Edited version of private advice

Authorisation Number: 1052013611473

Date of advice: 6 January 2023

Ruling

Subject: GST registration

Question

1.    Are you eligible to register for GST under section 25-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

2.    Are you entitled to an input tax credit under section 11-20 of the GST Act, for auditing services acquired?

Answer

1.    Yes, you are eligible to register for GST under section 23-5 of the GST Act.

2.    Yes, you are entitled to an input tax credit under section 11-20 of the GST Act, for auditing services acquired.

Relevant facts and circumstances

This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an endorsed charity and registered with the Australian Charities and Not-for-Profit Commission (ACNC). You are currently not registered for GST.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(e)

A New Tax System (Goods and Services Tax) Act 1999 section 11-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 11-15(1)

A New Tax System (Goods and Services Tax) Act 1999 section 11-20

A New Tax System (Goods and Services Tax) Act 1999 subsection 23-5(1)

Reasons for Decision

Question 1

Under subsection 23-5(1) of the GST Act the Commissioner must register you if:

(a)        you have applied for registration in an approved form, and

(b)        the Commissioner is satisfied that you are carrying on an enterprise, or you intend to carry on an enterprise from a particular date specified in your application.

Paragraph 23-5(1)(b) of the GST Act provides that the Commissioner must be satisfied that you are carrying on an enterprise or intends to carry on an enterprise before he will register you.

Subsection 9-20(1) of the GST Act provides an enterprise is an activity, or series of activities done, amongst other things,

(e)  by a charity.

You are an endorsed charity. You carry on activities to advance the objects of the charity.

As such, it is considered you are carrying on an enterprise as per paragraph 9-20(1)(e) of the GST Act. As such, you satisfy paragraph 23-5(1)(b) of the GST Act in that the Commissioner is satisfied that you are carrying on an enterprise and have continued to carry on an enterprise since you were previously registered for GST.

Therefore, provided you apply for GST registration in the approved form, the Commissioner must register you for GST.

Question 2

Under section 11-20 of the GST Act, you are entitled to an input tax credit for any creditable acquisition.

You make a creditable acquisition under section 11-5 of the GST Act if:

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

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

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

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

You are not currently registered for GST however you have an intention of being registered. Therefore, the assumption is that the answer applies so far as you are registered for GST.

You acquire auditing services as a requirement of meeting the administrative requirements of carrying on a charity. The supply of the auditing services to you is a taxable supply and you provide consideration for that supply.

Subsection 11-15(1) of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. However, under subsection 11-15(2) of the GST Act, you do not acquire the thing for a creditable purpose to the extent that:

(a)  the acquisition relates to making supplies that would be input taxed, or

(b)  the acquisition is of a private or domestic nature.

You acquire the auditing services in carrying out the requirements of carrying on a charity therefore it is not acquired for a private or domestic nature.

Goods and Services Tax Ruling GSTR 2008/1 Goods and services tax: when do you acquire anything or import goods solely or partly for a creditable purpose (GSTR 2008/1) provides guidance on determining whether the acquisition relates to making supplies that would be input taxed. Paragraph 106 of GSTR 2008/1 states that paragraph 11-15(2)(a) of the GST Act does not require tracing to a specific supply. Nevertheless, unlike subsection 11-15(1) of the GST Act, it requires some form of connection to the supplies that the entity makes, made or intends to make.

It follows that the charity is set up to conduct a number of activities. It is not an enterprise that consists of only making input taxed supplies. The audit expenses are incurred as part of the administrative requirements and compliance activities required as part of the charity. It is considered it is an expense that is for a creditable purpose. As such, it is considered that you are making a creditable acquisition under section 11-5 of the GST Act. Therefore, you are entitled to an input tax credit for the acquisition of audit expenses under section 11-20 of the GST Act.