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Edited version of private ruling
Authorisation Number: 1011575088026
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Ruling
Subject: GST and supplies for consideration
Question
Are the monies paid by the Clubs towards the project owned and administered by the Council, consideration for a taxable supply you make?
Answer
No, monies paid by the Clubs towards the project owned and administered by the Council are not consideration for a taxable supply you make.
Relevant facts and circumstances
You are registered for goods and services tax (GST)
The Committee of Management (the Committee) was created by you to manage and administer the grounds.
The Committee decided to upgrade the facilities at the grounds. The Council pledged $X to start off the project
The community pledged to contribute $Y to the project, made up of $Z in cash donations and an amount for work in kind.
The works were completed.
The Club has been leasing the grounds for a number of years and pays annual ground rentals to you. The supply of the grounds to the Club is treated as a taxable supply
The Club has been leasing the grounds for a number of years and pays ground rentals to you. The supply of the grounds to the Club is treated as a taxable supply.
The Club contributed an amount in cash payment towards the upgrade of the grounds.
Another Club contributed an amount towards the upgrade of the grounds.
The contributions by the Clubs were not made for the lease of the grounds.
It is not a condition of the lease that these contributions are made towards the grounds.
You are not providing advertising or acknowledgment in any other form to the Clubs.
Other sporting clubs which do not use the grounds have contributed monies towards the project.
You have stated that under the lease agreements you have with the sporting clubs, it is expected that you are able to provide to the clubs functional ovals.
Reasons for Decision
Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you make a taxable supply if:
(a) you make the supply for consideration
(b) the supply is made in the course or furtherance of an enterprise that you carry on
(c) the supply is connected with Australia, and
(d) you are registered or required to be registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
The first element of Section 9-5 of the GST Act is that there must be a supply for consideration.
Subsection 9-10(1) of the GST Act defines supply as any form of supply whatsoever. Subsection 9-10(2) of the GST Act provides that a supply includes, amongst other things:
· a supply of goods
· a supply of services
· a creation, grant, transfer, assignment or surrender of any right
· an entry into, or release from, an obligation:
- to do anything
- to refrain from an act, or
- to tolerate an act or situation.
You make a supply to the Club of the use of the grounds for which the relevant clubs pay a lease fee each year. The lease fee paid for the supply of the grounds is separate from the contributions the club made towards the upgrade of the grounds. Therefore, it needs to be determined if there has been any other supply that you have made to the relevant clubs in return for the contributions.
Goods and Services Tax Ruling GSTR 2006/9 examines the meaning of a supply in the GST Act. You are not providing any goods to the sporting clubs in return for the contributions. You are giving the sporting clubs the opportunity to use improved grounds, which benefits the sporting clubs and the community at large. A supply can not be made to the community at large and has to be a specific identified supply made with a sufficient nexus between the supply and any consideration provided.
Proposition 9 in GSTR 2006/9 provides that the creation of expectations alone does not establish a supply. The Commissioner considers that an agreement that does not bind the parties in some way is not sufficient to establish a supply by one party to the other.
As such, it is considered that you are not making a supply to the relevant sporting clubs in return for the contributions they make for the upgrade of the showgrounds. Therefore, the monies paid by the Clubs towards the new community centre and the reconstructed projects owned and administered by the Council are not consideration for a taxable supply you make under section 9-5 of the GST Act.
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