Edited version of private advice

Authorisation Number: 1052124672539

Date of advice: 1 June 2023

Ruling

Subject: GST - charities and non-profit - other

Question

Do you make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies alcohol beverages at its bar and coffee beverages from an automatic coffee machine?

Answer

Yes. You supply goods by way of providing alcohol and coffee beverages to recipients and in return you receive payments. Therefore, you make a supply for consideration. In additional, the supply of goods is made in the course or furtherance of the enterprise you carry on, the supply of goods is connected with Australia, and you are required to be registered for GST. The supply of coffee and alcohol drinks is not a supply that is input taxed or GST-free, you satisfy all the requirements for a taxable supply.

As you will exceed the GST registration threshold and you are required to be registered, therefore the supply of alcohol and coffee beverages is subject to GST.

This ruling applies for the following periods:

Year ending 30 June 2023

Year ending 30 June 2024

The scheme commenced on:

14 April 2023

Relevant facts and circumstances

You are an association incorporated under XXX.

You are registered with an ABN since XXX.

You are currently not registered for GST as you are below the GST turnover threshold, however, you project that your GST turnover threshold may exceed the not-for-profit GST registration threshold of $150,000 and will therefore be required to be registered for GST. As such this ruling is made on the basis that you are required to be registered for GST.

The above activities are manned, run and managed by unpaid volunteers from the Associations' membership.

All funds received, net of expenses, are used to further the objectives of the Association as per its constitution. No distribution of funds is allowed to individuals. All funds are retained (and used) for the benefit of the association.

You are not registered as an endorsed charity or a gift deductible entity for GST concessions.

Members of the association make payments for the purchase of the goods and services provided by the association on a by-use bases.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) section 9-5

A New Tax System (Goods and Services Tax) Act 1999 (GST Act) section 9-40

Reasons for decision

Section 9-40 of the GST Act states that 'you must pay the GST payable on any *taxable supply that you make'.

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 or *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.)

You are currently not registered for GST as you are below the GST turnover threshold, however, you project that your GST turnover may exceed the not-for-profit threshold of $150,000 and will therefore be required to be registered for GST. As such this ruling is made on the basis that you are registered or required to be registered for GST.

You make supplies of XXX for consideration in carrying on your enterprise in Australia.

Enterprise

Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number explains the Commissioner's view on when is an entity carrying on an enterprise.

Goods and Services Tax Determination GSTD 2006/6 addresses Goods and services tax: does MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999?

GSTD 2006/6explains that the principals in MT 2006/1 apply equally to the meaning of 'entity' and 'enterprise' and can be relied upon for GST purposes.

MT 2006/1 states:

Mutual organisations

220. Organisations or associations whose receipts consist entirely of mutual receipts (that is receipts only from members) may not be carrying on a business but rather carrying on activities that are similar to business activities. In this context, there is an inability to profit because the objective or outcome is not profits for the entity, but rather a desire to cover expenditure and to return any surplus directly or indirectly, sooner or later, to the members. The trading activities of these organisations may amount to activities in the form of a business.

221. Subsection 9-20(3) of the GST Act makes it clear that an entity may carry on an enterprise even though it can only make supplies to members of the entity. Subsection 9-20(3) is also relevant to non-profit clubs and associations.

Non-profit clubs and associations

222. Non-profit clubs and associations are similar to mutual organisations in that their activities may involve trading activities (for example bar facilities of a sporting club) and provision of services to members (and perhaps non-members). The objective or outcome is not to derive profits for distribution but merely to cover expenditure and apply any surplus directly or indirectly, sooner or later, to the benefit of the membership as a whole.

223. A non-profit club or association might, therefore, conduct activities that are in the form of a business. What is relevant is the nature of the businesslike activities of the organisation, rather than its non-profit status or who it trades with. However, activities may be taken to be an enterprise under one of the other paragraphs of section 9-20 of the GST Act. For example an organisation may be a charitable institution.

Example 26 - activities of a club that amount to an enterprise

224. A football club has 200 members, most of whom play for the club.

225. Membership fees amount to $10,000 per annum. The club attempts to cover its expenditure by running a bar at its clubhouse and this has an annual turnover of $30,000 with a net profit of just over $8,000. The bar is staffed on a voluntary basis and, in addition to beer, wine and spirits, sells some finger food. The club maintains records of its income and expenditure.

226. The club's activities are done in a businesslike manner.

227. The club is entitled to an ABN on the basis that it is:

•                    an unincorporated association of persons; and

•                    carrying on an enterprise as the activities are done in the form of a business.

You are running an enterprise.

Is your supply of XXX an input taxed supply to some extent?

Division 40 of the GST Act sets out those supplies that are input taxed. If a supply is input taxed, then:

•                     no GST is payable on the supply and

•                     there is no entitlement to an input tax credit (GST credit) for anything acquired.

However, there is no provision that allows your supplies to be input taxed

Is your supply of XXX a GST-free supply to some extent?

Division 38 of the GST Act sets out the supplies that are GST-free. If a supply is GST-free then:

•                     no GST is payable on the supply

•                     an entitlement to a GST credit for anything acquired or imported to make the supply is not affected.

However, there is no provision that allows your supplies to be GST-free.