Tax-Free Status for Sporting Clubs
Analyze the association between scholarly accounting research and specialized practice.
The study at hand elucidates in detail about income tax exemption in varied non-profit units such as sporting clubs or gaming associations. As per the regulation, income tax exemption is not applicable to a cluster of entities jointly referred to as “club”. Essentially, each specific entity operating in the group has the need to evaluate their own exemption status of income tax. An analytical assessment of news article on tax exempted earning of football league is hereby presented. It can be hereby seen that huge income is acquired by some of leagues of Australian football, despite the fact that they retained the tax free spot and requested for state funding for development building as well as upgrading of stadium facilities utilizing money of the tax payers.
The article penned by ErykBagshaw expound about exemption of tax of diverse sports corporation. Particularly, this explicates in detail about the football leagues that make use of state government finance that is the support of the money of tax payer’s contributions for development of facilities of stadium (Loh et al. 2015). Particularly, the ARI as well as the NRL are acquiring huge wealth by not disbursing tax payments. In itself, concessions provided to the Sports Corporation has enhanced the operating surpluses. This subsequently has led to augmentation of profits by 63% to approximately $330m for AFL in the year 2016 and doubling of profit to $133m for NRL during the same financial year.
According to the regulation, Tax Free Status is provided to sporting clubs only when the entity is registered as a “not for profit (NFP)” one and is instituted for the purpose of encouraging a certain sport or else a sport and animal racing. Furthermore, in case when the sports club satisfies any one of the tests namely physical presence in nation Australia test, prescribed by law test or DGR test, then they can acquire the status of NFP. Also, as per directives of the Australian Taxation Office on exemption of income tax for sporting clubs, there is need for compliance with different substantive necessities in particularly the governing regulations. In essence, this implies that the entity has the need to function in a particular manner that is consistent with the regulations of core significance to the operations (Uddin et al. 2016). This counts the ones associated to objects along with purpose and the ones relating to specifically the NFP status. Fundamentally, this is necessarily applicable to specific income as well as assets that is exclusively for the purpose for which the same is instituted. Therefore, it can be hereby said that there is need to use income as well as assets created out of tax exemption for the sole purpose for which the club is established.
Analyzing the Case of Football Leagues
In essence, as the sporting clubs are instituted for recreation and amusement, the government necessarily exempts these sporting clubs from disbursement of federal tax on income (Nichol and Duffy 2017). Further, the sporting clubs are entirely needy on membership dues as well as donations offered by public. Nonetheless, in the current scenario talks about the issue that stems from the signing of petition by over and above 100000 individuals expressing their displeasure. This petition exerted pressure on NSW government for discardig a million dollar scheme to renovate stadiums that already subsists and instead suggested to put in the money for development of schools as well as hospitals. As per them, the total wealth that is saved by sporting clubs need to be used in an effective manner, that is to say, the sum of money saved need to be utilized for the welfare of the general public and not in its place for renovation/reestablishment of stadiums that is redundant (Wilson et al. 2015). However, payers of tax are also anticipated to drain out wealth to different election commitment for the purpose of upgrading varied sport facilities at specifically Etihad stadiums along with other venues. However, sports fans also get frustrated by escalation of prices of tickets and ticket prices directed to administration funds (Smith et al. 2015).
As rightly mentioned by Nichol and Duffy (2017), public interest theory is an economic notion that deals with public welfare and approximations of money that is put in for meeting the interests of public. The sporting club such as AFL as well as NRL are acquiring enormous amount of money by way of not disbursing the tax and using state funds for development purposes. Therefore, it can be said that tax exemption in this case is hampering public welfare as the state funds could be used for other public projects (for example for development of schools and other educational facilities or health purposes). Also, the money generated from the sale of tickets is also employed for internal administration purposes and is not directed towards benefits of the general public. In that way, it can be said that this proposition is adversely affecting the state welfare (Pomfret 2016). Based on the analyses of the given case under consideration it can be hereby deduced that in case if this tax exemption can be removed for the sporting clubs, then that would positively affect the exchequer of the government. As such, the government would be able to acquire higher tax revenue from these companies and this acquired fund can be used for the purpose of development that can serve the interests of the public (Matthew 2017).
Requirements for Exemption of Income Tax
The clubs having the NFP status can necessarily seek aid from government for financing their projects of renovation else wise development of the stadium facilities. According to the capture theory, there is a specific procedure by which regulatory agencies eventually get dominated by the sectors they were regulating (Picard et al. 2016). Thus, it can be regarded as a kind of government failure that happens when a regulatory agency accountable that is supposed to act as per interests of the public instead progresses the commercial or else political issues of specific interest group that in turn dominate the sector it is responsible for regulating. Therefore, as per the capture theory, the sector under consideration has necessity to make certain that the amount of tax exempted is employed effectively in areas that can serve the interests of the public and add to their welfare (McGregor-Lowndes and Crittall 2017). However, there exists no accountability of wealth that are created out of sale of ticket prices and on top of that no tax is levied on the earning. Therefore, in the light of the capture theory it can be hereby stated that regulatory agencies (particularly Australian Taxation Office) is getting dominated by the sporting club sector and is failing to act as per interests of the public.
In accordance with the economic theory it can be hereby stated that benefits of particularly the tax-free state of sporting clubs in Australia is that it generates a particular association between revenues as well as expends in the financial budget. However, the theory has the need to encounter certain difficulty that restricts the scope of government actions. Scaife et al. (2015) states that the government can neither uphold nor can undertake steps for stabilization of the entire economy. In this case, there is huge amount of money that remains underutilized.
According to the primary purpose of the sporting clubs regardless of division have the need to inspire sports. However, any other secondary purpose other than generation interests for sports can be considered to be ancillary (Dawson et al. 2015). Thus, both small scale as well as large sized sporting clubs has the need to be disbursing tax and use the money for development of awareness regarding the sports as well as encouragement of sports and not for any other reason. As per the capture theory, as the money generated from the sports segment can be utilized for public interest. However, clubs that are genuinely interested in the generation of awareness of sports and encouragement of the same need to be exempted from tax. In this regard, size of the club can be taken into account for evaluation of tax.
Conclusion
The above mentioned study helps in comprehending the fact that primary purposes of sporting clubs regardless of divisions need to inspire sports and any other purpose need to be secondary. The current discussion at hand indicates towards effects of exemption of income tax of sporting clubs as there exists no accountability of specifically funds generated by the clubs by sale of ticket that is again tax free. Also, direction of state funds for development in this segment can also be redirected more towards projects that serve public interests. Therefore, it can be hereby mentioned tax exemption for sporting clubs need to be removed and government funding of projects of development of facilities in this area also need to be stopped
References
Dawson, A., Kremenchutskaya, N. and Gastin, P., 2015. Staying on track: A profile of the Australian athletics coaching workforce. Mod Athlete Coach, 53, pp.31-38.
Loh, C.M., Deegan, C. and Inglis, R., 2015. The changing trends of corporate social and environmental disclosure within the Australian gambling industry. Accounting & Finance, 55(3), pp.783-823.
Matthew, B.T., 2017. Financial management in the sport industry. Taylor & Francis.
McGregor-Lowndes, M. and Crittall, M., 2017. An examination of tax-deductible donations made by individual Australian taxpayers in 2014-15. Australian Centre for Philanthropy and Nonprofit Studies, Queensland University of Technology.
Nichol, M. and Duffy, M., 2017. Performance-enhancing drugs, sport and corporate governance—Lessons from an Australian football club. Common Law World Review, 46(2), pp.83-111.
Nichol, M. and Duffy, M., 2017. Performance-enhancing drugs, sport and corporate governance—Lessons from an Australian football club. Common Law World Review, 46(2), pp.83-111.
Picard, R.G., Belair-Gagnon, V., Ranchordás, S., Aptowitzer, A., Flynn, R., Papandrea, F. and Townend, J., 2016. The impact of charity and tax law and regulation on not-for-profit news organizations.
Pomfret, R., 2016. Australia’s Economic Mores through the Lens of the Professional Sports Industry. Only in Australia: The History, Politics, and Economics of Australian Exceptionalism.
Scaife, W., McDonald, K., Williamson, A. and Mossel, V., 2015. Giving in Australia: Philanthropic Potential Beginning to Be Realized. In The Palgrave Handbook of Global Philanthropy (pp. 488-505). Palgrave Macmillan, London.
Smith, B.J., Thomas, M. and Batras, D., 2015. Overcoming disparities in organized physical activity: findings from Australian community strategies. Health promotion international, 31(3), pp.572-581.
Uddin, S., Siddiqui, J. and Islam, M.A., 2016. Corporate social responsibility disclosures, traditionalism and politics: A story from a traditional setting. Journal of Business Ethics, pp.1-20.
Wilson, V., Freeman, S. and Freeman, J., 2015. Accounting: a Practical approach. Pearson Higher Education AU
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
