If you are a GST-registered owner, lessee, trainer, driver or jockey, any monetary prizes paid to you by a racing body will be subject to GST.
If you make racing-related supplies to a racing body, you will need to account for GST on any monetary payments that you receive for your supplies.
Racing bodies set the amount of prize money for each race. If a GST-registered participant wins prize money, the racing body will generally, though not always, increase the amount paid by 10% for that participant's share of the prize.
Racing bodies are not required to increase prize money by 10% for GST-registered participants. Any decision to do so is made by the racing body. If a racing body does not increase prize money, you are still required to account for GST of one-eleventh of the money received. Payments received without a 10% increase are not GST-free and you should not include these as GST-free supplies on your activity statement.
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A trophy or any other non-monetary prize that is paid by a racing body to you as an owner, lessee, trainer, driver or jockey, may be subject to GST.
If you are a GST-registered owner, lessee, trainer, driver or jockey making racing related supplies to a racing body, you may need to account for GST on any non-monetary payments that you receive for your supplies. (See Non-monetary prizes of no market value for information on when you are not required to account for GST when you receive non-monetary prizes.)
If you receive non-monetary payments, you need to work out the GST-inclusive market value of the non-monetary payments you receive. As the supplier, you are responsible for determining this value using a reasonable method.
Examples of reasonable methods include:
- the market value of an identical good, service or thing
- the market value of a similar good, service or thing
- the market value of the supply
- a professional appraisal.
Example: Determining the GST-inclusive market value of a non-monetary prize
Jenna is a GST-registered jockey who recently participated in a racing event in the course of her racing enterprise. Jenna received a non-monetary payment in the form of a new saddle for participating in a racing event. To work out the GST-inclusive market value of the saddle, Jenna visits a local equestrian supplies store. Jenna does not find an identical saddle, however she finds a saddle that is very similar. Jenna determines that her saddle has the same GST-inclusive market value as the saddle she found in the store.
Because the equestrian supplier conducts an enterprise that ordinarily sells saddles, and the saddle Jenna found is similar in every way to her own, Jenna can feel confident that she has used a reasonable method for determining the GST-inclusive market value of her saddle.
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Generally, the racing body will list the value of the non-monetary prize on the RCTI they issue to you.
It is important to understand that if you are registered or required to be registered for GST and you receive a prize intended as a non-monetary payment from a racing body in return for your supplies, there have been two separate transactions:
- You have made a taxable supply to the racing body – in this instance, you must account for GST on the GST-inclusive market value of the non-monetary prize the racing body provides to you.
- The racing body has supplied you with goods or services – the supply of goods or services to you are taxable supplies by the racing body in addition to being a payment to you for your supplies. You will be entitled to claim a GST credit equal to the amount of GST you pay on the prize.
As the payment takes the form of goods or services, the racing body must also account for the GST on the value of the prize.
Non-monetary prizes of no market value
You do not have to account for GST on non-monetary payments where the prize is purely a symbolic recognition of your achievement (such as a medal, ribbon, trophy or similar prize). We consider that such prizes have no market value and as such are not considered payment for your services. Therefore you are not entitled to claim a GST credit as the prize has no value.
If your medal, ribbon, trophy or similar prize is unique, contains valuable metal or gems, or exhibits quality artistic design or craftsmanship, it will be subject to GST.
Non-monetary prizes that are designed for a practical use are not purely a symbol of recognition. For example, a prize of a crystal decanter, a computer, or an item of sporting equipment has a market value that is included as payment for your services, even though a racing body may describe it as a 'trophy'.
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Example 1: Supply of a prize that is only a symbolic recognition of achievement and has no market value
At a race meeting, the AAA Race Club provides a silk rug (GST-inclusive market value $330), along with the prize money as first prize in a race. The silk rug is embroidered with the race name and the year of the race.
Mary owns the horse that wins the race and she is presented with the silk rug. Mary is registered for GST and is participating in the race in the course of her horse racing enterprise.
Whilst Mary must account for GST on any prize money she receives, she is not required to account for GST on the value of the silk rug. This is because the prize is not received as payment for the participation of Mary's horse. The prize is purely symbolic – it recognises the winner's achievement and has no value other than its personal or sentimental value to Mary.
The AAA club is not required to account for GST when they provide the silk rug to Mary as they have not made a taxable supply. This is because the silk rug is merely provided as a symbolic recognition of the winner's achievement and has no market value.
Example 2: Supply of a prize that is more than a symbolic recognition of achievement and has a market value
The AAA Race Club also presents a trophy (GST-inclusive market value $22,000) to Mary as the winner of the AAA Race Club Cup. The cup is partly made from gold and has been elaborately designed and engraved requiring a high quality of craftsmanship.
The trophy is more than symbolic recognition of Mary's achievement and its GST-inclusive market value is included in the price of the racing supply Mary made.
The requirements for accounting for GST and any entitlement to GST credits are the same as in example Determining the GST-inclusive market value of a non-monetary prize.
Example 3: Supply of a prize to a participant that is registered for GST
A GST-registered racing club conducts a race meeting. Bob's horse wins the Country Mile as part of the race meeting. Bob is registered for GST and is participating in the race in the course of his horse racing enterprise.
The racing club supplies prize money to Bob for winning the Country Mile. In addition to the money, the racing club also provides a non-monetary prize of a horse rug. The rug is designed to protect a horse from the elements and has a GST-inclusive market value of $440.
Bob must account for GST on the prize money and on the value of the horse rug as both are payments received for the supply he has made to the race club. The horse rug is included as a payment as it is designed for a practical use and is more than a symbolic recognition of Bob's achievement.
As Bob is registered for GST, he can claim a GST credit of one-eleventh of the GST-inclusive market value of the horse rug.
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