Edited version of private ruling

Authorisation Number: 1011769507425

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Ruling

Subject: GST and supply of religious services

Subject

GST and supply of religious services

Issue 1

Question 1

Is the invited religious speaker making a supply to you?

Yes.

Question 2

Is the money provided to the religious speaker considered a gift?

No.

Question 3

Are you entitled to claim a GST credit assuming there is a valid tax invoice?

Yes.

Issue 2

Question 1

Are the supplies of DVDs subject to GST?

Yes, where consideration is provided.

Relevant facts

You are an incorporated body and you operate the religious services at a local religious institution.

You are registered for GST.

You are a non-profit entity with income tax exempt status. You have advised us that you are a religious institution.

Sometimes there are invited religious speakers and may be from other religious institutions, other countries, or elsewhere. Arrangements made are normally informal. This is done by phone and there is nothing provided in writing. Payment is not discussed. You consider amounts provided to the religious speakers to be love offerings.

Some of the religious speakers hold an ABN. You do not currently ask whether invited religious speakers are registered for GST. You do not know of any being registered, but believe this may be possible.

You have not received any tax invoices from religious speakers. You sometimes receive a receipt that money has been paid to the religious speakers.

Where there is an invited religious speaker there are two collections of money made from the congregation. The first collection is for you, the second collection is for the invited religious speaker.

Payments made by the congregation in these collections are voluntary.

Funds provided are tallied by the religious head of the institution and the treasurer.

You sometimes provide further funds for the invited religious speaker if the collection amounts received for them are too low.

You do not currently claim any input tax credits in relation to the services of invited religious speakers.

You also record the sermons given on DVD. The DVDs are available for sale to members of the congregation. Sometimes they are given away to new visitors.

Reasons for decision

Issue 1

Question 1

Summary

The invited religious speaker is making a supply to you.

Detailed reasoning

You provide religious services at a local religious institution. In doing this you make a supply of services to the congregation. A religious institution is a non-profit institution operated for the public benefit to advance religion in a direct and immediate sense. As you have advised that you are a religious institution, and that the supply of a service to the congregation is integral to the practice of the religion, then under section 38-220 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) this supply will be GST free.

As part of providing services to the congregation you will sometimes engage an invited religious speaker. You engage the religious speaker and make all of the arrangements. After the service you ensure that a sufficient amount of funds are provided to the religious speaker. If congregation contributions are insufficient then you make up any shortfall.

You enter into the arrangement with the invited religious speaker. It is you rather than the congregation that receives the supply of speaking services. The benefit of the supply is enjoyed by the congregation, but the invited religious speaker's arrangement is with you and their responsibilities are to you. In this scenario you are the recipient of the speaking services provided by the invited religious speaker, which forms part of the religious service provided by you to the congregation. The Commissioner's view on this type of arrangement can be found in GSTR 2006/9, for example in paragraphs 165-170.

Question 2

Summary

The money provided by you to the invited religious speakers is consideration for the speaking services supplied rather than a gift or donation.

Detailed reasoning

Whether an amount is consideration is a question of fact. A donation is a payment that is made voluntarily, out of benefaction, where the payer receives no material benefit in return.

The love offerings given to your invited religious speakers are not solicited by religious speakers and are made voluntarily by you and the congregation. However, under subsection 9-15(2) of the GST Act a payment, act or forbearance can be consideration for a supply even if it is voluntary or is not made by the recipient of the supply.

You are responsible for forwarding amounts to the invited religious speakers funded wholly or in part by amounts collected from the congregation. You provide an amount to the religious speaker, and you may top up the amount given by the congregation if this is not enough in the circumstances. For these reasons it makes no difference if there is no second collection. The amount of contribution you receive from the congregation simply provides or supplements the amount you decide to give to the religious speaker.

The offerings received by the invited religious speaker are a result of the speaking activities undertaken by the religious speaker for you. The activities are a substantial reason for the offerings being given, and so there is a connection or nexus between the speaking services and the amounts given. Amounts of money given in this nature are more than mere tokens of appreciation and are consideration for the speaking services. The amounts given to the guest speakers can not be considered as donations as there is a material benefit received. Therefore, the invited religious speaker receives consideration for their supply of speaking services to you.

Question 3

Summary

You are entitled to a GST credit assuming the supply is a taxable supply and they hold a tax invoice.

Detailed reasoning

Under section 9-5 of the GST Act the supply by the invited religious speaker to you will be taxable if the religious speaker is registered, and the speaking services are provided in the course or furtherance of an enterprise that the speaker carries on.

However, the supply will only be taxable if the religious speaker is not a religious practitioner under section 50-5 of the GST Act. Under section 195-1 of the GST Act a religious practitioner is a minister, someone who is studying to be a minister, a full-time member of a religious order or someone who is studying to become a full-time member of a religious order.

Where a religious practitioner acts as part of their vocation as a religious practitioner and member of a religious institution then the GST law will apply as if the activities have been done by the religious institution and not by the religious practitioner. This means that where the supply by the religious institution is a supply of a religious service that is integral to the practice of religion then the religious service will be GST free.

Otherwise, if the religious speaker is registered and undertaking the activities as part of their enterprise (and not as a religious practitioner of another religious), the religious speaker makes a taxable supply to the religious for consideration. They will be liable for GST on the amounts received. The amount of GST payable equals 1/11 of the amount of offerings received.

Where a taxable supply is made the invited religious speaker must provide you with a tax invoice. The supply of the service will be a creditable acquisition to you where it is acquired for a creditable purpose, it meets the circumstances above to be a taxable supply, you provide consideration for the supply and you are registered for GST (section 11-5 GST Act).

You may claim GST credits for creditable acquisitions that you make if all the requirements for making a creditable acquisition are met. You can claim GST credits where the acquisitions are in relation to a supply that you make that is GST free.

You have suggested that the 'Department of Transport case' (Commissioner of Taxation v Secretary to the Department of Transport (Victoria) [2010] FCAFC 84) may apply to your case. This case considered whether the Department of Transport (DOT) would be entitled to GST credits when they pay half the fare for provision of transport in taxis to disabled persons. This case considered particular facts, including the licensing arrangements of taxis and the provision of an authorisation card before the start of a trip. These factors combined such that it was considered that effectively the DOT and the taxi passenger contracted with the taxi provider for the service. Therefore one series of acts resulted in two relevant services being supplied, one being to the DOT who was therefore entitled to claim the GST credits.

In your case, you have undertaken all arrangements to engage invited religious speakers and provided the whole consideration to the religious speakers. As discussed above, if this is a taxable supply it is YOU who is entitled to the full input tax credit. Each member of the congregation cannot be said to each have arranged a service with the invited speaker, or acquired a taxable supply for a creditable purpose.

Issue 2

Question 1

Summary

The supply of DVDs will be subject to GST if consideration is received.

Detailed reasoning

Under section 38-220 of the GST Act, a supply of a religious service is GST-free where:

(a) it is supplied by a religious institution; and

(b) it is integral to the practice of that religion.

The supply of religious services by a religious institution will be GST-free if the services are integral to the practice of that religion. Importantly, this only covers services and will not extend to the sale of property or goods such as DVDs.

As the sale of DVDs is not a supply of religious services, regardless of the status of the supplier, the sales will be subject to GST if the other requirements of section 9-5 of the GST Act are met.

Where you give away the DVDs no consideration is received, and so this is not a taxable supply.

The "nominal consideration" rules in section 38-250 do not apply. These rules provide that a supply by a charity is GST-free if the consideration is under certain amounts. You have not been endorsed as a charitable institution, and therefore cannot rely on this provision as it does not apply. Where any consideration is received the sale of DVDs will be subject to GST.

You have suggested that the supply of the DVDs could be viewed as a composite supply as part of GST-free religious services. A composite supply contains a dominant part and the supply includes something that is integral, ancillary or incidental to that part. The supply of the DVDs is not integral to the religious service. A DVD is a separately identifiable supply, with separate consideration received. Where consideration is received the supply is a taxable supply.