Possible crisis for North, South & Centrals looming?

[Rushby Hinds]

Souths loses favourable tax status

27mar06

ONE of Australia's biggest league clubs, Souths Juniors, has lost its tax-free status after a tribunal found its main activity was gambling rather than sport.

The Administrative Appeals Tribunal revoked Souths Juniors' income tax exemption last week, The Australian Financial Review reported today.
The court decided its operation of a "miniature Las Vegas" overtook its support for junior rugby league or the NRL's South Sydney Rabbitohs.

Souths Juniors has assets of $43 million and provides substantial activities to members including 545 poker machines, free shows and $5 steaks, the newspaper said. It also has 21 holiday units, a hotel, two gyms, and interest in a golf course and a catamaran cruiser.

The decision, which is a victory for the taxman, could affect 3000 clubs nationwide as it threatens the privileged tax status of the clubs industry.
"We are closely examining the ruling in regard to Souths Juniors and it potential to create a worrying precedent for more than 3000 sporting clubs across Australia," Clubs Australia chief David Costello told the newspaper.

Souths Juniors said 80 per cent of its profits, or $4.6 million in 2003, was distributed to the junior league and Rabbitohs.

But the tribunal said sporting donations accounted for only 34 per cent of profits.


from http://www.theaustralian.news.com.au/common/story_page/0,5744,18616548%255E29277,00.html

[Punk Rooster]

Souths Pokies- 545
North Adelaide- 80
Quite a bit of difference ther, one would think. Despite it being called "North Adelaide Golf Course", I don't think we own any part of it...

[drebin]

What if they had donated the whole lot back to the Football side of the club? That may have avoided the problems. I understand The NSW Leagues clubs are set up a little differently to here and without knowing the "nitty gritty" etc I understand from my dealings at North, it has been discussed by the SANFL CEO's and our clubs should be right the way the clubs are set up. We certainly tipped more than 30 percent back into the Football side and all of our consitution has been change to put the Roosters Club Social Arm all under the NAFC now. Who knows - will have to wait and see for the legal and technical issues to be explained before we panic?
P.S. All the SANFL clubs have pokies so they would all be affected if that ruling came into force - not just the big turnover clubs like North, Centrals and South.

[Rushby Hinds]

So you are saying that North aren't in the top 3000 clubs in Australia Punky?

[Punk Rooster]

So you are saying that North aren't in the top 3000 clubs in Australia Punky?

I honestly wouldn't know- I only made a statement that I know to be true, & that is that North have 80 pokies.

[Rushby Hinds]

the whispers are VERY strong that a club in SA (not one of the three named above) was/is being investigated very strongly by the ATO about 6 months ago, for what I believe is a very similar situation. I'm pretty sure you know the story as well Drebin.

[Punk Rooster]

I guess North won't be building that casino on the outer wing at Prospect then

[Rushby Hinds]

Well they COULD, but if hypothetically a club had paid above market prices to get the lease or the freehold and only had thin margins, then a 30% tax would turn the venue from an asset to a liability in the blink of an eye.

Not that that could really happen.

[drebin]

I will make some enquiries tommorow re the SA situation but as I alluded to previously the set up at North and the distribution of funds etc are okay at this stage. The real arguement is how much of the income raising businesses produce profit for the Football operations or is it being invested back to make more money and expansion. At the end of the day if the bul of moeny goes back into football should it matter where the profit or income is derived from. As it is we still pay a multitude of taxes - both State and Federal. Currently we are okay but it might put on hold (until a definite ruling is made) any future business operations expansion or additions being looked at.

[Grand Central]

I'm not surprised at the ruling. Souths Juniors dwarfs the South Sydney Rabbitohs, itself a pokies palace by comparison to SANFL clubs. It is a casino with a bit of kiddy league tacked on the side.

No SANFL club would be near the top 3000 clubs. Remember there's a stack of bowling clubs, RSL clubs and other sport clubs that have thrived for decades in NSW and QLD with pokies and quite frankly leave our clubs for dead.

[drebin]

Look at Southport FC (mentioned on another thread re bidding for the Roo's). It has 45,000 members (most would be pokie members) and an annual pokie fuelled turnover of $200m + a year and they play in the QAFL!

[Magpiespower]

The court decided its operation of a "miniature Las Vegas"

Would love to know what they call Panthers!

[Wedgie]

I know how the South Sydney and Souths Juniors operates being a pretty close follower of the NRL and I agree fully that its not a sporting club.
Completely different situation to anything in SA. Hell, they're even unique to the way other NRL clubs operate.
Souths Juniors stopped being a sporting club about 20 or 30 years ago, its amazing its taken the ATO this long.
Definately no worries for SANFL clubs.

PS Not sure what difference South and Centrals have from most of ther SANFL clubs so dont know why they were mentioned and not the Glenelgs, Westies, etc??

[Rushby Hinds]

PS Not sure what difference South and Centrals have from most of ther SANFL clubs so dont know why they were mentioned and not the Glenelgs, Westies, etc??

My throw away attention seeking line was based on the clubs that I would GUESS have the most income from pokies.

Possibly followed by eagles, West, then further down Port and the Bays.

I agree that South Sydney is FAR away from any of our clubs, but the ATO loves setting precedents...........

[doggies4eva]

Get real. If they took away the tax status of SANFL clubs pokie operations there would not be a sporting club in the country left that would qualify. That will never happen.

[topsywaldron]

Norwood have nothing to fear from this one.

If anything I'd be looking to claim a deduction from the losses our social arms have made over the last decade.

[Rushby Hinds]

Get real. If they took away the tax status of SANFL clubs pokie operations there would not be a sporting club in the country left that would qualify. That will never happen.

It's not the ATO's job to care. There job is to collect as much tax as they can where they think it should be paid. Convesely, they offer education to people who are paying too much tax if there is a legitimate way for them to reduce tax.

[doggies4eva]

Get real. If they took away the tax status of SANFL clubs pokie operations there would not be a sporting club in the country left that would qualify. That will never happen.

It's not the ATO's job to care. There job is to collect as much tax as they can where they think it should be paid. Convesely, they offer education to people who are paying too much tax if there is a legitimate way for them to reduce tax.

Yes and they are still an arm of government and sensitive to public opinion. Further they don't want to pick a fight with a huge section of the community that they probably can't win. The example of the Rabittos club is a fairly extreme case. In all cases that I know the SANFL clubs are effectively fund-raising arms of the sporting club and so can legitimately claim the benefits that they currently enjoy.

[Rushby Hinds]

Further they don't want to pick a fight with a huge section of the community that they probably can't win.

If they thought that theu were not going to win, presumably they would not bother. If they thought they had a legitimate arguement, then they would bother.


The whole point of the article is:

The decision, which is a victory for the taxman, could affect 3000 clubs nationwide as it threatens the privileged tax status of the clubs industry.
"We are closely examining the ruling in regard to Souths Juniors and it potential to create a worrying precedent for more than 3000 sporting clubs across Australia," Clubs Australia chief David Costello told the newspaper

.

I have NO idea whether our clubs are part of "Clubs Australia", but i would pray that the SANFL would at least LOOK at this ruling and get legal opinion whether it mattered or not.

[doggies4eva]

The SANFL clubs can spend money on lawyers if they wish but until they are challenged by the ATO it appears to be a bit of an over-reaction.

I would say that an entity with net assets of $43m which is distributing 34% of its profit to sporting clubs can be fairly diffrentiated from the SA scenario where the entities are worth close to bugger all and donate ALL of their earnings to sporting clubs.

One sounds like a business and the other a sporting fund raiser to me. But then I'm not the tax man.