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Edited version of your written advice
Authorisation Number: 1012762885341
Ruling
Subject: Goods and services tax (GST) and prize money
Question
Are you making a taxable supply to X in return for the prize money it pays you?
Answer
No.
Question 2
Are you making a taxable supply to X in return for the levy for administering the player prize money?
Answer
No.
Relevant facts and circumstances
You are registered for GST.
You are an Australian association.
X (a foreign entity) contracts Y (an Australian company) to run the tournament in Australia annually. Players who enter this tournament pay their entry fee to Y.
X receives sponsorship from other foreign entities to fund the player prize money for the tournament (no Australian GST is collected on the sponsorship by X).
X, upon completion of the tournament, pays prize money, less Australian withholding tax directly to any of the X member players.
The prize money for all non-X member players, plus the withholding tax on the X members' prize money is paid to you. There is a contract in place between you and X that sets out the responsibilities of both parties.
You then pay the prize money received to appropriate players including GST if the player is registered for GST in Australia and reports/pays the withholding tax on all player payments for the tournament to the Australian Taxation Office (ATO).
You are also paid a levy by X to administer the player prize money payments.
There is no agreement between you and X that you will supply services or something else in return for the prize money that it pays you.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 38-190
Reasons for decisions
Question 1
GST is payable on taxable supplies.
You make a taxable supply if you meet the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:
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.
(*Denotes a term that is defined in section 195-1 of the GST Act)
In regards to your activity of collecting prize money and forwarding it on to non-X member players, you are merely acting as a payment conduit for this money. X is effectively paying those players prize money relating to an event that X has contracted Y to stage and these payments are made through you as intermediary. The prize money that you receive is not consideration for any supply you make to X.
Therefore, you do not make a taxable supply in return for the prize money.
Hence, you do not have a GST liability to the ATO in respect of the prize money.
Question 2
You are supplying a service to X in return for the administration levy. The service is administering the payment of some of the prize money.
Item 1 in the table in subsection 38-190(1) of the GST Act (item 1) provides that a supply of something other than goods or real property is GST-free if the supply is made to a non-resident who is not in Australia when the thing supplied is done, and
(a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with *real property situated in Australia; or
(b) the *non-resident acquires the thing in *carrying on the non-resident's *enterprise, but is not *registered or required to be registered.
The administrative service is not goods or real property.
You supply the administrative service to a non-resident that is not in Australia.
The supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia.
The exclusions at subjections 38-190(2), 38-190(2A) and 38-190(3) of the GST Act do not apply.
Therefore, you make a GST-free supply under item 1 in return for the administrative levy.
Hence, GST is not payable on the administrative levy.
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