Accounting Theory: Tax Exemption, Public Welfare, and Sports Clubs

This report provides a comprehensive analysis of the tax exemption status of sports clubs, particularly focusing on Australian football leagues. It examines the financial implications of tax exemptions, highlighting how these clubs, despite receiving substantial income, often benefit from state funding and tax-free status. The report delves into the regulatory framework governing tax exemptions for not-for-profit organizations, emphasizing the requirements for clubs to maintain this status, and the potential conflicts with public welfare. It discusses the public interest theory, capture theory, and economic theory to evaluate whether the current tax exemptions are in the best interest of the public, considering the use of state funds for stadium development and the allocation of ticket revenue. The report concludes by suggesting the need for a reevaluation of tax exemptions for sports clubs and a potential shift in government funding priorities towards projects that directly benefit the public.

Running head: ACCOUNTING THEORY
Accounting Theory
University Name
Student Name
Authors’ Note

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Abstract
The rationale of the current study is to analyze the association between scholarly accounting
research and specialized practice. The current study presents an editorial appraisal and
acknowledges that scholarly accounting research is crucial for the higher education
arrangement, careers as well as publishers. Nonetheless, its influence on training, specialized
practice, accounting professions as well as society on the whole is a highly debated matter.
Essentially, the editorial refers to opportunity for accounting scholars to engage in this
profession and use their research work to influence significant concerns in higher education
across the globe. The study at hand delivers important commentary on the association
between research on accounting as well as specialized practice as reflected in various
scholastic journals and for that a real case is taken into consideration. Particular case on
article by ErykBagshaw is taken into account that the issue of tax exempted
earning of football league and its application that is mentioned in the article
penned by ErykBagshaw. Also, the article focuses on the total tax amount
exempted from earnings as well as what is done with the same.

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Introduction
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.
Detailed Discussion
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,

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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.
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).

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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).
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

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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

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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.

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References
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