Edited version of private ruling

Authorisation Number: 1011703698998

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Ruling

Subject: GST and entry fees to a sporting competition

Questions and answers

Are you making a taxable supply when you supply a sporting competition, to participants, for an entry fee?

Yes.

Are you entitled to an input tax credit (GST credit) for the goods and services tax (GST) included in the price of the 'afternoon tea' provided as part of the competition?

Yes.

Are you entitled to a GST credit on the prize money paid to participants?

No.

Relevant facts and circumstances

You are registered for GST.

You provide sporting facilities and competitions.

You hold a regular competition where each participant pays an entry fee.

The entry fee also entitles the participants to an 'afternoon tea'.

The 'afternoon tea' offers light refreshments consisting of tea, coffee, cake or biscuits.

From each entry fee, you pay an amount to an independent catering concern, registered for GST, for the supply of the 'afternoon tea'.

A certain amount of the entry fee is allocated as prize money and is paid to winning participants.

The remaining proceeds from the event are kept by you.

Participants in the competition are amateurs and it is very unlikely they would be registered for GST.

Reasons for decision

Summary

The requirements for making a taxable supply under the GST Act are met in relation to your supply of the competition.

The requirements for making a creditable acquisition under the GST Act are satisfied and consequently you are entitled to a GST credit on the purchase of the 'afternoon tea'.

The payment of prize money is not the payment for a taxable supply and consequently there is no entitlement to claim a GST credit.

Detailed reasoning

Question 1

Under the basic rules, an entity will be required to remit GST on any taxable supply that it makes. Further, a supply is taxable if the following requirements of section 9-5 of the GST Act are met:

· you make the supply for consideration

· the supply is made in the course or furtherance of your enterprise

· the supply is connected with Australia; and

· you are registered, or required to be registered for GST.

Please note that a supply is not taxable to the extent that it is GST-free or input taxed.

Goods and Services Tax Ruling GSTR 2002/3 (GSTR 2002/3) provides the ATO view on how GST applies to suppliers of competitions and to recipients of prizes. Paragraph 26 of GSTR 2002/3 provides that an event holder is supplying a right to participate in an event by accepting an entry into that event. In addition, paragraph 34 of GSTR 2002/3 provides that entry fees paid by participants are consideration for the supply of that right to participate in the event.

Consequently, the entry fee you receive from participants is consideration for your supply of the right to participate in the competition. Your supply is made in the course or furtherance of your enterprise, your supply is connected with Australia as it is made in Australia and you are registered for GST. There are also no provisions in the GST Act or any other Act that would allow your supply to be GST-free or input taxed.

Hence, your supply of the right to participate in the competition is a taxable supply under section 
9-5 of the GST Act and consequently, you would be required to remit GST on all the entry fees received in relation to each competition.

Question 2

Under the basic rules, GST registered entities are entitled to claim GST credits on the creditable acquisitions they make.

Section 11-5 of the GST Act provides that that you make a creditable acquisition if:

· you acquire anything solely or partly for a creditable purpose

· the supply of the thing to you is a taxable supply

· you provide, or liable to provide, consideration for the supply, and

· you are registered, or required to be registered, for GST.

Further to this, you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise but not to the extent that:

· the acquisition relates to making supplies that would be input taxed; or

· the acquisition is of a private or domestic nature.

In your case, the consideration you pay for the 'afternoon tea' that is supplied to the participants is for a creditable purpose and is a taxable supply to you. Consequently, you are entitled to claim the GST included in the price of the 'afternoon tea' on your activity statement.

Question 3

Paragraph 42 of GSTR 2002/3 states that the supply of a prize (which includes money) to a participant who is not registered (or required to be registered) for GST is not consideration for a taxable supply made by the participant. In addition, even if a participant is registered for GST, the supply of the prize is not taxable unless it is supplied in the course or furtherance of an enterprise carried on by the participant.

You have stated that the participants in the competition are amateurs who are very unlikely to be registered for GST. Accordingly, their supply of their participation in your competition is not taxable and consequently, payments made to them are not for a creditable acquisition as per section 11-5 of the GST Act (refer to question 2).

As a result, you are not entitled to claim a GST credit for the prize money paid to participants of the competition.