Question 1. If a training course is deemed to be a taxable supply how do you value the tuition and course materials?
If a supply of a training course consists of a supply of tuition and course materials, the fee charged for the training course is the consideration for the supply. As the supply is a taxable supply, the GST payable is 1/11th of the fee.
If a charity supplies a training course, the charity can use the 'Cost of supply guidelines – Section A' or the 'Market value guidelines – section B' to determine whether the supply is GST-free.
Question 2. What are the likely requirements, (to be determined by the ATO) to comply with the 'professional' valuations required for selling real estate under the margin scheme owned by religious, charitable or benevolent organisations at 1 July 2000?
What type of valuations will be recognised, and in what details?
If you hold real property at 1 July 2000 you must get a valuation of the property or premises to be able to supply the real property and premises using the margin scheme. Also, special valuation rules apply to construction agreements made before 1 July 2000 for the supply of goods or real property made available after that date.
For more information on:
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- rules for valuing property under construction as of 1 July 2000, refer to GSTR 2000/14External Link Goods and services tax: transitional valuation of work-in-progress for head contractors in the building or civil engineering industries
- the requirements for valuations under the margin scheme, refer to:
- GSTR 2000/21External Link Goods and services tax: the margin scheme for supplies of real property held prior to 1 July 2000
- GSTR 2006/7External Link Goods and services tax: how the margin scheme applies to a supply of real property made on or after 1 December 2005 that was acquired or held before 1 July 2000, and
- GSTR 2006/8External Link Goods and services tax: the margin scheme for supplies of real property acquired on or after 1 July 2000
- the methods for valuations, refer to:
Question 3. Charitable organisations that administer Supported Accommodation Assistance Programs (SAAP) offer a number of different services including:
- short term accommodation for refuges where rent is less than 50% of the commercial market rent
- externally supported accommodation for Crisis Accommodation Program (CAP) funded properties where the rent is 75% of the commercial market rent.
How will these different services be treated with respect to GST?
A supply of accommodation by a charity is GST-free if the supply is for consideration that is less than 75% of the market rent.
In working out whether a supply of supported accommodation or crisis accommodation is GST-free, charities can use the daily or weekly Benchmark market values of accommodation (refer to GST and non-commercial rules – benchmark market values) instead of using the Market value guidelines.
Question 4. Since rent is input taxed can charities claim input tax credits even when the rent is greater than 75% market value?
A supply of residential premises by way of lease, hire or licence is input taxed to the amount they are used predominantly for residential accommodation.
If a charity makes the supply for consideration that is less than 75% of the market rent, the supply is GST-free. The charity can claim input tax credits for purchasing things to make the supply.
If a charity makes the supply for consideration, that is at or above 75% of the market rent, the supply is input taxed. The charity cannot claim any input tax credits for purchasing things to make the supply.
Question 5. Community housing rents are either calculated as a percentage of income (usually 25%) or the market rents are driven by local conditions (that is, city rents are higher than country rents for tenants with the same income). How will this be treated for GST purposes?
If a charity supplies community housing for consideration that is less than 75% of the market rent, the supply is GST-free. The charity can claim input tax credits for purchasing things to make the supply.
If a charity supplies community housing for consideration that is at or above 75% of the market rent, the supply is input taxed. There is no GST payable on the supply and no input tax credits can be claimed for purchasing things to make the supply.
Question 6. If a charitable institution, trustee of a charitable fund, gift deductible entity or government school makes supplies of residential accommodation for no consideration, will those supplies be treated as GST-free (under section 38-250) or input taxed (under section 40-35)?
According to section 38-250, a supply of accommodation by a charity is GST-free if the supply is for consideration that is less than 75% of the market rent or less than 75% of the cost of providing the supply.
Although section 38-250 specifically mentions consideration and the charity charges no consideration for the supply, however, to give effect to the intent of the section, we consider that supplies of residential accommodation by charities for no consideration will be GST-free.
If the supply is a fringe benefit (including an exempt benefit) provided to an employee or their associate, the consideration for the supply will include the services provided by the employee. Consequently, we do not envisage this section applying to such supplies.
Question 7. Is the supply of accommodation by a church to a religious practitioner GST-free?
The answer to this question depends upon the circumstances in which the accommodation is provided.
If the supply is a fringe benefit, the supplier must consider whether the recipient's services represent consideration for the supply.
There are a number of different arrangements in which accommodation is provided by churches to their religious practitioners. The issue of whether the religious practitioners' services are included as consideration for the supply of accommodation is to be worked out on a case by case basis, based on the specific arrangement that exists.
In some cases, the church is obliged to provide accommodation, and in practice provides accommodation, to the religious practitioner regardless of the activities carried out by the religious practitioner. The supply of accommodation is dependent on the recipient's status as a religious practitioner and is not a consequence of the provision of their activities. We accept that the activities of the religious practitioners are not consideration for the provision of the accommodation if the church provides the accommodation regardless of the nature or range of activities carried out or if no services are provided by the practitioner. If no other consideration is provided, the supply of the accommodation is GST-free. In considering whether the accommodation is provided regardless of the activities of the religious practitioner, we will have regard to the governing rules of the church and the circumstances in which the accommodation is provided or will cease to be provided.
Under its governing rules, a church is required to provide support to the religious practitioner to enable them to carry out their pastoral duties. This support is provided by way of a stipend and the provision of accommodation.
The governing rules provide that the church is required to provide this support to all of its ordained religious practitioners of this denomination, regardless of the nature of the activities they perform or whether, in fact, they perform any activities. In addition, these rules require that the church must continue to provide accommodation to the religious practitioner on retirement for the remainder of their life or in the event of any long term absence from duties as a result of illness.
In these circumstances, the services of the religious practitioner are not included as consideration for the supply of the accommodation by the church as the provision of the accommodation is not dependent on the performance of services and the accommodation must be provided even where the religious practitioner does not carry out any activities. Consequently, the consideration for the supply of accommodation for the purposes of applying section 38-250 of the GST Act will be limited to any money or property or other consideration provided by the religious practitioner for the accommodation.
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If the services of a religious practitioner are provided as consideration for the provision of the accommodation, the value of the services must be taken into account in determining whether section 38-250 applies to the supply of the accommodation.
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The regional governing body of the church issues guidelines which cover matters such as stipends, conditions associated with accepting a call and statements of understanding between the religious practitioner and the church. These guidelines cover all churches of the denomination within a region.
The guidelines recommend that the church and the religious practitioner reach terms of agreement before a call is accepted and that this be documented. This statement clarifies the role of the religious practitioner, the terms and conditions of the call, and processes by which the ministry will be conducted in partnership together. The statement will include details such as the duration of the call, the role of the religious practitioner and the practitioner's relationship to the church, the total remuneration and how it is to be packaged, the process for decision-making, review of ministry, and dispute resolution and what happens when the ministry is concluded.
The guidelines set out that in calling and inducting a religious practitioner, the church and the religious practitioner enter into an arrangement which invokes particular responsibilities and rights for the parties concerned. The guidelines stress the importance of ensuring that the incoming religious practitioner is aware of what the church expects from the role. Therefore, the terms of agreement should include a role description that lists the main duties and accountabilities in the role.
It is recommended that the church conducts on-going reviews of its collective life and ministry. This review will include the manner in which the religious practitioner is exercising the ministry of leadership.
A properly constituted special church members meeting can conclude the religious practitioner's call and engagement allowing three months notice. This will occur where the conclusion of the ministry is in the best interests of both the church and the religious practitioner. Examples of where this may occur include where the emphasis or the direction in which the religious practitioner is attempting to lead the church is no longer in accord with that which was agreed when the religious practitioner was called, where the religious practitioner is in conflict with the expectation of the church and this cannot be easily reconciled, and where the religious practitioner no longer has the confidence and support of the church leadership. For serious misconduct, a properly constituted church members' meeting may conclude a religious practitioner's call without notice and with immediate effect.
The guidelines provide recommended remuneration levels. The majority of churches pay their religious practitioners based on the recommended levels. However, it is open for the church and the religious practitioner to negotiate a package different to the recommended levels. The guidelines provide a differing recommended stipend depending upon whether a manse is provided or not.
Based on the terms of engagement of the religious practitioner in these circumstances, the religious practitioner's services are consideration for the supply of accommodation as there is a sufficient nexus between the two.
The acceptance of a call by a religious practitioner results in the entry into an arrangement between the church and religious practitioner that invokes responsibilities and rights for both parties. Therefore, the accommodation is not provided to the religious practitioner merely because of the practitioner's status as it is dependent upon the practitioner carrying out those duties or responsibilities which arise from accepting the call.
In valuing the religious practitioner's services, reliance is placed upon GSTR 2001/6External Link. This ruling provides that the test for determining the market value of non-monetary consideration is an objective test.
The guidelines recommend a package including total stipend and benefits where a manse is not provided and a lower package where a manse is provided. By recommending that churches pay a lower package in those circumstances where a manse is provided, the regional governing body has effectively identified the value of that component of the religious practitioner's services that represents consideration for the supply of the accommodation.
Where, in practice, the church follows the guidelines issued by the regional governing body in relation to the recommended level of religious practitioner's stipends and benefits, we accept that the value of the non-monetary consideration for the supply of accommodation to the religious practitioner for the purposes of subparagraph 38-250(1)(b)(i) is currently the difference in stipend depending upon whether a manse is provided. Therefore, where this is less than 75% of the GST inclusive market value of the accommodation provided by the church, the supply will be GST-free.
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Question 8. GSTR 2001/3 Goods and services tax: how it applies to supplies of fringe benefits was released in May 2001 explaining the entitlement to input tax credits for acquisitions and importations related to providing fringe benefits. It states that 'consideration' is a broad term that may encompass services provided by employees. A fact sheet GST and the application of the non-commercial activity rules for charities to the provision of fringe benefits (NAT 7633) provides further information on the application of section 38-250 to the provision of fringe benefits. Religious institutions had until 30 June 2003 to put in place procedures to ensure that these supplies are treated correctly for GST purposes. The principles outlined in the fact sheet will apply to supplies made after 1 July 2003.
Will religious institutions be required to make creditable purpose adjustments for purchases made prior to 1 July 2003 as a consequence of the principles outlined in the fact sheet?
Religious institutions will not be required to make adjustments on input tax credits claimed on acquisitions made in the period from 1 July 2000 to 30 June 2003 as a consequence of the principles outlined in the fact sheet. However, adjustments under Division 129 on these acquisitions may still be required in other circumstances, for example, where there has been a change in the conditions attached to the provision of the accommodation.
An example of where an adjustment may arise is where a church, which originally provided accommodation on a rent-free basis, introduces a policy whereby the religious practitioner is required to pay a rental charge for the right to occupy the premises. In this situation, where the rental exceeds both 75% of the cost of supplying the accommodation and 75% of the market value of the accommodation, there has been a change in the extent of creditable purpose which may give rise to adjustments under Division 129.
Question 9. What is the GST impact on rental apartments provided for charitable or public benevolent institution purposes (for example, a visiting medical research fellow for a charitable teaching hospital being provided accommodation in an adjacent related retirement village)?
Generally residential rent is input taxed under section 40-35 and the normal rules for input taxed supplies would apply.
Subject to the principles in the fact sheet mentioned in the above question, where the residential accommodation is supplied by a charity for consideration that is less than 75% of the market rent or the cost of supply then the supply of the accommodation would be GST-free.
A supply of accommodation in commercial residential premises (for example, a boarding house or a hostel) for consideration is a taxable supply unless section 38-250 applies. Where the supply is long-term accommodation (at least 28 days continuously) and is taxable, the special rules in Division 87 apply unless the supplier chooses not to apply them. These rules have the effect of applying a lower rate than would otherwise apply thus reducing the amount of GST payable.
Question 10. What are the GST ramifications of a church owned property that is let to a college for use of education?
Generally, the supply of the church owned property to be used for education purposes would be taxable. However, where the consideration for the supply was less than 50% of the GST inclusive market rent, the supply would be GST-free. The college would be able to claim input tax credits for creditable acquisitions relating to making supplies that would be taxable or GST-free.