The tax-free status of clubs is apparently being rorted the ACT. The status is grants because clubs are non-profit and return all of their earnings back to the club or to worthwhile community aims.
The trouble is there will always be a few willing to apply the letter of law and not its spirit. They can divert the profits of what is on its face a community-based club to personal dividends. This is done by the “”club” paying very high rents for premises with the landlord being someone related to the rort. Another way is to pay directors annual fees well over what their work would warrant. So funds are milked out of the club and there is little difference between the club and a for-profit company, with the notable exception that the latter pays tax.
The Government has a major political difficulty. It could end the tax-free status of all clubs and replace it with community grants, which admittedly would be more expensive to administer. But if it is seen to clamp down on the tax status clubs it will be seen as heartlessly snatching benefits from junior sport and various ethnic communities, rather than sensibly cutting out a rort. Further, it requires federal help, because company tax is a federal matter and it will need federal co-operation to retrieve the tax to finance the grants.
The middle course is to try to isolate those “”clubs” which are not clubs and remove their tax-free status. Their actions are not fair to enterprises in the city to have to compete while paying tax. Inevitably, it will require expensive stricter financial and auditing reports by all clubs and perhaps wider investigation powers. It is unfortunate that charity should cost so much.