Edited version of your written advice

Authorisation Number: 1051426178179

Date of advice: 20 September 2018

Ruling

Subject: GST and requirement to register for GST

Question 1

Are you making a supply for consideration of an event under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, on the facts provided you are making a supply for consideration of an event under section 9-5 of the GST Act.

Question 2

If the answer to question 1 is yes, were you required to be registered for goods and services tax (GST) under section 23-5 of the GST Act and if so from when?

Answer

Yes, you were required to be registered for GST under section 23-5 of the GST Act. You were required to register for GST when your GST turnover met the registration turnover threshold.

Relevant facts and circumstances

You are registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC) and are endorsed to access various tax concessions, including the GST concession.

You are a national body incorporated under the relevant laws. Annually you hold national events.

An affiliated state body also holds annual standalone events. That state body is a separate legal entity that is also registered as a charity with the ACNC and endorsed to access GST concessions and income tax exemption.

In the year in question both you and the state body were to hold each of your respective events in the same state. As a result, the state body decided not to hold its annual event and assist you to hold what was referred to as a joint event for the year in question.

Organising Committee

Administrative arrangements for the joint event were carried out by the deputy chair of the state body. That person was involved in selecting and organising a new external event organiser, giving instruction to the event organiser, day to day carriage of the management of the event, selecting the venue and chairing the event organising committee, which consisted of members of the state executive and others.

Members of the joint event organising committee comprised representatives of both the state body and you. All members of the joint event organising committee were acting in a voluntary capacity and were not remunerated.

Appointment of Event Organiser

Early in the year in question, you entered into an event management agreement (event agreement) with an external event organiser in respect of the joint event.

Under the terms of the event agreement, the event manager was appointed as agent to exclusively provide specified ‘services’ to the ‘principal’ which was identified in the event agreement as you.

The terms of the event agreement provided that if the event generated a net profit then the event manager as your agent must account for the net profit to you as the principal. If the event did not generate a net profit then you as principal were to pay fees and disbursements pursuant to the event agreement.

The fees were set out in the event agreement and were described as ‘inclusive of GST’.

The income from holding the joint event exceeded expenses reporting a net profit that the event manager paid to you as per the terms of the event agreement.

Payment to state body

Pursuant to a side agreement between you and the state body that was recorded in the minutes of your executive committee meeting, you and the state body had agreed to split the net profits of the joint conference. Consequently, following payment by the event manager to you, you in turn made a payment to the state body.

You have advised that there is no evidence that reflects an intention to form a joint venture or a partnership between you and the state body as you had not turned your mind to these possible outcomes.

The state body was not a party to the event agreement. Any contractual arrangements entered into in respect of the joint event with the event manager were entered into by you.

Neither you nor the state body were registered for GST. Prior to holding the joint conference, the value of the supplies you made had not otherwise exceeded the $150,000 GST turnover threshold.

Due to the nature of your arrangement with the event manager and, your receipt of only the net profit pursuant to the event agreement, you did not have regard, in the calculation of your GST turnover to the value of the supplies associated with the joint conference made by the event manager on your behalf. Consequently you did not register for GST.

You became aware that there was a likelihood that you had exceeded the GST registration turnover threshold as a result of the gross income derived from holding the joint conference.

When taken into consideration, the revenue from the joint conference you were likely to make in the year in question resulted in your projected turnover to meet the GST registration threshold.

In the following year you and the state body reverted to each of your practice of hosting separate annual events.

In your correspondence you made submissions that you were uncertain as to which entity (you in your own right, a non-entity joint venture comprising you and the state body, or a partnership of you and the state body) was the supplier of the joint event. You provided a table setting out the revenue associated with the various scenarios.

You further submit that the correct position is that you alone supplied the joint event.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

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

A New Tax System (Goods and Services Tax) Act 1999 Section 188-10

A New Tax System (Goods and Services Tax) Act 1999 Section 188-20

Reasons for decision

Section 9-40 of the GST Act provides that you must pay the GST payable on any taxable supply that you make. You make a taxable supply under section 9-5 of the GST Act if:

● you make a supply for consideration; and

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

● the supply is connected with the indirect tax zone and

● you are registered or required to be registered for GST.

However the supply is not a taxable supply to the extent that it is GST-free or input taxed.

The issue that arises under section 9-5 of the GST Act is whether you made the supply of the joint conference through the event manager for consideration and if so whether you would have been required to be registered for GST when that supply was taken into consideration in determining your GST turnover.

Question 1 Who made the supply of the joint event for consideration?

The issue of whether you made the supply of the joint event is to be addressed in a context of a multi-party arrangement which involved a number of entities.

In arrangements involving more than two entities (referred to by the Commissioner as tripartite arrangements) the GST consequences of such arrangements turns on identifying:

● one or more supplies

● consideration

● a nexus between the supply and the consideration and

● to whom the supply is made and by whom.

Examining the agreement or other reciprocal legal relationship is the starting point in analysing an arrangement to determine, amongst other things, who is making a supply and to whom.

In the present case, the parties to the event agreement are you and the event manager. The event manager, according to the event agreement, supplied services to you related to the organisation, promotion and management of the joint event. The event manager collected the fees including those paid by delegates to attend the event and accounted to you for the ‘net profit’ from holding the joint event. The ‘net profit’ comprised the money remaining in the account after the payment of all expenses relating to the joint event and the fees and disbursements from the account.

On the facts provided the supply of the joint event made through the event manager as your agent were made on your behalf as principal. This relationship is further supported by you authorising the event manager to enter into contracts as agent for you in relation to the joint event.

The terms of the event agreement are clear that you alone have an obligation as the principal to pay the event manager’s fees and to reimburse the event manager for disbursements incurred by it in relation to the joint event.

You have reported the entire registration income from the joint event in your accounts for the year ended.

The state body’s involvement under a separate arrangement was to assist you by supplying its members including its chair to serve on the conference organising committee for the joint event. You agreed to pay the state body by reference to the ‘net profit’ received by you. The state body was not a party to the event agreement and was not entitled to the ‘net profit’ accounted to you by the event manager under that agreement.

You submit that the correct position is that you alone supplied the joint event. The Commissioner agrees with your submission for the reasons stated above. Having had regard to relevant documentation and the surrounding circumstances which together form the total fact situation, the Commissioner is satisfied that you were the sole supplier of the joint event. The relationship between you and the state body is neither a partnership nor a non-entity joint venture in respect of the supply of the joint event.

Question 2 Are you required to be registered for GST and if so when from?

Having determined that you made the supply of the joint event in your own right for consideration the next step is to determine whether you were required to be registered for GST and if so when from.

Section 23-5 of the GST Act provides that you are required to be registered for GST if:

● you are carrying on an enterprise and

● your GST turnover meets the registration turnover threshold.

Carrying on an enterprise

With regards to the first element of section 23-5 of the GST Act there is no issue that you were and continue to carry on an enterprise. The activities or series of activities undertaken by you as a charity come within the meaning of an enterprise under section 9-20 of the GST Act. Your activities in holding the joint event were, amongst other things, activities done in carrying on that enterprise.

Meeting the GST turnover threshold

With regards to the second element of section 23-5 of the GST Act you will be required to be registered for GST where your GST turnover meets the registration turnover threshold of $150,000 for a non-profit body (section 23-15 of the GST Act).

In Goods and Services Tax Ruling GSTR 2001/7 the Commissioner discusses the meaning of GST turnover.

Subsection 188-10(1) of the GST Act provides that you have a GST turnover that meets a particular turnover threshold (in this case the registration turnover threshold) if:

● your current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your projected GST turnover is below the turnover threshold; or

● your projected GST turnover is at or above the turnover threshold.

Current GST turnover

Subsection 188-15(1) of the GST Act provides that your current GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during the 12 months ending at the end of that month other than:

● supplies that are input taxed or

● supplies that are not for consideration (and are not taxable supplies under section 72-5) or

● supplies that are not made in connection with an enterprise that you carry on.

Certain supplies are disregarded in working out your projected GST turnover under subsection 188-15(3) of the GST Act (i.e. supplies that are not connected with the indirect tax zone).

Projected GST turnover

Subsection 188-20(1) of the GST Act provides that your projected GST turnover at a time during a particular month is the sum of the values of all the supplies you have made, or are likely to make, during that month and the next 11 months, other than:

● supplies that are input taxed or

● supplies that are not for consideration (and are not taxable supplies under section 72-5) or

● supplies that are not made in connection with an enterprise that you carry on.

Certain supplies are disregarded in working out your projected GST turnover in subsection 188-20(3) of the GST Act (i.e. supplies that are not connected with the indirect tax zone). Section 188-25 of the GST Act also excludes certain supplies made when working out your projected GST turnover.

The words ‘likely to make’ in sections 188-15 and 188-20 of the GST Act and ‘likely to be made’ under section 188-25 of the GST Act are not defined in the GST Act. The words retain their ordinary meaning in the context of the legislation.

For the purposes of sections 188-15, 188-20 and 188-25 of the GST Act the expression, ‘likely to make’ and ‘likely to be made’ mean that on the balance of probabilities, it can be predicted that the supply is more likely than not to be made (paragraph 23 of GSTR 2001/7).

When a supply is made, is determined in each case by reference to the terms of the particular contract, if applicable, and the nature of the supply.

At paragraph 16 of GSTR 2001/7, the Commissioner states:

‘16. Whether you have a GST turnover that meets or does not exceed a particular turnover threshold depends on an objective assessment of your projected GST turnover and current GST turnover. An objective assessment is one that a reasonable person could be expected to arrive at having regard to the facts and circumstances which apply to your enterprise at the relevant time. The Commissioner will accept your assessment of these turnovers unless he has reason to believe that your assessment was not reasonable’.

You advised that you have undertaken an objective assessment of your projected GST turnover and current GST turnover having regard to the facts and circumstances which applied to your enterprise at the relevant time. Facts and circumstances you have taken into account included:

● any new revenue streams that were introduced

● the holding of joint event which would attract delegates from you as well as the state body

● the making available of different registrations as opposed to mandatory registration in previous years.

The Commissioner explains at paragraph 19 of GSTR 2001/7 that although your current GST turnover and your projected GST turnover is capable of being determined on every day during a month, there is no requirement for continuous recalculation. However, you should monitor changes to your turnover where your turnover may be sufficiently close to the relevant thresholds to make a review prudent.

You contend that once you entered into the event agreement with the event manager in a given month, a reasonable person would have considered it more likely than not that the supply of the joint conference would be made in that month and the following 11 months.

Whether on balance of probability you could have predicted that the supply of the joint conference was more likely than not to be made at a time sooner than on entering the event agreement is a matter of fact. Subject to any evidence to the contrary, the Commissioner accepts your assessment that in the month you entered into the event agreement the supply of the joint event was likely to be made in the next 11 months.

If that is the case then in determining your projected GST turnover in that given month you would add the value of the supply of joint event you were likely to make to the sum of the value of all the other supplies you made or were likely to make in that given month and the next 11 months. For the purpose of calculating supplies likely to be made, the Commissioner will accept a calculation based on a bona fide business plan, accounting budget or some other reasonable estimate (paragraph 24 of GSTR 2001/7).

You submit that a reasonable person would have determined that, as at the given month, you exceeded the GST turnover threshold for the purposes of section 23-5 of the GST Act. Whereas the annual conference did not cause you to exceed the GST turnover threshold in previous years, given the expected additional revenue streams in the year in question and the fact that your ‘current GST turnover’ had come close to exceeding the threshold in the previous year, you accept that there was reason to believe that the GST turnover threshold would have been exceeded in light of the anticipated joint event.

By reference to subsection 188-20(1) of the GST Act and by coming to the conclusion that in a particular month, in this case the month you entered into the event agreement, your projected GST turnover met the registration GST turnover threshold then the second element of section 23-5 of the GST Act was satisfied requiring you to be registered for GST.

What follows once you are required to be registered for GST is that the supplies made by you that otherwise satisfy the requirements of section 9-5 of the GST Act are taxable supplies and acquisitions made by you that otherwise satisfy the requirements of 11-5 of the GST Act are creditable acquisition.