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Edited version of your written advice
Authorisation Number: 1051293294682
Date of advice: 10 October 2017
Ruling
Subject: GST and taxable supplies
Question 1
Is Entity A (you) making a taxable supply when providing a thankyou gift to a funder under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No.
Relevant facts and circumstances
Entity A is an Australian company.
Entity A intends to start its first round of fundraising to be crowdfunding, soliciting contributions towards its seed capital online via a crowdfunding website.
The crowdfunding campaign will solicit donations and offer thankyou gifts to their donors.
Entity A is not, and does not intend to be a retailer of clothing or any other item it might send as a thankyou gift. It only intends to use thankyou gifts in order to thank donors who contribute to its seed capital.
Relevant legislative provisions
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999
Section 9-25 of the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
Where you satisfy all the paragraphs under section 9-5 of the GST Act your supply will be taxable to the extent it is not GST-free or input taxed. This section provides you make a taxable supply if:
(a) you make the supply for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that you carry on; and
(c) the supply is connected to the indirect tax zone (Australia); and
(d) 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.
As a gift is given in return for the money provided it will have the required nexus and be a supply for consideration, regardless of the value of the gift compared to the funded amount. Hence, paragraph 9-5(a) of the GST Act will be satisfied. You will be undertaking the crowdfunding in the course of an enterprise that you carry on, as carrying on of an enterprise includes the commencement of an enterprise under section 195-1 of the GST Act. Hence, paragraph 9-5(b) is satisfied.
To satisfy paragraph 9-5(c) of the GST Act, the supply of the gift needs to be connected with the Australia. Section 9-25 of the GST Act defines when a supply is 'connected with Australia'. To determine whether a supply is connected with Australia, the section makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property. Furthermore, in determining whether a supply of goods is connected with Australia a distinction is made in section 9-25 of the GST Act between supplies of goods ‘wholly within’ Australia, supplies of goods ‘from’ Australia, and supplies of goods ‘to’ Australia.
Where you have a funder providing money you will in return provide a thankyou gift. The funder will be either in or outside of Australia and the gift will be sent directly to the recipient by the non-resident promoter on your behalf.
Paragraph 130 of Goods and Services Tax Ruling, GSTR 2000/31 Goods and services tax: supplies connected with Australia (GSTR 2000/31) provides an example where goods are supplied by a resident supplier and imported by a resident recipient as follows:
Example 8
Joe decides to fit his car with specialised seat covers. He approaches Seat Co in Sydney to supply the seat covers. However, the seat covers have to be imported from Italy. Under the arrangements with Seat Co, Joe imports the seat covers into Australia and pays Seat Co for the goods once the seat covers are cleared through Customs. The supply of goods, specialised seat covers by Seatco to Joe, is not connected with Australia because the goods are not delivered, or made available to Joe, in Australia.
Therefore, where the gift is sent to the recipient funder it will not be a supply that is connected to Australia by you and paragraph 9-5(c) of the GST Act will not be satisfied. This can be differentiated if you were to import the gift yourself and then supply it to the recipient in Australia as then it would be wholly within Australia and would be connected with Australia.
As previously mentioned for you to make a taxable supply all of the paragraphs under section 9-5 of the GST Act need to be satisfied and as that is not the case your supply of the gift will be out of scope for GST.
Please note there have been some law changes, however, they will not take effect till 1 July 2018. The ATO website address below will take you to the information that is due to start on the 1 July 2018 for the supply of low value goods from outside of Australia.
https://www.ato.gov.au/General/New-legislation/In-detail/Indirect-taxes/GST/GST-on-low-value-imported-goods/