Edited version of private ruling

Authorisation Number: 1011907513241

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Ruling

Subject: membership fees

Question

Are you entitled to a deduction for membership fees to a local service club?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You pay an annual membership/subscription fee to a local service club.

The service club is a non government international organisation which provides health, food, water and disaster relief via various projects and entities.

The service organisation in Australia operates via a network of suburban clubs in all states and its membership fees are paid to the clubs to cover costs of a monthly journal, clubs operating expenses and dues forwarded to the international organisation.

The activities of a local service club are to support and promote the charitable work of the organisation.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 25-55
Income Tax Assessment Act 1997 Division 30

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

As you do not gain or produce any assessable income in relation to the service club, you are not entitled to a deduction under section 8-1 of the ITAA 1997 for membership fees.

Payments to associations  

You can deduct a payment you make for membership of a trade, business or professional association under section 25-55 of the ITAA 1997

Your local service club is not considered a trade, business or professional association. Therefore, a deduction under section 25-55 of the ITAA 1997 does not apply.

Gifts or contributions  

You can deduct a gift or contribution in the situations set out in Division 30 of the ITAA 1997. Taxation Ruling TR 2005/13 contains the Tax Office's view on what is a gift.

In order to constitute a gift, the giver must not receive a benefit or an advantage of a material nature by way of return. Membership rights and privileges obtained as a result of a transfer are considered to be a material benefit or advantage. TR 2005/13 states that while membership will commonly indicate a desire to further a deductible gift recipient's work, taking up membership in order to receive special deals, members' privileges, voting rights, and so on, does not point to a gift.

In your case, as a result of paying a membership fee, you receive membership benefits. The rights and privileges awarded to you as a member of a service club is considered to be a material benefit. As such the membership fee is not a gift for the purposes of Division 30 of the ITAA 1997.