Private ruling: GST treatment of supplies at religious training schools
Published: November 2012

Ruling: Q1: Do you make taxable supplies of accommodation, training materials and meals associated with your religious training schools? | A1: Yes. These are taxable supplies, and you must remit goods and services tax (GST) on these supplies.

Relevant facts and circumstances: You are registered for GST. You are a not for profit Charitable Institution and are endorsed to receive GST concessions. You operate for the advancement of religion. Your activities include holding one day seminars and live-in religious training schools (training schools). The training schools are held at various commercial venues which provide accommodation and meals at a cost to you. You book the accommodation and make the arrangements for meals in your own name, and you receive the tax invoices from the supplier. You then charge your training school participants an amount that covers these expenses, in order to keep the courses affordable (ie you do not charge an additional amount for profit on accommodation and meals). You also charge a registration fee to training school participants to cover administration costs such as training materials and mail outs. For your live-in training schools the estimated cost is provided and includes a registration and an accommodation component. Your information days and prayer ministries are offered for no cost. Your website also indicates that there is no cost for the one day training schools.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | Section 11-5 | Section 38-250 | Section 38-220 | Division 63

Reasons for decision: Summary: Summary Your supplies of accommodation, meals and administrative services (training materials) are not GST-free religious supplies, nor are they supplies for nominal consideration. Therefore these are taxable supplies, and you must remit GST on these supplies. | Detailed Reasoning - Detailed reasoning: You are registered for GST and make supplies for consideration in the course of your religious enterprise. Therefore those supplies will be taxable supplies unless they are GST-free (or input taxed). GST-free religious services Under section 38-220 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a supply is GST-free if it is a supply of a service that is supplied by a religious institution and is integral to the practice of that religion. We consider that, based on the information provided, you are a religious institution. Your objects and activities reflect your character as a body instituted for the promotion of a religious object, and the beliefs and practices of your members constitute a religion. Therefore, where you supply a religious service that is integral to the practice of religion this will be a GST-free supply. For example, a religious service includes things such as religious retreats and ministry schools. A supply of religious services in those contexts is therefore a GST-free supply. The Charities consultative committee resolved issues document (CCC document) considers examples of religious services, and this includes religious retreats, bible study groups etc. However, this document also explains that services are GST-free where they are purely religious and there is no commercial equivalent. It considers that the following are examples of services that have a commercial equivalent and are therefore not GST-free: provision of administrative and financial services and the civil or secular elements of religious services. Civil or secular elements of a service include travel expenses, accommodation and food at a religious retreat. This reasoning in the CCC document is considered to be a straightforward application of the law. In your circumstances we consider that the amount paid for registration is for your administrative services. You have advised that this covers things such as training materials and mail outs. Your website also advises that other religious services that you offer, such as ministry services and one day courses do not have any fee. Therefore we consider that the payments are properly characterised as being for your administration services rather than your religious services. As these are not supplies of religious services they will therefore not be GST-free under section 38-220 of the GST Act. Similarly, the amounts that you receive from participants in relation to meals and accommodation are not amounts of consideration that you receive for your supply of religious services. Rather, they are for separate supplies of accommodation and food. Therefore these supplies are not supplies of religious services and are not GST-free under section 38-220 of the GST Act. Whilst you provide religious services at your training schools, the amounts of payment that you receive are not in connection with these religious services. Therefore your supplies of religious services are not taxable supplies under general principles (as they are not supplies for consideration). However, any payment that you did receive that was for those religious services (and not for any other services) would be GST-free under section 38-220 of the GST Act. GST-free supplies for nominal consideration As your supplies are not GST-free under section 38-220 of the GST Act it is necessary to consider whether they are GST-free under any other sections of the GST Act. Section 38-250 of the GST Act is relevant to supplies made by charitable institutions. A supply by a charitable institution is GST-free if it is a supply of accommodation for consideration that is less than 75% of the GST inclusive market value of the supply, or less than 75% of the cost to the supplier of providing the accommodation. Where a supply by a charitable institution is a supply of something other than accommodation it will be GST-free if it is a supply for consideration that is less than 50% of the GST inclusive market value of the supply or less than 75% of the consideration the supplier provided, or was liable to provide, for acquiring the thing supplied. In your circumstances, you have advised that the commercial venues provide accommodation and meals to you. You then charge training school participants an amount that covers these charges. Therefore your supply of the meals and accommodation do not meet the requirements of section 38-250 of the GST Act. The accommodation is not for less than 75% of its GST inclusive market value, or less than 75% of the cost to you. There is no indication that the commercial venues provide you with accommodation at non-market rates. When they charge you the market rate, you then also use this market rate to on-charge your training school participants. You also recoup 100% of the cost to you of providing the accommodation. Therefore the supply of accommodation is not GST-free under section 38-250 of the GST Act. Similarly, there is no indication given that you pay below market rates for the supply of meals. Therefore, when you provide those meals to your training school participants at cost you are making a supply for consideration that is for market value, and also for 100% of the consideration you provided for acquiring the thing supplied. Therefore the supply of meals is not GST-free under section 38-250 of the GST Act. The supply of administrative services (training materials, mail outs) may be GST-free if the supply is for less than 50% of the GST inclusive market value of the supply or for less than 75% of the consideration you provide for making that supply. However, we would expect that this amount covers your costs and is not for consideration of an amount that is less than 50% of what a person would expect to pay for such administrative services. Where this is the case the supply will not be GST-free under section 38-250 of the GST Act. As the supplies you make are not GST-free supplies they are therefore taxable supplies, and you must remit GST on them. You should also provide your training school participants with a tax invoice. We note that the above considerations are based on your advice that you acquire the supplies from the commercial venue and on-supply them to your course participants. If, however, the supplies were made directly to the participants by the venue then the GST amount paid by the participants is the same. As the commercial venue is not a charitable institution none of its supplies can be GST-free under section 38-250 of the GST Act. Other matters to note We note that where you have acquired accommodation from the commercial venues in the course of your enterprise (and it doesn't relate to making input taxed supplies) you make a creditable acquisition and are entitled to input tax credits. This means the effective cost to you of acquiring the accommodation is the GST-exclusive cost. You then effectively on-charge the whole cost of the original supply to the school participants for the same amount. The school participants therefore pay GST as they would have if they had purchased the accommodation and meals directly from the venue (and you do not pay any GST). The only circumstances where you would not have to charge GST to the school participants is where, rather than making supplies to them, you are merely acting as a paying agent for them. That is, where they are the recipient of the supply from the commercial venue (rather than receiving the supply from you). Goods and Services Tax Ruling GSTR 2000/37 provides guidance on agency relationships. It provides that if a payment is made in the capacity as a paying agent for a person, then no GST is payable by the agent on the subsequent reimbursement by the person (eg the school participant). An example of this would be if you acted as an agent for the school participants in arranging accommodation for them and you booked accommodation, meals etc in the name of the particular participant. Where you make no profit and on charge the cost to the school participant you are acting in the capacity of a paying agent and there is no GST payable by you on the subsequent reimbursement by the school participant. That is, you do not need to charge any GST. However, you are also then not entitled to claim any GST credits. Therefore the GST outcome is the same. We also note that under Division 63 of the GST Act some kinds of non-profit entities may choose to have some (or all) of their separately identifiable branches treated as separate entities for GST purposes. Relevantly, the entity must maintain an independent system of accounting and be separately identifiable by its activities. In these circumstances if the sub-entity's turnover is below the registration turnover threshold ($150,000) the sub-entity does not need to register for GST and therefore does not charge GST. However, the entity also does not claim any input tax credits in relation to its supplies. Therefore the GST outcome is also the same as the scenarios discussed above.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.