Edited version of private advice

Authorisation Number: 1052300125486

Date of advice: 13 September 2024

Ruling

Subject: Supply of accommodation to volunteer workers by endorsed charity for nil consideration

Question 1

Is the supply of accommodation to volunteer workers by XYZ GST-free pursuant to section 38-250 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

Question 2

Is XYZ entitled to input tax credits under section 11-15 of the GST Act in respect of acquisitions in relation to the supply of the accommodation?

Answer

Yes.

This ruling applies for the following period:

1 July 2024 to 30 June 2028

The scheme commenced on:

1 July 2024

Relevant facts and circumstances

XYZ is a charity:

a)    registered with the Australian Charities and Not-for-profits Commission (ACNC);

b)    endorsed as income tax exempt by the Australian Taxation Office (ATO);

c)    registered for GST; and

d)    endorsed as a charity by the Commissioner of Taxation under section 176-1 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act).

XYZ raises funds from supporters and provides financial support to ABC. ABC places volunteer workers overseas. The board and members of the two entities are different. The entities are not related and neither entity controls the other.

Individuals and families wishing to volunteer their time to serve as volunteer workers sign a document with ABC. This document stipulates that the volunteer workers are volunteers and not employees of ABC.

ABC provides volunteer workers with a living allowance. The allowance is a support payment, not a wage. The allowance paid by ABC is not reduced even if the volunteer worker is unable to volunteer all their time (e.g., because of an unforeseen health reason). The amount of the allowance paid by ABC is based on the composition of the family unit, and not the number of hours volunteered by the volunteer worker. The allowance is calculated by reference to costs that a volunteer worker will incur in living in frugal comfort in their location. If a volunteer worker receives income from other paid work, the allowance is reduced. While overseas, any services or support to the volunteer workers are provided by ABC, not XYZ.

Home assignment

Prior to travelling overseas for their first assignment, volunteer workers undertake a period of home assignment and volunteer their time with XYZ. The purpose of this period is for volunteer workers to build their support base and to prepare for their overseas assignment. Volunteer workers then serve overseas with ABC for around X years, before returning to Australia for an additional period of home assignment. After the home assignment, most volunteer workers return overseas. This X-year cycle continues throughout the volunteer workers' service with ABC.

Volunteer workers sign a document which records their intention to volunteer their time with XYZ while they are on home assignment. This document specifies the relationship between the volunteer worker and XYZ is that of a volunteer, not an employee or contractor, and states that the purposes of home assignment are to:

a)    engage with local supporters and to seek new support;

b)    promote the work and the ABC vision;

c)    spend time with family and friends;

d)    rest and spend time in recuperating and continuing professional development; and to

e)    attend to any health or related matters.

Accommodation arrangements while on home assignment

XYZ provides furnished accommodation to some of the volunteer workers and their families. For this purpose, XYZ currently owns X small furnished flats in BBB which are provided to volunteer workers when they are in BBB on home assignment.

XYZ does not charge volunteer workers rent for the accommodation it provides. In addition, XYZ pays all expenses associated with operating the accommodation, such as stocking the pantry, ongoing repairs, insurance, rates and utilities. Based on similar rents for the provision of unfurnished two- and three-bedroom flats in BBB, the estimated market rent for each flat is between $P and $Q per week.

Due to the timing and number of volunteer worker families expected to return to BBB on home assignment over the medium term, XYZ is intending to acquire additional, slightly larger residential premises to better accommodate volunteer worker family units comprising 4 or 5 members. Accordingly, while no charge will be paid by volunteer workers for this accommodation, it is expected that the weekly market rent of these premises will be commensurately higher than for the current accommodation. The additional accommodation will be provided to volunteer workers and their families on the same terms and conditions as the existing accommodation.

The provision of accommodation at no charge by XYZ to a volunteer worker while on home assignment is not dependent on the volunteer worker performing specific duties. Volunteer workers on home assignment rest, reconnect with family and friends, and attend to any health concerns. They voluntarily speak at events. XYZ does not pay volunteer workers to speak at events.

XYZ is providing the accommodation to the volunteer workers on home assignment with no requirement for services to be provided by volunteer workers. Although volunteer workers choose to speak at various events, the provision of the accommodation to volunteer workers is not dependent on them doing so. The accommodation is available regardless of whether the services are provided. Similarly, volunteer workers that do not use the XYZ accommodation will still undertake such speaking engagements.

The purpose of home assignment and the expectations of volunteer workers do not change regardless of whether they are provided with accommodation or not. While volunteer workers volunteer their time with XYZ, the accommodation is not provided as consideration for any work performed. Should the volunteer workers choose not to stay in XYZ provided accommodation, because they prefer to stay in their own home or stay with extended family or friends, the only assistance provided by XYZ for accommodation is the reimbursement of 25% of any out-of-pocket utility costs, including gas, electricity, water and council rates.

XYZ does not pay volunteer workers who volunteer their time while on home assignment. However, any out-of-pocket expenses incurred by volunteer workers while volunteering with XYZ, such as travelling on public transport or using a car to visit supporters, are reimbursed to them. XYZ does not reimburse a volunteer worker's private travel or private vehicle operating costs. As part of its ongoing care for volunteer workers while on home assignment, XYZ will cover some education costs such as one school uniform per child, to assist the volunteer workers children to attend school while on home assignment. None of these arrangements are impacted by a volunteer worker's decision to utilise the accommodation provided by XYZ.

ABC, not XYZ, continues to pay an allowance to volunteer workers while in Australia to assist with covering basic living costs.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999, sections 11-5, 11-15, 11-20, 38-250, 176-1, and 195-1.

Reasons for decision

All section references below are to the A New Tax System (Goods and Services Tax) Act 1999 unless otherwise specified.

Question 1

Subsection 38-250(1) states that a supply is GST-free if, among other things, the supplier is an endorsed charity and that, if the supply is a supply of accommodation, the supply is for consideration that is less than 75% of the GST inclusive market value of the supply. As XYZ has been endorsed by the Commissioner of Taxation under section 176-1, it meets the definition of an 'endorsed charity' in section 195-1 for this purpose.

In respect of the phrase "the supply is for consideration that is less than 75% ..." in subsection 38-250(1), a literal interpretation would indicate the provision only applies to a supply that is made for consideration, and not to a supply made for no consideration.

However, if that interpretation is correct, then all that is needed for a supplier to have a particular supply come within the terms of subsection 38-250(1) is to make the supply for some consideration, for example $1.

We do not apply that literal interpretation of subsection 38-250(1). Rather, and to give effect to the intent of the section, we consider that supplies of residential accommodation by charities for no consideration will be GST-free under that provision. We state this view at paragraph 339 of the public ruling known as the Charities Consultative Committee Resolved Issues Register.

Given the stated Facts and Circumstances, we are also of the view that XYZ is not receiving consideration for the supply of the accommodation from the performance of any services of volunteer workers. In other words, we are satisfied that any benefit derived by XYZ from activities performed by volunteer workers utilising the accommodation provided by XYZ bear no relationship or connection with that accommodation.

Our view extends to the additional accommodation that XYC intends to acquire for supplying to volunteer workers for nil rent, given the intention to provide this additional accommodation on the same terms and conditions as the existing supplies of accommodation. For the sake of completeness, we note that we ruled in May 2023 that volunteer workers on home assignment are not employees within either the ordinary meaning of subsection 12(1) of the Superannuation Guarantee (Administration) Act 1992 or within the extended meaning of subsection 12(3) of that Act.

It is therefore our view that XYZ satisfies the terms of subsection 38-250(1) in respect of the supplies the subject of this Ruling.

Subsection 38-250(4) states that subsection (1) (and subsection (2), which is not relevant) does not apply to a supply by a gift-deductible entity endorsed as a deductible gift recipient (within the meaning of the Income Tax Assessment Act 1997 (ITAA 1997)) under section 30-120 of the ITAA 1997 unless the supplier is, among other possible things, an endorsed charity.

Regardless of whether XYZ is a deductible gift recipient, the fact that it is an endorsed charity means that subsection 38-250(4) does not apply to exclude subsection 38-250(1) from applying to the subject supplies.

We make no ruling on whether section 40-35 applies to treat the accommodation provided by XYZ to volunteer workers as being input taxed. This is because, pursuant to section 9-30, the GST-free treatment provided by section 38-250 takes precedence over the application of section 40-35 in any event.

Question 2

Pursuant to section 11-20, XYZ is entitled to an input tax credit for any 'creditable acquisition' it makes. Under section 11-5, XYZ will make a creditable acquisition if it, among other things, acquires anything solely or partly for a 'creditable purpose'. Section 11-15 provides that a thing is acquired by an entity for a creditable purpose to the extent it is acquired in carrying on the entity's enterprise.

We are satisfied that the expenses incurred by XYZ in providing the subject accommodation are done so in carrying on its enterprise. Therefore, and providing any such acquisitions are taxable supplies to XYZ and acquired for consideration, XYZ is entitled to input tax credits in respect of such expenses.

Subsection 11-15(2) excludes from 'creditable purpose' any acquisition of a thing to the extent it relates to the making of a supply or supplies that are input taxed. Given the application of section 9-30 to those supplies, this exclusion does not apply.