Accounting Theory and Application - Assignment
Added on 2021-05-31
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FinancePolitical Science
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Accounting Theory 1Accounting Theory and Applicationby Student NameCourse & Course CodeProfessorUniversityThe City & StateDate
Accounting Theory 2Accounting Theory and ApplicationBasis of tax-free statusFor the past 81 years, the Australian Football League (AFL), the National Rugby League (NRL) and the Australian Sport industry have enjoyed tax-free status. In the recent past, the Australian government has been under immense pressure to abolish the tax free status enjoyed by the AFL and NRL since the two bodies are engaging in income generating activities such as multibillion-dollar TV deals and lucrative gambling and alcohol advertising.With the millions generated from such activities, AFL and NRL still expert the government to use taxpayers’ money develop or upgrade sporting facilities(Bagshaw, 2018). According to critics of the tax-free status is absurd and obscene and it’s high time the tax policy is abolished. The tax-free status in the sporting industry was introduced by the Australian government as a way of providing participating and development of sporting activities in the country. Through the tax-free status policy, the government allowed the community organisations and volunteers to provide sporting facilities locally and encourage sport participation. In return, the stakeholders would not pay tax. Arguments in favour of providing the tax-free statusTax exemption for sporting clubs and activities should be supported based on several reasons.First, the sporting clubs operate to fulfill the ultimate purpose to which they were formed. The clubs apply their funds and properties to encourage and advance sports in the community. Any benefits enjoyed by members such as in this case where payments of over 40 percent over the past decade by Executive to the sports administrators should be regarded as incidental in executing the ultimate purpose of the clubs. Second, tax-free status helps in encouraging and advancing sports which is regarded to as a charitable purpose in Australia.
Accounting Theory 3Third, Sporting activities help in building social capital and promoting community spirit(Taxpayers Australia Inc, 2014, p. 690). Reasons why clubs have achieved large incomes from tax-free statusTax-free status for sporting clubs was meant to increase the funds for facilitating development and support for sport in Australia. The funds are meant to solely help in supporting the cause of sport clubs and the NFL and NRL are not allowed to distribute their surpluses to their members or invest the money in projects that promote the financial status ofindividual members. Therefore, critics should not focus on the amount of many held by sporting clubs through mutual funds as well as the impact of tax-free policy(Kohler, 2015, p.43). Rather, questions should be asked whether or not the clubs use the funds for intended cause. Clubs are free to engage in activities that increase their financial position as far as suchactivities are meant for developing mutual funds and not profit making. Without subjected to taxation and allowed to engage in activities to develop their mutual funds, clubs are more likely to achieve large incomes(Kohler, 2015, p. 56). A difference between profit-making and mutual funds is based on the fact that the latter cannot be directed towards benefiting individuals. When it comes to tax-free status, critics should not focus on the activities involved in raising the funds. The focus should be on using the funds to serve the ultimate purpose. The purpose of increasing mutual funds is to allow clubs to conveniently fund their sporting activities(Parker, et al., 2011, p. 5). Minimising the cost of funding sporting activities sports the purpose of the sporting clubs. Tax-free status is one way of ensuring that sporting clubs obtains significant amount of funds and resources to meet their objectives every year. In conclusion, tax-free status enjoyed by the NRL and NRL clubs should not be abolished because the funds cannot be used to finance private projects; the funds can only be distributed to funds sporting activities(Di Pietra, et al., 2014, p. 113).
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