Advice on tax exemption for NFP games and sports completed

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ATO’s non-profit center deputy commissioner Jennifer Moltisanti says the draft income tax exemption is complete.

A draft amendment to the Tax Office’s official opinion on Sections 50-45 of the Tax Act, which sets out tax exemption rules for non-profit sports clubs, has been completed.

Australian Revenue Commissioner’s Charitable Center Deputy Commissioner Jennifer Moltisanti said the “review and update” of Tax decision TR 97/22 Income tax: exempt sports clubsnow completed, “considers when a corporation, club or club is deemed to be exempt from income tax for the promotion of a game or sport under Sections 50-45 of the Income Tax Assessment Act 1997.”

“The judgment finalizes the draft Tax Judgment TR 2021/D6 Income Tax: Exemption from Games and Sports, which replaces Tax Judgment TR 97/22 Income Tax: Exempted Sports Clubs,” she said.

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

A 2008 High Court ruling in which a church charity took the Commissioner of Taxation to court – and won – sparked the review that led to the ATO examination the Gaming and Sports Exemption Definition.

A panel considered alternative views on the exemption of games and sport, eventually concluding that the “Word investments‘ case does not change the legal criteria for determining a club’s primary purpose.

However, the updated draft of the exemption, prepared in consultation with the Australian Council for International Development, the Australian Federation of Disability Organisations, the Australian Institute of Company Directors, the Center for Social Impact and many others, has been finalised.

“Questions have been raised as to whether the decision in [the] Word Investments Limited [2008] HCA 55 (Word Investments) [case] had changed the legal tests to determine if an association was formed with the primary purpose of promoting a game or sport,” she said.

“In Word Investments, the High Court found that an organization which undertook fundraising activities and made those funds available to other organizations which undertook charitable work was itself incorporated for a purely charitable purpose.

“We have interested members of the NFP Stewardship Group to form a task force to review and refresh, and it was agreed that the impact of Word Investments on the Gaming and Sports Liberation should be submitted to a public advisory and advisory body for advice,” Moltisanti said.

She added in a statement that the gaming and sports exemption was developed in collaboration with the sector.

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

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