Edited version of private ruling

Authorisation Number: 1011631771784

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Ruling

Subject: Association established for the encouragement of sport

Question

Is X exempt from income under section 50-1 of the ITAA 1997 as a society, association club established for the encouragement of a particular sport pursuant to item 9.1 of section 50-45 of the ITAA 1997 and meets the special conditions of paragraph 50-70(a) of the ITAA 1997 of having a physical presence in Australia and incurs its expenditure and pursues its objective principally in the Australia?

Answer

X is exempt from income under section 50-1 of the ITAA 1997 as a society, association club established for the encouragement of a particular sport pursuant to item 9.1 of section 50-45 of the ITAA 1997 and meets the special conditions of paragraph 50-70(a) of the ITAA 1997 of having a physical presence in Australia and incurs its expenditure and pursues its objective principally in the Australia.

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commences on:

1 July 2006

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 50-1

Income Tax Assessment Act 1997 Section 50-45

Income Tax Assessment Act 1997 Paragraph 50-70(a)

Taxation Administration Act 1953 Paragraph 14ZAH(14ZAH)(c)

Reasons for decision

Summary

The entity is exempt from income tax as an organisation established for the encouragement of the particular sport.

· It is a non-profit organisation.

· Its object is to promote the sport in a state in Australia, and

· through an agreement with the controlling body of the sport it has entered into a deed with the individual clubs to have the sole rights to manage the activities stated in the objects clause.

A club which is established for the encouragement of the particular sport and which is not carried on the purposes of profit or gain to its individual members is exempt from income tax in accordance with item 9.1(a) of the table in section 50-45 of the ITAA 1997.

The guidelines in Taxation Ruling TR 97/22 Income tax: exempt sporting clubs could apply in determining income tax exemption for the sport. For a sporting club to be exempt from income tax under section 50-45 of the ITAA 1997 it needs to satisfy three tests:

· it cannot be carried on for the purposes of profit or gain its individual members

· it must be for the encouragement of the sport, and

· that encouragement must be the club's main purpose.

Non-profit requirement

The club must not be carried on for the purposes of profit or gain to its individual members. The clubs constituent document must contain clauses that prevent it from distributing its profits or assets among members on a daily operational basis and on its winding up. This provision must also be reflected in its activities.

To this end, the constituent documents of the entity contain a suitable non-profit clause and dissolution clause.

The entity meets the non-profit requirement.

Encouragement of the sport

The Tax Office publication Income tax guide for non-profit organisations, (NAT 07967-03-2007) indicates that the sport with which the entity is associated is an activity, the income from which is exempt from tax.

The entity was established to manage the specific activity for the sport in the state of Australia by acting as a representative body for the clubs in that state that wish or intend to participate in the arrangements. The written agreements give the entity the right to provide a broad coverage of the sporting events conducted by the clubs and provide other information regarding those events. By entering into the written agreements, the entity has broadened the scope of the operations and in turn provided more members of the public with the opportunity to become involved in the sporting events and to become familiar with the sport in general.

A separate agreement between the entity and the sport's controlling body in that state will ensure that funding will be available to enable key personnel to perform their relative functions under the written agreements with the individual clubs.

The main purpose of the entity is for the encouragement and promotion of the sport in an Australian state through the conduct of activities stated in its constituent document.