• Section E. Cultural and performing arts sector

    Applying the cost of supply test to tickets supplied by organisations in the cultural and performing arts sector

    Non-profit organisations in the cultural and performing arts sector that are charities can apply a range of GST concessions. A gift deductible entity for GST purposes is an entity that can receive gifts or contributions deductible under Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997).

    There has been some concern in the cultural and performing arts sector about how the 'cost of supply test' applies to supplies of tickets for performances and events.

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

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

    Further information

    For more information on:

    • the GST concession available for non-profit organisation, and
    • the cost of supply test, refer to subparagraph 38-250(2)(b)(ii) of A New Tax System (Goods and Services Tax) Act 1999.
    End of further information

    Methodology for applying the cost of supply test – supplies made by charities in the cultural and performing arts sector

    The following methodology for applying the cost of supply test is approved for use by charities in the cultural and performing arts sector that cannot establish their actual costs at the time of supply.

    This methodology is within the scope of the GST legislation and uses the principles explained in the cost of supply guidelines – section A. It simplifies the administrative and compliance requirements for the sector.

    To correctly calculate whether a supply is GST-free or taxable, charities must go through the following steps.

    Step 1: working out the cost of making the supply

    Estimate the projected costs for a season of performances, exhibition or event. Do this when the actual costs will not be known until after the supplies have been made. However, if actual costs are available they must be used.

    Estimate the total number of tickets (of all classes) that will sell.

    Divide the projected costs by the total number of tickets to obtain the cost of supplying a ticket.

    Attention

    We accept that when applying the cost of supply test, charities can include all direct costs and a reasonable apportionment of indirect costs. However, costs used must be real costs. Things like voluntary labour, donations, other imputed costs and depreciation can not be included. All projected costs must be realistic and must be aligned with other costing conducted when the charity determines ticket prices and the costs of holding an event or performance.

    End of attention

    Step 2: working out whether a supply is GST-free

    For each class of ticket, the charity should divide the price that is charged for a ticket in that class by the cost of supplying a ticket, worked out in step 1.

    If the price charged for that ticket is less than 75% of the cost of supplying the ticket, it will be GST-free.

    If the price charged is at or more than 75% of the cost of supplying the ticket, it will be subject to GST.

    All tickets in a class of tickets will be treated in the same way.

    Season tickets

    A season ticket entitles the holder to be admitted to a specific number of performances, exhibitions or events. Season tickets and single tickets are regarded as two classes of ticket for the methodology.

    In step 1 of the methodology, each season ticket is counted as the number of admissions which the ticket allows when working out the total number of tickets for all classes. The cost of supplying a season ticket is the cost of supplying a single ticket multiplied by the number of admissions allowed by the season ticket.

    In step 2 of the methodology, the price of a season ticket is compared to the cost of supplying the season ticket in working out whether a supply of the season ticket is GST-free.

    Example 1: bulk discount

    A charity charges $50 for a single ticket to a performance and $450 for 10 tickets to the performance. Bundles of 10 tickets and single tickets are regarded as two classes of tickets for the methodology. The charity should follow the process in 'Season tickets' in working out whether a supply of a bundle of 10 tickets is GST-free.

    End of example

     

    Example 2: applying the methodology to supplies of tickets

    A charity estimates that it will cost them $4.2 million to produce a season of performances.

    They have four classes of tickets:

    Pensioners and students pay $25 per ticket

    20,000 tickets available

    B Reserve tickets are sold for $45 per ticket

    40,000 tickets available

    A Reserve tickets are sold for $100 per ticket

    10,000 tickets available

    Box seats are sold for $175 per ticket

    1,000 tickets available

    Total

    71,000 tickets available

    The charity receives several government grants to help fund their activities. These grants are consideration for an agreement to supply services, and are not used in the calculation of the cost of supplying a ticket to a performance.

    They estimate that they will sell approximately 65,000 of the available tickets.

    The cost of supplying a ticket is $64.62 ($4,200,000/65,000).

    75% of the cost of supply is $48.47 ($64.62 x 75%).

    Any tickets sold for less than $48.47 will be GST-free.

    Looking at the different classes of tickets:

    • $25 tickets will be GST-free as $(25/64.62) x 100% = 38%
    • $45 tickets will be GST-free as $(45/64.62) x 100% = 69%

    The other tickets will be taxable because the consideration received per ticket is greater than the cost of supplying a ticket.

    End of example

    Public museums, public art galleries and public libraries

    Applying the cost of supply test – admission fees to public museums, public art galleries and public libraries

    Non-profit public museums, public art galleries and public libraries that are charities can apply a range of GST concessions. A gift deductible entity for GST purposes is an entity that can receive gifts or contributions that are deductible under Division 30 of the ITAA 1997.

    Public museums, public art galleries and public libraries are part of the cultural sector. There has been some concern in the cultural and performing arts sector about how the cost of supply test applies to supplies of tickets and admissions for performances and exhibitions.

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

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

    Further information

    For more information on:

    • the GST concessions available for non-profit organisations, and
    • the cost of supply test, refer to subparagraph 38-250(2)(b)(ii) of A New Tax System (Goods and Services Tax) Act 1999.
    End of further information

    Methodology for applying the cost of supply test – supplies made by charities operating public museums, public art galleries or public libraries

    The following methodology for applying the cost of supply test is approved for use by charities that operate public museums, public art galleries or public libraries and cannot establish their actual costs at the time of supply. This methodology is within the scope of the GST legislation and uses the principles explained in the Cost of supply guidelines – section A It simplifies the administrative and compliance requirements for the sector.

    To correctly calculate whether a supply is GST-free or taxable, charities must go through the following steps.

    Step 1: working out the cost of making a supply

    Estimate the projected costs for an exhibition or event. Do this when the actual costs will not be known until after the supplies have been made. However if actual costs are available they must be used.

    Estimate the total number of admissions (of all classes) that will sell.

    Divide the projected costs by the total number of admissions to obtain the cost of supplying an admission.

    Attention

    We accept that when applying the cost of supply test, charities can include all direct costs and a reasonable apportionment of indirect costs. However, costs used must be real costs. Things like voluntary labour, donations, other imputed costs and depreciation can not be included. All projected costs must be realistic and must be aligned with other costing conducted when the charity determines ticket prices and the costs of holding an event or exhibition.

    End of attention

    If public museums or public art galleries hold special exhibitions in addition to their general operations (of exhibiting their collections), they may apply step 1 to calculate the cost of supplying an admission to the special exhibitions by using the following options.

    Option 1: treat the general operations and special exhibition together when estimating the projected costs and the total number of admissions. The cost of supplying an admission to the general operations is the same as the cost of supplying an admission to the special exhibition.

    Option 2: treat the general operations and the special exhibition separately. If a public museum or public art gallery chooses this option, they will be required to isolate the projected costs and admissions for the special exhibition in working out a separate cost of supplying an admission to the special exhibition. In allocating costs to the special exhibition, both direct costs and an appropriate proportion of indirect costs must be taken into account. To the extent that projected costs and number of admissions have been included in the calculation of the cost of supplying an admission for the special exhibition, they will not be included in the calculation of the cost of supplying an admission for the general operations. Therefore, the cost of supplying an admission to the special exhibition may not be the same as the cost of supplying an admission to the general operations.

    Step 2: working out whether a supply is GST-free

    For each class of admissions, the charity should divide the price that is charged for an admission in that class by the cost of supplying an admission, worked out in step 1.

    If the price charged for that admission is less than 75% of the cost of supplying the admission, it will be GST-free.

    If the price charged is at or more than 75% of the cost of supplying the admission, it will be subject to GST.

    All admissions in a class of admissions will be treated in the same way.

    Example 3: applying the methodology to supplies of admissions 

    A public museum estimates that the cost of operating and maintaining the museum for the full year is $4.2 million. This cost includes $600,000 estimated for holding a special 'one-off' exhibition.

    The museum has the following admission prices:

    General operations

    • Concessional admissions $5
    • General admission $12

    Special exhibition

    • Concessional admissions $10
    • General admission $25

    The museum estimates total admissions for the general operations and special exhibition as follows:

    • General operations: 165,000 admissions
    • Special exhibition: 15,000 admissions

    The museum receives several government grants to help fund their activities. These grants are consideration for an agreement to supply services, and are not used in the calculation of the cost of supplying an admission.

    Option 1: treating the general operations and special exhibition together

    The estimated costs are $4,200,000.

    The estimated total number of admissions to the general operations and special exhibition is 180,000 (165,000 + 15,000).

    The cost of supplying an admission is $23.33 ($4,200,000/180,000).

    75% of the cost of supply is $17.50 ($23.33 x 75%).

    Admissions for less than $17.50 will be GST-free.

    Looking at the different classes of admissions:

    • All admissions to the general operations will be GST-free as the admission fees of $5 and $12 are less than 75% of the cost of supplying an admission.
    • The concessional admissions to the special exhibition will be GST-free as the admission fee of $10 is less than 75% of the cost of supplying an admission.
    • The general admissions to the special exhibition will be taxable because the admission fee of $25 is greater than 75% of the cost of supplying an admission ($(25/23.33) x 100% = 107%).

    Option 2: treating the general operations and special exhibition separately

    General operations

    Estimated costs associated with general operations are $3,800,000 ($4,200,000 – $600,000).

    The estimated total number of admissions to the general operations is 165,000.

    The cost of supplying an admission to the general operations is $23.03 ($3,800,000/165,000).

    75% of the cost of supply is $17.30 ($23.03 x 75%)

    All admissions to the general operations will be GST-free as the admission fees of $5 and $12 are less than 75% of the cost of supplying an admission.

    Special exhibition

    Estimated costs associated with the special exhibition are $600,000.

    The estimated total number of admissions to the special exhibition is 15,000.

    The cost of supplying an admission to the special exhibition is $40 ($600,000/15,000).

    75% of the cost of supply is $30 ($40 x 75%).

    All admissions to the special exhibition will be GST-free as the admission fees of $10 and $25 are less than 75% of the cost of supplying an admission.

    End of example

    Wide application of the methodology to non-accommodation supplies

    The methodology developed for charities operating public museums, public art galleries or public libraries is same as that for charities in the cultural and performing arts sector.

    The methodology has wide application and can be used by charities making other kinds of non-accommodation supplies.

    Example 4: transport services

    A charity operates a community bus for the purposes of transporting elderly and disabled persons around the neighbourhood. The charity charges 50 cents for a single trip and $4 for 10 single trips. The charity can apply the cost of supply methodology to the transport supplies (see examples 1 and 2).

    End of example

     

    Example 5: conference services

    A charity holds a conference and charges different registration fees for pensioners, students, adults holding concession cards, adults and families. The charity can apply the cost of supply methodology to conference services (see examples 1 and 3).

    End of example

     

    Example 6: supplying books

    A charity publishes a book on the protection and enhancement of natural environment and sells it for $25 a copy. The charity publishes another book on endangered wildlife and native vegetation and sells it for $35 a copy.
    The charity can apply the cost of supply methodology to the supplies of books by using:
    • option 1 – that is, applying the methodology collectively to both types of books to work out the cost of supplying a book, or
    • option 2 – that is, applying the methodology separately to each type of book to work out separately (these costs may be different)
    • the cost of supplying a book on the protection and enhancement of natural environment, and
    • the cost of supplying a book on endangered wildlife and native vegetation.
    End of example

     

    Find out more

    Also refer to example 3

    End of find out more

     

    Example 7: a university residential college supplying meals

    A university residential college makes a mixed supply of food and accommodation to students for weekly fees on a semester basis. The supply of food comprises three meals provided each day in the college dining room during the semester.

    As each student is entitled to consume three meals each day during the semester, the college can apply the cost of supply methodology to the supplies of meals by using:

    • option 1 – that is, applying the methodology collectively to daily meals encompassing a breakfast, a lunch and a dinner to work out the cost of supplying a breakfast, a lunch and a dinner each day, or
      • option 2 – that is, applying the methodology separately to each type of meal such as breakfasts, lunches or dinners to work out separately(these costs may be different)
        • the cost of supplying a breakfast
        • the cost of supplying a lunch, and
        • the cost of supplying a dinner.
         
       
    End of example

     

    Find out more

    Also refer to example 3

    End of find out more

    Example 7 demonstrates that the methodology we have approved in this section allows a charity–supplier to choose an option which the charity–supplier considers is more appropriate in its circumstances. We have also approved a similar methodology for boarding schools, university halls and colleges supplying meals to students on longer term bases (see section F).

    Cost of supplying accommodation

    Example 8: a university residential college supplying accommodation

    A university residential college makes a mixed supply of food and accommodation to students for weekly fees on a semester basis. Accommodation options are single and double rooms with shared facilities, single rooms with private facilities, and one bedroom apartments.

    The college can apply the methodology with one modification to the supplies of accommodation. The modification follows the principles explained in the Cost of supply guidelines – section A and requires the college to include depreciation in the projected costs, rather than the full costs of depreciable assets used to provide accommodation.

    The college can apply the modified methodology by using:

    • option 1 - that is, applying the modified methodology collectively to all accommodation options on a weekly basis to work out the cost of supplying accommodation, or
      • option 2 - that is, applying the modified methodology separately to each type of accommodation option such as single rooms with shared facilities, double rooms with shared facilities, single rooms with private facilities or one bedroom apartments to work out separately (these costs may be different):
        • the cost of supplying accommodation in a single room with shared facilities
        • the cost of supplying accommodation in a double room with shared facilities
        • the cost of supplying accommodation in a single room with private facilities, and
        • the cost of supplying accommodation in one bedroom apartment.
         
       
    End of example

     

    Find out more

    Also refer to example 3

    End of find out more
      Last modified: 18 Nov 2013QC 27139