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Ruling

Subject: GST and registration turnover thresholds

Question 1

Is the Strata Plan (you) considered to be a non-profit body for goods and services tax (GST) purposes?

Answer

Yes.

Question 2

Does the GST registration threshold of $150,000 apply to you?

Answer

Yes.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You must comply with the requirements of certain State or Territory legislation.

You do not have constituent documents or governing documents that prevent you from making distributions to individual members.

Your do not hold any accounts whereby interest or profits are distributed to your members.

You do not have an intention to distribute income or profits to individual members whilst functional or upon winding-up.

You are not contemplating winding-up.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 23-15

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 23-15(1)(b)

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 23-15(2)(b)

Reasons for decision

Non-profit classification

Goods and Services Tax Ruling GSTR 2012/2 provides the Australian Taxation Office (ATO) view on whether a particular body is a 'non-profit body' for GST purposes. This view is complimented by Issue 1.1.5 of the Property and Construction Industry Partnership Issues Register which provides guidelines to determine whether a body corporate is a non-profit body for the purposes of section 23-15 (GST registration turnover threshold) of the GST Act.

The term 'non-profit body' is not defined in the GST Act and therefore it takes on its ordinary meaning having regard to the context in which it appears. The term 'body' is defined in the Macquarie Dictionary as including 'A collective group; or an artificial person: body politic, body corporate.'

Paragraphs 108 and 109 of GSTR 2012/2 provide that a body is a non-profit body if, by operation of the law (for example, a statute governing body's activities) or by its constituent documents, the body is prevented from distributing its profits or assets amongst its members while the body is functional and on its winding up. The body's actions must, of course, be consistent with the prohibition.

You are required to comply with the requirements of certain State or Territory legislation.

The law does not prohibit you from making distributions to individual proprietors.

Furthermore, you do not have constituent documents or governing documents that prevent you from making distributions to individual members.

Where the law or the constituent documents do not prohibit a body corporate from making distributions to individual proprietors, it is a question of fact in each case to determine whether the body is not carried on for purpose of profit or gain to the individual proprietors. Factors that we consider relevant include whether distributions have been made, whether there is stated or demonstrated policy to make or not to make such distributions and whether winding up is contemplated. Where it is clear from the objects, policy statements, history, activities and proposed future directions of the body that there will be no distributions to individual proprietors, we accept that the non-profit test has been satisfied.

In most cases, the only assets that a body corporate will hold in its capacity will be limited to the balance of the sinking fund and administration fund and any personal property such as washing machines, driers and lawnmowers, etc which are necessary for the basic purpose of the strata scheme. A return of the members' own funds will not amount to a distribution of profits but a return of capital. The sinking fund and administration fund may include interest income or other income such as income from the rental of common property. The existence of interest income or income from rental or other activities in the various funds held by the body corporate will not preclude the body corporate from being a non-profit body for the purposes of the GST Act. However, an intention to distribute the interest income or profits from rental or other activities, either while the body corporate is functional or upon its winding up, would disqualify the body corporate from being a non-profit body for the purposes of the GST Act.

Based upon the information provided, we consider that you will not make distributions of profits to individual proprietors. This is based upon the following factors:

We therefore consider that you are a non-profit body for GST purposes.

Requirement to register for GST purposes.

If your non-profit organisation has a GST turnover of $150,000 or more ($75,000 for organisations that are not non-profit) it must register for GST. As your GST turnover is less than $150,000 you are not required to be registered for GST purposes.

However, despite your GST turnover being less than $150,000, you may still choose to register (or remain registered) for GST. The decision to voluntarily register for GST should be made based on the administrative and business needs of your organisation.

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