NFP games and sports tax exemption advice finalised

Assistant commissioner of the ATO’s not for profit centre Jennifer Moltisanti says the income tax exemption draft has been finalised.

 A draft to change the tax commissioner’s official opinion of section 50-45 of the tax law outlining tax exemption rules for not for profit sporting clubs has been finalised. 

 Assistant commissioner of the Australian Tax Office’s Not For Profit Centre Jennifer Moltisanti said the “review and refresh” of Taxation Ruling TR 97/22 Income tax: exempt sporting clubs, now finalised “considers when a society, association or club will qualify as exempt from income tax under section 50-45 of the Income Tax Assessment Act 1997 for the encouragement of a game or sport.”

 “The ruling finalises Draft Taxation Ruling TR 2021/D6 Income tax: the games and sports exemption which replaced Taxation Ruling TR 97/22 Income tax: exempt sporting clubs,” she said.

 In a statement, Moltisanti said while the ruling does not change the commissioner’s view that was expressed “in TR 97/22”, the ruling has been rewritten in plain English and includes contemporary examples to make it easier for organisations to apply the law.

 A High Court ruling in 2008, where a church-based charity took the Commissioner of Taxation to court – and won triggered the review leading to the ATO reviewing the games and sports exemption definition.

 A panel considered alternative views on the games and sports exemption and ultimately concluded that the ‘Word Investments’ case does not change the legal tests for determining the main purpose of a club.

 However the exemption updated draft, which was created with consultation from the Australian Council for International Development, the Australian Federation of Disability Organisations, the Australian Institute of Company Directors, the Centre for Social Impact and many more, has been finalised.

“Questions were raised about whether the decision in [the] Word Investments Limited [2008] HCA 55 (Word Investments) [case]  had changed the legal tests for determining whether a club is established for the main purpose of encouraging a game or sport,” she said.

“In Word Investments, the High Court found that an organisation that undertook fundraising activities and provided those funds to other organisations that conducted charitable works was itself established for a solely charitable purpose.

“We called for interested members of the NFP Stewardship Group to form a working group for the review and refresh and it was agreed the impact of Word Investments on the games and sports exemption should be taken to a public advice and guidance panel to seek advice,” Moltisanti said.

She added in a statement that the games and sports exemption was developed collaboratively with the sector.

“We’re confident they will make it easier for NFPs to understand and apply the law in practice,” she said.