The ATO revised its public ruling on societies, associations or clubs seeking to determine whether they are exempt from income tax under table item 9.1(c) of section 50-45 of the Income Tax Assessment Act 1997 (ITAA 97), Taxation Ruling 2022/2 – Income tax: the games and sports exemption[1].

It replaces Taxation Ruling 97/22 Income tax: exempt sporting clubs, and the slightly revised ruling maintains the views of the Commissioner.

The following, without a special context, will not be regarded as falling within the exemption:

  • bird-raising, bird-keeping and bird-watching;
  • bodybuilding;
  • car owners’ clubs/associations;
  • dancing as a social activity (including ballroom dancing, line dancing, square dancing and Highland dancing);
  • modelling of railways;
  • stamp and coin collecting;
  • playing of gaming or gambling machines and gambling generally, and
  • breeding and showing of animals.

Sporting organisations are one of the larger segments of 32 classes of organisations that self-assess their exemption for income tax under Division 50 of ITAA 97.

As noted in our previous Bulletin article[2], these exempt organisations are not required to file income tax returns and the ATO currently advises that these organisations should perform a self-assessment check annually to ensure that they still fall within the tax exempt category.

However, it is proposed that from 1 July 2024, for the 2023-24 tax year, the ATO will require income tax-exempt organisations with an active Australian Business Number (ABN) to submit online annual self-review forms with the information they ordinarily use to self-assess their eligibility for tax exemption.

This was announced as part of the 2021-22 federal budget, where the government announced that it had provided $1.9M for the ATO to build an online system to enhance the transparency of income tax exemptions claimed by exempt nonprofit entities.

The ATO has also provided a 9-page self-assessment template [3] for sporting clubs, and it may be expected that this will form the basis of the new self-assessment return.

We recommend that organisations that are income tax exempt perform an annual self-assessment of their taxation status and seek clarification if they are unsure of any matter raised in the review.

[1] Taxation Ruling 2022/2 – Income tax: the games and sports exemption https://www.ato.gov.au/law/view/document?LocID=”TXR%2FTR20222%2FNAT%2FATO”&PiT=99991231235958

[2] https://paxton-hall.com.au/2022/05/self-assessment-by-tax-exempt-non-profit-organisations/

[3] https://www.ato.gov.au/assets/0/104/1909/2003/64bc4849-3910-46c9-bcc6-d0f03c5cf6de.pdf

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