ATO ID 2003/4: GST and monetary and non-monetary consideration for a supply of membership
Date of decision: 4 December 2002
Business line: Indirect Tax

Issue
Does an interest-free loan form part of the consideration, as defined in section 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for a taxable supply of club membership made by the entity, a sporting club, to the individual where the individual pays an annual subscription fee as well as provide an interest-free loan to the entity?

Decision
Yes, the interest-free loan forms part of the consideration, as defined in section 9-15 of the GST Act for a taxable supply of club membership made by the entity to the individual where the individual pays an annual subscription fee as well as provide an interest-free loan to the entity. The entity receives both monetary and non-monetary consideration for the taxable supply of membership. The monetary consideration is the annual subscription fee. The non-monetary consideration is the benefit derived by the entity when it has the use of the sum of money, interest free, during the period that the loan continues.

Facts
The entity is a sporting club that is registered for goods and services tax (GST). The entity makes a taxable supply of club membership to an individual under section 9-5 of the GST Act. The entity receives from the individual an annual subscription fee and a once-only entrance loan that is provided interest-free. The entrance loan is repayable 30 days after the individual ceases to be a member or dies. The annual subscription fee and the entrance loan are compulsory payments by the member. In return for making these payments, members can use all of the sporting facilities offered by the club without any further payments being required in that subscription year.

Reasons for decision
Summary: Consideration is defined in section 195-1 of the GST Act to mean 'any consideration within the meaning given by sections 9-15 and 9-17, in connection with the supply or acquisition'. Subsection 9-15(1) of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with a supply of anything or in response to or for the inducement of a supply of anything. For the purposes of the GST Act it is clear that 'consideration' has a broad meaning. Consideration includes anything done or offered by way of reward or remuneration provided in connection, in response to or for the inducement of the supply. The definition includes payments as well as other acts or forbearances made in connection with the supply, which means that consideration may be monetary (consideration expressed as an amount of money) or non-monetary, or a combination of both. This reasoning is supported in Goods and Services Tax Ruling GSTR 2001/6 which states that where there is monetary consideration for a supply, it does not necessarily follow that there is no other consideration for that supply. If any non-monetary consideration is received for that supply, it must be added to the monetary amount to work out the total consideration for that supply. On the facts, the annual subscription fee that the entity receives is the monetary consideration for the taxable supply of the club membership. However, the entity also receives a once-only entrance loan in the form of an interest-free loan from the individual in connection with this taxable supply. Therefore, it is necessary to determine whether this interest-free loan is also consideration for the taxable supply of the club membership. In Customs and Excise Commissioners v Exeter Golf and Country Club Ltd (1979) 1 BVC 316; Exeter Golf and Country Club Ltd v Customs and Excise Commissioners (1981) 1 BVC 385 ( Exeter's case ) the Court considered whether, in addition to the payment of an annual subscription, the provision upon entrance of an interest-free loan as a condition of membership of a club, is part of the consideration for the supply by the club's facilities to its members. In concluding that the interest-free loan formed part of the consideration for the supply of the club's facilities to its members, the Court described the loan as being a transfer of money from 'A' to 'B' on the term that the borrower shall have the use of the money for the period that the loan has been agreed to be outstanding. The benefit that the borrower enjoyed when he borrowed the money from the lender was not the money, but the use of the money during the period that the loan continued. Applying the decision in Exeter's case , it is the benefit that the entity derives from the use of the money, interest-free, during the period that the loan continues, that forms part of the consideration for the taxable supply of membership and not the actual loan amount that it receives from the individual. As the benefit that the entity derives is not an amount expressed in the form of money, it is non-monetary consideration. Therefore, the interest-free loan provided by an individual to the entity forms part of the consideration received by the entity for a taxable supply of club membership by the entity to the individual under section 9-5 of the GST Act for which the individual also pays an annual membership fee. The entity receives both monetary and non-monetary consideration for the taxable supply of club membership. The monetary consideration is the annual subscription fee. The non-monetary consideration is the benefit derived by the entity by having the use of the sum of money, interest-free, during the period that the loan continues.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-15 subsection 9-15(1) section 9-17 section 195-1
Case references: Customs and Excise Commissioners v Exeter Golf and Country Club Ltd (1979) 1 BVC 316
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2001/6
Subject references: Goods and services tax GST consideration Taxable supply