Edited version of private advice

Authorisation Number: 1052337721918

Date of advice: 6 December 2024

Ruling

Subject: Raffle conducted by a not-for-profit organisation

Question 1

Are you making a taxable supply of raffle tickets under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 GST Act (GST Act)?

Answer

Yes.

Question 2

If your supply of the raffle tickets is a taxable supply, is the amount of GST payable under section 9-70 of the GST Act calculated on the full price of the raffle tickets sold?

Answer

Yes.

Question 3

If the supply of raffle tickets is a taxable supply, can we:

(a) recover the unpaid GST amount under section 105-50 of Schedule 1 to the Taxation Administration Act 1953 (TAA) for the tax periods prior to 1 July 2012,

(b) amend an assessment under section 155-35 of Schedule 1 to TAA for tax periods starting on or after 1 July 2012?

Answer

(a)  No.

(b)  We can amend your activity statements for the tax periods starting xxxxxxxx to xxxxxxxx.

However, the Commissioner can amend at any time if they are of the opinion there has been fraud or evasion.

This ruling applies for the following periods:

1 January 202x to 30 June 202y

Relevant facts and circumstances

You are a not-for-profit organisation and are registered as an incorporated association.

You have an Australian Business Number (ABN) and are registered for GST.

You are not registered with the Australian Charities and Not-for-Profits Commission (ACNC) nor are you registered as a gift deductible entity.

You conduct an annual raffle each year and invite other not-for-profit community organisations and clubs (NFPs) to participate and raise money for their own projects by selling the raffle tickets. You do not sell any raffle tickets yourself.

You have been conducting raffles since xxxxxxxx.

You provided details of the processes of the raffle that you conducted in xxxx (xxxx Raffle).

You obtained a permit to conduct the xxxx Raffle from the relevant authority.

All advertising in relation to the permit had to include your name and the permit number.

You purchased the prizes for the xxxx Raffle.

You claimed the GST credits in relation to the prizes purchased.

You invited the NFPs to participate in xxxx Raffles by submitting an application.

The application required the relevant NFPs to state the number of ticket books required and the project to which the funds raised would be allocated.

You set the rules for the selling of the tickets.

The NFPs were not permitted to sell the tickets at a discount.

The NFPs were not permitted to buy tickets from their funds or on behalf of their organisation.

The NFPs were accountable to you for all the sold and unsold tickets.

The prizes were drawn at your place of business under your supervision.

In exchange for selling the raffle tickets, the NFPs retained a specified amount per ticket sold.

You provided details of the number of NFPs that participated in the xxxx Raffle, the number of tickets sold and the total amount of the ticket sales.

Of this amount, the NFPs retained X% of the ticket sales and remitted Y% of the ticket sales back to you.

You have never made a profit on the raffles as the concept is only to manage the raffles for the benefit of other NFPs in the community who don't have the resources and time to run a raffle to raise funds.

You do not issue a receipt, invoice or tax invoice to the NFPs for the X% they retain from the ticket sales or the Y% of the ticket sales that you receive from them.

The NFPs do not provide you with a receipt, invoice or tax invoice for the Y% of the ticket sales that they remit to you or the X% of the ticket sales that they retain.

You have reported Y% of the sale price of the raffle tickets at Labels G1 or G3 in your activity statements for the xxxxxxxx to xxxxxxxx tax periods.

You have not remitted any GST on the supply of the raffle tickets from xxxxxxxx to xxxxxxxx as you always thought that the sale of raffles was a GST-free supply.

You lodged your activity statement for the quarterly tax period ending xxxxxxxx and reported GST on Y% of the ticket sales remitted to you by the NFPs.

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 Section 9-10

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

A New Tax System (Goods and Services Tax) Act 1999 Section 9-70

A New Tax System (Goods and Services Tax) Act 1999 Section 17-5

A New Tax System (Goods and Services Tax) Act 1999 Section 38-160

A New Tax System (Goods and Services Tax) Act 1999 Section 38-270

A New Tax System (Goods and Services Tax) Act 1999 Division 126

A New Tax System (Goods and Services Tax) Act 1999 Section 126-5

A New Tax System (Goods and Services Tax) Act 1999 Section 126-10

A New Tax System (Goods and Services Tax) Act 1999 Section 126-15

A New Tax System (Goods and Services Tax) Act 1999 Section 126-20

A New Tax System (Goods and Services Tax) Act 1999 Section 126-25

A New Tax System (Goods and Services Tax) Act 1999 Division 165

Schedule 1to Taxation Administration Act 1953 (TAA) 105-50

Schedule 1 to Taxation Administration Act 1953 (TAA) 155-35

Reasons for decision

In this reasoning, please note:

•         unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999.

•         all reference materials referred to are available on the Australian Taxation Office (ATO) website ato.gov.au.

•         all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act.

Question 1

Are you making a taxable supply of raffle tickets under section 9-5?

Summary

Yes, the sales of the raffle tickets are a taxable supply under section 9-5.

Detailed reasoning

Under section 9-5 you make a taxable supply if:

(a) you make the 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; 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.

Whether you are the supplier of the raffle tickets

Goods and Services Tax Ruling GSTR 2002/3 Goods and service tax: prizes (GSTR 2002/3) explains that an 'event holder' makes a supply when it accepts entry into an event by a participant.

Paragraph 14 of GSTR 2002/3 explains that 'event holder' refers to an entity that is responsible for the administration, organisation and giving of prizes in relation to an event.

Paragraphs 26 to 28 of GSTR 2002/3 state:

Supply by the event holder - the right to participate in the event

26. By accepting an entry into an event, an event holder is supplying a right to participate in the event. Intending participants may be required to formally enter the event by completing an entry form and paying an entry fee.

27. The supply that is made by the event holder may include other things in addition to the right to participate, such as use of facilities, entry to functions or items of clothing.

28. The supply of a right to participate in an event includes a contingent right to a prize. In order to claim the prize however, a participant must provide something additional to the entry fee, that is, participation or performance to a standard required by the conditions of the event.

Although you do not directly sell any of the raffle tickets yourself, we consider that you are the event holder and are supplying a right to individuals to participate in the annual raffle event. We do not consider that the NPFs are making a supply to the individuals. This is based on the following:

•         You obtain a Permit to conduct the annual raffle under the Gambling Regulation Act 2003.

•         All advertising in relation to the permit must include your name and the permit number.

•         You purchase the prizes for the raffles.

•         You claim the GST credits in relation to the prizes purchased.

•         You invite the NFPs to participate in the raffles by submitting an "Application for Tickets" form.

•         You set the rules for the selling of the tickets.

•         The NFPs are not permitted to sell the tickets at a discount.

•         The NFPs are not permitted to buy tickets from their funds or on behalf of their organisation.

•         The NFPs are accountable to you for all the sold and unsold tickets.

•         The prizes are drawn at your place of business under your supervision.

•         In exchange for selling the raffle tickets, the NFPs retain a consideration of $1.60 per ticket sold.

Your supply of the raffle tickets meets the requirements in paragraphs 9-5(a) to 9-5 (d) as the supply is made for consideration, it is in the course or furtherance of your enterprise, it is connected with the indirect tax zone as the tickets are sold to Individuals within Australia, and you are registered for GST.

Therefore, what is left to determine is whether your supply of the raffle tickets is GST-free or input taxed.

GST-free supply

Subsection 38-270(1) states 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:

(i)      a supply of a ticket in a raffle; or

(ii)      an acceptance of a person's participation in a game of bingo; or

(iii)     a *gambling supply of a kind specified in the regulations; and

(c) the supply does not contravene a *State law or a *Territory law.

For GST purposes, an endorsed charity is a charity that is registered with the Australian Charities and Not-for-profits Commission (ACNC) and is endorsed for GST concessions by the ATO.

In your case, as you are not an endorsed charity, a gift-deductible entity nor a government school, your supply of raffle tickets is not GST-free under subsection 38-270(1).

Input taxed supply

Subsection 40-160(1) provides that certain fund-raising events conducted by an endorsed charity, a gift deductible entity or a government school can be treated as input taxed.

As you are not an endorsed charity, a gift-deductible entity nor a government school, you cannot treat the supply of the raffle tickets as input taxed under subsection 40-160(1).

Your supply of raffle tickets therefore is a taxable supply as it meets all the requirements of section 9-5.

Question 2

If your supply of the raffle tickets is a taxable supply, is the amount of GST payable under section 9-70 calculated on the full price of the raffle tickets sold?

Summary

As you are making the supply of raffle tickets to the individuals, you will need to calculate the GST payable on the full price of each raffle ticket sold.

Detailed reasoning

Subdivision 9-C states how to work out the GST payable on a taxable supply. Section 9-70 provides that the amount of GST is 10% of the value of the taxable supply.

However, subsection 126-25 states that 'Subdivision 9-C does not apply to a *gambling supply'.

The terms 'gabling supplies' and 'gambling event' are defined in section 126-35 as follows:

(1) A gambling supply is a *taxable supply involving:

(a) the supply of a ticket (however described) in a lottery, raffle or similar undertaking; or

(b) the acceptance of a bet (however described) relating to the outcome of a *gambling event.

(2) A gambling event is:

(a) the conducting of a lottery or raffle, or similar undertaking; or

(b) a race, game, or sporting event, or any other event, for which there is an outcome.

Paragraphs 100 to 105 of GSTR 2002/3 provide that the amount paid for the ticket by the purchaser of the ticket is consideration for the supply of the ticket. Further, the non-monetary prize (e.g., a car) supplied to a ticket holder is not a taxable supply.

In your case, we are satisfied that you are conducting a gambling event when you conduct a raffle. In addition, we are satisfied that you are the provider of the gambling supply.

As stated above, you are making a taxable supply of raffle tickets to the individuals through the NFPs, you are therefore required to calculate the GST payable on the full price of the raffle tickets sold and not just the amount remitted to you by the NFPs.

How GST applies to gambling sales you make?

Paragraphs 174 to 176 of GSTR 2002/3 provide guidance on the supply of prizes by the providers of gambling supplies: They state:

174. The general rule for working out the net amount of GST that applies to entities for a tax period is contained in Division 17. Subsection 17-5(1) provides that the net amount for a tax period applying to entities is worked out using the formula:

'GST - Input tax credits'.

175. However, Division 126 provides the way of working out an entity's net amount by incorporating their net profits from taxable supplies involving gambling.

176. The activities, on which the net amount is worked out, are based on gambling supplies and gambling events. Both of these terms are defined in Division 126.

Subsection 126-5(1) states:

If you are liable for the GST on a *gambling supply, your net amount for the tax period to which the GST on the supply is attributable is as follows:

Global GST amount + Other GST - Input tax credits

where:

global GST amount is your *global GST amount for the tax period.

input tax credits is the sum of all of the input tax credits to which you are entitled on the *creditable acquisitions and *creditable importations that are attributable to the tax period.

Note: Any supplies under the global accounting system will not have attracted input tax credits

other GST is the sum of all of the GST for which you are liable on the *taxable supplies that are attributable to the tax period, other than *gambling supplies.

Subsection 126-10(1) provides that the global GST amount for a tax period is calculation as follows:

(Total amount wagered - Total monetary prizes) x 1/11

where:

total amounts wagered is the sum of the *consideration for all of your *gambling supplies that are attributable to that tax period.

total monetary prizes is the sum of:

(a) the *monetary prizes you are liable to pay, during the tax period, on the outcome of gambling events (whether or not any of those gambling events, or the *gambling supplies to which the monetary prizes relate, take place during the tax period); and ...

Paragraph 184 of GSTR 2002/3 provides that monetary prizes paid in a raffle event are included in the calculation of the global GST amount.

An example of the GST treatment of monetary and non-monetary prizes in a raffle event is provided at paragraphs 185 to 188 of GSTR 2002/3 and is set out below:

Example 21: Calculating global GST amount

185. The Merry Bowls Club conducts a raffle where the prize is a car worth $33,000 and $500 cash. The tickets are $10 each and 5,000 tickets are sold.

186. The Merry Bowls Club is required to account for GST on the global GST amount. This is determined by taking the total monetary prize ($500) from the total value of the tickets sold ($50,000).

187. The global GST amount is (($50,000 - $500) x 1/11) = $4,500.

188. Although the Merry Bowls Club does not make a taxable supply of the car, it is entitled to claim an input tax credit of $3,000, which is 1/11 of the price of the car.

As noted in the above example, non-monetary prizes are not taken into account when calculating the global GST amount. Therefore, where you do not provide any monetary prizes in a gambling event your global GST amount for that particular event is 1/11 of the total amount wagered.

You are entitled to claim input tax credits on the acquisitions of non-monetary prizes provided the supplies to you are taxable supplies.

Further, we consider that you are acquiring NFPs' selling services in return for the X% of the raffle tickets sales that they retain.

Where an NFP is registered for GST, your acquisition of their services of selling the raffles is a creditable acquisition. You are therefore entitled to a GST credit for the acquisition. However, to claim a GST credit you must hold a tax invoice that is issued by the NFP for the X% of the ticket sales that they retain.

Question 3

If the supply of raffle tickets is a taxable supply, can we:

(a) recover the unpaid GST amount under section 105-50 of Schedule 1 to Taxation Administration Act 1953 (TAA) for the tax periods prior to 1 July 2012,

(b) amend an assessment under section 155-35 of Schedule 1 to TAA for tax periods starting on or after 1 July 2012?

Summary

For the tax periods that start before 1 July 2012, your liability to pay the unpaid GST on the supply of raffle tickets ceased 4 years after the amount became payable.

For the tax periods starting on or after 1 July 2012, you have four years and one day from the date the activity statement was lodged to make an amendment under section 155-35 of Schedule 1 to the TAA. The periods of review for your activity statements for xxxxxxxx to xxxxxxxx tax periods have not expired, therefore these activity statements are able to be amended.

However, the Commissioner can amend at any time if they are of the opinion there has been fraud or evasion.

Detailed reasoning

For tax periods before 1 July 2012

Section 105-50 of Schedule 1 to the TAA (now repealed) provided that any unpaid net amount, net fuel amount or amount of indirect tax or an overpaid refund amount ceased to be payable by an entity 4 years after the amount became payable unless:

1. within those 4 years the Commissioner had required payment of the unpaid amount or overpaid refund amount by giving notice to the entity; or

2.      the Commissioner is satisfied that payment of the unpaid amount was avoided (or the overpaid refund amount was brought about) by fraud or evasion.

Law Administration Practice Statement PS LA 2009/3 (PS LA 2009/3) explains when we can recover unpaid amounts and overpaid refund amounts of indirect tax, outside the four-year time limit imposed by subsection 105-50(1) of Schedule 1 to the TAA. PS LA 2009/3 states that once an original activity statement is lodged for a tax period and the entity pays the amount disclosed in that activity statement, any further tax not disclosed on that activity statement ceases to be payable unless, in respect of that further tax, another section 105-50 notice had been given to the entity within time or there is a finding of fraud or evasion.

A lodgment and payment demand notice may constitute a notice under paragraph 105-50(3)(a) of Schedule 1 to the TAA. There is nothing in the law that extinguishes a valid section 105-50 notice however PS LA 2009/3 states that 'once the activity statement to which the lodgment and payment demand notice relates has been lodged and the tax disclosed on it has been paid, then the Commissioner will not rely on the notice to collect any further unpaid tax not disclosed on that activity statement'.

The above policy in PS LA 2009/3 is intended to cover a specific scenario - namely, in response to a lodgment and payment demand notice where an entity lodges an activity statement and pays the tax disclosed on it. Thus, in order for the policy to apply, an activity statement must have been lodged that disclosed some tax payable and that amount of tax must have been paid.

Therefore, the Commissioner is not restricted in his ability to rely on the demand notice to collect further unpaid tax not disclosed on an activity statement if the taxpayer has not paid the amount disclosed on that activity statement. The policy also does not apply where the activity statement lodged by the entity shows a nil amount.

In your case, our records show that for your activity statements for the quarterly tax periods ending xxxxxxxx, xxxxxxxx and xxxxxxxx the Commissioner has given you notices by the way of lodgement and payment demand notices. The activity statements for these tax periods were subsequently lodged with a positive net amount payable, which has been paid. As a result, you are unable to lodge a revised activity statement for these tax periods as the Commissioner is not able to rely on that notice to collect any further unpaid GST not disclosed on these activity statements.

In relation to the other quarterly tax periods ending before 30 June 2012, the Commissioner either had not given you a notice under section 105-50, or these activity statements lodged disclosed a refund amount. As a result, the Commissioner is unable to collect the GST payable amount for these tax periods.

Tax periods starting on or after 1 July 2012

For tax periods starting on or after 1 July 2012, section 105-50 of Schedule 1 to the TAA does not apply.

Subsection 155-35(1) of Schedule 1 to the TAA states that 'The Commissioner may amend an assessment of an *assessable amount within the *period of review for the assessment'.

Subsection 155-35(2) of Schedule 1 to the TAA outlines that the period of review, for an assessment of an *assessable amount of yours, is:

(a) the period:

(i) starting on the day on which the Commissioner first gives notice of the assessment to you under section 155-10; and

(ii) ending on the last day of the period of 4 years starting the day after that day; or

(b) if the period of review is extended under subsection (3) or (4) of this section-the period as so extended.

The period of review under section 155-35 of Schedule 1 to the TAA for certain tax periods has expired. These activity statements are unable to be amended as they were lodged over four years ago.

As the period of review for the other tax periods has not expired under section 155-35 of schedule 1 to the TAA, these activity statements are able to be amended.

In some case the GST errors made on an earlier activity statement maybe correct on a later activity statement if you meet certain conditions. For further information please refer the ATO website, QC16233.