How GST applies to gifts and donations
A gift or donation made to a not-for-profit (NFP) organisation is not payment for a supply. If you're an NFP, you don't:
- pay GST on gifts or donations you receive
- include the value of the gift or donations when working out your GST turnover.
A gift or donation has been made to you when the donor:
Voluntary gift or donation
A gift or donation is made voluntarily when:
- the donor is not obliged to make the gift or donation
- you're not obliged to use the gift or donation in a specific way.
Material benefits
A donor does not receive a material benefit if the benefit:
- can't be used or sold
- is insignificant to the value of the gift or donation
- has no connection to the gift or donation
- does not create any rights, privileges or entitlements
- only reports how the gift or donation was used
- only recognises the donor’s generosity.
A donor will receive a material benefit in circumstances where:
- the benefit is sought by the donor in connection with the gift or donation
- commercial advertising is provided to the donor
- membership rights or privileges are obtained because of the gift or donation
- you offer the benefit as an incentive to potential donors
- you must provide advice or information to the donor other than reporting how the gift or donation was used
- the gift or donation eliminates or reduces a legal obligation.
Example: donor makes a small payment and receives an item with no material benefit
Rodge Research Inc is an NFP registered for GST.
Yannik purchases a magazine at the local newsagency and notices a box of stickers placed next to the cash register. The sign on the box explains that Rodge Research Inc is seeking public support to fund medical research.
Yannik voluntarily places $2 in the box and takes a sticker as recognition for his gift.
Yannik made the payment voluntarily. The sticker does not have any useful purpose and only recognises the donor's generosity. The sticker does not give Yannik any material benefit.
Yannik's payment is a gift because Rodge Research Inc has not provided a material benefit to Yannik.
The gift made to Rodge Research Inc is not payment for a taxable sale. Rodge Research Inc does not pay GST on the gift.
End of exampleIf you provide a material benefit
If you provide a material benefit to the donor and you are registered (or required to be registered) for GST, your supply of the benefit to the donor will be taxable. You must pay GST on any taxable supplies you make. The GST is 1/11th of the total amount paid for the taxable supply, even if part of the payment was intended to be a gift.
Example: donor purchases a ticket to a fundraising event
Davies & Camp Animal Shelter holds a fundraising dinner with a ticket price of $1,000. The value of the meal is $200. Davies & Camp Animal Shelter is registered for GST and is an endorsed charity. They have not chosen to treat the event as an input-taxed fundraising event.
Rebecca voluntarily purchases a ticket for the fundraising dinner. Rebecca has received a material benefit of the meal even though part of the ticket price is intended to be a gift to the Davies & Camp Animal Shelter.
The purchase of the ticket is not a gift because Davies & Camp Animal Shelter has provided a material benefit to Rebecca. The money received is payment for a taxable supply of the fundraising dinner.
Davies & Camp Animal Shelter must pay GST to us. The amount of GST is $90.91 (1/11th of $1,000).
End of example
Example: donor makes a small payment and receives food
Eddi-Cation Inc is an NFP and is not registered for GST. Eddi-Cation Inc sells chocolate bars to raise funds.
Riley voluntarily pays $5 to Eddi-Cation Inc and receives a chocolate bar in return for his payment. As the chocolate bar can be eaten as a sweet, it has a use or function. Riley has received a material benefit in return for his payment.
Riley's payment is not a gift because Eddi-Cation Inc has provided a material benefit to Riley. The money received is payment for a supply of the chocolate bar.
Eddi-Cation Inc must include the supply of the chocolates in working out whether it is required to be registered for GST. If Eddi-Cation Inc's GST turnover is greater than $150,000, it must register for GST and the supply of the chocolate bar would be taxable.
End of exampleFor more information on gifts to non-profits, see paragraphs 69-83 in GST Ruling GSTR 2012/2 Goods and services tax: financial assistance payments.
Other GST concessions you may use
If you're an endorsed charity, gift-deductible entity or government school, you may choose to apply other GST concessions if you have provided a material benefit to a donor.