The NFP self-review return will be available from the Online Services section of the ATO website from 1 July 2024. It will be due for lodgement between 1 July and 31 October 2024 for 30 June financial year balancers. For details of the previous update click here.

The ATO has released high level information regarding the questions that NFPs will be required to answer on the online NFP self-review return, which includes:

• Organisation details – including annual turnover
• Income tax self-assessment – organisations will need to choose a category (e.g. community service, sporting, etc.) that best reflects the main purpose of the organisation. The ATO has provided some high level instructions to help make this determination including highlighting:
• the appropriate clauses in governing documents that prohibit the distribution of income or assets to members.
• confirming that the organisation exists to operate and incur its expenditure entirely in Australia.
• Examples of the potential questions included on the return and additional information that the ATO will provide to support organisations to complete the questions. 

Assuming answers indicate that an organisation is a tax exempt NFP, the ATO system will then generate a statement:

“Based on the information provided, the organisation has self-assessed as income tax exempt for this income year.”

A declaration is then required to be signed on behalf of the organisation. There is also the option to print a copy of the questions and answers to share with the board, committee or tax agent.

Get in touch with SW

We can assist in your preparation for the new online return. To discuss your broader eligibility for income tax exempt status, please contact our Tourism, Hospitality and Gaming (THG) industry experts and not for profit experts.

The post Sporting Clubs 2024 annual return update appeared first on SW Accountants & Advisors.

First announced in the 2021 Federal Budget, NFP’s 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. Find out more about the original announcement here.

The annual return reporting is part of the ATO’s revised guidance on the games and sports income tax exemption for NFP clubs under Tax Ruling 2022/2, aiming to enhance the transparency of income tax exemptions.

Lodgement period

Their first NFP period is between 1 July and 31 October 2024. The lodgement period will differ for clubs who don’t adopt a 30 June financial year end however, specifics are yet to be determined by the ATO.

How to prepare

The lodgement of the self-review return marks a major change in the reporting obligations for Not-For-Profit clubs as to maintaining their income tax exempt status. It is imperative that clubs take all necessary steps prior to the lodgement deadline to ensure they have appropriate documentation and procedures in place to support their income tax exemption classification and to be prepared to lodge the self-review return with appropriate disclosures.

In order for NFPs to prepare for the new online self-review return the ATO has outlined what organisations need to do:

• check to see if you have an active ABN
• identify your main purpose
• complete an Early Self Review – this Early Self Review form has just been released and the ATO has indicated that the questions in this checklist will be similar to the questions asked in the online return that will be required to be lodged next year.
• setup your myGovID and Relationship Authorisation Manager (RAM) to allow you to complete the NFP self-review return
• subscribe to the ATO’s monthly Not for Profit newsroom

Get in touch with SW

We can assist in your preparation for the new online return and completing the Early Self Review. To discuss your broader eligibility for income tax exempt status, please contact our Tourism, Hospitality and Gaming (THG) industry experts and not for profit experts.

Contributors

Blake Trad

The post Sporting Clubs 2024 annual return reporting moves a step closer appeared first on SW Accountants & Advisors.

In the 2021 Federal Budget, the former Government announced that it was providing $1.9m to build an online system to enhance the transparency of income tax exemptions claimed by Not-for-profits (NFPs).  From 1 July 2023, NFPs’ seeking to maintain their income tax exempt status will be required to lodge an online Annual Self-Review Form. This is part of the ATO’s recently revised guidance on the games and sports income tax exemption for not-for-profit clubs under Tax Ruling 2022/2.

SW has liaised with the ATO and can confirm that this announcement is still expected to be implemented.

Annual Self-Review Form

The ATO has confirmed the following details:

Lodgement timing

The first return will need to be lodged for the 2023–24 income year, with those clubs with a 30 June year end being the first required to lodge. This means the earliest anyone will be required to submit a return is 1 July 2024.

Who is required to lodge?

Only self-assessing income tax exempt entities (e.g. sporting clubs) with an active ABN are required to lodge a return under the new self-assessing reporting arrangements. For those clubs applying the principles of mutuality as to their income tax obligations, there is no change to existing income tax return lodgement processes.

Entities that do not hold an active ABN, will not be required to lodge a return or satisfy ongoing ABN registration requirements.

Are there additional obligations?

The two additional obligations for ongoing ABN registration are:

• the obligation to comply with income tax return lodgement requirements, and
• the obligation to update the accuracy of details on the Australian Business Register (ABR), annually.

It is intended that the return for self-assessing income tax exempt entities will collect the information required to satisfy the new ABN requirements, without the need for these entities to provide further information.

What information does the Annual Self-Review Form need to include?

The return is not an income tax return but rather a form containing the information that a club would ordinarily use for self-assessing eligibility for income tax exemption on a yearly basis.

The form needs to satisfy three elements:

1. Entitlement to income tax exemption
2. Basis for entitlement (category), and
3. Whether all requirements are being met.

How to prepare for the new reporting regime

There are 3 things your club can do to prepare for the new reporting regime:

1. Update your contact details with the ATO. It’s an ABN registration requirement to keep your contact details current and it also means you’ll receive important information about your tax and super obligations.
2. Use the ATO worksheets to review your eligibility for an income tax exemption.
3. Stay informed.

How can SW help?

If you would like to discuss how to best prepare for the new Annual Self-Review reporting regime and/or broader eligibility for income tax exemptions, please contact us.

Contributors

Alice Mulvogue

The post Clubs – Update on new self-review requirement for income tax exemption appeared first on SW Accountants & Advisors.

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.

Contributors

Alice Mulvogue, Assistant Manager, Tax

Sharon Lee, Consultant, Tax

The post ATO Tax Ruling – ‘Games and sports exemption’ TR 2022/2 appeared first on SW Accountants & Advisors.