Edited version of private advice

Authorisation Number: 1052002058253

Date of advice: 18 July 2022

Ruling

Subject: GST and charity

Question 1

Does Entity A (XXX) make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it receives the enrolment fee (Membership Fee)?

Answer

Yes.

Section 9-5 of the GST Act provides that XXX will make a taxable supply where the following requirements are met:

(a)  XXX make a supply for consideration, and

(b)  the supply is made in the course or furtherance of an enterprise XXX carry on, and

(c)   the supply is connected with the indirect tax zone (Australia) and

(d)  XXX are registered or required to be registered for GST.

However, a supply is not a taxable supply where it is either input taxed or GST-free.

In this case XX supply benefits by way of providing a membership (Membership) to individuals (the Member) in consideration for the Membership Fee. Therefore, XX have made a supply for consideration. In addition, the Membership is made in the course or furtherance of the enterprise XXX carry on, the Membership is connected with Australia and XXX are registered for GST. As the supply of the Membership is not a supply that is input taxed or GST-free XXX satisfy the requirements for a taxable supply.

Consequently, the supply of the Membership is subject to GST.

Question 2

Is the supply of XXXX education programs (the Course/s) that XX provide to participants a taxable supply under section 9-5 of the GST Act?

Answer

No.

The requirements for a taxable supply discussed above provide that a supply is not a taxable supply where it is either GST-free or input taxed. In some cases, a supply may be considered GST-free where it is made for nominal consideration. Relevantly, section 38-250 of the GST Act provides that a supply is GST-free if:

(a)  the supplier is an endorsed charity, a gift-deductible entity or a government school; and

(b)  the supply is for consideration that:

(i)            if the supply is a supply of accommodation - is less than 75% of the GST inclusive market value of the supply; or

(ii)           if the supply is not a supply of accommodation - is less than 50% of the GST inclusive market value of the supply.

In this case XXX are an endorsed charity and make a supply of the Course/s for less than 50% of the GST inclusive market value of the supply. As XXX meet the requirements above the supply of the Course/s is GST-free.

Consequently, as the supply of the Course/s are GST-free XXX do not make a taxable supply.

Question 3

Is the payment XXX receive from Entity B subject to GST?

Answer

No

Paragraph 9-17(2) of the GST Act specifically excludes a gift made to a non-profit body from being consideration for a supply. 'Gift' and 'non-profit body' are the essential terms in this paragraph. It follows that if there is a gift to a non-profit body there will not be a taxable supply, unless there is another supply made for the consideration (gift).

A payment will not be a gift where there is a contractual obligation on the part of the charity or non-profit organisation to use the funds in a specified way or the provision of a material benefit to the donor.

A payment made in return for a material benefit or an enforceable obligation to use the funds for a specified purpose is consideration for a supply. The organisation receiving the payment has supplied something in return for the payment.

In this case the is no obligation for XXX to do anything upon receipt of the payment from Entity B. On this basis we consider that this payment is not consideration for a supply and is therefore not subject to GST.

Question 4

Is the payment (Grant payment) XXX receive from Entity C subject to GST?

Answer

No.

Generally, XXX don't have any GST implications if the funding (grant) is not for a supply. If XXX provide something of value in return for the grant it can be a supply and GST implications may arise.

A grant is not a payment for a supply if XXX are only required to satisfy eligibility criteria to receive the grant.

In this case the Grant payment XXX receive is not subject to GST as XXX are not making a supply. Consequently, XXX do not meet the requirements of a taxable supply under section 9-5 of the GST Act.

This ruling applies for the following period:

X XXX 20XX till quarter ending XX XXXXXXXX 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Entity A (XXX) are a registered charity and are endorsement by the ATO for Charity Tax Concessions. XXX are also registered with the Australian Charities and Not for Profit Commission.

XXX are registered with an ABN since 1 July 20XX, and XXX are registered for GST.

XXX conduct on-going education by offering lectures on a wide variety of subjects. For the purposes of this private ruling, we refer to the education programs XXX provide to a participant (student) as the Course/s.

There are no examinations, no educational prerequisites, no set homework and no formal assessment of student performance. A student merely enrols in any course that interests them, and no prior experience is needed nor expected.

XXX charge students a fee for the Course/s XXX provide.

XXXX Enrolment Form (Enrolment Form) shows that the student provides payments which consist of:

• the course fee (Course Fee), and
• a once per-semester enrolment fee (Membership Fee).

The consideration XXX receive for supplying the Courses (i.e., the Course Fee) is significantly less than 50% of the market value of the supply.

The Membership Fee is a separate payment and is required to be paid by any persons, such as a student or other individual, to gain access to benefits XXX offer. Once the Membership Fee is paid for the period, the person become a member (Member) of XXXX entity and gains benefits, such as the offer to enrol in XXXX Courses, notification and access to attending functions/trips XXX arrange, and other benefits.

Entity C provides financial support to community groups through a Fund. The Fund is designed to partner with not-for-profit organsiations to deliver programs, services or projects the provide community benefit, which would not be possible with only one year's funding.

Funding by Entity C is provided in annual payments for up to 3 financial years. The annual contribution granted are at the discretion of a panel and are assessed on need.

XXX applied to receive funding payments (Grant payments) from Entity C. A copy of the Funding Agreement application (Application Form) has been provided as part of this private ruling request.

The Application Form identifies the project name and other matters. The form also identifies XXXX expected Grant expenditure as "venue costs".

XXX are required to provide an online Annual Report as an evaluation measure in respect of the project.

The Grant payments XXX receive amounted to $XXXX over the three financial years.

As part of XXXX enterprise, XXX seek contributions/donations from other organisations to support XXXX activities.

For the purposes of this private ruling XXX have provided a copy of a letter issued to Entity B. This letter is a request by XXX to Entity B for an amount of $XXXX to sponsor XXXX activities.

XXX have advised that XXX are not required to advertise, promote, or provide anything to Entity D in consideration for the sponsorship payment. Rather the payment is requested to carry out the ordinary activities of XXXX charity.

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 Paragraph 9-17(2)

A New Tax System (Goods and Services Tax) Act 1999 Section 38-250