of sport; at the very least, they were a collateral or independent purpose. The social activities of the leagues club stamped it as a club established to provide for the social needs of its members rather than for the promotion or encouragement of football. The club was therefore outside the provisions of sec. 23(g)(iii).

21. The facts appearing in the judgment of Hill J are sparse and do not disclose, for example, how many of the 13,000 members were rugby players, nor how many members of the board of directors had a relationship with the sport rugby league football - if any; unlike the Bowls Club in this case, which insists that the management and control of its affairs is vested in a board of directors ``which shall be elected annually by such members who hold bowling membership... All members of the board must, during the whole of their terms as Directors be Bowling members of the Club and must have held such membership for a continuous period of not less than one (1) year prior to their appointment''.

22. On the facts found by Hill J, his Honour concluded that whilst the leagues club's activities were related to football to a significant degree, such matters did not characterise its business activities to such an extent that it could be said that it fell within the exemption in sec 23(g).

23. Mr Hack sought some comfort from that finding, submitting ``that it is not the people who bowl who run the Club. At the top of the hierarchy is a board of directors, and subordinate to the board of directors are the committees or sub-committees who, in fact, operate the activities of bowls''. Having read the Club's literature and the several chairman's reports, I have not been persuaded that at the apex of this Club sits a board of directors whose main activities are other than a concern with bowling.

24. On appeal, a majority (Lockhart and Beaumont JJ) concluded that to qualify for the exemption under sec 23(g), it was not necessary that promotion or encouragement of the sport be the exclusive or sole object or purpose. It would be sufficient that the encouragement or promotion of sport (in the case league football) was the main object or purpose. In other words, a club may still qualify for the exemption, even if it had other objects provided these are merely incidental or ancillary or (semble) even unrelated to the main object; cf
Royal Australasian College of Surgeons v FC of T (1943) 7 ATD 289; (1943) 68 CLR 436 applied.

25. In the result, the majority held that the leagues club's main object was the provision to its members of social amenities and licensed club facilities, not the encouragement or promotion of rugby league football. Consequently, it was not entitled to the exemption. The assistance given to the football club and the facilities provided to it demonstrated that the taxpayer's activities were related to rugby league football, but those circumstances did not stamp the taxpayer's activities with the main purpose of encouraging or promoting rugby league football. The main or predominant object of the taxpayer was to provide for its members, and others, the facilities of a licensed club. This, their Honours concluded, was the true character of the object or purpose for which the leagues club was established, notwithstanding that footballers may have received some incidental benefits in the form of grants made to the football club. On that finding the taxpayer could not succeed.

26. The whole court, including the dissenting member (Foster J) analysed in detail the constituent elements of sec 23(g) and the test to be applied in deciding whether a taxpayer is established for the encouragement or promotion of an athletic game or sport. Although both Mr Hack and Mr Pape, of counsel for the applicant, took me once again carefully through all the relevant authorities, I am satisfied that it would be otiose for me to repeat yet again what their

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Honours did so much more ably in Cronulla than I could hope to do here. Suffice it for my purposes that having found - contrary to Cronulla - that this Club's main object or purpose was, in the relevant years, the encouragement and promotion of the athletic sport of bowls, that is the end of the matter.

27. In the result, I am satisfied on the evidence that what may be termed the ``non- bowling'' activities of the Club - however lucrative - have not overtaken the Club's main object - bowling - so as to attain an independent purpose to the point where the Club's object - the encouragement of the sport of bowls - has become a mere incident, subsumed in poker machines and other entertainment. I am satisfied that the Club's vast reserves have been earmarked for further development of the Club, identified as stages 4, 5 and 6, all involving improvements to the sporting and club facilities.

28. On that finding, however alluring the Club's vast untapped resources may appear to the respondent, once it is shown its main object is the promotion of an athletic sport, sec 23(g) ensures that the gain lies where it falls.

29. For the above reasons, the objection decisions in respect of each of the years under review are set aside and the applicants' objections in respect of those years are allowed in full.

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