Private ruling: GST and donations
Date of advice: 4 August 2016
Published: September 2016
Ruling period: NA
Date scheme commenced: NA

Ruling: Q1: Are donations received, from users of your services consideration for a taxable supply in accordance with section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Donations received from users of your services are not consideration for a taxable supply for the purposes of section 9-5 of the GST Act.

Relevant facts and circumstances: You are registered for GST and are not a deductible gift recipient. The growth in your activities drew the attention of the Environmental Protection Agency (EPA) and their insistence that you needed to be licensed. You saw the interest of the EPA in your legitimate activities as inappropriate claiming you were not required to be licensed and that the restrictions on activity would be detrimental to you. The differences were fought out in court resulting in you needing to be licensed and a level of control on your activities imposed by the EPA. Guessing that the interference by the EPA would be expensive your major tenant initiated a plan to invite voluntary gifts donations or contributions. The tenant had a container on the counter of his business inviting any visitor to make a cash contribution to the fund, or put their change in the container.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5, 9-10, 9-15.

Reasons for decision: Summary: A supply is not a taxable supply to the extent that it is GST-free or input taxed. To satisfy the first requirement in section 9-5 of the GST Act, an entity must first make a 'supply' for 'consideration'. For a payment to be consideration for a supply there must be a sufficient nexus between the payment made by the payer and a supply made by the payee. A payment is consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement of' a supply. The test is an objective one. In this case you have never sought any contributions from anybody to help defray the legal costs. The invitation for voluntary gifts donations or contributions was made by your major tenant and remitted to you. Therefore, we consider that there is no supply made by you to the major tenant for consideration. As the major tenant does not receive an inducement or a material benefit from providing the donation to you the money received from the major tenant is not consideration; it is a gift and no GST applies to the donations.