April - Club Victoria Inc.

Sporting Clubs:
PAYROLL TAX AND STAMP DUTY EXEMPT
By Victor Hamit
Are Sporting Clubs of sufficient benefit to the community
to be charitable and therefore exempt from Payroll Tax?
This is a question expected to be answered by the Supreme
Court of New South Wales in early 2011. The case involves
Northern NSW Football Ltd (NNFL) and the New South Wales
Chief Commissioner of State Revenue (Commissioner) over
a claim by NNFL for exemption from Payroll Tax and some
other NSW Duties. The NSW Payroll Tax provisions are similar
to Victoria. NNFL has amongst its objects the promotion,
fostering, management and prevention of discrimination in the
game of soccer.
The NNFL was exempt from Payroll Tax from 2004 to 2007 on
advice from the Commissioner. The exemption was withdrawn
by the Commissioner with effect from 1 July 2007.
NNFL appealed the Commissioner’s decision to withdraw the
exemption to the Administrative Decisions Tribunal (NSW)
and was successful in reinstating its exempt status [Northern
NSW Football Ltd v Chief Commissioner of State Revenue
[2009] NSWADT 113]. The Commissioner then appealed to
an Appeal Panel and was successful in having his determination
reconfirmed [Chief Commissioner of State Revenue v Northern
NSW Football Ltd (RD) [2010] NSWADTAP 28]. NNFL has
appealed to the Supreme Court of NSW.
In essence, the decision turned on whether NNFL was charitable
for the purposes of Australian law and therefore the Payroll
Tax Act (NSW). Australian Law recognises four categories of
charitable purposes, namely: the advancement of education, the
advancement of religion, the relief of poverty and other purposes
beneficial to the community. NNFL argued that its purposes
were beneficial to the community in principally promoting good
health and well being.
apply not only to the Victorian Payroll Tax Act, but also the
Victorian Duties Act. Such a finding may provide relief to
Victorian sporting clubs from payroll tax and stamp duty on the
acquisition of land.
The Income Tax Assessment Act 1997 (ITAA1997) also grants
exempt income tax status to organisations with a charitable
purpose as well as clubs with a main purpose of encouraging
sport.
The position of sporting clubs differs under the ITAA1997 where
income tax exempt status is granted specifically to clubs with a
main purpose of sport. There is no similar specific exemption in
the Victorian Payroll Tax Act or Victorian Duties Act. Currently,
a club needs to establish that its purposes are beneficial to the
community, and therefore charitable in order to be exempt from
payroll tax or stamp duty. It is possible that some clubs may
qualify whereas others may not, depending on their individual
circumstances.
The decision of the NSW Supreme Court will be awaited with
great interest by sporting clubs across the country. Clubs in
Victoria will also be keenly interested in the attitude of the
Victorian State Revenue Office should NNFL succeed in the
NSW Supreme Court.
Victor Hamit Wentworth Lawyers
Level 40 140 William Street
MELBOURNE VIC 3000
Email: vhamit@wentworthlawyers.com.au
Tel: (03) 9607 8380
NSW and Victorian State Revenue Authorities have rigidly relied
on an 1895 English case that “a gift for the encouragement of a
mere sport” is not charitable. That case decided that a trophy
donated as a prize for a yacht race was not charitable. Arguably
the State Revenue Authorities have since broadened the
principle and too rigidly applied the decision. The State Revenue
Authorities argue that sport cannot be a charitable purpose. The
decision has been criticised by Australian academic writers and
not followed by the Canadian Courts. It has been observed that
in 1895 yacht racing was the domain of the wealthy and that
many views of society had evolved over the past 100 years.
If the NSW Supreme Court finds NNFL charitable for Payroll
Tax purposes then it is expected that the same principles would
24 CLUBConnect April 2011