Edited version of your written advice

Authorisation Number: 1051208245951

Date of Advice: 29 March 2017

Ruling

Subject: GST and entitlement to input tax credits

Question 1

Are you entitled to input tax credits in regard to acquisitions related to the construction of the Prayer room under Stage 1 of the development?

Answer

Yes

Question 2

Are you entitled to input tax credits in regard to acquisitions related to the construction of the two dormitory halls/retreat blocks (Block A and Block B) under Stage 1 of the development?

Answer

Yes.

Question 3

Are you entitled to input tax credits in regard to acquisitions related to the construction of the two ablution blocks under Stage 1 of the development?

Answer

Yes

Relevant facts and circumstances

You are registered for GST.

You are a Not-For-Profit organisation and carry on an enterprise of providing religious services.

You have concessional status and are classed as a 'charitable institution' for income tax, GST and FBT purposes. Your primary charitable purpose is described as the advancement of religion.

You purchased property at a specified location (the Property) in yyyy.

The purpose of acquiring the Property was to develop a spiritual retreat centre.

You are constructing a total of eight buildings on your property in two stages that will serve as a religious retreat for the furtherance of your religious beliefs. The following buildings will be constructed:

Prayer room - (Stage 1);

Two dormitory halls/retreat blocks (Block A and Block B) - (Stage 1);

Two Ablution blocks - (Stage 1);

Meeting hall - (Stage 2);

Kitchen and dining hall - (Stage 2).

A sealed car parking area will also be constructed.

Currently you have raised sufficient funds to finance Stage 1 of the development. Fundraising for Stage 2 of the development has not been undertaken and it is uncertain whether Stage 2 will proceed.

Stage 1

Block A and Block B are identical in design.

Each Block will contain xx bedrooms:

Some bedrooms will contain three beds.

Some bedrooms contain two beds.

Some bedrooms contain one bed.

All bedrooms have an ensuite containing a shower, hand sink and toilet.

Each Block contains on office, linen storage areas and two book stalls.

Blocks A and B do not contain conventional kitchen facilities as it is expected that whilst the buildings are being used, participants will be on a religious fast. Alternatively, participants will bring any food and drink from outside the facility if required.

Each Block also contains an area where occupants can make tea/coffee. These areas will contain a sink and bar fridge only.

In the situation where the provision of food is required, the catering will be provided through external contractors at cost.

Blocks A and B will provide accommodation over weekends during particular events. These events will consist of three days of preaching, contemplation and spiritual guidance.

The buildings will be available for use by your members and the wider community. You will not charge a fee for the provision of accommodation and use of the retreat during such events however participants are encouraged to make a donation for weekend retreats.

Stage 2

The Property originally contained two buildings, horse stables and a machine shed. Local council approval was granted in yyyy for the alteration of these structures to be used as a kitchen/dining hall and meeting hall.

These structures will support the needs of the occupants of Blocks A and B until the new meeting hall and kitchen/dining hall is constructed as part of Stage 2 of the development.

Following the implementation of Stage 2 the existing structures will be decommissioned and used as storage areas.

The proposed kitchen/dining hall will contain a double sink, oven/stove, microwave and a fridge. The kitchen is not considered to be a commercial kitchen and as such would not require grease traps, etc.

There will be no cooking in the retreat centre. All required food will be catered for by external contractors.

The dining area will contain table and chairs to seat 40 people.

The buildings will be available for use by your members and the wider community for the specific purpose of religious devotion, reflection and teaching.

You will not charge a fee to participants attending any events on the Property.

Participants attending weekend retreats will be encouraged to provide a nominal amount which will be less than 75% of the GST inclusive market value of the supply.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Subsection 9-30(3)

Section 11-20

Section 11-5

Section 38-220

Section 38-250

Section 40-35

Subsection 40-35(1).

Reasons for decision

Note: In this reasoning, unless otherwise stated,

All legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

Reference material(s) referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au

Section 11-20 provides that you are entitled to an input tax credit (ITC) for any creditable acquisition that you make.

Section 11-5 defines the meaning of a 'creditable acquisition' and includes that to make a creditable acquisition that you acquire anything solely or partly for a creditable purpose.

You will acquire something for a 'creditable purpose' to the extent that you acquire the thing 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 input taxed supplies or the acquisition is of a private or domestic nature.

The issue in this case is whether you are acquiring goods and services in the process of the construction of the buildings that relate to you making input taxed supplies and if so, to what extent those acquisitions relate to making the input taxed supplies.

Question 1 - Prayer room/Chapel.

Under section 38-220, a supply is GST-free if it is a supply of a service that is supplied by a religious institution and is integral to the practice of that religion.

The Charities consultative committee resolved issues document (CCC document) on the ATO website discusses religious institutions and religious services.

The courts have determined that, for a body to be regarded as a religious institution:

Its objects and activities must reflect its character as a body instituted for the promotion of some religious object, and

The beliefs and practices of the members of that body must constitute a religion.

The two most important factors for determining whether a particular set of beliefs and practices constitute a religion are:

Belief in a supernatural being, thing or principle, and

Acceptance of canons of conduct which give effect to that belief, but which do not offend against the ordinary laws.

Religious institution is not confined to the major religions.

We consider that based on the information provided you are a religious institution.

The CCC document provides some examples of a 'religious service' including worship, Sunday School, a wedding, funeral or baptism service, religious retreats, bible study groups etc.

We consider that your supply of the use of the Prayer room/Chapel to attendees of your retreats constitutes a supply of a religious service and would be GST-free pursuant to section 38-220.

The supply of the use of the Prayer room/Chapel does not fall within the input taxed supply provisions.

Question 2 - Dormitory halls (Block A and Block B).

Under section 38-250, a supply by a charitable institution is GST-free if it is a supply of accommodation for consideration that is

Less than 75% of the GST inclusive market value of the supply, or

Less than 75% of the cost to the supplier of providing the accommodation.

Participants attending weekend retreats will be encouraged to provide a nominal amount which will be less than 75% of the GST inclusive market value of the supply.

Therefore, your supplies of accommodation will be GST-free pursuant to section 38-250.

Question 3 - Ablution blocks.

The supply of the use of the ablution blocks to attendees of the retreats does not fall within the input taxed supply provisions.

Conclusion

As discussed above, you do not acquire the thing for a creditable purpose to the extent that the acquisition relates to making input taxed supplies or the acquisition is of a private or domestic nature.

Your acquisitions of building and construction services in regard to the Prayer room/Chapel, dormitory halls and ablution blocks were acquired for a creditable purpose. Where those supplies to you were a taxable supply and you provided (or are liable to provide) consideration for the supply, your acquisitions of those supplies are creditable acquisitions pursuant to section 11-5 and you are entitled to an ITC in accordance with section 11-20.