The term structure can have various meanings for different roles within your State Sporting Organisation. Some may see it as their employee organisational structure, or board structure, however within the context of this toolkit, we are referring to the legal entity structure.
The manner in which your State Sporting Organisation is structured will often mandate your compliance obligations. As examples, these obligations can extend across reporting, auditing and taxation. Do you know how you are structured?
The way in which your sport is structured is often inherited. It is often a good idea at the time, but has not been subjected to review for some time. The manner in which you are structured can dictate much of your compliance obligation.
Common structures within the sporting sector include:
- Public Company limited by guarantee; and
- Incorporated associations.
State Sporting Organisations hold a special place in the heart of the community, and as such, are often of a public interest. As a board, you have an obligation to the members and the community. Auditing of financial statements may be required by law, but don’t forget, it may be required by constitution. Do you know your obligation? Please consider:
- Does your constitution call for an audit?
- Does your structure call for an audit?
- Does your structure call for a review?
Audit v Review:
Your structure and in some circumstances your turnover will determine whether you require an audit or a review.
If required by constitution, an audit will need to occur.
For companies limited by guarantee, it is suggested reviewing the threshold requirements published by ASIC (ASIC Guidance).
For incorporated associations, it is suggested reviewing the threshold requirements published at Fair Trading NSW Guidance.
These guidance statements are useful is assessing if your structure requires an audit.
What is an audit?
An audit is a process involving an independent auditor inspecting and assesses your financial statements and underlying records at year end to ensure that materially they present fairly the financial statements of the State Sporting Organisation. This information is often required by other users, such as members or funding bodies.
An audit, whilst some may find it daunting, is a great opportunity for the board to seek feedback on their financial rigour, and to seek external verification that their books and records are in good shape.
What is a review?
A review is not as extensive as an audit, providing less assurance over the financial statements. A review includes reduced procedures by the auditor, mainly consisting of enquiries of management and analysis of financial information.
You should be aware of your requirements before exploring this option.
Working with auditors
Being audited should by no means be a nerve wracking experience. There are many benefits of obtaining an external audit, including:
- Providing an independent view of performance for stakeholders;
- Enhancing overall governance processes;
- Adherence with Accounting Standards and legislative requirements;
- May assists in obtaining funding opportunities;
- Identifies key areas within financial process that may require improvement;
- Identifies control gaps or weaknesses; and
- May act as a deterrent to fraud, or may also detect fraud.
In order for the audit experience to be effective and efficient, your auditor should seek to undertake the following throughout the annual engagement:
- Provide you with a Fee and Engagement Letter;
- Meeting with you to discuss audit risk areas and expectations throughout the engagement;
- Provide you with a detailed list of audit information requirements to ensure a timely and streamlined audit;
- Regularly engage with the Audit and Risk Committee / Board of Directors;
- Provide you with notification of upcoming changes to accounting standards; and
- Provide you with a management letter covering audit issues identified and recommendations for the future at the completion of the engagement.
As mentioned previously, State Sporting Organisations hold a special place in the heart of the community, and as such, are often of a public interest. Your reporting requirements are often driven by who the users of the financial statements are, and even if they are not, it’s important to consider who might need them to make decisions.
Users of financial statements may include the following:
|Members||Understanding how the sport is operating and performing|
|Directors||Making decisions on how to operate the sport|
|Financiers||Assessing the ability to service debt|
|Government||Assessing funding needs along with assessing the long term viability of the sport|
Some State Sporting Organisations have the ability to self-assess their tax exempt status – meaning if eligible there is no income tax to pay. It is important to continually review any exemption to ensure it remains valid. It is recommended this be completed annually. The Australian Tax Office provide much guidance on this.
Whilst a State Sporting Organisation may be exempt for income tax purposes, just as paying your annual sporting membership fee or participation fee is considered to be an obligation for your sport, there are other specific tax obligations that must be considered. Whilst not exhaustive, the following must be understood:
- Fringe benefits tax
- Goods and services tax
- Payroll tax
- Superannuation guarantee
- Land tax
- Stamp duty
The Australian Tax Office published a guide in 2014 on the interaction between tax and not-for-profit organisations, which can be accessed here.
GST for State Sporting Organisations is not as clear cut as opting in or out. The ATO publish threshold tests to assess if you have an obligation. It is important to understand that any GST collected is not the money of your sport – and you must plan around your requirements to remit these monies collected.
Regardless of thresholds, you may still choose to register your State Sporting Organisation for GST if its GST turnover is less than the threshold. The decision to voluntarily register for GST is one that should be based on the administrative needs of your State Sporting Organisation. Some State Sporting Organisations under the threshold may choose not to register for GST because they consider the GST reporting requirements to be a greater burden than the benefit.
As the name suggests, employment taxes refer to taxes paid for or on behalf of your employees. They include the following:
- Fringe benefits tax
- Payroll tax
- Pay as you go (PAYG)
In order to determine if you may have such obligations, consider asking yourself the following questions as a starting point:
|Are we currently providing cash or non-cash benefits to employees outside of their salary and wages? Non-cash benefits may include things such as a company car, mobile phones, internet, gym membership or health insurance.||Fringe benefits tax|
|Do we have frequent or significant entertainment and meal expenses?||
Fringe benefits tax
|Do we provide access to the use of a car to employees?||Fringe benefits tax|
|Have we assessed if we meet the threshold requirements for payroll tax in NSW?||Payroll tax|
|Are we withholding tax from employees as required under pay as you go withholding?||Pay as you go withholding|
|Are we paying the superannuation guarantee on behalf of our employees?||Superannuation guarantee|
|Do we have full time equivalent employees or contractors?||Payroll tax and superannuation guarantee|
Note: as with any legal and financial documents, this does not replace obtaining legal and financial advice on each sports specific requirements and it is recommended you do so.
The information provided in the framework and tool kit is for your information only. The authors and the NSW Office of Sport accept no responsibility for the accuracy of the information or your reliance upon it.