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Ruling

Subject: Raffles conducted by charitable institutions.

Question

Is your supply of pins and raffle tickets GST-free?

Advice/Answers

Yes, provided your supply of raffle tickets does not contravene a State law or a Territory law.

Relevant facts

You are registered for GST. You are endorsed as a charitable institution for GST purposes.

You are initiating a promotion which will involve the supply of a raffle ticket. The purchaser will be able to purchase a ticket for either $X or $XX. With the purchase of the ticket, the purchaser will also receive a pin. The pin comes in two different colours to reflect the value of the tickets of $X or $XX respectively.

The outcome of the promotion will be:

· A short term fundraising outcome, and

· A longer term outcome, being further development of a database of potential supporters.

In order to be able to comply with the relevant States' legislation applying to fund raising events such as this, where a raffle is being supplied, you have found that, to allow a consistent approach in all States and Territories where the promotion is to be undertaken, it is only viable for you to do so if you take the most stringent of the State's requirements and apply those requirements to the promotion Australia wide.

The sample terms and conditions applicable to the promotion that you have provided state that:

· To be eligible to enter, individuals must purchase a collectable pin for either $X or $XX during the promotional period. Each collectable pin will include a free raffle ticket.

· Each ticket qualifies the holder to one entry into the major prize draw regardless of whether they win an instant prize or not.

· The pins cannot be purchased on their own. They can only be obtained with the raffle ticket. The sale of the raffle ticket alone would contravene certain state laws. The sale of the pin alone would not achieve your dual objectives of the promotion. The pin is purely to satisfy the requirements of certain of the States' legislative requirements in relation to fundraising and promotions of this type by charitable institutions.

For this reason the promotion is structured so that it appears to be marketed as the supply of the pin, with a 'free raffle ticket'. Despite this, your objectives are the twofold outcomes mentioned above.

The actual retail value of the pin is nominal. You estimate that it would be less than $Y per item and also less than 20% of the consideration for the total supply.

You confirmed that you have complied, and will continue to comply, with all of the requirements necessary to enable you to conduct the 'promotion' in accordance with relevant State and Territory legislation requirements.

Contentions:

Your tax adviser submits that the supplies of 'Pins and Raffle Tickets' under the promotion made by you form a composite supply. And that the supply made by you is GST-free on the basis that it is made in accordance with subsection 38-270(1) of the GST Act , specifically that:

· You are a charitable institution

· You make a supply of a raffle ticket in a raffle and

· That supply does not contravene a State law or a territory law.

Relevant legislative provisions

Section 9-5, 38-270 of the GST Act

Reasons for decision

Under the general rules, GST will apply to any taxable supply that you make.

A taxable supply is defined under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

You make a taxable supply if:

· you make the supply for consideration

· the supply is made in the course or furtherance of an enterprise that you carry on

· the supply is connected with Australia, and

· you are 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.

Your proposed supply will meet subsections (a) to (d) above and will be taxable unless it is deemed to be GST-free or input taxed. In view of the specific question at issue, we have not considered whether your promotion would be input taxed under subdivision 40-F of the GST Act.

Section 38-270 of the GST Act, which deals with 'Raffles and bingo conducted by charitable institutions etc', provides under subsection (1) that a supply will be GST-free if:

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

the supply is:

(i) a supply of a ticket in a raffle; or

(ii) an acceptance of a person's participation in a game of bingo; or

(iii) a gambling supply of a kind specified in the regulations; and

(c) the supply does not contravene a State law or a Territory law. 

Therefore, if the supply under your promotion of a Pin and a Raffle Ticket, meets all the requirements of the above subsection it will be GST-free.

Our records confirm that you are registered for GST with access to GST concessions as an endorsed charitable institution. As such, paragraph (a) above is met.

A raffle is a game of chance where the prizes are either goods or cash, or a combination of the two.

A 'gambling supply' is defined in section 126-35(1) as a taxable supply involving the supply of a ticket (however described) in a lottery, raffle or similar undertaking.

While there are no kinds of gambling supplies specified in the regulations we consider in your case that the sale of 'Raffle Tickets' is a similar undertaking to the sale of raffle or lottery tickets and is therefore a game of chance. As such, paragraph (b) above is met.

You are initiating a promotion which will involve the supply of a raffle. The purchaser will be able to purchase a ticket for either $X or $XX. With the purchase of the ticket, the purchaser will also receive a pin. The pin is separately coloured to reflect the value of the tickets of $X or $XX respectively.

Each State or Territory has enacted law to regulate the conduct of lotteries, gaming, art unions, bingo and so on. The relevant State or territory law may provide rules which you must comply with. If you breach any of those rules, you may be guilty of an offence under the law.

The pins cannot be purchased on their own. They can only be obtained with the raffle ticket. The sale of the raffle ticket alone would contravene certain state laws. The sale of the pin alone would not achieve your dual objectives of the promotion. The pin is purely to satisfy the requirements of certain of the States' legislative requirements in relation to fundraising and promotions of this type by charitable institutions.

For this reason you have structured the promotion so that it appears to be marketed as the supply of the pin, with a 'free raffle ticket'. Despite this, your objectives are the twofold outcomes mentioned above. That is, the fundraising from the supply of the raffle ticket and the action that it promotes, being the further development of a potential supporters data base, rather than the supply of the pin.

Fundraising activities by charities will not be subject to GST where the charity is receiving unconditional donations or gifts. Characteristically, donations and gifts are made voluntarily, they do not provide a material benefit to the donor and they essentially arise from benefaction, and proceed from detached and disinterested generosity. Conversely, the purchase of raffle or art union tickets, or chocolates, pens or t-shirts for example are not gifts and the supply will generally be subject to GST. However, an acknowledgement that a recipient makes in appreciation of a payment can be consistent with the payment being a gift. Acceptable forms of acknowledgement include lapel pins/badges, stickers, mention in a newsletter and plaques - if they are of small cost and prominence.

In your case the actual retail value of the pin is nominal. You estimate that it would be less than $Y per item and also less than 20% of the consideration for the total supply.

Your proposed supply consists of two components, being the raffle ticket (and second draw) and the pin. If supplied separately, the two components would lead to different GST outcomes. Therefore, it is necessary to determine whether you are making a mixed supply or a composite supply.

The pin is provided as a token with no material benefit compared to the consideration provided. The main purpose of the consideration is to assist with fund raising and to enter the raffles

Paragraphs 19 to 22 and 43 of Goods and Services Tax Ruling GSTR 2001/8: apportioning the consideration for a supply that includes taxable and non-taxable parts provide guidance in this situation.

Differentiating between mixed and composite supplies

19. Where a transaction comprises a bundle of features and acts, you must consider all of the circumstances of the transaction to ascertain its essential character. You also need to consider the effect the GST Act has on the supply or any of its individual parts. You can then determine whether the transaction is a mixed supply because it has separately identifiable parts that the GST Act treats as taxable and non-taxable, or whether it is a composite supply because one part of the supply should be regarded as being the dominant part, with the other parts being integral, ancillary or incidental to that dominant part.

20. The distinction between parts that are separately identifiable and things that are integral, ancillary or incidental, is a question of fact and degree. In deciding whether a supply consists of more than one part we take the view that you adopt a commonsense approach.

21. You may choose to treat something (or things taken together) as integral, ancillary or incidental if the consideration that would be apportioned to it (if it were a separately identifiable part of a mixed supply) does not exceed the lesser of:

· $3.00; or

· 20% of the consideration for the total supply.

22. If you choose not to apply this approach, then you need to make an objective assessment about whether the thing is integral, ancillary or incidental.

43. A mixed supply is a single supply made up of separately identifiable parts, where one or more of the parts is taxable and one or more of the parts is non-taxable, and these parts are not integral, ancillary or incidental in relation to a dominant part of the supply. On the other hand, a composite supply is a single supply made up of one dominant part and other parts that are not treated as having a separate identity as they are integral, ancillary or incidental to the dominant part of the supply.

Given that the value of the pin is less than $3 and is also less than 20% of the consideration for the total supply, you may choose to treat the supply of the pin as ancillary to the dominant part of the supply, being the supply of the raffle ticket.

You are a charitable institution making a supply of a raffle ticket. Further, you have stated that your supply does not contravene a State law or a Territory law. Therefore your supply of the Raffle Ticket and Pin jointly will be a GST-free supply under subsection 38-270(1) of the GST Act.