Edited version of your written advice

Authorisation Number: 1051453055498

Date of advice: 26 November 2018

Ruling

Subject: GST and consideration on a gift of property.

Question

What input tax credits are you entitled to on the acquisition of the property supplied to you?

Answer

The amount of the input tax credit for the acquisition of the property is equal to the GST payable on the supply. Subject to the normal tax invoice requirements.

This ruling applies for the following period:

Activity statement period ending June 20XX

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You are a deductible gift recipient and a registered charity.

You acquired property (property).

To effect the transfer of the property a contract of sale was prepared.

The property was part of an enterprise.

The Contract states a sale price with a deposit.

To create a gift to you, the supplier waived the purchase price balance payable on completion of the contract, excluding the GST amount.

The contact shows ‘GST: taxable supply’ is ticked as ‘yes in full’.

The contract shows that the margin scheme was not used.

The contract shows a GST amount plus deposit.

You have provided monetary consideration.

You are under no contractual obligation in regards to the property to do, or not to do, anything.

You have stated that the supply of the property to you satisfies all the elements of section 9-5 of the GST Act.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Division 9

A New Tax System (Goods and Services Tax) Act 1999 Division 11

Reasons for decision

GST is payable on taxable supplies. 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 a supply for consideration

● 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 purposes.

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

In your situation, what needs to be considered is whether the payment made by you is consideration for a supply which is a taxable supply.

Gifts to non-profit bodies are not consideration

Sub-section 9-17(2) of the GST Act specifically excludes a gift made to a non-profit body (including charities) from being consideration for a supply. For a payment to be considered a gift, it must be unfettered, meaning that there is no obligation to do anything in recognition of the gift and no expectation on the part of the donor to receive anything in return.

What constitutes a ‘gift’ for GST and income tax purposes have been set out in two public rulings – Goods and Services Tax Ruling GSTR 2012/2 (Goods and services tax: financial assistance payments) and Taxation Ruling TR 2005/13 (Income Tax: tax deductible gifts – what is a gift). The guidelines set out in TR 2005/13 are also applicable for GST.

GSTR 2012/2 provides guidance on what is a gift. Paragraphs 69 to 70:

69. Gifts to a non-profit body are not consideration for a supply.

70. The term ‘gift’ is not defined in the law and therefore takes its ordinary meaning having regard to the context in which it appears. It is considered that a ‘gift’ has the following characteristics and features:

● there is a transfer of a beneficial interest in property;

● the transfer is made voluntarily;

● the transfer arises by way of benefaction; and

● no material benefit or advantage is received by the giver (payer) by way of return.

Therefore, a something will be a gift where:

● it is made voluntarily and not the result of a prior contractual obligation

● no material benefit flows to the payer as a result of the payment, and

● it is made essentially out of benefaction.

The first and the last criteria have been satisfied, that is, the gift of the property to you was made voluntarily and not the result of a prior contractual obligation, also the gift was essentially out of benefaction. However, there is a material benefit that flows. That is, the payment is a material benefit, therefore the supply of the land is not a ‘gift’ for GST purposes.

Consideration

Consideration includes, among other things, any payment in connection with a supply. Division 11 of the GST Act describes how to work out the GST credits on acquisitions. Section 11-25 of the GST Act states, among other things, that the credits you are entitled to is an amount equal to the GST payable on the supply. The amount of GST payable on a taxable supply is 10

Price X 11

Price includes, among other things, consideration expressed as an amount of money. You provided monetary consideration in connection with the supply of the property and the GST on the supply. Therefore you are entitled to input tax credits. Subject to the normal tax invoice requirements.