• Section A. Cost of supply guidelines

    1. Working out the cost of providing something

    A supply of accommodation by a charity is GST-free if it is for consideration that is less than 75% of the cost to the charity of providing the accommodation.

    If the supply is not a supply of accommodation, the supply is GST-free if it is for consideration that is less than 75% of the consideration the charity provided, or was liable to provide, for acquiring the thing supplied.

    We consider these two points allow the charity to use the cost of providing the thing supplied when making this calculation.

    Further information

    For more information, refer to section 38-250External Link, in particular, paragraph 38-250(2)(b).

    End of further information

    2. General position

    When working out the cost of providing something, a charity should include:

    • all direct costs incurred – for example, materials and direct labour, and
    • a reasonable apportionment of indirect costs incurred – for example, marketing, administration, office expenses, electricity, telephone and insurance.

    3. Cost of providing supplies – other than accommodation

    For supplies that are not accommodation, charities should only include amounts paid or payable by them in the calculation.

    This is because subparagraph 38-250(2)(b)(ii) states that it is the 'consideration the supplier provided or was liable to provide for acquiring the thing supplied'.

    The consideration the supplier provided or was liable to provide is GST-inclusive.

    Charities cannot include the following things in the calculation as they do not involve an actual outlay by the charity:

    • depreciation of assets, and
    • imputed costs for things like volunteer labour, donations, and free rent where the charity has not actually provided any consideration or incurred any real costs.
    Further information

    For more information, refer to section 38-250External Link, in particular subparagraph 38-250(2)(b)(ii).

    End of further information

    4. Cost of providing accommodation

    A supply of accommodation by a charity is GST-free if it is for consideration that is less than 75% of the cost to the charity of providing the accommodation.

    For supplies of accommodation, only costs incurred in providing the accommodation can be included in the calculation. This does not include imputed costs for things like volunteer labour, donations or free rent where the charity has not actually provided any consideration or payment, or incurred any real costs.

    If a depreciable asset is used to provide accommodation, the charity should use the depreciation amount for the asset rather than the whole cost of the asset in the calculation. This ensures:

    • the cost of the depreciating asset is not attributed to the first supply of the accommodation, and
    • the cost of the asset can be attributed to later supplies.
    Attention

    Charities must not include both the full cost of an asset and the depreciation amount for the asset in the calculation. Depreciation amounts can only be included for supplies of accommodation.

    End of attention
    Further information

    For more information, refer to sections 38-250External Link, in particular subparagraph 38-250(2)(b)(i).

    End of further information
      Last modified: 18 Nov 2013QC 27139