Edited version of your private ruling

Authorisation Number: 1012552639142

Ruling

Subject: GST and subscriptions

Question

Is a voluntary subscription received by you consideration for a taxable supply and therefore subject to goods and services tax (GST)?

Answer

No.

Relevant facts and circumstances

· You are registered for GST.

· You are endorsed as a charity for GST purposes.

· You are not endorsed as a Deductible Gift Recipient (DGR).

· Your main charitable purpose is the advancement of social and community welfare.

· The annual subscription payments are made voluntarily and are not the result of any contractual obligation

· You have your own governing Constitution.

· Your Constitution sets out your requirements and regulations including voting rights and membership.

· You have advised that there are various subscription fees applicable.

· All the above members do not receive anything for these contributions, although they receive acknowledgement for supporting your efforts.

· Voluntary subscriptions payments are invited generally on an annual basis.

· Members are also kept informed of your activities through the occasional newsletter/pamphlet which is available to all the general public.

· The donations and subscription funds are used to purchase and maintain equipment, and to also fund miscellaneous expenses.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 7-1

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Sub-section 9-15(1)

A New Tax System (Goods and Services Tax) Act 1999 Sub-section 9-17(2)

Reasons for decision

GST is payable on taxable supplies. In determining whether a taxable supply is made, all of the following conditions need to be satisfied.

· There is a supply for consideration;

· The supply is made in the course or furtherance of an enterprise that is carried on by the supplier;

· The supply is connected with Australia;

· The person making the supply is registered or required to be registered for GST; and

· The supply is neither GST-free or input taxed.

Sub-section 9-17(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) specifically excludes a gift made to a non-profit body from being consideration for a supply. As you are a non-profit body, you will therefore not be required to remit GST on the contributions you receive from your annual subscriptions provided the contributions are considered to be gifts.

Gifts to non-profit bodies are not consideration

What constitutes a 'gift' for GST and income tax purposes have been set out in two public rulings - Goods and Services Tax Ruling GSTR 2012/2 (Goods and services tax: financial assistance payments) and Taxation Ruling TR 2005/13 (Income Tax: tax deductible gifts - what is a gift). The guidelines set out in TR 2005/13 are also applicable for GST.

Both rulings state that amongst other things, a gift ordinarily proceeds from a detached and disinterested generosity of the giver who must not receive a benefit or an advantage of a material nature by way of return. However it is a question of fact in each case whether any benefit or advantage is considered material.

GSTR 2012/2 provides guidance on what is a gift. Paragraphs 69 to 70:

69. Gifts to a non-profit body are not consideration for a supply.

70. The term 'gift' is not defined in the law and therefore takes its ordinary meaning having regard to the context in which it appears. It is considered that a 'gift' has the following characteristics and features:

· there is a transfer of a beneficial interest in property;

· the transfer is made voluntarily;

· the transfer arises by way of benefaction; and

· no material benefit or advantage is received by the giver (payer) by way of return.

Therefore, a payment will be a gift where:

· it is made voluntarily

· no material benefit flows to the payer as a result of the payment, and

· it is made essentially out of benefaction.

Are the subscription payments from an individual gifts?

In order for a payment to be considered a gift, it must satisfy the following conditions:

· The payment must be made voluntarily.

Subscription payments made to you satisfy this characteristic of a gift as an individual (a member) has no obligation to make a payment.

· No material benefit flows to the payer as a result of the payment.

You advise that a member who pays the voluntary subscription receives a thank you acknowledgement. The member can also vote at the Annual General Meeting (AGM) if they also satisfy certain additional criteria. However if a member who has paid the voluntary subscription does not satisfy the additional criteria, they cannot vote at the AGM.

In these circumstances we consider that the right to vote at an AGM is not a material benefit received by a member who has paid the voluntary subscription. We also consider that where the payer receives things like a 'thank you' letter and the infrequent newsletter/pamphlet this would simply amount to a mere acknowledgement of the donation, where the purpose of this newsletter is to encourage further donations; and

· The payment is made out of benefaction.

In your circumstances, we consider that the subscription payment arises by way of benefaction.

Therefore we consider that the voluntary subscription made by an individual in your circumstances is a gift and has no GST consequences.

Paragraph 199 of TR 2005/13 provides an example where a payment for membership is not a gift as the membership entitles the payer to receive special deals, membership privileges, voting rights and so on.

Example 70

1. E suffers from a debilitating disease. He hears that there is an association which undertakes research into the disease, educates sufferers on appropriate diets and the best ways to deal with the condition. He contacts the association, and is advised that if he pays a membership subscription of $60 per year, he will be entitled to receive the association's monthly newsletter that contains helpful information for sufferers, and he will be entitled to obtain advice from the association's professional officers. The $60 payment is not a gift. The payment discharges a contractual obligation, and E receives a material advantage in return for it.

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