This chapter in one minute
- A club or association must not keep running if it cannot pay its debts. That is the law, whether it is run by volunteers or a paid board.
- In Queensland, committee members of an incorporated association have carried this duty personally since June 2022. Directors of a club company carry the full company-director duty.
- A healthy bank balance can hide trouble. Tied grants, fees paid in advance and short-term loans all make cash look better than it is.
- A new clubhouse or renovation is the most common trap: grants and loans pay to build it, but nothing pays to run it.
- The best protection is simple: look at the next three years of cash before every AGM, write down what you find, and record the committee’s decision in the minutes.
⚠ General information, not legal advice
This chapter explains the law in plain English as at October 2026. The Queensland rules have been checked against the Queensland Government’s own pages. Other states and territories have their own rules; Chapter 2D.4 sets out what has been checked so far (New South Wales, Victoria and Western Australia). Confirm your position with your accountant or a solicitor.
In short: anyone who runs, or checks the accounts of, a club, association or charity that takes in and pays out money.
That includes sporting clubs, surf clubs, bowls and golf clubs, community associations, licensed leagues and RSL clubs, and registered charities.
It is written for two people. The first is the volunteer who joined the committee to help with the juniors or the canteen, and now shares responsibility for the club’s money. The second is the accountant, auditor or verifier who checks the club’s accounts each year. That person is often the only one able to say early, and with authority, “your cash won’t cover next year”.
Why the same formula applies
The Sustainable Cashflow Formula is simple: all cash coming in must equal or exceed all cash going out, every year, with something left over for rising costs and a reserve. A club that spends more than it brings in will run out of money, whether or not anyone is trying to make a profit.
In short: the club’s legal form decides which law applies, but in every case the people in charge must not let it run while it cannot pay its debts.
| Kind of club | Usually | Who carries the duty | Which rule |
|---|---|---|---|
| Incorporated association | Most community and sporting clubs | The committee | Your state’s Associations Act. Queensland: see 2B.3 |
| Company limited by guarantee | Most licensed clubs (leagues, RSL, bowls and golf clubs with gaming) | The directors | The Corporations Act, section 588G, exactly as for any company (Chapter 2A) |
| Registered charity | Any of the above, if registered with the ACNC | The committee or board | ACNC Governance Standard 5, on top of the rules above |
A club that has never incorporated is not a separate legal body at all. The people who sign up its debts could be personally liable for them. If your club trades and is not incorporated, ask your accountant or a solicitor about incorporating.
In short: since 22 June 2022, a Queensland committee member can be penalised personally for letting the association take on a debt it cannot pay.
Associations Incorporation Act 1981 (Qld), section 70I — duty to prevent insolvent trading
Management committee members have a duty to prevent the association incurring a debt where there are “reasonable grounds to expect that the association is insolvent or will become insolvent if the debt is incurred”. Maximum penalty: 60 penalty units.
Committee members and officers must also act in the association’s best interests, with due care and diligence (also up to 60 penalty units).
Sources: Queensland Government, Previous law changes for incorporated associations; Explanatory Notes to the Associations Incorporation and Other Legislation Amendment Bill 2019.
The law gives a committee member three defences. It is up to the committee member to prove one of them:
- the debt was taken on without their authority or consent;
- they were not involved in running the association at the time, because of illness or another good reason; or
- they had reasonable grounds to expect the association could pay its debts.
The third defence is the one a careful committee can rely on, and it depends on having looked. A three-year cash forecast, read at a committee meeting and recorded in the minutes, is the kind of evidence that could show reasonable grounds.
Remember this
Company directors have a “safe harbour” while they work on a rescue plan (Chapter 2A.4). An incorporated association has no safe harbour, and there is no general defence of “we took all reasonable steps”. The committee’s protection is to look ahead, act early, take the accountant’s advice, and minute it all.
Before 2022 there was a gap: a 2015 Supreme Court case (Robson v Commissioner of Taxation) found the company insolvent-trading rules did not reach Queensland associations. The 2022 duty closes that gap. Victoria has a similar duty. The other states and territories each have their own Act, so check your state’s rules. Chapter 2D.4 sets out what has been checked so far.
In short: some of a club’s money is not what it seems. These six traps are where clubs most often get caught.
Watch out: a big bank balance can hide the trouble
In both worked examples, the bank balance still looks comfortable at the end of the first bad year. In one, it is what is left of a building grant. In the other, it is propped up by a short-term loan and unpaid suppliers. The forecast shows the problem. The bank balance does not.
In short: you do not need to be an accountant. You need to know whether the club can pay its way next year, and be able to show you asked.
- Ask for a three-year cash forecast each year, not just last year’s accounts, and read it at a meeting.
- Before approving a new project or loan, ask what it will cost to run each year, and where that money will come from.
- Look again each quarter once the BAS is done (Chapter 3A), so a bad season is caught while it is small.
- Raise any concern in writing to the whole committee or board, and ask for it to be minuted. A private worry protects no one.
- Build a reserve, and know who funds it. BusinessSolvency tops up the club’s Contingency Reserve from its own spare cash first, and shows a Members’ Reserve Contribution (a levy or appeal) only for the part that cash cannot cover — never from money borrowed that year. The Balance Sheet shows Members’ Funds (levies, grants and appeals) and the accumulated surplus, with the reserve as the part “set aside”.
- Take advice early from the club’s accountant. If the club may not be able to pay its debts, see an insolvency practitioner before taking on any new debt.
Remember this: the club version of “no money out while things are negative”
A club pays no dividends or drawings, but it can still spend money it does not have: starting a new project from savings, signing up for building work before the running costs are covered, or borrowing to pay wages. While the forecast shows the club falling short, don’t start spending that doesn’t pay for itself, and don’t borrow to cover running costs.
Urgent: this will catch you out
A club that keeps going on a short-term loan, unpaid suppliers or a levy it hasn’t yet raised could already be insolvent in the eyes of the law. Club company directors face the full company-director exposure in Chapter 2A, including personal liability for unpaid PAYG, GST and super. Queensland committee members face their own statutory duty and penalty. Waiting for next season is the most expensive choice.
In short: every association already has its accounts checked before the AGM. Adding a three-year cash forecast answers the question the AGM should be asking: can we keep going?
In Queensland, an incorporated association must hold its AGM within six months of the end of its financial year. The financial statement, with the auditor’s or verifier’s report, is presented to the AGM, and the annual return must be lodged with the Office of Fair Trading within one month of the AGM.
That statement looks back. It tells members what happened last year. Neither the financial statement nor the annual return is designed to show whether the club can pay its way next year. A three-year forecast presented alongside it fills that gap at almost no extra cost, because the figures are already up to date and the accountant is already involved.
The treasurer closes the books in Xero, MYOB or QuickBooks.
The accountant, auditor or verifier checks the accounts, and imports them into BusinessSolvency.
With the treasurer, they build the next three years from the committee’s budget and plans.
The financial statement and the Solvency Forecast are tabled. The committee’s response is minuted.
After each BAS, the treasurer updates the figures and the committee reads the forecast again.
For a club company, the same idea applies at the annual general meeting of members and when the directors sign the annual financial report.
In short: two fictional Queensland clubs show these ideas with real numbers, checked by the BusinessSolvency calculation engine. One acts in time. One does not.
Riverbend Sports & Recreation Association Inc
A new clubhouse opens in FY2026, paid for with grants and a loan. In FY2027 it costs more to run than the club earns. The club loses $48,880 and cannot cover its loan repayments from trading. The bank still shows $46,370, so on the surface all looks well.
The committee acts: a members’ levy, price rises and a solar grant. The club recovers.
Coastline Leagues & Community Club Ltd
A $2.6 million renovation in FY2026, mostly borrowed. In FY2027 the club loses $717,000. The bank shows $458,790, but only because of a $400,000 short-term loan and suppliers waiting to be paid.
The board carries on as before. The forecast runs out of cash in FY2028 and is $1.66 million overdrawn by FY2030. The directors face the full company-director duty.
The detail you need to advise a club — club companies and charities, the sector’s strain, tax, who checks the numbers and where the reports go, an annual routine, and setting a club up in BusinessSolvency — is now in its own chapter. Go to Chapter 2C → Then Chapter 2D: why the committee should bring the accountant in from the start, and how to use the two worked examples.
Key sources drawn on in this chapter
- Queensland Government — Previous law changes for incorporated associations (changes that started on 22 June 2022)
- Queensland Cabinet — Explanatory Notes, Associations Incorporation and Other Legislation Amendment Bill 2019 (section 70I and its defences)
- Queensland Government — Lodging your association’s annual return
- HopgoodGanim Lawyers — on Robson v Commissioner of Taxation [2015] QSC 76
- Consumer Affairs Victoria — Committee and committee members (incorporated associations)
- ACNC — Governance Standard 5
- Stephen Fairbairn — Clubs and Associations Research Brief, 12 October 2026