Private ruling: GST and non-profit sub-entities
Date of advice: 18 June 2015
Published: June 2015

Ruling: Q1: Can X revoke its choice to treat a separately identifiable branch as a non-profit sub-entity, with a retrospective date of effect under paragraph 63-10(2)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes. Under Division 63 of the GST Act, certain non-profit entities may choose to have some or all of their separately identifiable branches treated as separate entities. Section 63-10 of the GST Act discusses the period for which such a choice has effect and states: (1) The choice has effect from the time the entity makes the choice. (2) The choice ceases to have effect if: (a) the entity revokes the choice; or (b) the entity ceases to meet the requirements of subsection 63-5(2). (3) However, the entity: (a) cannot revoke the choice within 12 months after the day on which the entity made the choice; and (b) cannot make a further choice within 12 months after the day on which the entity revoked a previous choice. We consider that in the circumstances of X, X can retrospectively revoke the choice to treat a separately identifiable branch as a non-profit sub-entity subject to the relevant time limits. Once the non-profit sub-entity status of a branch is revoked retrospectively the supplies that were made by the branch will become supplies made by X and there will be GST implications. It is important to note that if the non-profit sub-entity was not registered for GST and had not made a record to treat the fundraising events held before the revocation as input taxed, X cannot treat those events as input taxed retrospectively. That is, X will have GST liabilities for any taxable supplies made in connection with those fundraising events and will be entitled to the input tax credits for any related creditable acquisitions. Further, where a branch that is treated as a non-profit sub-entity registers for GST it can choose to treat its future fundraising events as input taxed if the events meet the requirements of Subdivision 40-F of the GST Act. The branch will not be entitled to claim input tax credits for any acquisitions that it makes in relation to the event and it will not be required to pay GST on any supplies that it makes in connection with the event. The branch will not be entitled to claim input tax credits regardless of whether the supply would have been GST-free had the branch not made the choice to treat the fundraising event as input taxed.

Relevant facts and circumstances: X has a specified number of branches in both metropolitan and country regional areas. While forming part of the overall X legal entity, each branch is required to be managed and administered independently from financial, operational and governance perspectives. X is a charitable organisation and a Deductible Gift Recipient. X was registered for GST purposes from a specified date and is registered with the Australian Charities and Not-for-profits Commission (ACNC). X is an endorsed charity as defined in the GST Act. On a specified date, a resolution was passed by X to treat all its branches as non-profit sub-entities for GST purposes under Division 63 of the GST Act. As none of the branches exceeded the GST registration threshold for non-profit entities, the branches did not register separately for GST. X is currently considering revoking the non-profit sub-entity status of some or all of its branches. X is aware of the implications of backdating the revocation of the non-profit sub-entity status of the branches.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 63-10