| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011610810584
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Goods and services tax (GST) and membership fees, marketing fees and prizes
Question 1
Will GST be payable by you where you receive membership fees?
Answer
Yes.
Question 2
Will GST be payable by you where you receive marketing fees?
Answer
Yes.
Question 3
Will GST be payable by you where you pay cash prizes?
Answer
No.
Question 4
Will GST be payable by you where you supply non-monetary prizes?
Answer
No.
Question 5
Will you be entitled to input tax credits where you pay cash prizes?
Answer
No.
Question 6
Will you be entitled to input tax credits where you supply non-monetary prizes?
Answer
No.
Question 7
Will you be entitled to input tax credits where you purchase non-monetary prizes?
Answer
Yes.
Relevant facts and circumstances
You are registered for GST.
You will carry on a marketing business solely in Australia.
You will have members, and you will charge membership fees and marketing fees to the members.
You will supply the following things in return for the membership fees and the marketing fees:
· yellow pages type advertisements of the members on your website, which will have the members' names, say what the members do and provide contact details
· the right to advertise the members' special discount offers in a members' special discount section of your website, and
· the option of having links in your website to the members' websites.
The members' customers will register on your website to participate in prize draws that you will conduct.
There will be no charge to your members' customers to register for the prize draw, and the members' customers will not give you anything in return for prizes. The winners will be randomly selected by computer.
You will give cash and non-monetary prizes to the members' customers.
You will purchase the non-monetary prizes. The supplies of the non-monetary prizes to you will be taxable supplies for GST purposes.
Question 1 and Question 2
Summary
GST will be payable where you receive the membership fees and the marketing fees as these payments will be consideration for supplies that you will make that will satisfy all of the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Detailed reasoning
GST is payable on taxable supplies.
You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states:
You make a taxable supply if:
· you make the supply for *consideration; and
· the supply is made in the course or furtherance of an *enterprise that
· you *carry on; and
· the supply is *connected with Australia; and
· you are *registered, or *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
(*denotes a defined term in section 195-1 of the GST Act.)
You will supply the following things in return for the membership fees and the marketing fees:
· a yellow pages type advertisement of the members, which will have the members' names, say what the members do and provide contact details
· the right to advertise the members' special discount offers in a members' special discount section of your website, and
· the option of having a link in your website to the member's website.
You will make these supplies for consideration, being the membership fees and the marketing fees. Therefore, you will satisfy the requirement of paragraph 9-5(a) of the GST Act.
You will make these supplies in the course or furtherance of the marketing enterprise that you will carry on. Therefore, you will satisfy the requirement of paragraph 9-5(b) of the GST Act
These supplies will be connected with Australia. Therefore, you will satisfy the requirement of paragraph 9-5(c) of the GST Act.
You are registered for GST. Therefore, you will satisfy the requirement of paragraph 9-5(d) of the GST Act.
There are no provisions in the GST Act or in any other Act under which the supplies you will make in return for the membership fees and marketing fees will be GST-free or input taxed.
As you will satisfy all of the requirements of section 9-5 of the GST Act, you will make taxable supplies where you receive membership fees and marketing fees. Therefore, GST will be payable by you where you receive membership fees and marketing fees.
Question 3
Summary
GST will not be payable where you pay cash prizes, as the payment of the cash prizes will not be supplies.
Detailed reasoning
In accordance with subsection 9-10(4) of the GST Act, a supply of money is not a supply unless the money is provided as consideration for a supply of money.
Your cash prizes are money and you will not supply this money as consideration for a supply of money. Hence, your payment of cash prizes will not be supplies, for GST purposes.
Therefore, you will not satisfy the requirement of paragraph 9-5(a) of the GST Act.
As you will not satisfy all of the requirements of section 9-5 of the GST Act, you will not make taxable supplies where you pay cash prizes. Hence, GST will not be payable by you where you pay cash prizes.
Question 4
The winners will not provide any consideration for your supplies of non-monetary prizes.
Therefore, you will not satisfy the requirement of paragraph 9-5(a) of the GST Act.
As you will not satisfy all of the requirements of section 9-5 of the GST Act, you will not make taxable supplies where you supply non-monetary prizes. Hence, GST will not be payable by you where you supply non-monetary prizes.
Question 5
Summary
You will not be entitled to input tax credits where you pay cash prizes, as you will not make acquisitions in return for the cash prizes.
Detailed reasoning
You are entitled to input tax credits for creditable acquisitions that you make.
You make a creditable acquisition where you satisfy the requirements of section 11-5 of the GST Act, which states:
· You make a creditable acquisition if:
· you acquire anything solely or partly for a *creditable purpose; and
· the supply of the thing to you is a *taxable supply; and
· you provide, or are liable to provide, consideration for the supply; and
· you are *registered, or *required to be registered.
Subsection 11-15(1) of the GST Act states:
You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise.
However, subsection 11-15(2) of the GST Act states:
However, you do not acquire the thing for a creditable purpose to the
extent that:
· the acquisition relates to making supplies that would be *input taxed, or
· the acquisition is of a private or domestic nature.
You will not make acquisitions from the winners where you pay cash prizes. Therefore, you will not satisfy the requirement of paragraph 11-5(a) of the GST Act. As you will not satisfy all of the requirements of section 11-5 of the GST Act, you will not make creditable acquisitions where you pay cash prizes. Therefore, you will not be entitled to input tax credits where you pay cash prizes.
Question 6
Summary
You will not be entitled to input tax credits where you supply non-monetary prizes, as you will not make acquisitions in return for the non-monetary prizes.
Detailed reasoning
You will not make acquisitions from the winners where you supply non-monetary prizes. Therefore, you will not satisfy the requirement of paragraph 11-5(a) of the GST Act. As you will not satisfy all of the requirements of section 11-5 of the GST Act, you will not make creditable acquisitions where you supply non-monetary prizes. Therefore, you will not be entitled to input tax credits where you supply non-monetary prizes.
Question 7
Summary
You will be entitled to input tax credits where you purchase non-monetary prizes, as your acquisitions of these prizes will satisfy all of the requirements of section 11-5 of the GST Act.
Detailed reasoning
You will acquire non-monetary prizes in carrying on your marketing enterprise, as your supplies of the prizes will be an incentive for your members to pay you membership fees and marketing fees. Your acquisitions of the non-monetary prizes will not relate to making supplies that would be input taxed. These acquisitions will not be of a private or domestic nature. Hence, you will acquire non-monetary prizes for a creditable purpose. Therefore, you will satisfy the requirement of paragraph 11-5(a) of the GST Act.
The supplies of the non-monetary prizes to you will be taxable supplies. Therefore, you will satisfy the requirement of paragraph 11-5(b) of the GST Act.
You will provide consideration for the supplies of the prizes to you. Therefore, you will satisfy the requirement of paragraph 11-5(c) of the GST Act.
You are registered for GST. Therefore, you will satisfy the requirement of paragraph 11-5(d) of the GST Act.
As you will satisfy all of the requirements of section 11-5 of the GST Act, you will make creditable acquisitions where you purchase non-monetary prizes. Therefore, you will be entitled to input tax credits where you purchase non-monetary prizes.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
