Clubs-and-Associations

Clubs, Societies, and Associations 2024

Tax Status

• The term “society, association or club” is not defined in tax law but takes its ordinary meaning.
• All incorporated clubs, societies, and associations are considered companies for tax purposes.
• Unincorporated clubs, societies, and associations not classified as partnerships are also treated as companies for tax purposes.

Exempt Clubs, Societies, and Associations

• Certain non-profit organizations, including charities and certain religious, cultural, health, educational, and sporting organizations, can be exempt from income tax if endorsed by the ATO.
• Non-profit organizations cannot distribute profits to members or private individuals; profits must be used for the organization’s purpose.

Non-Profit Sporting Clubs

• s.50-45 exempts income of non-profit sporting clubs established for the promotion or encouragement of sports or games.
• To be tax-exempt, clubs must meet at least one of the following tests:
  1. Physical presence in Australia.
  2. Deductible gift recipient test.
  3. Prescribed by law test.

Principle of Mutuality Exemption

• Under the principle of mutuality, a club cannot derive assessable income from transactions with its members.
• Surpluses from contributions to a common fund created and controlled by members for a common purpose are not considered income.

Assessable Income of Clubs

• Receipts from members, such as membership fees, subscriptions, and payments for services (e.g., bar sales, raffles, poker machines), are exempt from tax.
• Receipts from non-members, including income from services to non-members and investment income (dividends, interest, rent), are assessable income.

Calculation of Taxable Income

• If the details of non-member receipts are known, taxable income is calculated as: [ \text{Taxable Income} = \text{Receipts from Non-Members} - \left( \text{Expenditure} \times \frac{\text{Receipts from Non-Members}}{\text{Total Receipts}} \right) ]
• If non-member receipts are not distinguishable, the Waratah’s formula is used to calculate the percentage of receipts attributable to non-members.

Tax Rates

• Not-for-Profit Companies (Small Business Entities - SBE):
  • $0 to $416: Nil
  • $417 to $832: 55% on the excess over $416
  • $833 and above: 27.5% flat on the whole of taxable income.
• Not-for-Profit Companies (Not SBE):
  • $0 to $416: Nil
  • $417 to $915: 55% on the excess over $416
  • $916 and above: 30% flat on the whole of taxable income.
• Other Taxable Companies:
  • Taxed at either 27.5% or 30% flat depending on their classification.