Edited version of private advice

Authorisation Number: 1051611840184

Date of advice: 27 November 2019

Ruling

Subject: Calculating GST turnover and taxable supplies

Question 1

How is your GST turnover calculated under Division 188 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

To determine your GST turnover under Division 188 of the GST Act, you need to calculate the sum of the value of your supplies of;

·        memberships

·        entry to competitions (right to participate), and

·        any other supplies you make that are not excluded from the calculation.

When your GST turnover meets the GST registration turnover threshold of $150,000, as a non-profit body you will be required to be registered for GST.

Question 2

If you are required to be registered for GST, do you make taxable supplies under section 9-5 of the GST Act when you charge members an entry fee to participate in competitions?

Answer

Yes, where you are registered or required to be registered for GST, you are making taxable supplies when you charge members an entry fee to participate in competitions.

Relevant facts and circumstances

Relevant facts

You are an incorporated association. You are a not-for-profit club.

You are not currently registered for GST.

You stated that most of your members are individuals who are not registered for GST.

Your major sources of revenue are membership fees and daily competition entry fees.

Your projected GST turnover may exceed the GST registration turnover threshold of $150,000 for a non-profit body in the 2020 financial year.

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 9-70

A New Tax System (Goods and Services Tax) Act 1999 Section 9-75

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

A New Tax System (Goods and Services Tax) Act 1999 Subsection 23-15(2)

A New Tax System (Goods and Services Tax) Regulations 2019 Section 23-15.02

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

A New Tax System (Goods and Services Tax) Act 1999 Section 188-32

This ruling applies on and from the date of issue.

Reasons for decision

Question 1

Detailed reasoning

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

Under section 23-5, you are required to be registered for GST if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold. Subsection 23-15(2) of the GST Act and section 23-15.02 of the A New Tax System (Goods and Services Tax) Regulations 2019 provide that if you are a non-profit body, your registration turnover threshold is $150,000.

Section 188-10 provides that you have a GST turnover that meets the registration turnover threshold if your projected GST turnover is at or above that threshold, or your current GST turnover is at or above the registration turnover threshold and the Commissioner is not satisfied that your projected GST turnover is below that threshold.

Your current GST turnover is the sum of supplies made, or likely to be made, in the current month and the previous eleven months less excluded supplies. Your projected GST turnover is the sum of supplies made, or likely to be made, in the current month and the next eleven months less excluded supplies.

Supplies that are excluded in calculating your current and projected GST turnovers are supplies that are:

·        input taxed

·        for no consideration

·        not made in the course of your enterprise, or

·        not connected with the indirect tax zone.

'Supply' is defined very broadly in section 9-10, which provides that 'a supply is any form of supply whatsoever' and includes a supply of goods or services.

Membership Fees

In this case, you receive an annual membership fee payment. Membership allows a person to enter into competitions that you conduct and provides general rights, including voting rights, under your rules. Any person who is not a member of your club is not permitted to enter into competitions.

Therefore, it can be seen that membership of your club bestows rights to members, even where nothing tangible is supplied. As such, the membership fees are payments in return for services or rights and will be subject to GST.

Rights to participate in Competitions

Goods and Services Tax Ruling GSTR 2002/3 Goods and service tax: prizes (GSTR 2002/3) explains that an 'event holder' makes a supply when it accepts entry into an event by a participant.

Paragraph 14 of GSTR 2002/3 explains that 'event holder' refers to an entity that is responsible for the administration, organisation and giving of prizes in relation to an event.

Paragraphs 26-28 of GSTR 2002/3 state:

Supply by the event holder - the right to participate in the event

26. By accepting an entry into an event, an event holder is supplying a right to participate in the event. Intending participants may be required to formally enter the event by completing an entry form and paying an entry fee.

27. The supply that is made by the event holder may include other things in addition to the right to participate, such as use of facilities, entry to functions or items of clothing.

28. The supply of a right to participate in an event includes a contingent right to a prize. In order to claim the prize however, a participant must provide something additional to the entry fee, that is, participation or performance to a standard required by the conditions of the event.

In your case, as the event holder, you arrange and schedule competitions for your members on an annual basis.

All club members who wish to participate in competitions that you conduct must pay a daily competition entry fee.

Based on the facts provided, when you accept payment from a participant to play in a competition you are making a supply of a right to participate in the event.

Your contentions

You have stated that the value of your supplies of the right to participate in an event would be more fairly calculated under section 188-32. Section 188-32 states that:

For the purposes only of this Division, the value of all the *gambling supplies that an entity makes during a particular period is taken to be an amount equal to 11 times:

(a)   the entity's *global GST amount for that period...

Section 126-35 provides the definition of a gambling supply and a gambling event. Section 126-35 states that:

(1)   A gambling supply is a *taxable supply involving:

(a) the supply of a ticket (however described) in a lottery, raffle or similar undertaking; or

(b) the acceptance of a bet (however described) relating to the outcome of a *gambling event

(2)   A gambling event is:

(a) the conducting of a lottery or raffle, or similar undertaking; or

(b) a race, game, or sporting event, or any other event, for which there is an outcome.

Paragraph 178 and paragraph 179 of GSTR 2002/3 provide examples of gambling events which include games offered in casinos, gaming machines in clubs and hotels, lotteries and raffles. In addition, any race, game or sporting event, or any other event for which there is an outcome is a gambling event, or example: horse and greyhound racing, football and other sporting matches and other events, the outcome of which will not be known until some time in the future, such as which participant will receive an award.

Paragraph 180 of GSTR 2002/3 states:

A gambling supply, in relation to the above examples, is the supply of the ticket for the raffle or lottery, or the acceptance of a bet. When a sporting team plays a match, it is not making a gambling supply. However, a bookmaker in accepting a bet on the outcome of the match, is making a gambling supply.

In your case, while you conduct competitions which are considered 'sporting events', when a participant pays a participation fee for the right to play in a competition they are not making a wager or bet on the outcome of a sporting event. You do not accept any bets in relation to the outcome of the competitions. Therefore, you are not making gambling supplies in relation to a gambling event.

As such, section 188-32 does not apply in this case and as discussed above the gross monetary consideration received by you from members for participation in competitions is included in the calculation of your GST turnover

Therefore, you should monitor the value of the supplies that you make on a regular basis. Once you meet the GST registration turnover threshold of $150,000 that applies to a non-profit body, you will be required to be registered for GST.

Whether the supplies you are making are taxable supplies needs to be determined.

Question 2

Detailed reasoning

Under section 9-5 you make a taxable supply if:

·        you make the supply for consideration

·        the supply is made in the course of carrying on an enterprise

·        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.

We have established in question one that you are making supplies when you charge members an entry fee to participate in competitions. However, for a supply to be a taxable supply all the requirements of section 9-5 must be met.

GSTR 2002/3 provides advice on when an entry fee paid by a participant in an event is consideration for a supply made by the 'event holder'.

Paragraph 34 of GSTR 2002/3 explains that an entry fee paid by a participant is consideration for the supply of the right to participate in an event. Paragraph 35 provides the following example:

35. Rod is a professional golfer and is registered for GST. He enters a tournament being run by event holder, Golfers Unlimited (GU). He completes an entry form and pays an entry fee of $55. GU's supply to Rod of a right to participate in the event is a taxable supply for consideration of $55. The price of the supply is the consideration of $55. GU accounts for $5 GST payable, being 1/11 of the price. Rod is entitled to an input tax credit of $5 for the creditable acquisition of GU's supply.

You have stated that most of your members are individuals who are not registered for GST. However, all club members who wish to participate in competitions that you conduct must pay a daily competition entry fee. This payment is consideration for the supply of the right to participate in the competition (the sporting event).

The price of the supply is the consideration paid. If the supply is a taxable supply you would account for 1/11^th of the price as GST, as provided at sections 9-70 and 9-75. This is the case whether your members are registered for GST or not.

In addition, the annual payments that you receive for club memberships that you provide to your members are consideration for a supply.

You are not currently registered for GST. However, you carry on an enterprise in Australia (indirect tax zone) and you receive consideration for providing club memberships and conducting competition events.

As your supplies are made for consideration in the course of carrying on your enterprise in Australia (indirect tax zone) and are not input taxed, once you meet the registration threshold of $150,000 you will be required to be registered for GST. These supplies will then meet the requirements of section 9-5 and will be taxable.