GST on non-commercial activities

How GST applies to non-commercial activities

Your supply will be GST-free if:

• you're an endorsed charity, certain gift deductible entity or government school (if you're unsure, view our definitions of eligible entities for GST concessions)
• the total consideration (payment) for the supply meets the nominal consideration threshold tests.

We refer to these types of supplies as 'non-commercial activities'. GST applies to your commercial activities if you're registered for GST.

If you make GST-free supplies, you:

• don't need to pay GST on them
• can claim GST credits for the GST included in the price of purchases related to these supplies
• must include these supplies when working out your GST turnover.

Nominal consideration threshold tests

The nominal consideration threshold tests that apply to you depend on whether you're making supplies of:

• accommodation
• things other than accommodation.

Accommodation supplies threshold

Supplies of accommodation meet the nominal consideration threshold test if the total consideration is less than 75% of either the:

• GST-inclusive market value of the supply
• cost to you of providing the accommodation.

Non-accommodation supplies threshold

Supplies of things that aren't accommodation meet the nominal consideration threshold test if the total consideration is less than either:

• 50% of the GST-inclusive market value of the supply
• 75% of the consideration you paid or are liable to pay for purchasing the thing.

Working out the market value

The market value is the amount a knowledgeable, willing and not anxious buyer and seller would agree to pay in an arm's length transaction.

When working out the market value, you may choose to either:

• use the same or similar supply tests
• use a professional valuer to obtain an independent market valuation
• apply the benchmark market values, if you're an endorsed charity making certain types of supplies.

You need to ensure any market valuation for your supply is objective and supportable.

Same or similar supply tests

When using the same or similar supply tests, you must use the 2 following tests in order:

1. Same supply test
2. Similar supply test

This means if you identify a same supply from the first test, you can't use the similar supply test.

When comparing supplies under each test, you should consider:

• identifying the market you operate in
• the location of the supply or market area
• the quality or nature of the supply
• the size, quantity or duration of the supply
• the conditions of the supply
• whether there are other charitable or commercial suppliers
• how many comparisons are available.

Use the Non-commercial activities market value guidelines to understand how to apply these tests.

1. Same supply test

For the same supply test, check if other suppliers make the same supply in the market. The supplies must genuinely be like-for-like. If the same supply exists in the market, the price of that supply is the market value you must use in your calculation.

If there is no same supply in the market, you must work out if a similar supply exists.

2. Similar supply test

For the similar supply test, check if other suppliers make similar supplies in the market. You must identify any differences in the supplies and how this would change the market value. If a similar supply exists, the market value you use must reflect any difference you identify between that supply and what you’re supplying.

Using a professional valuer

You may choose to use a professional valuer to undertake an independent market valuation. You're not required to use a valuer.

If you choose to use a valuer:

• the valuer should review the Market value guidelines and the Non-commercial activities market value guidelines that set out our expectations
• you must use the independent market valuation they provide, unless you qualify to use the transitional arrangements for market valuations.

Use our tips if you decide to engage a valuer:

• Ensure the valuer is qualified and registered or licenced in your state or territory.
• Check if they have professional indemnity insurance and there are no unusual or restrictive conditions that could void the policy.
• Ask if they have conducted similar valuations and request a sample.
• Review the company profile information (such as number of valuers and experience, background of directors and company, quality assurance processes, and valuation systems used).

Search ASIC's professional registersExternal Link to confirm the company is registered and check the directors aren't former directors of liquidated property valuation firms.

Benchmark market values

Endorsed charities who don't have an independent market valuation may use the benchmark values for the following types of supplies:

• Supported accommodation and community housing (long-term accommodation)
• Crisis care (short-term and long-term accommodation as appropriate)
• Accommodation in a retirement village that doesn't meet the definition of 'retirement village' in section 195-1 of the GST Act (long-term accommodation)
• University halls and residential colleges
• Residential housing (long-term accommodation)
• Meals on wheels, charity soup kitchens, and other supplies of meals to the frail, homeless or needy.

For more information, see Applying benchmark market values.

Other methodology

You may want to use a different method to work out the market value of the supply. Any valuation method must be based on the most relevant and reliable information that is known or could reasonably be foreseen. The market value guidelines and the Non-commercial activities market value guidelines set out our expectations on market valuations.

Factors that are relevant to working out the market value of your supplies include:

• the market you operate in
• the location of the supply or market area
• the quality or nature of the supply
• the size, quantity or duration of the supply
• the conditions of the supply
• whether there are other charitable or commercial suppliers
• how many comparisons are available.

If you want advice on the market value of a particular supply, you can write to us by applying for a private binding ruling. We may use a professional valuer in providing this advice. If we do, you are required to pay the professional valuer's fees.

Working out the cost of the supply

When working out the cost of making your supply, include:

• all direct costs incurred (for example, materials and direct labour)
• a reasonable apportionment of indirect costs incurred (for example, marketing, administration, office expenses, electricity, phone and insurance).

You can't include things that don't have an actual cost, such as:

• volunteer labour
• donations
• free rent.

The way you determine the cost of making your supplies depends on whether you're making supplies of:

• accommodation
• things other than accommodation.

Use the Non-commercial activities cost of supply guidelines to understand how to apply this test.

Accommodation supplies

You can only include costs incurred in providing accommodation in your calculation.

If you use a depreciable asset to provide accommodation, you must use the depreciation amount and not the full cost of the asset. This ensures the:

• depreciating asset is not attributed to the first supply of the accommodation
• cost of the asset can be attributed to later supplies.

Non-accommodation supplies

Only amounts paid or payable by you for making the supply can be included in your calculation.

You can't include any amounts for the depreciation of assets used in making the supply.

The goods or services purchased do not need to be the same as the goods or services you supply. The purchase can include things:

• that you on-supply
• used in providing services or manufacturing goods
• used in making a supply of something else.

Keeping records

Remember to keep accurate records, including:

• how you calculated your valuations
• what you considered in the valuation process
• the evidence used to support your valuation
• the rationale for choosing a particular valuation method
• details of when the valuation was undertaken, including date and valuer.

Residential colleges

An endorsed charity may operate a residential college that is either:

• university-owned
• affiliated with a host university by a formal contract or linked in a constitution.

Residential colleges may offer different supplies under their student contracts, including:

• accommodation
• meals
• tertiary residential college courses
• student tutoring
• religious services.

These supplies may be a mix of taxable, input taxed or GST-free. If you're an endorsed charity, your supplies may be GST-free:

• where they're certain non-commercial activities
• if you're providing religious services as an ACNC-registered religious institution
• if you're providing tertiary residential college courses.

Practical guidelines to assess your GST treatment

We are aware of the practical difficulties for residential colleges in determining how GST applies to supplies they make under student contracts and in determining the amount of GST credits they can claim.

We have set out practical guidelines in Practical Compliance Guideline PCG 2022/3 GST and residential colleges that you can use to determine the GST treatment of your supplies and entitlement to GST credits. This guideline covers supplies made under a resident student contract including:

• accommodation
• meals
• tertiary residential college courses
• religious services.

This guideline also assists suppliers with:

• apportioning fees for components in a student contract
• other student contract matters.