ATO Interpretative Decision

ATO ID 2001/498 (Withdrawn)

Goods and Services Tax

• The ATO view for this issue is covered in the Charities Consultative Committee Resolved Issues Document - Part 4 - Fundraising, Gifts and Donations.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a charitable institution, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it sells fundraising aids to a separate fundraising organisation?

Decision

Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it sells fundraising aids to a separate fundraising organisation.

Facts

The entity is a charitable institution and gift deductible entity. The entity is selling fundraising aids to a separate fundraising organisation in Australia.

The fundraising organisation uses the aids for its own fundraising campaign.

The entity sells the fundraising aids for an amount that is more than 75% of the consideration that the entity has provided to acquire the fundraising aids, and that is more than 50% of the GST inclusive market value of the fundraising aids.

The entity is registered for goods and services tax (GST).

Reasons for Decision

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

(a)

it makes the supply for consideration; and

(b)

the supply is in the course or furtherance of its enterprise; and

(c)

the supply is connected with Australia; and

(d)

the entity is registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is a GST-free supply or an input taxed supply.

In this case:

•

the entity makes the supply for payment (consideration). The payment is not excluded from being consideration under paragraph 9-15(3)(b) of the GST Act, as the payment made to the entity is not a gift. This is because the separate fundraising organisation gains a material benefit in return for their payment; the aids and the right to use them to further their fundraising activities;

•

the entity makes the supply in the course of its enterprise;

•

the supply is connected with Australia as the fundraising aids are sold to the separate fundraising organisation in Australia; and

•

the entity is registered for GST.

Therefore, the supply meets paragraphs (a) to (d) of section 9-5 of the GST Act.

Subdivision 38-G of the GST Act operates to make certain supplies made by charitable institutions GST-free. However, none of these provisions apply in this case. In particular, the supply is not a GST-free supply for nominal consideration under section 38-250 of the GST Act as the payment received by the entity for each aid it sells is not less than 50% of its GST inclusive market value; nor is it less than 75% of the consideration the entity provided to acquire it.

The supply meets paragraphs (a) to (d) of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells fundraising aids to a separate fundraising organisation.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   paragraph 9-13(3)(b)
   Division 38
   Subdivision 38-G
   section 38-250
   Division 40
   Division 63

Other References:
Charities Consultative Committee Resolved Issues

Keywords
Goods & services tax
GST free
GST non profit
Nominal consideration
GST supplies & acquisitions
Taxable supply

Business Line:  GST

Date of publication:  22 October 2001

ISSN: 1445-2782