Edited version of private advice

Authorisation Number: 1012650353458

Ruling

Subject: GST and requirement to register for GST

Question 1

Is the Club required to register for goods and services tax (GST)?

Answer

Refer to the reasons for decision below.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The Club

• The Club is a sporting body and is not registered for GST.

• The Club is a non-profit organisation.

• The Membership fees for all classes of Membership shall be determined by the Club Committee and shall be set seasonally.

• All Members will be required to join the Association (the Association) and pay an annual fee as set by the Association.

• To date the Club has not had to register for GST purposes as the Club's GST turnover was below the GST registration threshold.

• The Association has abolished the $x/game fee and replaced it with a one-off fee per team of $xxx per team per season. This fee is to be paid to the Association by the teams. Each team owes the money to the Association. When players register online with the club, the system is set up in such a way that some money goes to the Association to pay this fee for the team. As the number of players / team can vary, any adjustment needed is paid or received by the club at the point at which all teams' fees are due and payable.

• The Club contends that the fees are collected by the Club on the Association's behalf.

• A Clause of the Club's Constitution provides that all Members will be required to join the Association and pay an annual fee as set by the Association

• The Club has advised that the fee mentioned in the clause of the Club's Constitution was levied to join the Sports Club (SC). The Association used to form part of the SC, and all the Association members had to be members of SC, however SC is no longer in existence and therefore this clause no longer applies.

• There are no clauses in the Club's Constitution that indicate that the Club acts as an agent for the Association in the collection of fees.

• Players are now charged approximately $xxx/season, of which the Club pass on the 'per team' fee to the Association (50%)

• The Association has set up the Club to an online payment system whereby players will pay 50% of their total fees to the Club and the other 50% of the fees direct to the Association.

• The amounts paid will be placed into appropriate accounts of each organisation.

• There are two separate bank accounts (the Association and the Clubs), and half of the player's funds goes to the Club's account and half to the Association's account.

• The individual player goes into the online payment system and makes the payment.

• The online payment system allows a payment split, but the Club's perspective the Club does not see the Association's share of the fees and the Association does not see the Club's share of the fees.

• Once payment has been made an invoice of payment will be provided to the player by the Association. The invoice is generated automatically by the system at the time of registration.

• Where amounts are insufficient to cover the costs for court fees/referees etc, then the Association will invoice the Club directly for the difference and vice-versa should the amounts be overpaid.

• Once midway through the season is reached, the Club will revert to accepting 100% of each player's fees (for stragglers /later payers) and the Association will invoice the club directly for the difference or reimburse the Club if the Association has received more. None of this amount is forwarded to the Association and the Club would provide a receipt of payment to the player If paid manually.

The Association

• The Association is registered for GST.

• The Association's Junior By-laws contain a number of clauses relating to invoicing and fees.

• The Association's Constitution provides that it may appoint agents to transact any business of the Association on its behalf.

• There are no clauses in the Association's Constitution that indicate that the Association has appointed the Club to act as an agent for the Association in the collection of fees.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999:

Section 9-5

Section 9-40

Section 23-5

Section 188-10

Section 188-20

Section 195-1

Reasons for decision

Issue 1

Question

Summary

The approximate $xxx that the player's pay into the on-line payment system is consideration for the supply of membership by the Club and should be included in the Club's calculations of their GST turnover threshold.

The $xxx per team per season fee does not form part of the Club's calculations of their GST turnover threshold.

Detailed reasoning

Agency

The basic principles of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) at times may be subject to the common law of agency. The GST Act provides specific provisions that may override this common law in certain instances, eg. resident agents acting for non-residents (Division 57) and principals and agents as separate suppliers or acquirers (Sub-div 153-B). However, where the specific provisions are not triggered the common law of agency may prevail in certain instances.

An agency relationship exists under the common law of agency where the 'agent' acting under its authority can effect legal relations between the 'principal' and a third party (GSTR 2000/37). The basic principle is that the actions of the agent are treated as being the actions of the principal. Consequently, for GST purposes, the principal and not the agent would make the supply and therefore the liability for paying the GST on a taxable supply, as well as any entitlement to input tax credits for a creditable acquisition, rests solely with the principal and not the agent. Hence, the supply shall be made between the principal and the third party.

You contend that you are acting as an agent for the Association in the collection of the fees the Association, however, there are no clauses in the Club's Constitution that indicate that the Club acts as an agent for the Association in the collection of fees. Additionally there are no clauses in the Association's Constitution that indicate that the Association has appointed the Club to act as an agent for the Association in the collection of fees.

Supply

According to section 9-5 of the GST Act a taxable supply is:

• a supply made for consideration;

• the supply is made in the course of or furtherance of an enterprise the supplier carries on;

• the supply is connected with Australia; and

• the supplier is registered, or required to be registered.

GST is payable on the value of a taxable supply (section 9-70). Nevertheless, a supply that is GST-free or input taxed is not a taxable supply (section 9-5) and therefore no GST is payable.

Both "supply" and "consideration" are defined broadly in the GST Act. A supply includes any form of supply whatsoever (sub-section 9-10(1)). A supply of goods, a supply of services and the creation or grant of a right (sub-section 9-10(2)) is just a few examples. As a general rule, membership to a particular club or association of persons is a supply that is made to the member for it provides the member with a benefit through the right of membership.

In the current arrangement we consider that there are 2 supplies.

The first supply is the supply from the Association to the Club for the per team fee of $xxx per team per season for the right to have a team in the competition and the costs associated to the Association in running this competition such as stadium expenses, referee and staff costs etc.

The second supply is the supply of membership by the Club to the individual players. We consider this membership fee is the approximate $xxx that each individual member pays in the automated on-line payment system.

The Club is legally obligated to pay the Association the per team fee and it does this by passing-on its share of the membership fee paid by the players through the on-line payment system.

These arrangements are discussed further below.

The Association Fee

In the present instance, the Club is one of a number of sporting clubs that operate under the umbrella of the Association. The Association is registered for GST. 

The Club fields team(s) and participates in a sports competition controlled by the Association. The Association is bound by its Constitution and associated By-Laws. Throughout the year, the Club collects receipts from its playing members for affiliation with the Association, which is registered for GST in its own right. The affiliation fees facilitate the registration of the players who are then eligible to represent the Club in the sports' competition controlled by the Association. The Club shall forfeit a game if it plays an unregistered player in one of its sports teams.

In this case one of the issues to be decided is whether the Association is supplying the right to participate in its sports competition to the members (individual players) of the Club or to the Club itself. 

Indicators that the supply is made to the individual players (who are unregistered for GST), as the recipient, and not the registered club may include:

• A Club acts as agent for the governing body in collecting the payment of fees from the individual players. This may be either expressed in writing between the Club and the governing body under some agreement relating to affiliation and membership fees, or, in practice, from the understanding that the moneys collected by a Club are not its own funds.

• The fees that are collected by a Club are paid in full to the Association and the Club does not charge a fee for collecting those funds, nor, retains any part of those funds as its own money.

In the context of the fee paying process which is the subject of this Private Ruling, you have provided copies of both the Club's constitution and the Association's constitution, together with a copy of the on-line receipt provided once payment has been made.

You have advised that players are now charged approximately $xxx/season, of which the Club 'pass-on' the 'per team' fee to the Association. The Association has set up the Club to an online payment system whereby players will pay 50% of their total fees to the Club and the other 50% of the fees direct to the Association.

The amounts paid will be placed into appropriate accounts of each organisation. There are two separate bank accounts (the Association and the Clubs), and half of the player's funds goes to the Club's account and half to the Association's account.

The online payment system allows a payment split, but from the Club's perspective the Club does not see the Association's share of the fees and the Association does not see the Club's share of the fees.

Once payment has been made an invoice of payment is provided to the player which is generated automatically by the system at the time of registration.

Where amounts are insufficient to cover the costs for court fees/referees etc, then the Association will invoice the Club directly for the difference and vice-versa should the amounts be overpaid.

You have advised that this fee is to be paid to the Association by the teams. Each team owes the money to the Association. When players register online with the Club, the system is set up in such a way that some money goes to the Association to pay this fee for the team. As the number of players / team can vary, any adjustment may be needed to either refund the Club amounts overpaid above the team fee or an extra amount may be needed to be paid by the Club. Any amounts that are overpaid by the team are paid directly to the Club and not to individual players.

In this case it is clear that the fee charged by the Association is a 'per team' fee and not a fee to each individual player, and in this instance we consider the 'team' to be the Club, although administratively you require the individual player to pay this fee directly through the on-line payment system rather than to the Club 'as agent' for the Association.

In this context we consider that the Association fee is a fee charged by the Association to the Club for the supply of a right to field a team in the Association competition. It does not matter that the individual player is providing the consideration as in this case they are paying the fee on behalf of the Club through an administrative arrangement that benefits the Club and the Association. Therefore, where the Association is registered for GST, GST should apply to this transaction and were the Club registered for GST the Club would be entitled to an input tax credit.

The Club has also advised that once midway through the season is reached, the Club reverts to accepting 100% of each player's fees (for stragglers /later payers). None of this amount is forwarded to the Association and the Club would provide a receipt of payment to the player if paid manually. As this amount becomes the 'property' of the Club we consider that this further supports the view that there are two supplies being made.

Consideration

Consideration may be made in more than one form such as a payment of money. It also includes any act or forbearance in connection with the supply (sub-section 9-15(1)). A nexus must exist between the supply and the payment for there to be consideration (GSTR 2001/4).

Under section 11-5 of the GST Act a creditable acquisition is made by an entity if:

• the thing acquired was solely or partly for a creditable purpose;

• the supply of the thing to the entity was a taxable supply;

• the entity provided, or was liable to provide, consideration for the supply; and

• the entity is registered, or required to be registered.

The acquisition of a thing is for a creditable purpose where it is acquired by the entity in the course of carrying on its enterprise (sub-section 11-15(1)). Carrying on an enterprise includes doing anything in the course of the commencement or termination of an enterprise (section 195-1). However, an acquisition is not for a creditable purpose to the extent to which it relates to the making of input taxed supplies or is of a private or domestic nature (sub-section 11-15(2)). Acquisitions that relate to making financial supplies that are input taxed supplies which do not exceed the financial acquisitions threshold ('FAT') are disregarded as being input taxed supplies for this purpose and are effectively treated as being made for a creditable purpose (sub-section 11-15(4)).

Club fee

It is also necessary to ascertain whether there are any supplies being made directly to the individual players by the Club for which the relevant fees would be consideration.

As mentioned previously a taxable supply is:

• a supply made for consideration;

• the supply is made in the course of or furtherance of an enterprise the supplier carries on;

• the supply is connected with Australia; and

• the supplier is registered, or required to be registered.

Based on the information given, the Club supplies membership in return for membership fees. The membership fee entitles the members to play a sport in a team nominated by the Club and use the associated facilities. 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 through the on-line payment system to their associations can be consideration for the supply.

Based on the information given, the Club is making the supply of membership which entitles the members to use the clubroom facilities (if any) to represent the Club in the teams and to participate in any activities organised by the Club. In return the Club receives the membership 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.

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 Club's activities are done in 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 by the Club to the members satisfies the requirement of paragraph 9-5(b) of the GST Act.

Connected with Australia and GST registration

Based on the information given, the supply of the membership 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.

Where the Clubs turnover threshold meets the GST turnover threshold of $150,000 the Club would be required to be registered for GST and therefore paragraph 9-5(d) of the GST Act would be 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 38-250 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 by the Club to the members in Australia GST-free or input taxed.

Requirement to register for GST

An entity is required to be registered if:

• it is carrying on an enterprise (an entity that performs activities in the form of a business is carrying on an enterprise. The activities of a religious institution, or a charitable institution or fund, also fall within the definition of an enterprise), and

• it has a GST turnover that meets a particular threshold. For non-profit bodies, this threshold is $150,000. For other entities, the threshold is $75,000.

An entity may choose to register for GST if it is carrying on an enterprise but its GST turnover does not meet the threshold.

If an entity is required to be registered because its GST turnover meets the threshold, it must make the application within 21 days of becoming required to be registered.

Meeting a turnover threshold

An entity's GST turnover will meet a particular turnover threshold if:

• its current GST turnover is at or above the threshold and its projected GST turnover is at or above the threshold, or

• its projected GST turnover is at or above the threshold.

In other words, if an entity's current GST turnover is at or above the threshold, but its projected GST turnover is below the threshold, then it is not required to register for GST.

If an entity's projected GST turnover is at or above the threshold, then it is required to register for GST even if its current GST turnover is below the threshold.

Current and projected GST turnover

Current GST turnover is the value (excluding GST) of all the supplies that an entity has made, or is likely to make, during the current month and the previous 11 months.

Projected GST turnover is the value (excluding GST) of all the supplies that the entity has made, or is likely to make, during the current month and the next 11 months.

When calculating current and projected GST turnover, an entity does not include:

• input taxed supplies (if a supply is input taxed, then no GST is payable on the supply and there is no entitlement to an input tax credit for anything acquired or imported to make the supply)

• supplies for which an entity does not receive any payment (except those supplies that are made to an associate of the entity that is not registered for GST or acquires the thing other than solely for a creditable purpose)

• supplies that are not made in connection with an enterprise that the entity carries on

• supplies that are not connected with Australia

• payments from insurers in settlement of an insurance claim, or

• the sale of capital assets (excluded from projected GST turnover only).

In summary, the approximate $xxx that the player's pay into the on-line payment system is consideration for the supply of membership by the Club and should be included in the Club's calculations of their GST turnover threshold.

The $xxx per team per season fee is consideration for a supply made by the Association to the Club and does not form part of the Club's calculation of their GST turnover threshold.

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