Edited version of private advice

Authorisation Number: 1051994859354

Date of advice: 22 June 2022

Ruling

Subject: GST - charities and non-profit - non-commercial activities

Issue 1

Question 1

Is GST payable on the sale of youth conference tickets?

Answer

Yes.

Question 2

Is GST payable on the supplies of

        i.    Coffee you sell at the youth conference, and

       ii.    Various snacks you sell at the youth conference, and

      iii.    T-shirt you sell at the youth conference?

Answer

Yes.

Question 3

Are you entitled to claim GST input tax credits (ITCs) on the acquisitions you make for the sale of:

1. Coffee you sell at the youth conference, and
2. Various snacks you sell at the youth conference, and
3. T-shirt you sell at the youth conference?

Answer

Yes, where they are creditable acquisitions to you, you will be entitled to the ITCs.

This ruling applies until:

30 June 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

You are a not-for-profit entity.

You are registered for GST and endorsed by the Commissioner of Taxation as a charitable institution entitled to GST concessions.

You are registered with the Australian Charities and Not-for-profits Commission (ACNC) as a charity. Therefore, you are an ACNC-registered xxx institution.

You are a xxx organisation who arrange events to encourage young people on their life journey.

You run 2 to 3 conferences per year for young people. The first conference is held in xxx and the second one in xxx.

The conferences are run similar to a youth camp. You have xxx, activities, seminars on different topics all youth related and positive encourage for the young people who attend.

You have xxx music, talks and group discussions.

You sell coffee and various snacks at the youth conference and provided the following break-down of conference café expenses:

You provided that the total income from conference café sales is approximately $xxx and the total estimated cost of supply is $xxx.

You provided that the sale of t-shirts was $xxx each and the cost price was $xxx each.

You provided the following break-down of ticket prices for the conference below:

You provided that the total cost of venue was $xxx and the net income from conference ticket sales was $xxx.

You stated that 'as far as the pricing of items in comparison to other not-for-profit organisations, to the best of our knowledge our pricing is very similar to those other organisations.'

You explained that the pricing of each ticket was determined by the need to cover all expenses for the conference through ticket, café, and donation income. The ticket includes accommodation, catering, entertainment, production costs, promotion, merchandise, site expenses and copyright costs. The different ticket prices varies in terms of the length of stay at the conference.

Relevant legislative provisions

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

Section 9-5

Section 11-5

Section 11-15

Section 11-20

Section 11-30

Section 38-220

Section 38-250

Reasons for decision

Issue 1

Question 1

Summary

When you make a supply for consideration it will be a taxable supply. This is because the supply is made for consideration and in the course of your enterprise and it is connected with Australia and you are registered for GST (section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

A supply is only taxable to the extent that it is not GST-free or input taxed. However, there are no provisions that can operate to make your sales GST-free.

Detailed reasoning

GST is payable on taxable supplies.

Under section 9-5 of the GST Act, you make a taxable supply if:

(a)  You make a 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 with the indirect tax zone (Australia); and

(d)  You are *registered for *required to be registered.

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

(Note: the * denote a defined term within the GST Act.)

We also considered if the sale of conference tickets may be GST-free under section 38-250 of the GST Act.

As a registered charitable institution, your commercial activities are taxable but your non-commercial activities may be GST-free. This means that if you make non-commercial sales you do not pay GST on the payments that you receive.

Non-commercial sales refer to those sales where the payment received for the sale is less than cost or less than market value. Under section 38-250 of the GST Act a supply (other than the supply of accommodation) is GST-free if the amount charged is either:

•         Less than 50% of the GST-inclusive market value of the supply (subparagraph 38-250(1)(b)(ii)of the GST Act), or

•         Less than 75% of the amount that you paid or liable to pay to purchase the item that is subsequently sold (subparagraph 38-250(2)(b)(ii) of the GST Act).

The term 'market value' is not defined in the GST Act. However, the Charities consultative committee resolved issues document (available on the ATO website) provides information on determining the market value of a supply in this context at Issue 1. This issue, including the sections, tables and issues contained in it, is a public ruling for the purposes of section 105-60 of Schedule 1 to the Taxation Administration Act 1953.

For the purposes of the non-commercial supply rules, we consider that the market value of a thing is the price that would be negotiated between:

•         a knowledgeable, willing and not anxious buyer, and

•         a knowledgeable, willing and not anxious seller acting at 'arm's length' in an appropriate market.

In determining the market value of a supply, the charity can use the same supply test and the similar supply test successively.

You have expressed that your pricing is very similar to other not-for-profit organisations. Based on this, you have established the approximate amount of consideration that can be anticipated. The price of which you are selling the conference ticket for is the market value of your supply.

When the consideration for your supply is at least 50% or more of the GST inclusive market value, this cannot be considered as nominal consideration. Therefore, the sale of conference tickets will be subject to GST.

We need to consider subparagraph 38-250(2)(b)(ii) which states that a supply is GST-free if the supplier is an endorsed charity and the supply (not a supply of accommodation) is for consideration that 'is less than 75% of the consideration the supplier provided, or was liable to provide, for acquiring the thing supplied'.

In your circumstances, you stated that the pricing of each ticket was determined by the need to cover all expenses for the conference through ticket, café, and donation income. This means that the amount you charge for the conference tickets is not less than 75% of the total amount you paid, or liable to pay, to run the conference. The supply is not GST-free under the 'cost of supply' rule.

The supply of conference tickets will be taxable.

Additional information

In accordance with section 11-5 of the GST Act, to be entitled to an input tax credit on the purchase of something, the purchaser must make the acquisition for a creditable purpose.

In accordance with paragraph 11-15(2)(a) of the GST Act, a purchaser does not acquire something for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed.

You will generally be entitled to input tax credits on expenses you incur in carrying on your enterprise and you are registered or required to be registered for GST, provided that those expenses have a GST component and not for an input-taxed sale.

Question 2

Summary

When you make supplies of coffee, various snacks and t-shirts for consideration it will be a taxable supply. This is because the supply is made for consideration and in the course of your enterprise, it is connected with Australia and you are registered for GST (section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999) (GST Act).

A supply is only taxable to the extent that it is not GST-free or input taxed. However, there are no provisions that can operate to make your sale GST-free.

Detailed reasoning

As a registered charitable institution, your commercial activities are taxable but your non-commercial activities can be GST-free. This means that if you make non-commercial sales you do not pay GST on the payments that you receive.

Non-commercial sales refer to those sales where the payment received for the sale is less than cost or less than market value. Under section 38-250 of the GST Act a supply (other than the supply of accommodation) is GST-free if the amount charged is either:

•         Less than 50% of the GST-inclusive market value of the supply (subparagraph 38-250(1)(b)(ii)of the GST Act), or

•         Less than 75% of the amount that you paid or liable to pay to purchase the item that is subsequently sold (subparagraph 38-250(2)(b)(ii) of the GST Act).

The term 'market value' is not defined in the GST Act. However, the Charities consultative committee resolved issues document (available on the ATO website) provides information on determining the market value of a supply in this context at Issue 1. This issue, including the sections, tables and issues contained in it, is a public ruling for the purposes of section 105-60 of Schedule 1 to the Taxation Administration Act 1953.

For the purposes of the non-commercial supply rules, we consider that the market value of a thing is the price that would be negotiated between:

•         a knowledgeable, willing and not anxious buyer, and

•         a knowledgeable, willing and not anxious seller acting at 'arm's length' in an appropriate market.

In determining the market value of a supply, the charity can use the same supply test and the similar supply test successively.

In your circumstances, you have expressed that your pricing is very similar to other not-for-profit organisations. Based on this, you have established the approximate amount of consideration that can be anticipated. The price of which you are selling the coffee for is the market value of your supply.

When the consideration for your supply is at least 50% or more of the GST inclusive market value, this cannot be considered as nominal consideration. Therefore, the sale of conference tickets will be subject to GST.

We need to consider subparagraph 38-250(2)(b)(ii) which states that a supply is GST-free if the supplier is an endorsed charity and the supply (not a supply of accommodation) is for consideration that 'is less than 75% of the consideration the supplier provided, or was liable to provide, for acquiring the thing supplied'.

Based on the information you have provided, the sale prices of coffee, various snacks and t-shirts are greater than its cost price, therefore the amount you received is not less than 75% of the consideration you provided to acquire the supply you made. The supply is not GST-free under the 'cost of supply' rule.

The supplies of coffee, various snacks and t-shirts will be taxable.

Question 3

Summary

Your acquisitions of goods and services for the youth conference are a creditable acquisition for the purpose of section 11-5 of the GST Act where those supplies to you are a taxable supply and you have acquired them for a creditable purpose.

Detailed reasoning

An entity is entitled to the input tax credit for any creditable acquisition that it makes.

Section 11-5 of the GST Act states:

You make a creditable acquisition if:

(a) you acquire anything solely or partly for a *creditable purpose; and

(b) the supply of the thing to you is a *taxable supply; and

(c) you provide, or are liable to provide, *consideration for the supply; and

(d) you are *registered, or *required to be registered.

(Note: the * denote a defined term within the GST Act.)

You acquire a thing for a creditable purpose to the extent that you acquire it 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 is of a private or domestic nature.

Section 11-20 of the GST Act provides that you are entitled to the input tax credit for any creditable acquisition that you make.

Therefore, if you acquire a thing for a creditable purpose you will be entitled to input tax credits.

In addition to meeting the requirements of a creditable acquisition, you must obtain a tax invoice from the supplier for purchases that costs more than $82.50 (including GST). For purchases that cost $82.50 or less (including GST), to claim ITCs you must have either a tax invoice, cash register dockets, a receipt or an invoice in relation to the purchase.

Section 11-15 of the GST Act states the amount of the input tax credit for a creditable acquisition is an amount equal to the GST payable on the supply of the thing acquired. However, the amount of the input tax credit for a creditable acquisition is reduced if the acquisition is only partly creditable.

The amount of the ITC you can claim on an acquisition that is made for a partly creditable purpose is provided in subsection 11-30(3) of the GST Act:

Full input tax credit x Extent of creditable purpose x Extent of consideration

where:

extent of consideration is the extent to which you provide, or are liable to provide, the consideration for the acquisition, expressed as a percentage of the total consideration for the acquisition.

extent of creditable purpose is the extent to which the *creditable acquisition is for a *creditable purpose, expressed as a percentage of the total purpose of the acquisition.

full input tax credit is what would have been the amount of the input tax credit for the acquisition if it had been made solely for a creditable purpose and you had provided, or had been liable to provide, all of the consideration.

In your case, you are acquiring the goods and services in relation to the youth conference you run in the course of your enterprise. You are entitled to ITCs as the goods and services you acquire does not relate to making input taxed supplies. However, the amount of ITCs you are entitled to are reduced if the acquisition is only partly creditable.