Sporting Clubs – Ready to play ball with the ATO?

Starting from 1July 2024, Not-for-profits (NFPs), including sporting clubs, societies and associations, with an active Australian business number (ABN) need to lodge an annual NFP self-review return to continue accessing income tax exemption.

Whilst there has not been a deviation from the requirement of sporting clubs to self-assess their income tax exempt status, it now requires a formal lodgement of this assessment with the ATO.

Lodgement will need occur between 1 July 2024 and 31 October 2024.

Failure to lodge the return may result in the sporting club becoming ineligible for income tax exemption in additions to penalties being applied.

Getting ready for lodgement

Your club’s responsible person will need to:

  • Ensure the club’s Australian Business Number (ABN) is active
  • Update contact details with the ATO
  • Confirm the club’s governing documents are in order
  • Self-assess that the clubs’ main purpose is in line with the requirements for income tax exemption
  • Ensure your club can access the lodgement form via Online services for Business.

Qualifying for the exemption

A sporting club will be exempt from income tax (under self-assessment) provided the following requirements are met:

  • It is not a charity
  • It is a not-for-profit society, association or club
  • It is established for the purpose (i.e. main purpose) of encouragement of either:
    • A game or sport
    • Animal racing
  • It meets one of three test:
    • 1. Physical presence in Australia test
    • 2. Deductible gift recipient test
    • 3. Prescribed by law test
  • It applies its income and assets solely for the purpose for which it is established
  • It complies with the substantive requirements in its governing rules.

Potential issue – Identification of Main Purpose versus Other Purpose

A sporting club’s main purpose must be the encouragement of a game or sport.

The determination requires an objective assessment of all material facts and circumstances. This assessment must be taken on a yearly basis as circumstances for an organisation may change from year to year.

Other Purpose

Issues in determining a club’s main purpose can arise where a club has both sporting and non-sporting purpose.

Non-sporting purposes may still be exempt provided that the non-sporting purpose is:

  • Merely ancillary and incidental to its sporting purpose; or
  • Secondary to its sporting purpose.

For example:

  • A club that also has an equipment/gear shop – is this merely ancillary and incidental or secondary to its purpose?
  • A club that has a club house for member and non-member use where there is a licenced bar and restaurant, offers gaming facilities and accommodation – is this merely ancillary and incident or secondary to its purpose or is it the main purpose?

There are various factors that will need to be considered in determining a club’s main and other purposes, including the assessment of the club’s governing documents and the way in which the club undertakes its day-to-day activities and strategic plans.

What clubs need to do?

Sporting clubs will need to:

  • Continue to self-assess and document their main purpose
  • Ensure that the lodgement can take place via Online Services for Business by the due date
  • Considering engaging professionals should clubs require assistance with assessing the club’s main purpose and/or lodgement process.

The new ATO reporting requirements represent a significant change for sporting clubs and other not-for-profit organisations. By understanding these requirements and preparing in advance, clubs can ensure they remain compliant and continue to benefit from income tax exemption.

Useful links

Next steps

If this raises questions for you, please contact your Bentleys advisor to discuss your situation or contact us via the general enquiry form.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.

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