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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012807953073

Ruling

Subject: GST and non-commercial activities

Question 1

Is the method used for determining the cost of making a supply of a ticket by you acceptable to the Commissioner for the purposes of sub-paragraph 38-250(2)(b)(ii) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the 2015 annual event

Answer

Yes

Question 2

By applying the cost of supply method in question 1 is the supply of the tickets for the 2015 annual event GST-free under sub-paragraph 38-250(2)(b)(ii) of the GST Act?

Answer

The supply of a ticket is GST-free when the consideration received for the ticket is less than 75% the cost of supply calculated in accordance with the method in question 1.

Relevant facts and circumstances

• You are an endorsed charity and is registered for goods and services tax (GST).

• You are eligible for GST concessions including sub-paragraph 38-250(2)(b)(ii) of the GST Act.

• The primary activity that you carry out to achieve your objective is the annual event.

Your cost allocation methodology

NOTE

This Private Binding Ruling is given on the basis of the facts stated above. Any material variation from these facts (including any matters not stated in the description, or any departure from these facts) may mean that the Private Binding Ruling has no effect.

Therefore if you advise that you

We will determine how the GST law applies to the facts as provided. That is, we will determine whether you have:

The Commissioner does not consider himself to be bound by a PBR where - for the purposes of subsection 105-60(2) of Schedule 1 of the Taxation Administration Act 1953 - he is satisfied that an entity has misstated or suppressed a material fact or facts.

Therefore, if, there are different or other material facts which you have not made known or disclosed to the Tax Office, or those facts change over the course of time and those facts vary or alter this ruling, then you should advise the Tax Office in writing of those facts and request a revised ruling.

It is not the role of the PBR to determine the accuracy of the facts, e.g.

However, we may comment on whether the use of a particular method in apportioning an amount of cost to a particular type of expenditure is in accordance with our view.

Relevant legislative provisions

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

Section 9-5

Subparagraph 38-250(2)(b)(ii)

Reasons for decision

Question 1

Summary

(a) Yes, your methodology used in determining the cost of supplying tickets for the event is in accordance with the Cost of Supply Guidelines provided in section E of the GST Industry Issues Charity Consultative Committee Non-commercial activities of charities, cost of supply and market value tests.

(b) You can use the methodology described in question 1 for future years provided that material facts remain unchanged (see Reasons for decisions)

Detailed reasoning

Commercial activities of charities will generally be taxable or input taxed. However, the non-commercial activities by charities will be GST-free.

As question 1 relates to the supply of tickets to the event (a supply other than the supply of accommodation), subparagraph 38-250(2)(b)(ii) of the GST Act is of relevance.

This sub-paragraph provides that a supply of anything (other than accommodation) by an endorsed charity will be GST-free if the payment, or consideration for the supply is less than 75% of the consideration the charity provided or is liable to provide, for acquiring the thing supplies..

Cost of supply guidelines

The GST Industry Issues Charity Consultative Committee Non-commercial activities of charities, cost of supply and market value tests (which is a public ruling) (CCC) contains the ATO view on the methodology to determine the cost of making a supply ( cost of supply) for sub-paragraph 38-250(2)(b)(ii) purpose.

In determining the consideration the charity provided or was liable to provide in acquiring the thing supplied, the ATO considers:

Charities cannot include the imputed costs of things in the calculation as they do not involve an actual outlay by the charity. The imputed costs for things like volunteer labour, donations and free rent do not involve an actual outlay by the charity where the charity has not actually provided any consideration or incurred any real costs.

However, Goods and Services Tax Determination 2013/4 (GSTD 2013/4) further provides that the consideration the supplier provided for acquiring those assets that diminish in value over time can be taken into account in determining whether a supply in that period is GST-free under subparagraph 38-250(2)(b)(ii) of the GST Act to the extent the consideration provided reasonably relates to that supply.

In this instance the supply of a ticket will be GST-free if it is made for consideration that is less than 75% of the consideration you provided or is liable to provide, for acquiring the thing supplied or things to make the supply.

Section E of the GST Industry Issues Charity Consultative Committee Non-commercial activities of charities, cost of supply and market value tests provides the approved methodology for applying the cost of supply test for use by charities in the cultural and performing arts sector that cannot establish their actual costs at the time of supply.

This methodology is within the scope of the GST legislation and uses the principles explained in the cost of supply guidelines. It simplifies the administrative and compliance requirements for the sector.

Step 1: working out the cost of making the supply

We accept that when applying the cost of supply test, charities can include all direct costs and a reasonable apportionment of indirect costs. However, costs used must be real costs. Things like voluntary labour, donations, and other imputed costs cannot be included. All projected costs must be realistic and must be aligned with other costing conducted when the charity determines ticket prices and the costs of holding an event or performance.

Step 2: working out whether a supply is GST-free

Your methodology

Classes of tickets

You provide that there are four different types of tickets. Each class of ticket is a separate cost centre for working out the cost of supply for each ticket in a class.

Budgeted costs of all acquisitions

Allocation of costs

The total projected costs of acquisitions for all programs are $XXXXX

Apportionment of indirect costs to the classes of ticket

You allocate the indirect costs for each class of ticket by apportion the total indirect costs of the four class of ticket on the total number of projected supplies.

Estimate the number of supplies

The estimate number of supplies made consists of the following:

(c) Indirect costs for each of the class of ticket

Your methodology described above in determining the cost of supplying tickets for the event is in accordance with the Cost of Supply Guidelines provided in section E of the GST Industry Issues Charity Consultative Committee Non-commercial activities of charities, cost of supply and market value tests.

Can you use the same methodology described in question 1 for future years?

You can use the approved methodology in question 1 in calculating the cost of supply for a ticket in each class. However, as provided in the Note above, where the material facts change over the course of time and those facts vary or alter this ruling, then you should advise the Tax Office in writing of those facts and request a revised ruling.

Question 2

Summary

Yes, by applying the costing methodology described above, the supply of tickets (of a class) by you will be GST-free where the consideration for a ticket is less than 75% of the cost of supply that ticket under subparagraph 38-250(2)(b)(ii) of the GST Act.

Detailed reasoning

The Cost per supply of a ticket is determined by the following formulae. In return for the ticket:

Total consideration for a class of ticket (direct + indirect costs) provided for supplying a ticket

By applying the formulae above to each class of ticket, you can determine the cost of supply of each ticket in each class. Where the consideration for a ticket is less than 75% of the cost of supply that ticket, the supply of that ticket is GST-free under paragraph 38-250(2)(b)(ii) of the GST Act.


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