Edited version of private ruling

Authorisation Number: 1011736038717

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Ruling

Subject: GST and the supplies of membership subscriptions and use of maintenance equipments

Question 1

Is the supply of annual membership subscriptions by an Australian Club ('Club') to members in Australia subject to Goods and Services Tax (GST)?

Answer

Yes. The supply of annual membership subscriptions by the Club to members in Australia is taxable, and subject to GST.

Question 2

Is the fee charged by the Club to members for the use of the maintenance equipments subject to GST?

Answer

Yes. The fee charged by the Club to members for the use of the maintenance equipments is consideration for a taxable supply and is subject to GST.

Relevant facts and circumstances

The entity is an Australian club ('Club') which is registered for GST.

The Club has been running on a 'no profit' or 'breakeven' basis for the enjoyment of its members. All the Club's activities, including management of the bar, secretarial and book-keeping and all administrative duties are carried out by elected members on an unpaid basis. The Club does not employ any staff.

The income and capital of the Club shall be applied exclusively to the promotion of its objects and no portion shall be paid or distributed directly or indirectly to members or their associates. Various club activities and services are paid for by the annual contributions made by the members.

The objects of the Club are to promote, encourage, and support a form of sporting recreation.

The Club supplies various categories of membership subscriptions to members in Australia.

All the members pay annual subscription fee based upon their category of membership. The amount of the subscription fee is calculated annually and reflects the cost of maintaining and administrating the Club's facilities and meeting its legal and public obligations.

The membership is held on an individual basis and is non-transferable. Individual members are not required to register for GST and are unable to claim their membership as deductable expense for personal taxation reasons.

All the members who have paid their annual subscription are able to use the clubroom facilities which include a bar, showers, kitchen and a secure car park.

A person who supports the objects of the Club and agrees to abide by its rules may become a member in one of a number of types of membership categories. The benefits of the members depend on their category of membership:

The member is entitled to:

· all privileges of the Club in accordance with the rules; and

· use of the Club's buildings and facilities; and

· participate in any activities organised by the Club; and

· vote at meetings of the Club; and

· hold office and stand on any committee or sub-committee.

Members are also allowed to use the Club's equipments for maintenance and repairs. A fee is charged to members for use of maintenance equipments that are owned by the Club. It is understood that this is a contribution made by members to the maintenance, repair and replacement of equipment that they own by virtue of their membership of the Club.

Certain type of memberships are not entitled to vote at meetings of the Club, or hold office or stand on any committee, or use any maintenance or storing facilities provided.

An honorary life member shall be entitled to all the rights and privileges without payment of any further membership subscriptions.

Members are required to pay in advance the membership subscriptions fees.

The Club's maintenance facilities are available at the premises and to persons who are members of the Club.

Fees for the use of the Club's maintenance equipment and facilities are determined by the Club and published to members. A booking to use any Club equipment or facility for maintenance shall be made on the form provided by the Club. The member must ensure that all use of the equipment or facility is correctly entered and authorises the Club to debit their Club account at the current rates.

The Club does not do the actual repair or maintenance. The members are responsible to do the maintenance on their own equipments.

Reasons for decisions

Question 1

GST is payable on a taxable supply. 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; and

b) the supply is made in the course or furtherance of an enterprise that you carry on; and

c) the supply is connected with Australia; and

d) 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.

We will consider each of the requirements below.

(a) Supply for consideration

The term supply is defined in subsection 9-10(1) of the GST Act in very wide terms as being any form of supply whatsoever. Subsection 9-10(2) of the GST Act then, without limiting subsection

9-10(1) of the GST Act, lists a number of things that are specifically included as supplies, including goods, services, a provision of advice or information, rights created and obligations entered into. Further, a supply also includes any combination of any 2 or more of the matters referred to in paragraphs 9-10(2)(a) to (g) of the GST Act.

Based on the information given, the Club supplies the membership subscriptions in return for subscription fees. The membership subscriptions entitle the members to use the clubroom facilities including a bar, showers, kitchen and car park. Furthermore, the members are entitled to participate in any activities organised by the Club. Accordingly, the Club is making a supply to the members under section 9-10 of the GST Act.

The next step is to determine whether the supply is made for consideration. The term consideration is defined in section 9-15 of the GST Act to include any payment, or any act or forbearance, in connection with, or in response to or for the inducement of, a supply of anything.

Further subsection 9-15(2B) of the GST Act states:

For the avoidance of doubt, the fact that the supplier is an entity of which the recipient of the supply is a member, or that the supplier is an entity that only makes supplies to its members, does not prevent the payment, act or forbearance from being consideration.

This means that the payments made by members to their associations can be consideration for the supply.

Based on the information given, the Club is making the supply of membership subscriptions which entitles the members to use the clubroom facilities (including bar, showers, kitchen and car park) and to participate in any activities organised by the Club. In return the Club receives the subscription fee from the members which is consideration for a supply. Accordingly, the Club is making a supply for consideration to the members and paragraph 9-5(a) of the GST Act is satisfied.

(b) Supply made in the course or furtherance of an enterprise

The definition of an enterprise in section 9-20 of the GST Act includes (amongst other things) an activity or series of activities, done:

· in the form of a business

· in the form of an adventure or concern in the nature of trade, or

· on a regular or continuous basis, in the form of a lease, license or other grant of an interest in property.

Subsection 9-20(3) of the GST Act is relevant to non-profit clubs and associations. It states:

(3) For the avoidance of doubt, the fact that activities of an entity are limited to making supplies to members of the entity does not prevent those activities:

(a) being in the form of a *business within the meaning of paragraph (1)(a); or

(b) being in the form of an adventure or concern in the nature of trade within the meaning of paragraph (1)(b).

(*denotes a defined term in section 195-1 of the GST Act).

The meaning of enterprise is considered in Miscellaneous Taxation Ruling MT 2006/1: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number, and Goods and Services Tax Determination GSTD 2006/6: does MT2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the GST Act. The principles outlined in these public rulings have been applied to your circumstances.

Paragraphs 222 to 227 of MT 2006/1 specifically consider non-profit clubs and associations which state:

222. Non-profit clubs and associations are similar to mutual organisations in that their activities may involve trading activities (for example bar facilities of a sporting club) and provision of services to members (and perhaps non-members). The objective or outcome is not to derive profits for distribution but merely to cover expenditure and apply any surplus directly or indirectly, sooner or later, to the benefit of the membership as a whole.

223. A non-profit club or association might, therefore, conduct activities that are in the form of a business. What is relevant is the nature of the businesslike activities of the organisation, rather than its non-profit status or who it trades with. However, activities may be taken to be an enterprise under one of the other paragraphs of section 9-20 of the GST Act. For example an organisation may be a charitable institution.

Example 26 - activities of a club that amount to an enterprise

224. A football club has 200 members, most of whom play for the club.

225. Membership fees amount to $10,000 per annum. The club attempts to cover its expenditure by running a bar at its clubhouse and this has an annual turnover of $30,000 with a net profit of just over $8,000. The bar is staffed on a voluntary basis and, in addition to beer, wine and spirits, sells some finger food. The club maintains records of its income and expenditure.

226. The club's activities are done in a businesslike manner.

227. The club is entitled to an ABN on the basis that it is :

· an unincorporated association of persons ; and

· carrying on an enterprise as the activities are done in the form of a business.

From the information given, the fact that the Club is running on a 'no profit' or 'breakeven' basis for the enjoyment of its members, and that the various Club activities and services are paid for from the annual membership contributions does not prevent the activities from being in the form of a business. The Club's activities are done in form of a businesslike manner and the Club is considered to be carrying on enterprise as defined in section 9-20 of the GST Act. Accordingly, the supply of the membership subscriptions by the Club to the members satisfies the requirement of paragraph 9-5(b) of the GST Act.

(c) & (d) Connected with Australia and GST registration

Based on the information given, the supply of the membership subscriptions is provided in Australia and made through an enterprise that the Club carries on in Australia. Therefore, the supply is connected with Australia and paragraph 9-5(c) of the GST Act is satisfied.

The Club is registered for GST and therefore paragraph 9-5(d) of the GST Act is satisfied.

GST-free & input taxed supplies

The facts do not indicate that the Club is a charitable institution or a gift deductable entity. Hence, the supply by the Club to the members does not satisfy the GST-free provision under section

38-160 of the GST Act, nor the input taxed provision under section 40-160 of the GST Act. There are no other provisions under the GST Act that make the supply of the annual membership subscriptions by the Club to the members in Australia GST-free or input taxed.

Accordingly, all the requirements of section 9-5 of the GST Act are satisfied, and the supply of annual membership subscriptions by the Club to the members in Australia is a taxable supply and the subscription fee is subjected to GST.

Question 2

The supply of the use of the maintenance equipments by the Club to members will be a taxable supply if all the requirements under section 9-5 of the GST Act are satisfied.

From the information given, the Club satisfies all the requirements of section 9-5 of the GST Act, as follows:

· The Club supplies the maintenance equipments (for use) to members and in return receives a fee. The payments made by members to their associations can be consideration for the supply as per subsection 9-15(2B) of the GST Act (stated above), and therefore paragraph 9-5(a) of the GST Act is satisfied.

· The Club's activities are not excluded from being in the form of an enterprise as per subsection 9-20(3) of the GST Act (stated above). The supply of the use of the maintenance equipments to members is made in the course of the Club's enterprise (business), and paragraph 9-5(b) of the GST Act is satisfied.

· The Club supplies the maintenance equipments in Australia and through an enterprise that it carries on in Australia. The supply is connected with Australia, and paragraph 9-5(c) of the GST Act is satisfied.

· The Club is registered for GST in Australia, and paragraph 9-5(d) of the GST Act is satisfied.

· The Club is not a charitable institution or a gift deductable entity, and does not satisfy the GST-free provision under section 38-160 of the GST Act, nor the input taxed provision under section 40-160 of the GST Act. There are no other provisions in the GST Act that makes the supply of the maintenance equipments by the Club to members in Australia GST-free or input taxed.

Accordingly, all the requirements of section 9-5 of the GST Act are satisfied, and the supply of use of the maintenance equipments by the Club to members in Australia is a taxable supply and the fee charged for the maintenance equipments is subject to GST.

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