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Edited version of your written advice
Authorisation Number: 1013066658934
Date of advice: 15 August 2016
Ruling
Subject: GST and cash prizes
Question 1
Are the cash prizes you pay to the winning participants of your events subject to GST and are you entitled to input tax credits on these cash prizes?
Answer
For GST registered winning participants:
The cash prizes you pay to the GST registered winning participants will be subject to GST if the other requirements of a taxable supply under section 9-5 are satisfied. The registered participants will be making a taxable supply of participation in the event to you. You will be entitled to an input tax credit for your creditable acquisition of the winners' participation but you must hold a valid tax invoice to be able to claim the input tax credits.
For unregistered winning participants:
The cash prizes you pay to the unregistered winning participants will not be subject to GST.
Question 2
Are the appearance monies paid by you subject to GST and are you entitled to input tax credits on the appearance monies?
Answer
The GST status of the appearance monies will also depend on whether the participants are registered for GST. That is, where the participant is GST registered and all the requirements of a taxable supply under section 9-5 are satisfied, then the appearance monies will be subject to GST.
Where the participants are not registered for GST, then the payment of the appearance monies will not be subject to GST.
Relevant facts and circumstances
You are registered for GST.
You hold events regularly and give away cash prizes to the winning participants.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
A New Tax System (Goods and Services Tax) Act 1999 subsection 9-5(a)
A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(1)
Reasons for decision
Unless otherwise stated, all legislative references in this Ruling are to the A New Tax System (Goods and Services Tax) Act 1999.
Goods and Services Tax Ruling GSTR 2002/3 (GSTR 2002/3) explains how the GST applies to suppliers and recipients of prizes under the GST Act.
Giving prize money is not making a supply. Paragraph 20 of GSTR 2002/3 provides that as the event holder giving the prize money to the winners, you are not making a supply for GST purposes, as a supply does not include a supply of money unless the money is provided as consideration for a supply that is itself a supply of money.
Paragraph 29 of GSTR 2002/3 mentions that all participants make a supply to the event holder by participating in the event, although the event holder may give a prize only to the winner of the event. The participants are making a supply of their participation even if they may receive nothing from participating, for example, if they do not win the race.
However, the participant's supply of participation in an event will only be subject to GST if it meets the requirements of a taxable supply.
Under section 9-5, an entity makes a taxable supply if:
(a) it makes a supply for *consideration; and
(b) the supply is made in the course or furtherance of an *enterprise that it carries on; and
(c) the supply is *connected with the indirect tax zone; and
(d) the entity is *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.
Subsection 9-10(1) states that a 'supply' is any form of supply whatsoever.
Where there is a connection or sufficient nexus with the payment of the prize and the supply of participation, then the requirement in subsection 9-5(a) is met.
However, the supply of participation for consideration must be made in the course or furtherance of an enterprise that the participant carries on and the participant must be registered or required to be registered for GST.
Paragraphs 36 to 39 of GSTR 2002/3 states:
36. A registered winner of a prize in an event, having participated in the event in the course or furtherance of an enterprise that they carry on, has a GST liability for the supply of their participation where there is a sufficient nexus between the prize and the supply.
37. An event holder offers prizes in an event as an inducement and reward for a winning performance in the event. As these prizes are in the nature of rewards for services rendered, we consider that there is a sufficient nexus between a prize given to the winner and the supply of the winner's participation.
38. Where a prize is consideration for a supply of participation and the other requirements of section 9-5 are satisfied in relation to the supply, the supply is a taxable supply. For example, where a registered owner of a racehorse starts the horse in a race in the course of an enterprise the owner carries on, and the horse wins a prize, the owner is liable for GST of 1/11 of the prize.
39. The price of the supply of the horse's participation in the race is the amount of prize money (if any) together with the GST inclusive market value of non-monetary prizes.
GSTR 2002/3 provides in Example 2 when there is a supply of participation from the participant to the event holder and states:
Example 2: Supply of participation in the event
40. Rod (from Example 1) makes a supply to GU by participating in the event. Rod wins the event and receives a non-monetary prize with a market value of $2,200, which is consideration for the supply of his participation. As Rod is registered for GST and is supplying his participation in the course or furtherance of an enterprise he carries on, the supply is a taxable supply.
41. The price of the taxable supply is the GST inclusive market value of the prize, which is $2,200. Rod accounts for the GST payable on his taxable supply of $200, being 1/11 of $2,200. GU is entitled to an input tax credit of $200 for the creditable acquisition of Rod's participation.
GST REGISTERED WINNING PARTICIPANTS
Where your winning participants are registered for GST and all the other requirements of a taxable supply under section 9-5 are satisfied, then the payment of the cash prizes will be subject to GST as the participant will be making a taxable supply of participation to you.
You will be entitled to an input tax credit for the GST component of the cash prize for your creditable acquisition of the winner's participation.
You must hold a valid tax invoice to be able to claim input tax credits.
UNREGISTERED WINNING PARTICIPANTS
If the winner is not registered for GST (nor required to be registered), the supply is not subject to GST. Therefore, your payment of the prize money is not a creditable acquisition and you are not entitled to input tax credits.
Appearance monies
Where there is a connection or sufficient nexus with the payment of the appearance monies and the supply of participation and the participant is registered for GST and the other requirements of a taxable supply under section 9-5 are satisfied, then the payment of the appearance monies will be subject to GST. You will be entitled to an input tax credit for the GST component of the appearance monies for your creditable acquisition of the appearance monies.
You must hold a valid tax invoice to be able to claim input tax credits.
Where the participant is not registered for GST, the appearance monies will not be subject to GST.
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