Edited version of private advice

Authorisation Number: 1012684526861

Ruling

Subject: Entitlements to GST credits

Question

Can you claim GST credits in relation to the building of your new club room if you register for GST purposes?

Answer

Yes.

Relevant facts and circumstances

• You have an Australian Business Number and are not registered for GST.

• Your GST turnover is currently below the GST registration threshold of $150,000.

• You are a non-profit body.

• Your Constitution states that the objects of the Club are the promotion and playing of sports.

• Your turnover includes receipts from membership fees, gate takings, sale of food & beverages and fund-raising activities.

• You intend to register for GST as you are about to build a club room and will be exceeding the GST turnover threshold. You propose to register prior to the preparation and construction of the new club room.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 11-5

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 11-15

A New Tax System (Goods and Services Tax) Act 1999 Paragraph 11-20

A New Tax System (Goods and Services Tax) Act 1999 Section 23-5

A New Tax System (Goods and Services Tax) Act 1999 Section 23-10

A New Tax System (Goods and Services Tax) Act 1999 Section 63-5

A New Tax System (Goods and Services Tax) Act 1999 Section 63-15

A New Tax System (Goods and Services Tax) Act 1999 Section 138-5

Reasons for decision

Under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you are entitled to a GST credit for any creditable acquisition that you make.

Section 11-5 of the GST Act sets out the requirements for a creditable acquisition. 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 are liable to provide, consideration for the supply, and

• you are registered or required to be registered.

The meaning of creditable purposes is defined in section 11-15 of the GST Act. You acquire a thing for creditable purpose to the extent that you acquire it in carrying on your enterprise. However, you do not acquire the thing for a creditable purpose 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.

The building of your new club room is for the use and recreation of your members and will be constructed for the purposes of your objectives. Therefore the acquisitions relating to the building of your new club room is for a creditable purpose.

The supplies of labour and materials for the building of the new club room will be taxable supplies to you if the suppliers are registered or required to be registered for GST. The suppliers would be providing tax invoices to you for their taxable supplies and you will be providing consideration (payment) for the building and services.

Not registered for GST

You are currently not registered (nor required to be registered) for GST. Your GST turnover for the financial year is less than the GST registration turnover threshold. (The GST registration turnover threshold for a non-profit body is $150,000). Therefore you are not required to be registered for GST under section 23-5 of the GST Act. As you are not registered nor required to be registered for GST, you do not satisfy the criteria for creditable acquisition under section 11-5 of the GST Act. You cannot claim GST credit on the building of the new club rooms.

Choosing to register for GST

However, you may choose to register for GST under section 23-10 of the GST Act. If you are registered for GST, the acquisitions relating to the building of the new club rooms will satisfy all the criteria in section 11-5 of the GST Act and you will be making creditable acquisition to the building of the new club rooms. You can therefore claim the GST credits on your acquisitions if you hold tax invoices for these acquisitions.

If you choose to register for GST, you will generally be liable for GST for all your taxable supplies such as membership fees, gate fees, and fund-raising activities while you remain registered.

Additional Information:

1. Adjustments

Please note that the GST legislation (section 25-55) requires that once you register for GST you are generally required to remain on the system for at least 12 months prior to cancelling your registration even if your GST turnover falls below the GST registration threshold.

The GST Act provides that an entity has an increasing adjustment if its registration is cancelled and immediately before the cancellation, its assets include anything for which it was, or is, entitled to GST credits. The ATO view on increasing adjustments resulting from GST cancellation is provided in the Goods and Services Tax Advice GSTA TPP 094. We enclose a copy for your reference.

2. Non-Profit Sub-Entities

Under the GST Act certain non-profit bodies have the option to treat branches or units of their organisation as if they were separate entities for GST purposes and not part of the main organisation. You cannot create a non-profit sub-entity for your core activities such as club membership and gate takings.

As you are a non-profit body, then if you register for GST purposes you may form a non-profit sub-entity in respect of your 'fund-raising activities', 'bar activities' and your 'canteen' providing you satisfy certain requirements. More information on the requirements and operation of non-profit sub-entities can be found in the ATO booklet - Tax basics for non-profit organisations. A copy of this booklet is enclosed for your information.