ATO Tax Ruling – ‘Games and sports exemption’ TR 2022/2

ATO Tax Ruling – ‘Games and sports exemption’ TR 2022/2


On 14 September 2022, the ATO has revised its guidance on the games and sports income tax exemption for not-for-profit clubs.

While the application of the exemption has not changed, Taxation Ruling 2022/2 does provide further clarifications and references the Word Investments High Court case. This ruling replaces Taxation Ruling 97/22, which has now been withdrawn.

TR 2022/2 relates to the exemption of not-for-profit clubs from income tax. The games and sports exemption is applicable to a club (including societies and associations) where it:

  • is founded for the primary goal to promote a sport or game
  • does not have a profit motive for its individual members
  • meets other special conditions under section 50-70 (including, is not carried on for profit or gain of its individual members)

What is included as a ‘sport’ or ‘game’?

TR 2022/2 clarifies that the terms ‘game’ and ‘sport’ also encompasses nonathletic activities such as chess or bridge, activities which involve machines to take part such as motor racing, and non-competitive activities such as mountaineering.

A requirement to qualify as a game or sport for the exemption include key features that it typically has rules, expectations and conventions. Competition is also another general feature of a game or sport, however this is not essential.

When determining if a club qualifies for the exemption, it is important to consider the club’s primary purpose. To be eligible, the club’s main purpose must be the encouragement of a game or sport. Where another purpose, such as the encouragement of sociability, participation and relaxation dominates the promotion of the sport or game, this would not meet the criteria of a sport or game.

Commercial activities and purpose

Clubs that engage in commercial activities to earn revenue are required to objectively establish the degree to which commercial activities are a means to the required primary purpose of encouragement of a game or sport.

A club is able to establish a purpose of supporting a game or sport where it provides financial and in-kind contributions to other organisations that directly carry out those activities.

Examples of direct or indirect activities that show the promotion of a game or sport include:

  • organising and conducting tournaments
  • improving the abilities of participants
  • providing purchased or leased facilities for the activities or the game or sport for the use of club members and visitors, and
  • marketing.

It needs to be objectively demonstrated that these activities are conducted as a means to further the main purpose of encouraging the game or sport.

In cases where a club has another purpose outside sporting purposes, it will not meet the games and sports exemption unless the non-sporting purpose is merely in relation to carrying out its sporting business or independent from the sporting purpose but is less significant than the sporting purpose.

To establish whether the club has a primary propose of promoting a game or sport, the circumstances and facts of each case needs to be considered objectively, considering the following factors deemed relevant by courts and tribunals:

  • the club’s constituent documents
  • extent of sporting activities
  • the conduct of activities directly connected to the game or sport
  • member participation in the game or sport
  • marketing of the organisation to the public as one that encourages a game or sport
  • involvement of the committee management in the promotion of sport
  • the use of surplus funds for promoting the game or sport, and
  • the provision of financial and in-kind support for encouraging the game or sport.

Factors that work against the conclusion that a club’s main purpose is the encouragement of a game of sport, include:

  • an emphasis in its constitution to provide a social club for members
  • the provision of social facilities for members
  • no direct involvement in fielding sporting teams or entering into competitions
  • funding of game or sport only on an inconsistent basis with its members taking priority
  • the relative size and extent of social facilities provided for the benefit of members compared to the financial and in-kind support provided to sport and games.

Surplus funds

Where clubs accumulate surplus funds, they should have a detailed plan that show how the funds will be used to support the encouragement of sport or game.

Self review form

Clubs with an active Australian Business Number will be required to complete an online self-review form of their eligibility to the income tax exemption each year from 1 July 2023.

How we can help

Whilst it is pleasing that further examples have been provided in this ruling, there is still a significant grey area when determining if the games and sport exemption applies.

This is particularly the case for large clubs with significant commercial activities that have multiple purposes of encouraging a sport or game as well as providing significant benefits to members. Therefore, it is important for club’s objectives to be clearly documented and for any plans to clearly highlight how the club encourages a sport or game.

If you require further advice regarding this tax exemption, please reach out to our SW team.


Alice Mulvogue, Assistant Manager, Tax

Sharon Lee, Consultant, Tax

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