Edited version of your private ruling

Authorisation Number: 1012485762983

Ruling

Subject: GST and concessions

Question

What income generating activities as detailed in the facts would be liable for goods and services tax (GST)?

Answer

GST would be payable on all the income received from the income generating activities unless you can apply one of the GST concessions available to you as an endorsed charity.

Please refer to the reasons for decision as to what GST concessions you can apply to your income generating activities.

Relevant facts and circumstances

You are registered for GST.

You have been endorsed by the Australian Charities and Not-For-Profits Commission as a charity (advancement of education and religion) but not as a religious institution.

You have been endorsed by the Australian Tax Office (ATO) as a charity and are entitled to apply the GST concessions that come with this endorsement.

You carry on (or will carry on) the following income generating activities as part of your enterprise.

Foods and drinks

1. Canteen.

2. Fete (including barbeques).

Education

3. Tuition fees (classes, workshops, programs).

4. Study books bought in Australia and sold as-is.

5. Study books bought overseas and sold as-is.

6. In-house made study / workshop books.

Uniforms

7. Uniforms bought in Australia and sold as-is.

8. Uniforms bought overseas and sold as-is.

Shop

9. Small promotional items bought in Australia and sold as-is (eg pens, T-shirts).

10. Small promotional items bought overseas and sold as-is.

Fundraising activities

11. One-off external annual social and sport activities, meant to raise funds (eg sporting tournament, gala dinner); entry fees are fixed price.

Rent

1. Temporary use of part of your premises for private functions, classes etc.

All proceeds raised from your fund-raising and other income generating activities are to be used for your charitable purpose.

You are not in the business of conducting fund-raising events.

Some of the participants in your education program are required to wear a uniform.

You are not a higher education institution, government school or a non-government school that is recognised as a school under the law of a State or Territory in which the school is located.

You are not a Registered Training Organisation.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

Subdivision 40-F

Division 63

Subdivision 38-G.

Reasons for decision

Fund-raising events

Fund-raising events are covered by subdivision 40-F of the GST Act.

When an event is treated as a fund-raising event it is input taxed. This means that no GST is payable on the income received from the supplies made in connection with the event. These supplies cover things such as entry fees and sales (including the sales from a barbeque). However, no GST credits can be claimed on any acquisitions that are used in the running of the event. Note that some events do require prior approval from the ATO before they can be treated by you as a fund-raising event.

In your case, all proceeds raised from your fund-raising activities are to be used for your charitable purpose. You are also not in the business of conducting fund-raising events. As such, Activity 2 (Fete) and Activity 11 (Tournament and gala dinners) can both be treated as fund-raising events under this part of the GST Act. The Tournament would require prior approval from the ATO to enable you to treat the event as a fund-raising event. No prior approval is required for a fete or gala dinner.

Note that there is a limit on the number of such events that can be run. Generally this is restricted to X such events per financial year, for example X tournaments, X gala dinners etc.

The fund-raising event has to be recorded in your records as an event that is treated as input taxed.

I have enclosed the booklet Fundraising which will provide further information on this and the following concessions.

Non-profit sub entities (NPSE)

NPSEs are covered by Division 63 of the GST Act.

Activities that are not directly related to an endorsed charity's main purpose can be separated out and placed into a NPSE. A NPSE is a separate entity for GST purposes only. It must maintain an independent system of accounting and be separately identifiable from the main organisation by its location or by its activities. There is no GST payable on income generated from a NPSE (provided it too is not registered or required to be registered for GST) but as with fund-raising events, no GST credits can be claimed on any of its acquisitions.

In your case, Activity 1 (Canteen) and Activities 9, 10 (Shop) are activities that are not directly related to your main charitable purpose and are separately identifiable from your main activities as a charity. Consequently, you would be entitled to use NPSEs for these activities under this part of the GST Act.

Nominal consideration rules

Nominal consideration rules are covered by subdivision 38-G of the GST Act.

Your charitable purpose is the advancement of education and religion. As a consequence, Activities 3, 4, 5, 6 (Education) and Activities 7 and 8 (Uniform) are directly related towards this charitable purpose (the uniforms being a requirement for some of the children in your care). As a result, you are not entitled to treat these activities as NPSE or as a fund-raising event. Consequently, you would be liable to remit GST on the income generated from these activities but would be entitled to claim any GST credits included in the price of any acquisitions you make in relation to these activities.

There are two tests that can be applied where a NPSE cannot be used or the event cannot be treated as a fund-raising event. If either test is met then the supply of the goods or services made by the charity would be GST-free. A supply that is GST-free is similar to input taxed fund-raising events in that you are not required to remit any GST on the income received. However you are entitled to claim GST credits on any acquisitions that are used in making of the supply.

The two tests are:

· The market test - the goods or services are sold or supplied at less than 50% of the market value.

· The cost test - the goods or services are supplied at less than 75% of what they cost the charity.

Note that the above percentages are different where it is accommodation that is being supplied.

Rent

When you rent out your building (Activity 12) to allow another organisation to use it for the advancement of education and religion (such as education or religious classes and workshops) then this would be directly related towards your charitable purpose. This would imply that you would be liable to remit GST on the rent received but you would be entitled to apply the nominal consideration rules to this supply.

Where you rent out your building for a private function that is not for the advancement of education and religion (for example a dinner) then this could be treated as NPSE or as a fund-raising event. Prior approval from the ATO would be required before it could be treated by you as a fund-raising event.

Other considerations

Education and training courses can be GST-free in certain circumstances. However given your circumstances, your education program would not satisfy the necessary requirements to be GST-free as an education course.

There are further GST concessions available that may be of interest to you and these are discussed in the enclosed booklet.

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