GST and the funeral industry
GST applies to all funeral services.
If you sell funeral services, you are providing a funeral arrangement, not a series of separate supplies. When you calculate GST, you will need to include GST on the total package, even if some parts of it are GST-free to you. You cannot separate individual services from the funeral package.
For example, a church service supplied as part of a funeral is GST-free if it is provided by a religious institution as part of practicing that religion. However, if the church service is included in your funeral package, it is no longer a service provided by a religious institution and you need to charge GST on the total price of the funeral package, including the church service.
The amount of GST you will need to pay us is equal to one-eleventh of the total price of the funeral package.
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GSTR 2001/8External Link Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts.
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How do you account for GST on funeral services?
If you account for GST on a non-cash (accruals) basis, you need to account for all the GST payable in whichever is earlier, the tax period you:
- issue a tax invoice for the funeral package
- receive any of the payment for the funeral package.
If you account for GST on a cash basis, you need to account for GST in the tax period when you receive the payment. If payments are made over a number of tax periods, then you account for GST for the amounts you receive in each period.
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- GSTR 2000/29External Link Goods and services tax: attributing GST payable, input tax credits and adjustments and particular attribution rules made under section 29-25 - refer to paragraphs 14-17 and 32-34 for information about attribution of the GST payable on a taxable sale.
- GST definitions: GST credits, sales.
Does GST apply to cemetery services?
GST applies to cemetery services including:
- a 'Grant of Right of Burial'
- burial plots
- mausoleum crypts
- memorial sites such as wall niches and garden memorials
- renewal of burial plot or memorial site
Does GST apply to investments in funeral bonds, funeral benefit funds or similar investments?
Where there is investment in a funeral benefit plan or funeral bond in the name of the client this is viewed as a separate financial supply and not subject to GST at the point of investment or redemption.
Will you have an adjustment event for a funeral service?
An adjustment event may arise when a GST amount you reported on a previous activity statement is no longer correct. For example, when:
- a contract for a funeral arrangement is cancelled
- there is a change to the previously agreed cost of a funeral arrangement
- you provide a funeral service and all or part of the cost is outstanding for 12 months
- you write off a bad debt.
Adjustments can increase or decrease your net GST amount for a tax period.
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How does GST apply to prepaid funerals?
Generally, a prepaid funeral is where an individual enters into an agreement with a funeral provider for a funeral service to be provided in the future.
As the funeral provider, you are making a taxable supply of the right to receive a funeral service. You will need to pay GST equivalent to one-eleventh of the price for the right to receive the funeral service agreed to. The actual supply of the funeral service is not considered to be a taxable supply as no further payment is received.
What if you transfer a prepaid funeral agreement?
If the agreement is transferred to a new funeral provider, the transfer does not cancel the agreement as long as there are no changes to the original terms and conditions agreed to between both:
- the original funeral provider
- the client on entry into the agreement.
Provided that all of the GST has been remitted on the original agreement, there will be no GST effect.
However, if a client transfers the original agreement, and then enters into a separate agreement with the new funeral provider to upgrade the funeral service (for example, a more expensive casket), the new funeral provider must pay GST on the value of the upgrade.
How does GST apply to prepaid funeral agreements entered into before 1 July 2000?
If you entered into a funeral agreement before 1 December 1999, the amount of the funeral cost paid before 1 July 2005 is GST-free regardless of when the funeral is performed. GST applies to any amount that remains unpaid on 1 July 2005.
If you entered into a funeral agreement on, or after 1 December 1999 and before 1 July 2000, it will be subject to GST unless the funeral takes place before 1 July 2000.
GST applies to funeral agreements entered into on, or after 1 July 2000.
What if a GST-free prepaid funeral agreement is varied?
If you, or your client vary a funeral agreement that you entered into before 1 December 1999 and it does not affect the nature or cost of the service, the funeral will still be GST-free. For example, if a church specified in an agreement is substituted for a different church at no additional cost.
If you, or your client vary a funeral agreement and it does affect the nature or the cost of the service, this will result in a new agreement. For example, if you receive an additional payment to upgrade to a different coffin or provide additional services, a new agreement has been made. GST will apply to the total price of the new funeral package.
However, if you agree to make an additional supply under a separate agreement to the original agreement that is entered into after 1 December 1999, GST will only apply to that additional agreement.
O'Crane and Sons are GST registered funeral providers who entered into a funeral agreement with James on 7 November 1999, who paid the full price upfront. The agreement does not provide flowers for the service. On 5 July 2003, James decided to enter into a separate agreement with O'Crane and Sons to provide flowers for the service for $275.
GST of $25 will apply to this separate agreement (one-eleventh of $275).
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If a funeral agreement made before 1 December 1999 is cancelled and a new agreement is made with a new supplier, GST will apply to the total price of the new funeral package.
However, if the agreement is transferred, and the new supplier provides the same terms and conditions of the original agreement, with no change to the services or the cost, the funeral service remains GST-free.
What if a prepaid funeral agreement includes a grant of right of burial or memorial site?
Prepaid funeral agreements may include a grant of right of burial or memorial site. A Grant of Right of Burial relates to burial plots and mausoleum crypts. Memorial sites include wall niches and garden memorials. The supply of a grant of right of burial or memorial site is made at the time of purchase.
If a Grant of Right of Burial or memorial site was provided after 1 July 2000 and it was part of an overall funeral agreement that was made after 1 December 1999 and before 1 July 2000, the cost of the site remains GST-free if it can be separated from the total cost of the funeral package. If the cost of the site cannot be separated, GST will apply to the total funeral package if it is sold after 1 July 2000.
If an agreement is transferred and it includes a Grant of Right of Burial or memorial site, that was specifically allocated at the time (before 1 December 1999), and the purchase of a new burial site is required, for example if the service takes place in a different town, the allocation of the new site is a new supply. GST will only apply to the new burial site if the cost can be separated from the whole funeral agreement. If there is no change to the service or cost of the original agreement, it will remain GST-free.
Where an agreement is entered into on or after 1 July 2000 for the renewal of a burial plot or memorial site, this is taken to be a new supply and will be subject to GST.
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Abstract: Explains how GST applies to funeral services.