Edited version of private ruling

Authorisation Number: 1011849166668

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Ruling

Subject: GST and the sale of second-hand goods

Question

Is your supply of goods (by way of sale) that are obtained from your pick-up points a GST-free supply of second-hand goods under section 38-255 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

Relevant facts and circumstances

· You are registered for goods and services tax (GST).

· You have been endorsed by the ATO as a charitable institution.

· You own several pick-up points that allow donated goods to be left by members of the public.

· You have an agreement (Agreement) with another organisation (A) in relation to the collection, processing and subsequent supply to you of the goods left at the pick-up points.

· The Agreement requires that A:

· collects the goods

· sorts out those goods that are suitable for sale (shop quality goods) and delivers these particular goods to you

· supplies you with a certain quantity of shop quality goods, and

· receives a certain fee for the delivered goods.

· The Agreement also provides that the shop quality goods remain your property until they are picked up by A. You regain ownership of the shop quality goods once they are delivered to you.

· You sell the shop quality goods unaltered.

· You have provided a statement (Statement), signed by yourself and A, clarifying the understanding you and A have of the operation of the Agreement with respect to the shop quality goods. This Statement provides that:

· it was (and still is) the intention that A provides you with collection and sorting services (including collecting rejected goods from you) for which A charges you a certain rate

· A does not at any point own any of the shop quality goods they collect and sort from your pick-up points

· you receive all the shop quality goods obtained from your pick-up points after sorting

· shop quality goods donated to you at your pick-up points remain your property while being collected and sorted by A, and

· A confirms that your goods are kept separate from the goods collected and sorted by them on behalf of other organisations and that only the shop quality goods placed at your pick-up points are sent to you.

Relevant legislative provisions

GST Act; Section 38-255

Reasons for decision

Summary

Your sale of the shop quality goods would be GST-free as second-hand goods given the requirements of section 38-255 of the GST Act are met.

Detailed reasoning

Subsection 38-255(1) of the GST Act states that a supply of second-hand goods is GST-free if:

(a) the supplier is a charitable institution, a trustee of a charitable fund, a *gift- deductible entity or a government school; and

(b) the goods were supplied to the institution, trustee, *gift-deductible entity or *government school:

(i) as a gift; or

(ii) by way of a supply that was GST-free because of a previous application of this section.

However, the supply is not GST-free if the institution, trustee, gift-deductible entity or government school has dealt with the goods in such a way that the goods no longer have their original character.

Note that the asterisks denote a defined term in the GST Act.

Subsection 38-255(2) of the GST Act further provides that the above subsection does not apply in relation to a charitable institution or a trustee of a charitable fund unless the institution or trustee is an endorsed charitable institution or an endorsed trustee of a charitable fund.

Therefore, given the requirements of section 38-255 of the GST Act, a supply of goods by a GST registered entity is GST-free under this particular section when:

· the supply is a supply of second-hand goods

· the goods retain their original character, that is, the entity supplies the goods as they have acquired them

· the entity has been endorsed by the ATO as a charitable institution or a trustee of a charitable fund, and

· the goods are supplied to them as either gifts or GST-free supplies under section 38-255 of the GST Act.

In your case, the donated goods are left at your pick-up points by the members of the public and therefore, the goods can be considered as second-hand for the purposes of section 38-255 of the GST Act. The goods retain their original character, not being altered either by you or A before their sale, and you are endorsed by the ATO as a charitable institution. Hence, it is now only necessary to determine whether the goods collected from your pick-up points are a gift made to you to be able to determine if your sale of the goods is GST-free.

Agreement and the intention of the contracting parties

You entered into the Agreement with A in relation to the collection, processing and subsequent supply to you of the donated goods left at your pick-up points. The terms of the Agreement, especially in relation to the ownership of the goods, indicate that it is A that is the owner of the shop quality goods prior to you taking possession.

You have since provided a Statement clarifying the understanding you and A have of the operation of the Agreement in relation to the collection, sorting and delivery of the shop quality goods. This Statement allows the ATO to now look at the commercial intentions you and A had prior to entering into the Agreement. The Statement provides that:

· it was (and still is) the intention that A provides you with collection and sorting services (including collecting rejected goods from you) for which A charges you a certain rate

· A does not at any point own any of the shop quality goods they collect and sort from your pick-up points

· you receive all the shop quality goods obtained from your pick-up points after sorting

· shop quality goods donated to you at your pick-up points remain your property while being collected and sorted by A, and

· A confirms that your goods are kept separate from the goods collected and sorted by them on behalf of other organisations and that only the shop quality goods placed at your pick-up points are sent to you.

This Statement takes the ownership of the shop quality goods away from A and places their ownership with you throughout the collection, sorting and delivery stages.

The ATO accepts the new facts raised in the Statement particularly since both contracting parties have clarified the intention and actual operation of the Agreement. The fact that you only receive from A the shop quality goods that were deposited at your pick-up points and not a mixture of goods retrieved from the other pick-up points over which A has responsibility is also relevant.

Donated goods are a gift

The meaning of a gift is provided in Goods and Services Tax Ruling GSTR 2000/11. In particular, paragraphs 57 to 59 of this ruling outline the following requirements for something to be considered as a gift:

· a gift is transferred voluntarily by the donor and the transfer is not as a result of a contractual obligation

· the donor may not receive an advantage of a material character for providing the gift, and

· a gift confers benefaction on the recipient, and is transferred by the donor by way of detached and disinterested generosity.

As a consequence of GSTR 2000/11, the donated goods left at your pick-up points can be treated as gifts. You also remain the owner of the shop quality goods even throughout the collection, sorting and delivery stages and consequently, the shop quality goods are gifts that are made to you and not A. Therefore, given all the requirements of subsection 38-255(1) of the GST Act are met; your sale of the shop quality goods can be treated as being GST-free.