Edited version of your written advice

Authorisation Number: 1051216044671

Date of Advice: 2 June 2017

Ruling

Subject: Income Tax Exemption

Question 1

Will the entity be exempt from income tax under section 50-1 of the Income Tax Assessment Act 1997 by virtue of being an association for the encouragement of a game or sport under section 50-45 of the Income Tax Assessment Act 1997?

Answer

No

Question 2

Are membership subscriptions received by the entity assessable income under section 6-5 of the Income Tax Assessment Act 1997?

Answer

No

Question 3

Are the amounts received from Entity A and Entity B assessable under section 6-5 of the Income Tax Assessment Act 1997?

Answer

Yes

Question 4

Are the amounts received from Entity C, Entity D and Entity E assessable under section 6-5 of the Income Tax Assessment Act 1997?

Answer

No

Question 5

In respect of the specified amounts received by the Entity, what expenses are deductible (either fully or apportioned) under section 8-1 of Income Tax Assessment Act 1997?

Answer

The extents to which the expenses incurred by the entity are fully deductible or apportioned are set out in the reasons for decision.

This ruling applies for the following periods:

Year ending 30 June 2016

The scheme commences on:

1 July 2013

Relevant facts and circumstances

● The Entity is a company limited by guarantee

● The Entity was incorporated in Australia.

● The Entity awards a sporting competition to a particular association (host entity) at various locations across the world. The host entity is responsible for actual delivery of the competition under the general oversight of the Entity, with specific assistance as appropriate on a case by case basis.

● The Entity's decisions are made by the directors of the Board. During 20XX-YY there were no Board meetings held in Australia. The majority of directors of the Board reside outside Australia

● During the 20XX-YY no competitions were held in Australia.

● The members of the Entity are sports association from various countries.

● The entity has a verbal understanding with the Australia member organisation to provide human and equipment resources for the conduct of accounting/administration activities of the entity. The personnel are paid for by the member but located in the applicant entity's office.

● The Entity provides monetary assistance to the member organisations to participate at competitions across a region in the world.

● APG derives funds principally from sources outside Australia. Funds sourced from within Australia relate to membership subscriptions of the Australian member.

● The Entity's Receipts in 2016

XX,000 Euro - Entity A

A sponsorship agreement between Entity A and the Entity grants Entity, the right to advertise and promote its product at sporting competitions

In consideration for the rights granted under the agreement Entity A pays an annual fee of XX,000 Euros.

XX,000 USD - Entity B

There is a sponsorship agreement between Entity B and the Entity at a particular competition.

Entity B pays XX,000 USD to the Entity for supporter privileges such as advertising on on-site facilities and in event programs.

XX,000 AUD - Entity C

Entity C and a Telecasting Organisation (Telecasting) agreed by memorandum to sponsor a competition. The Entity is not a party to the agreement.

Telecasting donated a certain amount of money to Entity for the development of the sport in a specific world region in the year the competition is held. In the agreement between Entity C and Telecasting it is acknowledged that the Entity C may donate money to the Entity. An amount of $XX,000 AUD was paid from Entity C to the Entity for that purpose.

XX,000 GBP Entity D

The Entity applied for XX,000 English Pounds from Entity D to support teams playing in the a competition in 20XX. The XX,000 English Pounds were allocated to all participating teams.

X0,000 AUD Entity E

The Entity invoiced the Entity E for $X0,000 (AUD). The amount was paid by Entity E to promote the sport in a region in the world. The invoicing process was adopted as a convenient mode for requesting financial assistance in pursuing the object of promoting the sport in a region in the world.

Assumption(s)

None

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 50-45

Income Tax Assessment Act 1997 Section 50-70

Income Tax Assessment Act 1997 Section 59-35

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 8-1

ATO view documents

Taxation Determination TD 93/194 income tax: how should a licensed club apportion expenses when calculating its taxable income?

'Mutuality and taxable income' QC 23099 on the ATO's website: ato.gov.au.

Other references (non ATO view)

Scott v FCT (1966) 117 CLR 514)

Moorhouse v Dooland (1955) CH 284)

Roberts and Smith v FC of T 92 ATC at 4386, ATR at 501;

Lunney and Anor v FC of T (1958) 11 ATD 404, (1978-1958) 100 CLR 478

Fletcher and Ors v FC of T 91 ATC 4950, (1991) 22 ATR 613)

Charles Moore and Co (WA) Pty Ltd v FC of T (1956) 95 CLR 344,

FC of T v DP Smith (1981) 147 CLR 578

Ronpibon Tin NL v FC of T (1949) 78 CLR 47)

Tweed Heads Bowls Club v FC of T 92 ATC 2087

AAT Case 8267 (1992) 24 ATR 1068

Case X25 90 ATC 251; (1990) 21 ATR 3257

Douglas v Federal Commissioner of Taxation 36 ATR 532; (1997) 77 FCR 112; 97 ATC 4722

Pro-campo Ltd. v. Commr of Land Tax (NSW) 81 ATC 4270; (1981) 12 ATR 26

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 50-45

Income Tax Assessment Act 1997 Section 50-70

Income Tax Assessment Act 1997 Section 50-75

Income Tax Assessment Act 1997 Section 59-35

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Question 1

Will the Entity be exempt from income tax under section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) by virtue of being an association for the encouragement of a game or sport under section 50-45 of the ITAA 1997?

Summary

The Entity does not satisfy the conditions to have income tax exempt status as a society, association or club established for the encouragement of a game or sport.

Detailed reasoning

Section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states:

'The total *ordinary income and *statutory income of the entities covered by the following tables is exempt from income tax. In some cases, the exemption is subject to special conditions.'

(* as defined in section 995-1 of the ITAA 1997)

The tables referred to in section 50-1 of the ITAA 1997 are contained in sections 50-5 to 50-45 of the ITAA 1997. A society, association or club established for the encouragement of a game or sport is listed at item 9.1 (c) in the table in section 50-45 of the ITAA 1997. The society, association or club must meet the special condition detailed in section 50-70 of the ITAA 1997.

An entity is therefore exempt from income tax as a society, association or club established for the encouragement of a game or sport if it:

● is a society, association or club,

● is established for the encouragement of a game or sport, and

● satisfies the special conditions.

Society, association or club

The term 'society, association or club' is not defined in the ITAA 1997. The term is therefore construed according to the ordinary meaning of the words.

In Douglas v Federal Commissioner of Taxation 36 ATR 532; (1997) 77 FCR 112; 97 ATC 4722 reference was made by the court to the definitions contained in the Concise Oxford Dictionary for each of these terms. 'Society, association or club' was accepted by the court as referring to a voluntary organisation having members associated together for a common or shared purpose.

In Pro-campo Ltd. v. Commr of Land Tax (NSW) 81 ATC 4270; (1981) 12 ATR 26 the court considered the meaning of 'society, club or association'. The court stated at 4279:

In Theosophical Foundation Pty Ltd v. Commr of Land Tax (NSW) [1966] 67 SR (NSW)…Sugerman JA stated at 82:

"A society, in the relevant sense, is a number of persons associated together by some common interest or purpose, united by a common vow, holding the same belief or opinion, following the same trade or profession, etc; an association'…"

The meaning of "society" as the Oxford English Dictionary definition shows can be the equivalent of "association" and I do not think that any relevant distinction in nature exists between the two. It merely seems to have happened that some organizations are called "associations", others are called "societies" but no meaningful difference can be detected between the two…Although clubs can in some respects and in some instances be seen to be distinguishable by reason of their purposes from societies or associations, they nevertheless fall squarely within the dictionary definition of "society" set out above. In short the three words are describing bodies made up of groups of persons who have come together to implement common purposes and objects…

The members of the Entity voluntarily associate together for a common purpose and common interest. The Entity has directors and a constitution. The Entity is an 'association, society or club'.

Established for the encouragement of a game or sport

Taxation Ruling TR 97/22 Income tax: exempt sporting clubs describes the circumstances under which a society, association or club is considered to be established for the encouragement of a game or sport.

Game or sport

'Game' and 'sport' are not defined in the ITAA 1997 and are therefore given their ordinary meaning. Paragraph 38 of TR 97/22 provides a non-exhaustive list of activities that are considered a 'sport' for the purposes of section 50-45 of the ITAA 1997.

The constituent documents of the entity reference its association with a sport namely, to foster and develop a specific sport.

It is accepted that the entity is an organisation associated with a game or sport.

Encouragement

A society, association or club will only be exempt from income tax if it has as a main purpose the encouragement of a game or sport. Encouragement can occur directly or indirectly.

TR 97/22 details features considered to be persuasive of supporting a conclusion that the main purpose of a club is to encourage a game or sport.

Paragraph 15 of TR 97/22 describes highly persuasive features which are present when a club is for the encouragement a game or sport:

● the club conducts activities in the relevant year that are directly related to the game or sport.;

● the sporting activities encouraged by the club are extensive;

● the club uses a significant proportion of its surplus funds in encouraging the game or sport; and

● the club's constituent documents emphasise that the club's main purpose is to encourage a game or sport and the club operates in accordance with those documents.

TR 97/22 also lists other features considered relevant at paragraph 16:

● a high level of participation by members in the game or sport;

● the members of the committee, or persons who control the direction, of the club are predominantly participants in or concerned with the encouragement of the game or sport (as distinct from day to day management of the club);

● voting rights in the club vest only in members involved in encouraging the game or sport, whether by personal participation or by encouraging participation by others; and

● the club promotes itself to patrons and the public as one encouraging the game or sport, and its advertisements and publicity emphasise the game or sporting facilities provided.

The Entity conducts a significant number of competitions. It decides which sports association will host the relevant competition. The host association is responsible for the delivery of the competition but entity is general overseer and provides specific assistance on a case by case basis.

The objects and activities in the constitution are related to the promotion and development of the sport. It is accepted that the entity is established for the encouragement of a game or sport.

Special conditions

Section 50-70 of the ITAA 1997 states that an entity covered by item 9.1 is not exempt from income tax unless the entity is not carried on for the profit or gain of its members and:

● it has a physical presence in Australia and, to that extent it pursues its objectives and incurs its expenditure principally in Australia; or

● it is a deductible gift recipient; or

● it is prescribed by law in the income tax regulations and it is located outside Australia and is exempt from income tax in its country of residence.

Non-profit requirement

Paragraphs 9 and 21 - 23 of Taxation Ruling TR 97/22 discuss the non-profit requirement. A society, club or association established for the encouragement of a game or sport is non-profit if it is not carried on for the profit or gain of its individual members.

Organisations satisfy the non-profit requirement if their constituent documents prevent them from distributing profits or assets among members while the organisation is functional and on winding up. The organisation's actions must be consistent with this requirement.

The Constitution prevents distribution to members while it is operating and on winding up. The entity is not carried on for the profit or gain of its individual members.

Has a physical presence in Australia and, to that extent it pursues its objectives and incurs its expenditure principally in Australia

First requirement - physical presence in Australia

The term 'physical presence' is not defined in the ITAA 1997 and takes its ordinary meaning.

The Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 7) 1997 states at paragraph 3.12 with respect to the words 'physical presence':

'that a broad interpretation has been adopted. All that is required is for an organisation to operate through a division, sub-division or the like in Australia. The structure of the organisation is immaterial as is whether it has its central management and control or principal place of residence in Australia.'

To have a physical presence in Australia, an entity does not need to have a separate legal personality. It is sufficient that the Entity operates through a division, subdivision or branch in Australia.

Application to the facts

The Entity is a company limited by guarantee and incorporated in Australia.

The Entity conducts competitions and any contracts or agreements are in its name as are any receipts received and expenditure incurred.

A sporting association which is a member of the Entity has a verbal agreement with the entity to provide an administrative and financial hub and it pays the employees.

The cost of the administrative and financial hub is wholly incurred in Australia and its functions wholly performed in Australia although a member of the entity provides the human and equipment resources.

The entity has a physical presence in Australia it does not have a physical presence in any other country.

Second requirement - incurs expenditure and pursues objectives principally in Australia

Once it has been established that the entity has a physical presence in Australia, then it is necessary to examine where the entity incurs its expenditure and pursues its objectives.

To that extent

If the entity has a physical presence in Australia only, then it is necessary to examine all of the expenditure incurred and objectives pursued by the entity. The entity must incur its expenditure, and pursue its objectives, principally in Australia.

If the entity has a physical presence in Australia and also overseas, then it is necessary to work out the expenditure incurred and objectives pursued that is attributable to the entity's physical presence in Australia. This means that only the entity's physical presence in Australia is considered when determining whether the entity has incurred its expenditure, and pursued its objectives, principally in Australia. For example, if an entity's physical presence in Australia is through a division, the second requirement applies only to that Australian division's expenditure incurred and objectives pursued. The expenditure incurred and objectives pursued by any overseas divisions are not relevant.

Principally

An entity's expenditure incurred and objectives pursued need not be solely but must be 'principally' in Australia. For most entities it will be clear whether it incurs its expenditure and pursues its objectives principally in Australia. Where there is some doubt whether this requirement is satisfied, it will be necessary to examine each entity's individual circumstances.

The term 'principally' is not defined in the ITAA 1997 and takes its ordinary meaning.

Accordingly, it is not possible to specify a particular percentage but less than 50% would not be considered to be 'principally'.

Incurs its expenditure and pursues its objectives

The phrase 'incurs its expenditure' is not defined in the ITAA 1997 and takes its ordinary meaning. When these words are read together in their entirety and in context, the ordinary meaning of the phrase is that expenditure is incurred when an entity pays out or disburses money or is liable to pay out or disburse money. Thus, expenditure incurred may include payments, or accounts payable, for rent, utilities, salary and wages, and goods or services.

The phrase 'pursues it objectives' is not defined in the ITAA 1997 and takes its ordinary meaning. Objectives are pursued in Australia if the things done by the entity attempt to realise those objectives in Australia. The pursuit of objectives can include things done overseas if they are only a means of pursuing those objectives in Australia.

The High Court in Federal Commissioner of Taxation of the Commonwealth of Australia v Word Investments Limited (Word Investments) considered whether Word complied with former section 50-50(a) that it “has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia”. The majority said at paragraph 73 that Word did incur its expenditure and pursue its objectives principally in Australia because “the decisions to pay were made in Australia, the payments were made in Australia, the payments were made to Australian organisations, and the objects of Word included giving financial assistance to those organisations”.

Therefore, where an entity 'incurs its expenditure' will depend on a range of circumstances considered on a case by case basis. The range of circumstances of the expenditure may include: where the decision to make the expenditure is made; where the expenditure is made; where the recipient of the expenditure is located and, if the expenditure relates to goods or services, where the goods or services are consumed. There may be other relevant factors to consider depending on the individual circumstances of the expenditure.

The majority in Word Investments further stated at paragraph 73 that the ITAA 1997 does not mandate that the recipient of the payment incur its expenditure and pursue its objectives principally in Australia. Therefore, where an entity's objects allow it, there is no restriction in the tax law on making a payment to another organisation which ultimately expends the funds outside of Australia. Except in the situation where the entity knows or ought to have known that the recipient would misapply the funds for a purpose other than in the pursuit of its objectives.

Therefore, objectives are pursued in Australia if the things done by the entity pursue those objectives in Australia. The pursuit of objectives can include things done overseas, for example purchasing goods overseas, if they are only a means of pursuing those objectives in Australia. It can also include making payments in Australia to Australian organisations that ultimately expend the monies overseas.

An entity must pursue its objectives principally in Australia. A suitable proxy, such as time spent or expenditure may be used to measure the pursuit of objectives.

Application to the facts

It is recognised that the objectives of the Entity are internationally focused and that member sporting associations would have an expectation that they would be chosen as a competition host country from time to time.

Funds are sourced from Australia in relation to membership subscriptions relating to the Australian member, the rest of the funds for the whole organisation are sourced from outside Australia. The recipients of the expenditure are principally overseas being where the majority of the competitions take place or are expected to take place.

The costs are incurred in Australia and based on the financial statements provided, and the amount that can be disregarded under section 50-75 of ITAA 1997, the Entity does incur its expenditure principally in Australia.

However, no payment decisions are made in Australia the financial and administrative hub operates under the direction of board of directors, the majority of whom reside overseas.

The facts can be distinguished from Word Investments which concerned a charitable entity. In Word Investments, payments were made in Australia, payments were made to Australian organisations, and funds were raised in Australia.

In comparison in the 20XX-YY year the Entity's payments are made to organisations outside Australia based on decisions made by directors, the majority of whom reside overseas. While it is accepted that the financial and administrative activities carried out by the administrative and financial hub assist the entity to achieve its objectives on balance the entity's objectives are pursued principally outside Australia by promoting the sport a specific region of the world.

Conclusion

The Entity is therefore not exempt from income tax as a society, association or club established for the encouragement of a game or sport since it does not satisfy the special conditions in section 50-70 of the ITAA 1997.

Due to the above findings, the Entity does not fall under any type of exempt entity described in Division 50 of the ITAA 1997.

Consequences

As the Entity is not entitled to income tax exemption, the normal rules of whether an entity should lodge income tax returns will apply.

Consequentially, the Entity is required to lodge income tax returns.

Question 2

Are membership subscriptions received by the Entity assessable income under section 6-5 of the Income Tax Assessment Act 1997?

Answer

No

Mutuality principle and the determination of taxable income

The mutuality principle is a legal principle established by case law. It is based on the proposition that an organisation cannot derive income from itself. The principle provides that where a number of persons contribute to a common fund created and controlled by them for a common purpose, any surplus arising from the use of that fund for the common purpose is not income. The principle does not extend to include income that is derived from sources outside that group.

The mutuality principle was described succinctly by McTiernan J in Revesby Credit Union Cooperative Ltd v Federal Commissioner of Taxation (1965) 112 CLR 564 (Revesby Credit Union) at 574-575:

The principle of mutuality seems to me to be settled. Where a number of people contribute to a fund created and controlled by them for a common purpose any surplus paid to the contributors after the use of the fund for the common purpose is not income but is to be regarded as a mere repayment of the contributor's own money…Incorporation of the fund is not relevant…What is required is that the fund must have been created for the common purpose and owned or controlled wholly by the contributors. If it is owned or controlled by anyone else the principle cannot apply…Furthermore any contributions to the fund derived from sources other than the contributors' payments, such as interest from the investment of part of the fund, or income from a business activity conducted by the members, cannot be taken into account in computing the surplus…Also the cases establish that the principle cannot apply unless at any given point in time the contributors to the fund are identical with the beneficiaries of the distribution of the surplus.

A number of authorities have established the application of the mutuality principle in Australia. They include Bohemians Club, Revesby Credit Union, Social Credit Savings and Loan Society Ltd v. FC of T 125 CLR 560 (Social Credit Savings and Loan Society), Sydney Water Board Employees Credit Union Ltd v. FC of T (1973) 73 ATC 4129 (Sydney Water Board), Royal Automobile Club of Victoria (RACV) v. Federal Commissioner of Taxation 73 ATC 4153 (RACV), and FC of T v. Australian Music Traders Association (1990) 90 ATC 4536 (Music Traders).

A mutual association has all of the following characteristics:

n a voluntary association of persons (contributors) who make contributions out of their own moneys to a common fund (which they create, own, control and all have an interest in) for a common purpose (which may also be for their personal benefit as participators) and that purpose is not undertaken for profit;

n contributions are based on an estimate of expected expenses of the common purpose (mutual liabilities), and are made on the stipulation that any surplus (the unused or unexpected amount) will be, sooner or later, returned/repaid to the contributors (in their capacity as contributors) in some form or other (however under section 59-35 of the Income Tax Assessment Act 1997 (ITAA 1997) an amount of ordinary income is non-assessable non-exempt income where the only thing preventing it from being a mutual receipt is a prohibition on actual distribution to the members);

n complete identity as a class between the contributors and the participators; and

n a reasonable relationship between what a member contributes and what the member may be expected or entitled to receive in respect of the common fund.

Generally, under this proposition, most income derived by a club from its members is not treated as assessable income and expenses incurred in respect of its members are not deductible expenses.

The subscriptions represent a contribution to a common fund which is created and controlled by members for the common purpose of the development of golf. It is accepted that the Entity's subscriptions would be mutual receipts at common law except for the Entity's non-profit clause which prevents distributions to members. However section 59-35 of the ITAA 1997 operates to ensure that an amount of ordinary income is not assessable income, and not exempt income, where the only thing preventing it from being a mutual receipt is a prohibition on actual distribution to members. The subscriptions are non-assessable non-exempt income and therefore are not assessable income under section 6-15 of the ITAA 1997.

Question 3

Are the amounts received from Entity A and Entity B assessable under section 6-5 of the Income Tax Assessment Act 1997?

Answer

Yes

The sponsor has the right to advertise and promote its status and title in any medium, world-wide. In consideration for the rights granted under the agreement the entity pays an annual fee.

The sponsor paid an amount to the entity as compensation for privileges under an agreement with the entity such as advertising on on-site facilities, and in event programs.

Any income derived by the entity under an arrangement entered into with the sponsors is not contributions by entity members to a common fund and are not mutual receipts. Therefore these amounts are assessable income assessable under section 6-5 of the ITAA 1997.

Question 4

Are the amounts received from Entity C, Entity D and Entity E assessable under section 6-5 of the Income Tax Assessment Act 1997?

Answer

No

There is no benefit or services provided by the Entity in respect of the payments received from Entity C, Entity D and Entity E. In the Entity's hands it is a mere expectation and was given voluntarily. It is not income rendered for personal services, income from property or income from trading activities. These amounts are accepted as a gift and are not assessable on that basis.

Question 5

In respect of the specified amounts received by the Entity, what expenses are deductible (either fully or apportioned) under section 8-1 of Income Tax Assessment Act 1997?

Answer

The extents to which the expenses incurred by the Entity are fully deductible or apportioned are set below.

Deductions

The general principle of deductibility is set out in section 8-1 (Income Tax Assessment Act 1997 (ITAA 1997)). The expenditure must be an outgoing incurred in gaining or producing assessable income or necessarily incurred in carrying on a business (Roberts and Smith v FC of T 92 ATC at 4386, ATR at 501; Lunney and Anor v FC of T (1958) 11 ATD 404, (1978-1958) 100 CLR 478; Fletcher and Ors v FC of T 91 ATC 4950, (1991) 22 ATR 613).

The expenditure must have the necessary and relevant connection with the operation or activities which directly gain or produce assessable income (Charles Moore and Co (WA) Pty Ltd v FC of T (1956) 95 CLR 344, FC of T v DP Smith (1981) 147 CLR 578, Ronpibon Tin NL v FC of T (1949) 78 CLR 47).

Expenses incurred in deriving mutual receipts are not deductible under section 8-1(1) of the ITAA 1997, because they are not incurred in gaining or producing assessable income, and they are not incurred in carrying on a business for the purpose of gaining or producing assessable income.

The following deductions are allowable in full in relation to 2015-16 on the basis that the expenditure is incurred

(a) remuneration paid to directors.

(b) remuneration paid to the competition service personnel;

(c) travel expenses (airfares and accommodation) of the directors and service personnel in connection with the competitions;

(d) costs of competition trophies;

(e) freight costs for transport of competition uniforms and trophies;

(f) the cost of a commemorative plate/item presented to a club hosting the competition in appreciation of hosting the event;

(g) Expenses of producing and disseminating the journal.

(h) Currency exchange expenses in relation to sponsorship for events/

(i) bank charges in respect of payments of amounts above

The following is not deductible as an expense in the 20XX-YY year

The currency exchange expenses for the amounts received from Entity C, Entity D and Entity E are not deductible as they are not incurred in gaining or producing assessable income.

Funding provided to member associations from the grant from Entity D to assist them with funding the participation of teams in competitions conducted by Entity is not deductible under s8-1 of the ITAA 1997 as they are not incurred in gaining or producing assessable income.

The following are allowable deductions to the extent indicated in relation to 20XX-YY

(a) Fees for the provision of the resources administration hub are to be apportioned between amounts referable to gaining assessable income and amounts referable to dealing with mutual receipts, with the former being allowed as deductions.

(b) In relation to directors' accommodation costs in respect of attending the Entity's board meetings and/or competitions conducted by the Entity.

● If the Entity's director's accommodation costs are not increased due to undertaking activities of a mutual nature during the period to which the accommodation costs relate, the whole of the accommodation costs can be reimbursed.

● A proportion of a director's reimbursed accommodation is deductible if reasonably apportioned on the basis of time

(c) The amount of audit fees charged would be deductible less a pro-rata amount (calculated on a time basis) for the amount of time spent in auditing the Entity's subscriptions and donation amounts and associated expenses.

(d) cost of hosting a function to express appreciation to a competition host and a competition sponsor is apportionable:

ATO information on apportionment

Taxation Determination TD 93/194 income tax: how should a licensed club apportion expenses when calculating its taxable income? (TD 93/194) examines the apportionment of expenses between mutual and non-mutual activities of a licensed club.

Paragraph 2 of TD 93/194 sets out the acceptable methodologies for allocating expenditure between mutual and non-mutual receipts, including a discussion on the 'reasonable basis method', as discussed below:

Clubs may, for the purposes of calculating taxable income, adopt an alternative technique where there is a reasonable basis to do so (e.g. better recording system of member/non-member spending) and provided it reasonably and accurately reflects the club's income for the year in question.

Although TD 93/194 relates specifically to clubs, the principles set out in the ruling are also relevant to other taxpayers.

ATO guide for taxable non-profit organisations Mutuality and taxable income' QC 23099 on the ATO's website: ato.gov.au discusses the issue of apportionment

● The method (or methods) your organisation chooses must reasonably and accurately reflect its revenue and expenses;

● An organisation may use one or more methods to separate its apportionable items for the year in question; and

● You may, for the purposes of calculating taxable income, adopt another method of apportionment where there is a reasonable basis to do so and provided it reasonably and accurately reflects your organisation's revenue or expenses for the year in question.

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