ClubPack (current to 19 June 2003)

Appendixes

This document has been archived. It is current only to 19 June 2003.

Appendix 1 - Type of exempt entity

The types of club, society and association that can be exempt from income tax are listed in the table in chapter 1.

This appendix provides the further information that the table says you may need to determine whether your organisation is exempt.

It includes descriptions and examples of the exempt categories, explains the further requirements that you might need to meet, and provides checklists.

The information has been grouped for types of exempt categories with similar characteristics:

Group	Group
Cultural organisations	Health organisations
Community service organisations	Religious organisations
Educational organisations	Resource development organisations
Employment organisations	Scientific organisations
Friendly societies	Sporting organisations

Cultural organisations

You will be exempt from income tax if:

• you are a non-profit society, association or club ('non-profit' is explained)
• you are established for:
• the encouragement of art, literature or music, or
  • musical purposes
  • you are not a charity, and
• you meet at least one of three additional tests.

Types of organisation

The main purpose of the organisation must be the encouragement of art, literature or music, or musical purposes. To work out your main purpose, you should look at your constituent documents, activities, use of funds, and your history. Any other purpose of the organisation must be incidental, ancillary or secondary to the musical purposes or encouragement of art, literature or music.

The words art, literature and music are not defined in the legislation and take their natural meaning. For this exemption, art includes drama and ballet as well as painting, architecture and sculpture. It does not 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, liturgical).

The means of encouraging 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.

A non-profit society is set up to give people access to the writings of John Dennis. 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. A non-profit 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.

If your main purpose is providing social and recreational facilities and activities, you will not be exempt. This is the case even if you also give money to encourage the arts, literature or music.

A non-profit club's main operations are providing dining, gaming and leisure facilities at its clubhouse. It gives a yearly grant to an associated singing club, but is not involved with the singing itself. It is not exempt.

Charity

Organisations that are also charities must meet the special requirements for charities to be income tax exempt. They are explained in CharityPack. This means that if you are one of these types of organisation and also a charity, you should use CharityPack and not this guide. You can get a CharityPack from the ATO.

To work out if you are a charity, go to Appendix 2 - Are you a charity? Cultural organisations that operate for the public benefit to advance the arts or educate the public in the arts are likely to be charities. Organisations will not be charities if they are primarily recreational, for entertainment, or for the benefit of their members.

A non-profit society is set up for study of Henry Lawson's writings. It operates only for subscribing members. The society is not a charity because it is not operated for the public benefit. A non-profit club is set up to provide a venue for jazz musicians to jam. The club is not a charity. It is primarily recreational and for the benefit of its members.

Three tests

There are further conditions these organisations must meet to be exempt from income tax. They must meet at least one of the conditions explained here . Go here to work out if your organisation meets one of the three tests.

Checklist

You will be exempt from income tax if you meet all of the following:

• you are a non-profit society, association or club
• you are established for:
  • the encouragement of art, literature or music, or
  • musical purposes
• you are not a charity, and
• you meet one of the three tests.
  
  

Being exempt from income tax gives you important income tax entitlements:

• you do not need to lodge an income tax return, unless specifically requested, and
• you do not need to notify the ATO of your exemption.

To ensure the correctness of your exemption status, you should review whether you are still exempt at least once per year and at any time when there are major changes in your structure or activities (see the worksheet at appendix 4 ). Despite being income tax exempt, you may still be liable for other taxes (see chapter 3 ).

If your organisation does not meet all the requirements for exemption, you should check the other exemption categories in the table. Organisations that are not exempt are taxable - see chapter 2 .

Community service organisations

You will be exempt from income tax if:

• you are a non-profit society, association or club ('non-profit' is explained)
• you are established for community service purposes (except political or lobbying purposes)
• you are not a charity, and
• you meet at least one of three additional tests.

Type of organisation

The main purpose of the organisation must be community service purposes. To work out your main purpose, you should look at your constituent documents, activities, use of funds, and your history. Any other purpose of the organisation must be incidental, ancillary or secondary to the community service purposes.

Community service purposes are altruistic. That is, community service organisations are established and operated with regard to the well-being and benefit of others.

Community service organisations promote, provide or carry out activities, facilities or projects for the benefit or welfare of the community or any members who have a particular need by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances.

• non-profit child care centres, including those providing long-day care facilities, after school care, and day child care in activity caravans
• associations of Justices of the Peace
• associations of play groups
• traditional service clubs
• community service clubs, and
• pensioner or senior citizens associations.

Organisations that seek to advance the common interests of their members are not altruistic and so cannot be community service organisations. If an organisation's main purpose is lobbying or political, its income will not be exempt.

• clubs which promote public speaking or debating
• clubs which provide a social forum for retired or semi-retired business people, senior public servants and the like
• clubs which provide a social forum for expatriates of a particular country
• pensioner associations which conduct significant political or lobbying activities
• military service unit organisations, and
• social clubs for newcomers to a particular residential area.

Further information on community service organisations is provided in Taxation Determination TD 93/190, available from the ATO.

Charity

If a community service organisation is also a charity, it must meet the special requirements for charities to be income tax exempt. They are explained in CharityPack. This means that if you are a community service organisation and also a charity, you should use CharityPack and not this booklet. You can get a CharityPack from the ATO.

To work out if you are a charity, go to Appendix 2- Are you a charity? Many community service organisations will be charities. Organisations that have the purpose of advancing the common interests of their members are not charities.

Three tests

To be exempt from income tax, a community service organisation must also meet one of the three tests explained here. Go here to work out if your organisation meets one of the three tests.

Checklist

You will be exempt from income tax if you meet all of the following:

• you are a non-profit society, association or club
• you are established for community service purposes (except political or lobbying purposes)
• you are not a charity, and
• you meet one of the three tests.

Being exempt from income tax gives you important income tax entitlements:

• you do not need to lodge an income tax return, unless specifically requested, and
• you do not need to notify the ATO of your exemption.

To ensure the correctness of your exemption status, you should review whether you are still exempt at least once per year and at any time when there are major changes in your structure or activities (see the worksheet at appendix 4 ). Despite being income tax exempt, you may still be liable for other taxes (see chapter 3 ).

If your organisation does not meet all the requirements for exemption, you should check the other exemption categories in the table. Organisations that are not exempt are taxable - see chapter 2 .

Educational organisations

You will be exempt from income tax if:

• you are a public educational institution
• you are not a charity, and
• you meet at least one of the three tests.

Public educational institution

A public educational institution is an institution that is available or open to the public or a section of the public and whose dominant purpose is providing education. Any other purpose of the organisation must be incidental or ancillary to providing public education. Education in this context does not extend to merely providing information or lobbying.

• universities or colleges managed by public bodies
• grammar schools
• primary and secondary schools run by churches or religious bodies, and
• non-profit business colleges.

• colleges run for the profit of the private owners
• associations operated for their members' professional benefit, and
• promotional and lobbying bodies.

Many other organisations connected with education are not public educational institutions. Examples are a parents and friends committee and a scholarship provider. These organisations should check CharityPack to see if they can be exempt as charities.

Charity

A public educational institution that is a charity must meet the special requirements for charities to be income tax exempt. They are explained in CharityPack . If you are both a public educational institution and a charity, you should use CharityPack and not this guide. You can get a CharityPack from the ATO.

To work out if you are a charity, go to Appendix 2 - Are you a charity? Most public educational institutions are likely to be charities.

Three tests

If you work out you are not a charity, you must meet at least one of three tests to be exempt from income tax. Go here to work out if your organisation meets one of the three tests.

Checklist

You will be exempt from income tax if you meet all of the following:

• you are a public educational institution
• you are not a charity, and
• you meet at least one of the three tests.

Being exempt from income tax gives you important income tax entitlements:

• you do not need to lodge an income tax return, unless specifically requested, and
• you do not need to notify the ATO of your exemption.

To ensure the correctness of your exemption status, you should review whether you are still exempt at least once per year and at any time when there are major changes in your structure or activities (see the worksheet at appendix 4 ). Despite being income tax exempt, you may still be liable for other taxes (see chapter 3 ).

If your organisation does not meet all the requirements for exemption, you should check the other exemption categories in the table. Organisations that are not exempt are taxable - see chapter 2 .

Employment organisations

Three types of employment organisations can be exempt:

• trade unions
• employee associations that are registered under a Commonwealth, State or Territory law relating to the settlement of industrial disputes, and
• employer associations that are registered under a Commonwealth, State or Territory law relating to the settlement of industrial disputes.

(An employer association that is not registered cannot qualify as a trade union.)

To be exempt, these three types of organisations, must:

• be located in Australia, and
• pursue their objectives and incur their expenditure principally in Australia.

Limit on exemption

The exemption does not apply to the investment income from superannuation, life assurance and accident and disability insurance business of some registered trade unions and some employee associations.

Friendly societies

An organisation is exempt on some of its income if:

• it is a friendly society
• it is not a friendly society dispensary
• it is non-profit ('non-profit' is explained here), and
• it meets at least one of the three tests.

A friendly society is a body that:

• is registered or incorporated as a friendly society under a law of a State or Territory
• is a friendly society for the purposes of the Life Insurance Act 1995
• is permitted, by a law of a State or Territory, to assume or use the expression 'friendly society', and
• immediately before the date that is the transfer date for the purposes of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No 1) 1999 , was registered or incorporated as a friendly society under a law of a State or Territory.

A friendly society dispensary is an approved pharmacist (within the meaning of Part VII of the National Health Act 1953) that is a friendly society or a body carrying on business for the benefit of members of a friendly society.

Friendly societies offering education funds should consult Taxation Ruling TR 93/39. It explains the circumstances when education funds are carried on for profit or gain of the individual members, such as to deny exemption status.

If a friendly society's sole purpose is the relieving of poverty, it should use CharityPack and not this guide. Such friendly societies will need to be endorsed to be exempt from income tax.

Three tests

To be exempt, the friendly society must meet at least one of the three tests explained here . Go here to work out if your organisation meets one of the three tests.

Checklist

You will be exempt from income tax on some of your income if you meet all of the following:

• you are a friendly society
• you are not a friendly society dispensary
• you are non-profit ('non-profit' is explained here), and
• you meet at least one of the three tests.

Limit on exemption

The exemption does not apply to the friendly society's investment income from superannuation, life assurance and accident and disability insurance business.

Health organisations

A hospital can be exempt from income tax if:

• it is a public hospital, or
• it is carried on by a non-profit society or association ('non-profit' is explained here)

A hospital will be exempt as a hospital if:

• it is not a charity, and
• it meets at least one of three tests.

A hospital is an institution in which patients are received for continuous medical care and treatment for sickness, disease or injury. Providing accommodation is integral to a hospital's care and treatment. Clinics that mainly treat ambulatory patients who return to their homes after each visit are not hospitals. However, day surgeries that provide beds for patients to recover after surgery may be hospitals. Homes to provide nursing care for feeding, cleanliness and the like are not hospitals. However, nursing homes for persons suffering from illness are accepted as hospitals. Hospices for the terminally ill will generally be hospitals. Minor out-patient and nursing care will not prevent an institution being a hospital.

Examples of non-profit hospitals include those run by churches and religious orders.

Charity

If a hospital is also a charity it must meet the special requirements for charities to be income tax exempt. They are explained in CharityPack . This means that, if your organisation is both a hospital and a charity, you should use CharityPack and not this guide. You can get a CharityPack from the ATO.

To work out if you are a charity, go to Appendix 2 - Are you a charity? Many hospitals, including many run by religious organisations, are charities. If your hospital is a public benevolent institution, it is a charity. A hospital is not a charity if it is run only to treat the members of its controlling association or society.

A non-profit hospital is set up by an employer to treat its staff and their families. The hospital is not a charity because it is only for a private group and not for the benefit of the community.

Three tests

The special condition a hospital must meet to be exempt from income tax is that it meets one of the three tests explained .

Go here to work out if your hospital meets one of the three tests.

Checklist

You will be exempt from income tax if you meet all of the following:

• you are
• a public hospital, or
• a hospital that it is carried on by a non-profit society or association ('non-profit' is explained here)
• you are not a charity, and
• you meet at least one of three tests.

Being exempt from income tax gives you important income tax entitlements:

• you do not need to lodge an income tax return, unless specifically requested, and
• you do not need to notify the ATO of your exemption.

To ensure the correctness of your exemption status, you should review whether you are still exempt at least once per year and at any time when there are major changes in your structure or activities (see the worksheet at appendix 4 ). Despite being income tax exempt, you may still be liable for other taxes (see chapter 3 ).

If your organisation does not meet all the requirements for exemption, you should check the other exemption categories in the table. Organisations that are not exempt are taxable - see chapter 2 .

Benefits organisations

Note that non-profit medical, health and hospital benefits organisations registered for the purposes of the National Health Act 1953 are also exempt from income tax.

Religious organisations

You will be exempt from income tax if:

• you are a religious institution
• you are not a charity, and
• you meet at least one of four other conditions.

Religious institution

You will be a religious institution if you are an establishment, organisation or association that is instituted to advance or promote religious purposes.

An institution may have the legal structure of an unincorporated association or a corporation. However, incorporation is not enough, on its own, for an organisation to be an institution. Its activities, size, permanence and recognition will be relevant.

An organisation that is established, controlled and operated by family members and friends would not normally be an institution.

A corporation is set up and controlled by a family. Its object is to spread the Gospel. The only activities are holding assets and arranging for the father of the family to speak at churches on some Sundays. The corporation is not an institution.

An institution will be a religious institution if:

• its objects and activities reflect its character as a body instituted for the promotion of some religious object, and
• the beliefs and practices of the members constitute a religion.

The expression religion is not confined to major religions such as Christianity, Islam, Judaism, but also extends to Buddhism, Taoism, Jehovah Witnesses, the Free Deist Communion of Australia and Scientology. The categories of religion are not closed. Nonetheless, to be a religion there must be:

• belief in a supernatural Being, Thing or Principle, and
• acceptance of canons of conduct which give effect to that belief, but which do not offend against the ordinary laws.

Charity

If a religious institution is also a charity, it must meet the special requirements for charities to be income tax exempt. They are explained in CharityPack . This means that, if you are both a religious institution and a charity, you should use CharityPack and not this guide. You can get a CharityPack from the ATO.

To work out if you are a charity, go to Appendix 2 - Are you a charity? The vast majority of religious institutions are charities. An example of a religious institution that is not a charity could be a closed group that is conducted only for the benefit of its members and not for the public.

A scriptural college was established for descendants of Northern Ireland Protestants who had settled in New South Wales before 1880. The college would not be a charity because it was not established for the public benefit. Those to benefit were selected on the basis of relationship to particular persons. A group of thirteen families formed an association 80 years ago. It solely owns and runs a shrine. Use of the shrine is limited to the members of the families. The association is not a charity because it is not for the public benefit.

If you have worked out that you are not a charity, continue reading.

Four other conditions

There are further conditions a religious institution must meet to be exempt from income tax. The religious institution:

• must meet at least one of the three tests explained here, or
• must be listed by name in the income tax regulations for these purposes, and have a physical presence in Australia but pursue its objectives and incur its expenditure principally outside Australia.

Checklist

You will be exempt from income tax if you meet all of the following:

• you are a religious institution
• you are not a charity, and
• you meet at least one of four other conditions.

Being exempt from income tax gives you important income tax entitlements:

• you do not need to lodge an income tax return, unless specifically requested, and
• you do not need to notify the ATO of your exemption.

To ensure the correctness of your exemption status, you should review whether you are still exempt at least once per year and at any time when there are major changes in your structure or activities (see the worksheet at appendix 4 ). Despite being income tax exempt, you may still be liable for other taxes (see chapter 3 ).

If your organisation does not meet all the requirements for exemption, you should check the other exemption categories in the table. Organisations that are not exempt are taxable - see chapter 2 .

Resource development organisations

A range of resource development organisations can be exempt. The organisations must not be charities, but must be non-profit ('non-profit' is explained here ). They must also be established for the purpose of promoting the development of:

• aviation
• tourism
• agricultural resources of Australia
• aquacultural resources of Australia (for 1999-2000 and later years)
• fishing resources of Australia (for 1999-2000 and later years)
• horticultural resources of Australia
• industrial resources of Australia
• manufacturing resources of Australia
• pastoral resources of Australia, or
• viticultural resources of Australia.

Types of organisation

Aviation, tourism and the various resources have their ordinary meaning. Industrial resources include building, mining, quarrying, shipping and transport, but do not include business and commercial resources such as insurance and services such as surveying.

Pastoral resources include infrastructure, facilities, plant and equipment, personnel, knowledge, expertise and skills.

Promoting development can be by various means, including research, providing facilities, training, improving marketing methods, facilitating cooperation, and the like.

A non-profit association's purpose is to run a tourism information booth. Its volunteers provide brochures and information to tourists and residents about all the tourism opportunities in the district. The association is promoting the development of tourism.

The main purpose of the society, association or club must be promoting the development of the relevant resources. To work out your main purpose, you should look at your constituent documents, activities, use of funds, and your history. Any other purpose of the organisation must be incidental, ancillary or secondary to promoting development of the relevant resources.

If the organisation's main purpose is merely to provide services to its members, it will not be exempt. This is the case even if the services result in better use of resources by those members.

A non-profit association is set up by a group of horticulture businesses. Its purpose is to buy supplies for the members in bulk and undertake joint marketing of their businesses. The association is not promoting the development of horticultural resources.

Charity

If an organisation is also a charity, it must meet the special requirements for charities to be income tax exempt. They are explained in CharityPack . This means that, if you are both one of these organisations and a charity, you should use CharityPack and not this guide. You can get a CharityPack from the ATO.

To work out if you are a charity, go to Appendix 2 - Are you a charity? Many resource development organisations are charities. To be a charity, your dominant purpose must be for the benefit of the community. Any other purposes must be incidental to that purpose.

A community board is set up to market an agricultural product grown by farmers in the district. The board comprises community, grower, government, union and business representatives. The board is not a charity because it provides benefits to particular businesses.

Checklist

You will be exempt from income tax if you meet all of the following:

• you are a non-profit society or association established for the purpose of promoting the development of:
  • aviation
  • tourism
  • agricultural resources of Australia
  • aquacultural resources of Australia (for 1999-2000 and later years)
  • fishing resources of Australia (for 1999-2000 and later years)
  • horticultural resources of Australia
  • industrial resources of Australia
  • manufacturing resources of Australia
  • pastoral resources of Australia, or
  • viticultural resources of Australia, and
  • you are not a charity.

Being exempt from income tax gives you important income tax entitlements:

• you do not need to lodge an income tax return, unless specifically requested, and
• you do not need to notify the ATO of your exemption.

To ensure the correctness of your exemption status, you should review whether you are still exempt at least once per year and at any time when there are major changes in your structure or activities (see the worksheet at appendix 4 ). Despite being income tax exempt, you may still be liable for other taxes (see chapter 3 ).

If your organisation does not meet all the requirements for exemption, you should check the other exemption categories in the table. Organisations that are not exempt are taxable - see chapter 2 .

Scientific organisations

Three types of association, society or club can be exempt from income tax:

• scientific institutions
• non-profit societies, associations or clubs established for the encouragement of science ('non-profit' explained), and
• funds established to enable scientific research to be conducted by or with a public university or public hospital.

Types of organisation

For these purposes, science has its ordinary meaning. It is not limited to the physical sciences and includes the human and applied sciences.

Scientific institutions. These are institutions set up and operated for the dominant purpose of advancing science. Common ways of advancing science include research, exploration and teaching. Disseminating information will often be involved.

Scientific institutions do not include:

• organisations run for the profit of their individual owners or members, and
• professional associations primarily run for the professional or business interests of their members.

An institution is set up to hold conferences and meetings on an aspect of engineering. Any professional advantage the engineer members gain is only through the institution's advancement of science. The institution is a scientific institution. A non-profit organisation is set up to carry out scientific research. All research is carried out under contract, with the client owning the intellectual property and the organisation bound not to disclose any information about the research. The organisation is not a scientific institution.

Scientific associations. The main purpose of the society or association must be the encouragement of science. Recreational or hobby clubs do not qualify. The main purpose must not be promoting the professional or business interests of members.

A non-profit society is set up by frog enthusiasts. Its object is to observe frogs in the district and record changes in their types, numbers and habits. The society is established for the encouragement of science. A non-profit organisation is set up to advance the profession of surveying, raise professional standards and represent the profession to government and industry. The organisation is not a scientific association.

Scientific research funds. The association, society or club must be no more than a fund, and it must have sufficient links with public universities or public hospitals. The fund itself does not conduct the scientific research. It is conducted by the university or hospital or by other bodies in conjunction with them.

The fund may enable the research by various means including providing money or facilities.

A fund's sole object is to provide money to a public university for it to carry out medical research. The investment income of the fund is given to the university under an agreement requiring it to be used only for medical research. The fund can qualify for income tax exemption if it meets the other conditions.

Charity

Scientific institutions and scientific associations that are charities must also meet the special requirements for charities to be income tax exempt. They are explained in CharityPack.

If this applies to you, you should use CharityPack and not this guide. You can get a CharityPack from the ATO.

To work out if you are a charity, go to Appendix 2 - Are you a charity? While most scientific institutions are likely to be charities, a scientific association will not be a charity if it is carried on for the benefit of its members rather than for the community.

Other conditions

Scientific institutions and scientific associations

These organisations must meet at least one of the three tests explained on here . Go here to work out if you meet one of the three tests.

Scientific research funds

If you are one of these organisations, the fund must be applied for the purposes for which it was established. If it is being applied for other purposes, it will not be exempt.

The scientific research fund must also meet at least one of two conditions.

One condition is that the fund is a deductible gift recipient (DGR). DGRs are entitled to receive income tax deductible gifts.

To meet the other condition, the fund must:

• be established to enable the scientific research to be conducted principally in Australia by or in conjunction with the public university or public hospital
• be located in Australia, and
• incur its expenditure principally in Australia.

In working out whether expenditure is principally incurred in Australia, the fund can disregard any distributions it makes of amounts it received as gifts or government grants.

You will be exempt from income tax if you meet all of the following:

• you are:
  • a scientific institution
  • a non-profit society, association or club established for the encouragement of science, or
  • a fund established to enable scientific research to be conducted by or with a public university or public hospital
• you are not a charity, and
• you meet the other conditions for exemption.

Being exempt from income tax gives you important income tax entitlements:

• you do not need to lodge an income tax return, unless specifically requested, and
• you do not need to notify the ATO of your exemption.

To ensure the correctness of your exemption status, you should review whether you are still exempt at least once per year and at any time when there are major changes in your structure or activities (see the worksheet at appendix 4 ). Despite being income tax exempt, you may still be liable for other taxes (see chapter 3 ).

If your organisation does not meet all the requirements for exemption, you should check the other exemption categories in the table. Organisations that are not exempt are taxable - see chapter 2 .

Sporting organisations

You will be exempt from income tax if:

• you are a non-profit society, association or club ('non-profit' explained )
• you are established for the encouragement of:
  • a game or sport, or
  • animal racing
• you are not a charity, and
• you meet at least one of three additional tests.

Type of organisation

The main purpose of the society, association or club must be the encouragement of a game or sport, or animal racing. To work out your main purpose, you should look at your constituent documents, activities, use of funds, and your history. Any other purpose of the organisation must be incidental, ancillary or secondary to encouragement of the game, sport or animal racing. More information on working out your main purpose is given in Taxation Ruling TR 97/22.

If your main purpose is providing social and recreational facilities and activities, you will not be exempt. This is the case even if you also give money to encourage games, sports or animal racing.

A non-profit 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.

Game or sport

The words 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 do not extend to stamp-collecting, keeping and showing pets, making model railways, maintaining vintage cars, and various social and recreational pursuits. More information is given in Taxation Ruling TR 97/22.

Encouragement of the games or sports extends to less direct means, such as research or testing, developing referees, and providing sporting facilities.

A non-profit 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 one of the three tests.

Animal racing

The exemption covers horse racing and trotting, and greyhound racing, but also extends to the racing of other animals.

Charity

If one of these organisations is also a charity, it must meet the special requirements for charities to be income tax exempt. They are explained in CharityPack. This means that, if you are both one of these organisations and a charity, you should use CharityPack and not this guide. You can get a CharityPack from the ATO.

The vast majority of sporting clubs are not charities. You will only be a charity if your encouragement of the game, sport or animal racing is wholly integrated in carrying out purposes that are charitable. Such charitable purposes include advancing education and relieving the condition of the sick or disabled. More information on charities is in Appendix 2 - Are you a charity?

Sporting clubs that are charities include:

• a club wholly integrated in a school or university and furthering its educational aims
• a club that primarily uses a game to help rehabilitate the sick, and
• a club that primarily uses a sport to relieve disability.

Three tests

There are further conditions the organisation must meet to be exempt from income tax.

It must meet at least one of the three tests explained .

Go here to work out if you meet one of the three tests.

You will be exempt from income tax if you meet all of the following:

• you are a non-profit society, association or club
• you are established for the encouragement of:
  • a game or sport, or
  • animal racing
• you are not a charity, and
• you meet one of the three tests.

Being exempt from income tax gives you important income tax entitlements:

• you do not need to lodge an income tax return, unless specifically requested, and
• you do not need to notify the ATO of your exemption.

To ensure the correctness of your exemption status, you should review whether you are still exempt at least once per year and at any time when there are major changes in your structure or activities (see the worksheet at appendix 4 ). Despite being income tax exempt, you may still be liable for other taxes (see chapter 3 ).

If your organisation does not meet all the requirements for exemption, you should check the other exemption categories in the table. Organisations that are not exempt are taxable - see chapter 2 .

Appendix 2 - Are you a charity?

In working out whether the income of your club, society or association is exempt from income tax, you will need to know whether it is a charity.

There are special rules for charities to be exempt from income tax. Those special rules are explained in CharityPack; they are not explained in this guide. A club, society or association that is a charity must be endorsed as an income tax exempt charity (ITEC) to be exempt from income tax. If you qualify for exemption as an ITEC, you cannot claim exemption on the basis that you fall into one of the exemption categories set out in the table of exempt entities in chapter 1 of ClubPack . Charities need to apply to the ATO for endorsement.

This appendix will help you work out if your organisation is a charity. It largely reproduces appendix 1 from CharityPack but has been slightly modified to make it more specific for clubs, societies and associations.

If you work out that your organisation is a charity, you should get a CharityPack from the ATO by contacting the sources listed in this guide.

Are you a charity?

This appendix helps you work out if you are a charity. It provides:

• the characteristics of charities - What is a charity?
• purposes that are not charitable - Organisations that are not charities
• key points to work through - Checklist - am I a charity? and
• lists of descriptions and examples of charities and non-charities - Types of organisation listing.

The checklist helps you relate these elements to your circumstances by drawing together the characteristics, purposes and examples. Before concluding that you are or are not a charity, you should use the checklist.

What is a charity?

A charity is an entity established for altruistic purposes that the law regards as charitable.

The ATO does not set the criteria to decide whether or not an organisation is a charity. The criteria are established in the law by case judgments.

Charitable purposes are the relief of poverty, the relief of the needs of the aged, the relief of sickness or distress, the advancement of religion, the advancement of education and other purposes beneficial to the community.

Charities include most religious institutions, aged persons homes, homeless hostels, organisations relieving the special needs of people with disabilities, and societies that promote the fine arts.

The characteristics of a charity are:

• it is an entity which is also a trust fund or an institution
• it exists for the public benefit or the relief of poverty
• its purposes are charitable within the legal sense of that term
• it is non-profit, and
• its sole or dominant purpose is charitable.

Entity

An entity for these purposes includes a corporation and an unincorporated club, society or association. A part of an entity - like a branch, division or account - is not treated as a charity.

The entity must be a trust fund or an institution.

Trust funds are not discussed in ClubPack . It is envisaged that if a club, society or association covered by ClubPack is a charity, it will not be a trust fund.

Whether a club, society or association has the character of an institution will depend on a range of features including its activities, size, permanence, purposes and recognition. Incorporation is not enough, on its own, to show an organisation is an institution.

A charitable institution would not usually include an organisation that is established, controlled and operated by family members and friends.

The object of an association is to advance charitable education. Its members are two engineers and their families. Funding comes from the members, and investments include leases made to the two engineers. Profits are used to make charitable distributions. The association is not a charitable institution.

Charities are for the public

Charities are altruistic and exist for the benefit of the community or the relief of poverty. If an entity places limits on those who can benefit from its activities, it may still be a charity if those limits are only to enable it to better carry out its charitable purposes.

Charities sometimes limit their activities to a particular segment of the community. Such groups include residents of a particular geographic area, the adherents of a particular religion, or sufferers of a particular disability or condition. If the nature of the benefits provided by an organisation are compatible with such a limit, the purpose can be charitable.

Limiting access to a library to residents of a particular town could be for the public benefit, but limiting the use of a bridge to followers of a particular religion would not.

Charities often limit access so as to better provide their services to the community. Examples can include the enrolment procedures of schools, the membership procedures of a police and citizens youth club, referral policies of medical clinics, and the borrowing rules of libraries. The continuation and efficient administration of a charity can make such limits necessary.

A religious school only educates children who go through its enrolment procedure. If this is merely a means of enabling the school to provide its services to the community, the enrolment process does not disentitle the school from being a charity.

If an entity limits benefits on the basis of family ties, employment with a particular employer or membership of a particular association, it will not be a charity unless its purpose is solely to relieve poverty.

A business association is set up to advance the common interests of its members. It is not a charity because its purpose is to benefit its members and not the public. This is the case even though it funds research.

Charitable purposes

Not all entities which are of benefit to the community are charitable. The entity must be set up for purposes that the law regards as charitable. These purposes are not limited to a finite list. As new community needs arise, particular purposes may be recognised by the courts as charitable. We have provided examples of charities in the listing under the following headings:

• aged persons
• animals
• culture
• defence and public order
• disaster relief
• education
• environment
• health
• indigenous persons
• industry, commerce, agriculture
• locality or neighbourhood
• moral improvement
• people with disabilities
• poverty
• public works and utilities
• religion
• research
• science
• unemployment, and
• young persons.

The listing introduces the characteristics of charities under each heading and gives examples of charities and non-charities.

Charities are non-profit

An entity is not charitable if it is carried on for the purposes of profit or gain to particular persons including its owners or members. This is the case irrespective of the number of owners or members, or whether charitable consequences flow from the entity's activities.

A hospital is operated to distribute dividends to private shareholders. The hospital is not a charity even though it cares for the sick.

Entities can satisfy the non-profit requirement if their constituent or governing documents prevent them from distributing profits or assets for the benefit of particular persons both while they are operating and on winding up. The entity's actions must be consistent with this requirement. This is so for both direct and indirect gains.

A company limited by guarantee with the following clauses in its constitution would meet the non-profit requirement, providing its actions were consistent with them. 'The assets and income of the organisation shall be applied solely in furtherance of the above-mentioned objects and no portion shall be distributed directly or indirectly to the members of the organisation except as bona fide compensation for services rendered or expenses incurred on behalf of the organisation.' 'In the event of the organisation being wound up, any surplus assets remaining after the payment of the organisation's liabilities shall be transferred to another organisation with similar purposes and which is not carried on for the purposes of profit or gain to its individual members.'

A charity can be non-profit and still make a profit. However, any profits it makes must be used for charitable purposes. The profits must not be distributed to owners, members or other private persons.

A charity makes a $40 000 profit for the year. It uses the profit to reduce its debts and provide for next year's charitable activities.

Sole or dominant purpose

The sole or dominant purpose of the entity must be charitable.

If the entity has purposes which, when viewed in isolation would not be charitable, they must be incidental or ancillary to the charitable purpose.

A religious congregation holds occasional sporting activities among members. These activities are designed to advance and foster religion among the group. The religious congregation is a charity. The sporting activities are incidental to its religious purpose.

If an entity has purposes that are not part of or incidental to its charitable purpose, it is not a charity. This is the case even if those purposes are secondary.

An association has been set up to be a social club and to look after injured animals. It is not a charity even though it mainly cares for animals, with lesser attention given to the social club.

The characteristics of each entity will determine whether it is a charity. An entity's governing or constituent documents (constitution, memorandum and articles of association, rules, charter etc) must show that it is a charity. Its activities must also show it is a charity.

A corporation limited by guarantee has the object of operating a volunteer disaster relief service for the public. Its activities are consistent with its object. The corporation is a charity.

Organisations that are not charities

Many community organisations are not charities. An entity is not a charity if:

• it is primarily for sporting, recreational or social purposes, or
• it is primarily for political, lobbying or promotional purposes.

Government departments and instrumentalities carrying out the ordinary functions of government are unlikely to be charities.

Charities are not sporting, recreational or social

Sporting and recreational entities established for sporting or recreational purposes are not charities.

Organisations that are not charities include rowing clubs, football clubs, dancing clubs, bridge clubs, card clubs, athletic clubs, horse racing clubs, model train societies, gem clubs, boating and fishing clubs, snooker centres, boxing clubs, callisthenic clubs, golf clubs, ski clubs, car clubs, scuba-diving clubs and motor-racing clubs.

Entities which are primarily for social or entertainment purposes are not charitable.

Organisations that are not charities include social clubs run by religious institutions, ethnic cultural associations, cinema clubs, nudist clubs, singles clubs, friendship clubs, wine societies and fan clubs.

Sporting, recreational or social activities can be carried out by a charity if they are merely a means used to achieve charitable purposes.

A rehabilitation service organises swimming sessions to help its clients regain full use of their limbs. It is a charity as its swimming activities are a means of carrying out its dominant purpose of helping people recover from their injuries. An organisation has been set up to facilitate sporting programs run by universities in Queensland. The organisation is a charity if the sporting programs are a means of advancing education among the universities' students.

Charities are not political, lobbying or promotional

An entity is not charitable if its dominant purpose is advocating a political party or cause, attempting to change the law or government policy, or merely promoting a particular point of view.

However, if an entity's purpose is otherwise charitable, the presence of political, lobbying or promotional activity that is incidental to the charitable aims will not prevent it being a charity.

An animal shelter's main purpose is looking after sick, stray and unwanted animals. Around budget time it sometimes lobbies politicians for funding. As long as the lobbying remains no more than incidental to the charitable purpose, the animal shelter will continue to be a charity. A group of State-based health charities form a national peak body having the same objects. The activities of the peak body are various means of coordinating and supporting the State charities' activities, including by lobbying. As long as the lobbying is incidental to the charitable health purposes, the peak body can be a charity.

Political parties and organisations promoting political parties or their policies are not charitable.

An institute formed to educate people in the platform of a political party is not a charity.

An entity whose dominant purpose is to change the law or government policies is not charitable. This is so even if the subject matter of the change may be beneficial to the community or is of great concern to the community.

A residents action group is formed to lobby against a proposed rubbish dump near a suburb. It is not a charity.

An entity seeking to maintain existing law or government policy is also considered not charitable.

An entity which aims to promote a particular point of view or endeavours to convince the public of the correctness of such a view is not charitable. This is irrespective of whether the view seeks to change law or government policy, or uses educational means to achieve its aims.

An organisation is set up to convince the public that pornography is a detriment to society. It is not a charity. An organisation has been established to promote a 40 letter alphabet to be used by the community. It believes that the alphabet will result in a great benefit to the community because it will be cheaper and easier to use. The organisation is not a charity.

Governmental

Government departments and instrumentalities are unlikely to be charitable institutions. They are simply carrying on the ordinary activities of a Government department. This is so even if the activities are such that if carried on by private persons they would be charitable.

A State welfare department helps homeless people. The department is not a charity.

However, charities frequently receive government funding. This does not stop them being charities.

A migrant resource centre receives government funding and has a service agreement with a government department. The centre is still a charity despite having been funded by a government department. To be a charity you must:

• be an entity (corporation, unincorporated association, trust or partnership etc)
• be an institution
• be able to demonstrate from your constituent or governing documents and your activities that you are carried on for the public benefit or the relief of poverty
• be non-profit. This means you are not carried on for the profit or gain of your owners, members or other private persons
• not be:
  • carried on for sporting, recreational or social purposes
  • carried on for political, lobbying or promotional purposes, or
  • a government instrumentality carrying out the ordinary functions of government
• from the listing that applies to you (Types of organisation listing) have a sole or dominant purpose:
  • within the characteristics in the Description
  • the same as, or equivalent to, that of any organisation in the Charities - examples , and
  • not the same as, and not equivalent to, any in the Non-charities - examples .

If you are a charity, you will need to know the special income tax arrangements for charities. They are explained in CharityPack which is available from the ATO by phoning 13 24 78 . Charities are not automatically exempt from income tax and must be endorsed by the ATO.

Type of organisation listing

For each group of charities, the following listing gives a description of the characteristics of organisations that are charities. It then gives examples of typical charities and non-charities in alphabetical order. You should check both examples.

These lists are intended to be illustrative of the guidelines and principles set out in this appendix and are not exceptions to them.

The list of examples of charities and non- charities in this appendix is not exhaustive.

Your organisation could fall into more than one group of charity. You should check other groups.

Use the Checklist - am I a charity? to confirm whether you are a charity.

Group	Group
Aged persons	Locality or neighbourhood
Animals	Moral improvement
Culture	People with disabilities
Defence and public order	Poverty
Disaster relief	Public works and utilities
Education	Religion
Environment	Research
Health	Science
Indigenous persons	Unemployment
Industry, commerce, agriculture	Young persons

Aged persons

Description

Non-profit entities that operate for the public benefit to relieve needs arising from old age are charities. Needs can involve accommodation, nursing and health care, security, isolation and loneliness.

Social, recreational and lobbying groups are not charities. Organisations that are primarily for the benefit of members are not charitable.

Charities - examples

• Alzheimer's associations
• arthritis foundations
• community services that provide food, home visits and assistance with shopping for the elderly and infirm
• home maintenance services for the elderly and frail
• respite services
• senior citizen organisations if they are not lobbying or merely social or recreational
• trust funds distributing solely to charities that relieve the needs of the aged

Non-charities examples

• lobbying bodies including lobbying of government on social security benefits and entitlements
• political bodies
• social, sporting and recreational bodies even where the majority of participants are aged people

(Note: some organisations will be charitable where the social, sporting and recreational purpose is ancillary to a charitable purpose of alleviating the needs of the elderly in terms of health, isolation and loneliness. Each case will depend on the circumstances.)

Animals

Description

Non-profit entities that operate for the public benefit to protect, care for, preserve, or study animals, or improve the community's moral feelings towards them, are charities.

Recreational, sporting, lobbying and private bodies are not charities. Organisations that are primarily for the benefit of members are not charitable.

Charities - examples

• animal protection societies
• animal refuges and shelters which help lost, sick or injured animals including organisations that care for unwanted and deserted pets
• cat protection societies involved in caring and finding homes for unwanted kittens and cats and promoting the de-sexing of animals
• endangered species organisations whose purpose is to conserve particular animal species and look after their well-being, for example koala preservation societies
• guide dog associations
• scientific bodies studying animal behaviour and disseminating information to the public
• wildlife hospitals which provide care and sanctuary for injured wildlife
• wildlife protection societies involved in protecting and preserving wildlife and organising wildlife rescues

Non-charities examples

• animal rights bodies that are lobbying in nature
• animal racing organisations , for example horse racing, greyhound racing and pigeon racing
• anti-vivisection societies
• breeders associations that represent the interests of breeders and help members in their breeding activities
• fanciers and owners associations , for example canary clubs and beekeepers associations
• fishing and angling clubs
• funds for particular animals , for example a trust under a will for a deceased person's cat
• lobbying and political bodies

Culture

Description

Non-profit entities that operate for the public benefit to advance the arts or educate the public in the arts are charities.

Recreational, entertainment, lobbying and private bodies are not charities. Organisations that are primarily for the benefit of members are not charities.

Charities - examples

• arts societies which encourage and promote the cultivation and appreciation of the fine arts
• ballet foundations to promote and encourage interest in ballet
• bodies promoting culture and the arts in schools
• choral and orchestral societies
• friends of public museums and art galleries
• opera companies that are non-profit
• public art galleries
• public libraries
• public museums
• trust funds distributing solely to charities that promote the arts

Non-charities - examples

• antique or vintage car clubs
• bridge and other card clubs
• camera clubs
• cinema clubs
• doll clubs
• ethnic social and cultural associations
• historical re-enactment clubs
• professional associations of artists, dancers, musicians, curators, educators in the cultural arts field, and the like
• science fiction clubs
• social clubs and organisations
• stamp-collecting clubs
• trade unions

Defence and public order

Description

Non-profit entities that operate for the public benefit to contribute to the defence of Australia and to help maintain public order are charities.

Social and recreational groups are not charities. Government instrumentalities carrying out the ordinary functions of government are unlikely to be charities.

Charities - examples

• defence research organisations which provide research into aspects of Australian defence and national security
• disabled soldier associations which care for soldiers injured or maimed during service, for example blinded soldiers associations and limbless soldiers associations
• family support organisations which help the families of deceased veterans or police personnel
• historical societies which record and research the history of the armed forces
• social welfare organisations for the benefit of armed forces personnel and their dependants
• volunteer emergency rescue bodies
• veterans organisations if their purpose is to provide welfare services for veterans

Non-charities - examples

• government instrumentalities carrying out the ordinary functions of government
• homing pigeon associations
• pistol and rifle clubs
• social or cultural groups set up by defence force members, police or emergency personnel
• trade unions and employee associations for members of the police force and other emergency personnel

Disaster relief

Description

Non-profit entities that operate for the public benefit to relieve or prevent the distresses caused by natural and man-made catastrophes are charities.

Government instrumentalities are unlikely to be charities.

Charities - examples

• cyclone relief funds
• flood relief funds
• public funds for disaster relief
• public funds relieving necessitous circumstances
• surf lifesaving clubs
• volunteer emergency rescue bodies

Non-charities - examples

• employee associations that protect the industrial interests of employees in the emergency services sector
• funds for private persons who have been in natural or man-made disasters
• government instrumentalities carrying out the ordinary functions of government

Education

Description

Non-profit entities that operate for the public benefit to advance education are charities.

Organisations run for the profit of their owners or the common interests of members (for example professional and business associations) are not charities. Lobbying and political bodies are not charities.

Charities - examples

• bursary and prize funds set up to reward academic excellence that are for a section of the public and not for private interests such as the employees of an employer
• childbirth education bodies
• educational institutes which are not party political and whose purpose is to stimulate debate on cultural, political, economic, moral or philosophical issues
• grammar schools
• health education bodies , for first aid and resuscitation
• historical societies whose purpose is to preserve historical items and educate the public in history
• industry training organisations if they are for the public benefit and not only for particular businesses
• kindergartens
• parents and friends groups of non-government schools
• parents and citizens groups of government schools
• pre-schools
• public universities
• schools and colleges run by religious denominations
• school and university sports organisations where they are integrated with the advancement of education in charitable education institutions
• scholarship trust funds set up to give scholarships for students of a particular school
• Scouts and Guides
• student union bodies if they are integrated in a particular university or college
• Sunday school associations
• trust funds distributing solely to educational charities

Non-charities - examples

• childcare centres
• computer users clubs
• educational trusts for individuals, family members or employees of particular employers
• lobbying bodies which promote a particular view, for example organisations promoting euthanasia, the rights of the unborn child or funding of education
• occupational associations which educate only members
• playgroups
• professional associations for accountants, lawyers, writers, sales people, etc
• public speaking associations
• social clubs and organisations including ex-student associations
• sporting organisations even where they involve school-age children as participants, for example a junior football club
• teachers associations which further the professional interests of teachers or represent their views
• trade unions such as academic staff associations and teachers unions

Environment

Description

Non-profit entities that operate for the public benefit to protect, preserve, care for, and educate the community about the environment are charities.

Lobbying and political bodies are not charities.

Charities - examples

• conservation bodies which help protect the environment provided they are not for lobbying or political purposes
• environmental associations whose purpose is to educate the public about environmental issues
• flora and fauna conservation societies which are not political or lobbying in nature
• friends of botanic gardens
• Landcare groups and other greening organisations involved in tree-planting and revegetation
• marine conservation societies which are involved in the conservation of Australia's coastal areas or coral reefs
• natural resource organisations which educate the public about the wise use of Australian resources such as soil, water and forests
• support groups for national parks

Non-charities - examples

• bushwalking clubs
• government instrumentalities carrying out the ordinary functions of government
• lobbying bodies even if their activities may have consequences for the environment
• outdoor recreation clubs
• political bodies
• resident action groups set up to oppose planning policies detrimental to their lifestyle
• watersports clubs

Health

Description

Non-profit entities that operate for the public benefit to advance health are charities.

Organisations run for the profit of their owners or the common interests of members (for example health funds) are not charities. Lobbying and political bodies are not charities.

Charities - examples

• accommodation services for the relatives of hospital patients
• alcohol and drug education bodies
• Alzheimer's associations
• arthritis foundations
• associations supporting nursing mothers
• auxiliaries of public hospitals
• alcohol drug rehabilitation services
• family planning services and contraception organisations
• family support services providing services such as counselling
• health promotion bodies for example cancer councils, diabetes societies, epilepsy associations, heart and asthma foundations
• medical counselling organisations for psychiatric illnesses and disorders
• medical research bodies
• natural family planning organisations
• nursing services
• patient transport services
• pregnant women support services
• support groups for sufferers of a particular disease or disorder, for example drug dependence or chronic fatigue syndrome
• trust funds distributing to charities that promote health or relieve sickness
• women's shelters

Non-charities - examples

• friendly societies that are not carried on solely for the relief of poverty
• health benefit funds
• hospitals run by mutual societies or for-profit entities
• hospital benefit funds
• medical benefit funds

Indigenous persons

Description

Non-profit entities that operate for the public benefit to advance the condition and welfare of Australian indigenous persons are charities.

Organisations run for the profit of their owners or the common interests of members (for example business associations) are not charities. Lobbying and political bodies are not charities.

Charities - examples

• Aboriginal and Islander health and welfare bodies
• Aboriginal and Islander legal services
• cultural organisations for indigenous art, dance or history
• educational and resource centres for Aborigines and Islanders
• family support services for Aborigines and Islanders
• housing cooperatives for Aborigines and Islanders
• research organisations into Aboriginal and Islander affairs
• youth services for Aborigines and Islanders

Non-charities - examples

• lobbying and political bodies

Industry, commerce, agriculture

Description

Non-profit entities that operate for the public benefit to advance industry, commerce or agriculture are charities.

Organisations run for the profit of their owners or the common interests of members (for example business associations) are not charities. Providing services to, and furthering the private interests of, businesses or agriculturalists are not charitable purposes.

Lobbying and political bodies are not charities.

Charities - examples

• agricultural show societies
• apprenticeship and traineeship organisations if they are for the public benefit and not for particular businesses
• industry training organisations if they are for the public benefit and not for particular businesses
• research organisations that make the benefits of their research publicly available

Non-charities - examples

• aviation clubs
• breeders associations that represent the interests of breeders and help members in their breeding activities
• business associations which exist for the benefit of members
• co-operatives which provide buying and selling services for members
• development or progress associations campaigning on governmental or planning issues
• employer associations
• farmers and growers bodies advancing the business interests of their farmer or grower members
• hobby farmers associations
• industry regulators
• marketing agencies
• professional associations set up to advance a profession or its members, for example associations of accountants, administrators, doctors, engineers, surveyors, lawyers, secretaries and executives
• retailer or seller associations promoting or marketing businesses and their products
• trade unions

Locality or neighbourhood

Description

Non-profit entities that operate for the public benefit to provide charitable benefits for a particular town, city or region are charities.

Organisations will not be charities simply because they operate in a particular region. For example, a social club for the residents of a particular suburb is not a charity.

Charities - examples

• accommodation providers for the needy
• citizens advice bureaus
• community information and referral services which make people aware of rights and responsibilities and the services and facilities available to them
• community justice and mediation centres which provide informal dispute resolution services
• crisis accommodation services
• family support services providing services such as counselling
• health information organisations which collect and disseminate health information
• historical societies whose purpose is to preserve historical items and stimulate interest in history
• information, translating and interpreting services for migrants
• marriage counselling organisations
• migrant resource centres
• multiple birth organisations
• neighbourhood centres
• public radio stations
• relationships counselling organisations
• surf lifesaving clubs
• telephone crisis counselling services
• women's shelters
• associations supporting the work of the United Nations

Non-charities - examples

• expatriate organisations providing a social forum for people from a particular country
• lobbying groups
• political parties
• republican or monarchist organisations
• recreational clubs promoting sporting or recreational activities in a region
• resident action groups lobbying on development or planning issues
• social clubs for newcomers to a particular residential area
• traditional service clubs

Moral improvement

Description

Non-profit entities that operate for the public benefit to advance moral improvement in society are charities.

Lobbying and political bodies are not charities.

Charities - examples

• alcohol and drug education bodies
• community justice and mediation centres which provide informal dispute resolution services
• ethical societies
• marriage counselling organisations
• relationships counselling organisations
• road safety organisations which educate on dangers of drink-driving, fatigue or dangers of speeding
• temperance societies
• associations supporting the work of the United Nations

Non-charities - examples

• lobbying and political bodies on issues such as morals, animals, the environment etc.
• fraternal associations

People with disabilities

Description

Non-profit entities that operate for the public benefit to relieve needs arising from physical or mental disability are charities.

Organisations catering for people with disabilities, but not for the relief of their special needs, (such as purely social or recreational bodies) are not charities. Lobbying and political bodies are not charities.

Charities - examples

• Braille libraries
• carer support services
• community organisations that provide food, home visits and assistance with shopping for people with disabilities
• disability resource centres
• disability employment services
• guide dog associations
• information support services for people with disabilities and their carers
• intellectually handicapped associations
• respite care services
• sheltered workshops
• spastic societies
• support organisations for people with particular disabilities, for example autism, cerebral palsy, Down's syndrome, hearing or sight impairment, and paraplegia
• toy libraries for the handicapped
• trust funds distributing solely to charities that relieve disability

Non-charities - examples

• lobbying bodies

Poverty

Description

Non-profit entities that operate solely to relieve poverty are charities.

Charities - examples

• accommodation providers for the needy
• community services that provide food to the elderly and infirm
• crisis accommodation services
• hostels for the homeless
• overseas aid organisations
• prisoners aid associations
• refugee relief bodies
• soup kitchens
• trust funds distributing solely to charities that relieve poverty

Non-charities - examples

• lobbying and political bodies

Public works and utilities

Description

Non-profit entities that operate for the public benefit by providing socially necessary facilities for use by the community are charities.

Government instrumentalities carrying out the ordinary functions of government are unlikely to be charities.

Charities - examples

• botanic gardens
• halls provided for public use
• law reporting councils
• public art galleries
• public libraries
• public museums
• observatories
• trusts for places of historic interest
• providers of public recreational facilities, such as sporting fields and public parks
• public radio stations
• showground societies

Non-charities - examples

• fee-for-service providers of normal amenities such as cinemas and shops
• government instrumentalities carrying out the ordinary functions of government

Religion

Description

Non-profit entities that operate for the public benefit to advance religion in a direct and immediate sense are charities.

Religion involves belief in a supernatural being, thing or principle and acceptance of canons of conduct which give effect to that belief.

Charities - examples

• Bible colleges
• Bible societies distributing religious literature
• building funds for the construction, maintenance or furnishing of church buildings, mosques, synagogues etc
• church choirs
• churches and other religious congregations
• clergy funds to maintain priests, pastors, ministers of religion, students for the ministry etc
• institutions of missionaries
• religious instruction funds for teaching religion in schools
• religious orders but not orders which do not act for the public benefit
• religious retreat bodies for lay persons
• seminaries
• Sunday school associations

Non-charities - examples

• family companies controlled by family members and friends, even where they practice religion
• for-profit entities that sell religious books, artefacts and other materials
• fraternal associations
• lobbying bodies , for example groups applying pressure on church governance issues
• self-betterment groups which are designed to enhance personal success
• social clubs for the followers of a particular religion

Research

Description

Non-profit entities that operate for the public benefit by carrying out research are charities. The subject matter of the research must be useful to the community (for example agriculture, education, health, indigenous culture, public administration or water) and the results must be made publicly available.

Lobbying bodies that carry out research to promote their aims are not charities.

Non-charities - examples

• business research bodies if the research is primarily for particular businesses or groups of businesses
• lobbying bodies whose research is only a means for their lobbying aims

Science

Description

Non-profit entities that operate for the public benefit by advancing science are charities.

Professional associations carried on for the benefit of a profession or its members (such as engineers, doctors, or surveyors) and other organisations run for the benefit of their members are not charities. Hobby groups are not charities.

Charities - examples

• archaeological societies
• astronomical societies that are not hobby groups
• botanical societies
• geographical societies
• herpetological societies that are not hobby groups
• scientific research organisations

Non-charities - examples

• business associations
• employer associations
• industry regulators
• professional associations
• trade unions

Unemployment

Description

Non-profit entities that operate for the public benefit to relieve needs arising from unemployment are charities.

Organisations run for the profit of their owners or the common interests of members are not charities. Lobbying and political bodies are not charities.

Charities - examples

• apprenticeship or traineeship organisations if they are for the public benefit and not for particular businesses
• vocational guidance counselling bodies that are non-profit
• disabled persons employment services
• prisoner employment services for recently released prisoners
• training organisations if they are non-profit and operate for the public benefit

Non-charities - examples

• commercial enterprise entities are not charities merely because they take on unemployed people
• employers will not be charities merely because they provide employment opportunities for disadvantaged people
• recruitment organisations for employers

Young persons

Description

Non-profit entities that operate for the public benefit to assist, educate and develop young people are charities.

Sporting, social and recreational groups are not charities.

Charities - examples

• child abuse associations which exist to prevent cruelty to, or exploitation of, children and are not political or lobbying in nature
• children's disease organisations , such as asthma foundations and cancer foundations
• child health associations
• children's disability organisations which provide services and information to carers of children with disabilities
• information services for young people providing advice and support on a range of issues such as health and accommodation
• youth development programs , for example Scouts, Brownies and Guides
• youth orchestras
• youth leadership associations
• youth suicide organisations

Non-charities - examples

• childcare centres
• playgroups
• sporting organisations for the young, for example cricket and junior football.

Appendix 3 - List of definitions

Australian Business Number (ABN)

The Australian Business Number is the new identifier for your dealings with the ATO and for future dealings with other departments and agencies.

Business Activity Statement

This is the single form you use to account for FBT instalments, GST and some other taxes at the end of each tax period under The New Tax System. Organisations not registered for GST will use an Instalment Activity Statement to report their entitlements and obligations.

Charity

A charity is an institution or fund established for a charitable purpose. Charitable purposes are those which the law regards as charitable. The term 'charitable' has a technical legal meaning which is different from its everyday meaning. Charitable purposes are:

• the relief of poverty or sickness or the needs of the aged
• the advancement of education
• the advancement of religion, and
• other purposes beneficial to the community.

Deductible gift recipient (DGR)

A DGR is an entity that is entitled to receive income tax deductible gifts. All DGRs have to be endorsed, unless they are named specifically in the income tax law. There are two types of DGR endorsement. One is for entities that are DGRs in their own right. The other is for an entity that is a DGR only in relation to a fund, authority or institution that it operates. For the second type, only gifts to the fund, authority or institution are tax deductible.

Entity

An entity is an individual (for example a sole trader), a body corporate (a company), a corporation sole (an ongoing paid office, for example a bishopric), a body politic, a partnership, an unincorporated association or body of persons, a trust, or a superannuation fund.

Fringe benefits tax (FBT)

FBT is a tax payable by employers who provide fringe benefits to their employees or associates of their employees.

Goods and services tax (GST)

GST is a broad-based tax of 10 per cent on the supply of most goods, services and anything else consumed in Australia and the importation of goods into Australia.

GST- free

If a supply is GST- free you do not include GST on the supply, but you are entitled to input tax credits for anything acquired or imported for use in your activities.

Income tax exempt charity (ITEC)

An ITEC is a charity that has been endorsed by the ATO as exempt from income tax.

Input tax credits

When you pay GST on any taxable supplies you purchase or acquire for use in your activities, you can claim these amounts (called input tax credits) back from the ATO.

Non-profit

An organisation is non-profit for determining income tax exempt status 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 ATO accepts an organisation as non- profit if its constitution or governing documents prohibit distribution of profits or gains to individual members and its actions are consistent with the prohibition.

Non-profit company

A non-profit company for determining rates of income tax and whether to lodge income tax returns is:

• a company that is not carried on for the purposes of profit or gain to its individual members and is, by the terms of the company's constituent documents, prohibited from making any distribution, whether in money, property or otherwise, to its members, or
• a friendly society dispensary.

Non-profit sub-entity

Certain non-profit organisations, with independent branches (units), have the option of treating their units as if they were separate entities for GST purposes and not part of the main organisation.

Pay As You Go (PAYG) instalments

PAYG instalments replaces provisional tax and company and superannuation fund instalments tax. Under PAYG instalments, taxpayers who are notified by the ATO of an instalment rate will be required to pay their own income tax by regular self-assessed instalments.

Pay As You Go (PAYG) withholding

PAYG withholding requires an entity to withhold an amount if it makes certain listed payments including salary, wages, commission, bonuses or allowances to an employee, directors' fees, payments for a supply (goods or services) to another business which does not quote an ABN, and certain dividend, interest and royalty payments.

Supplies

Supplies include the goods and services you sell as part of your activities. Not all supplies are taxable supplies.

Taxable supply

The term is widely defined to include most supplies (goods, services and anything else) you make. A supply is not a taxable supply if it is GST- free or input taxed.

Appendix 4 - Worksheet - working out your organisation's income tax status

This worksheet has been prepared to help organisations work out their income tax status. Do not write on the original worksheet - keep it as a template so that you can make copies whenever you carry out a self-review.

You should use this worksheet whenever you want to check your income tax status. The ATO recommends that you review the status of your organisation each year. You should also review when there has been a major change in structure or activities. It is the organisation's responsibility to ensure that any changes which may alter its status are considered at the time that the changes become evident.

Who should use this worksheet

Clubs, societies and associations should use this worksheet. It is not to be used by charities, friendly societies, employee associations, employer associations, trade unions, or health, hospital or medical benefits organisations. Charities should use CharityPack which also includes a worksheet. Friendly societies should refer to here in the ClubPack , and the employment organisations here .

What you will need

• a copy of ClubPack (and the latest ClubPack Updater )
• your constituent or governing documents (for example, constitution, rules, memorandum and articles of association), and
• information about your organisation's activities, finances, plans, advertisements and history.

Once you have worked out your income tax status, you do not need to apply to the Australian Tax Office (ATO) to have it confirmed. When you have completed this worksheet, do not send it to the ATO. Keep it with the records of your organisation. It will show why and how you arrived at the decision of your organisation's income tax status and help future office bearers.

1. Full name of the organisation

2. Australian Business Number (ABN) (if held)

3. Period of review

To

4. Reason for review

Change in activity

Annual review

Other - please specify

-------------------

CHARITY

5. Is your ABN still current?

Yes

Do not continue with this worksheet. You should use CharityPack , available from the ATO. There is an endorsement process for charities to be exempt from income tax. Your entity may be eligible for endorsement as an income tax exempt charity (ITEC). CharityPack explains conditions attached to obtaining ITEC endorsement.

No

Go to question 6.

An explanation of what is a charity is explained in appendix 2 of ClubPack .

A charity is an organisation whose dominant purpose is the carrying on of charitable purposes. Charity has a legal meaning for taxation purposes which differs from how it is used in ordinary language. Charitable purposes fall into several broad categories:

• the relief of poverty, sickness and the needs of the aged
• the advancement of education
• the advancement of religion, or
• other purposes beneficial to the community.

NOTES: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Exempt Organisation

6. Does your organisation fall within one of the categories of exempt organisation listed below?

Yes

Go to question 7.

No

The entity is not income tax exempt. Go to question 8.

The following types of organisations can be exempt from income tax:

Cultural organisations

• art - a non-profit society, association or club established for the encouragement of art
• literature - a non-profit society, association or club established for the encouragement of literature
• music - a non-profit society, association or club established for the encouragement of music
• musical purposes - a non-profit society, association or club established for musical purposes

Community service organisations

• community service - a non-profit society, association or club established for community service purposes (except political or lobbying purposes)

Educational organisations

• public educational institution

Health organisations

• public hospital
• non-profit hospital - hospital carried on by a non-profit society or association

Religious organisations

• religious institution

Resource development organisations

• agricultural resources - a non-profit society or association established for the purpose of promoting the development of Australian agricultural resources
• aquacultural resources - a non-profit society or association established for the purpose of promoting the development of Australian aquacultural resources (for the year 1999-2000 and later years)
• aviation - a non-profit society or association established for the purpose of promoting the development of aviation
• fishing resources - a non-profit society or association established for the purpose of promoting the development of Australian fishing resources (for the year 1999-2000 and later years)
• horticultural resources - a non-profit society or association established for the purpose of promoting the development of Australian horticultural resources
• industrial resources - a non-profit society or association established for the purpose of promoting the development of Australian industrial resources
• manufacturing resources - a non-profit society or association established for the purpose of promoting the development of Australian manufacturing resources
• pastoral resources - a non-profit society or association established for the purpose of promoting the development of Australian pastoral resources
• tourism - a non-profit society or association established for the purpose of promoting the development of tourism
• viticultural resources - a non-profit society or association established for the purpose of promoting the development of Australian viticultural resources

Science organisations

• scientific institution
• science association - a non-profit society, association or club established for the encouragement of science
• scientific research fund - a fund established to enable scientific research to be conducted by, or in conjunction with, a public university or public hospital

Sports organisations

• animal racing - a non-profit society, association or club established for the encouragement of animal racing
• game or sport - a non-profit society, association or club established for the encouragement of a game or sport

7. Does your organisation meet all the conditions for exemption as specified in the relevant part of ClubPack ?

Yes

Your organisation is income tax exempt. Go to the end of the worksheet.

No

Your organisation is not income tax exempt. Go to question 8.

The table in chapter 1 of ClubPack tells you where to find more information about the categories of exempt organisations listed in question 6. Read this extra information for the category that you think applies to your organisation. This information is necessary for working out whether your organisation is exempt from income tax.

You will need your constituent or governing documents and information about your activities, finances, plans, advertisements and history.

NOTES: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Non-Profit Company

8 Is your organisation a company that meets both the following requirements?

• it is not carried on for the purposes of profit or gain to its individual members, and
• its constituent documents prohibit it from making any distribution, whether in money, property or otherwise, to its members

Yes

Your organisation is a non-profit company for income tax purposes. This affects whether you need to lodge income tax returns and the rate of tax: see chapter 2 of ClubPack .

No

The entity is not a non-profit company. It must lodge income tax returns.

The requirements to be a non-profit company for income tax purposes are explained further here .

NOTES: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Once you have completed the worksheet you should:

• sign it off and keep it with your organisation's other records,
• make an entry in the log at the back of ClubPack showing you have performed the review.

Name of person conducting review

Position held

Signature

Date

Approval by Board/Committee

Appendix 5 - Log of reviews

Record your organisation's key information in the table below:

Record of key information:

Name of organisation
Australian Business Number (ABN)
Tax File Number (TFN)

We recommend you make an entry in the log below each time you conduct a review of your organisation's income tax status.

A worksheet has been provided to assist you with these reviews - see Appendix 4 - Worksheet - working out your organisation's income tax status.

Period reviewed		Income tax status Exempt Non-profit company Other taxable company	Person conducting review	Position held	Signature	Date
Start date	End date

Need more information?

If you would like to find out more about clubs, societies and associations and The New Tax System:

• phone the business Tax Reform Infoline on 13 24 78
• download information from our web site at www.taxreform.ato.gov.au
• obtain A Fax From Tax on 13 28 60 , or
• write to us at PO Box 9935 in your capital city.

If you do not speak English and need help from the ATO, phone the Translating and Interpreting Service (TIS) on 13 14 50 .

People with a hearing or speech impairment can phone the Telephone Typewriter Service on 1300 130 478 .

ATO references:
NO NAT 13727