Private ruling: GST and membership fees
Published: May 2012

Ruling: Q1: Is one of the fees paid by you members (herein known as fee A) exempt from goods and services tax (GST)? | A1: No.

Relevant facts and circumstances: You are registered for GST. You are exempt from paying income tax as a sports club. Your Constitution requires you to promote your particular sport. Your members pay you different types of fees, including fee A. Your Constitution provides that all fees become payable within a certain time period. Your Constitution also provides that a member can have their membership cancelled if they don't pay their fees by a certain date. You have a loan from an organisation which you used in relation to your enterprise. Your Constitution also provides that you must use the fees, including fee A, in carrying on your enterprise.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 7-1 | Section 9-5 | Section 9-10 | Section 63-5 | Subsection 63-15(1) | Income Tax Assessment Act 1997 Item 9.1 of section 50-45.

Reasons for decision: Summary: Section 7-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies. Section 9-10 of the GST Act provides that the supply of sporting facilities to a sporting club's members is a supply for GST purposes. Further to this, section 9-5 of the GST Act provides that the supply is taxable if: · you make the supply for consideration · the supply is made in the course or furtherance of an enterprise that you carry on · the supply is connected with Australia, and · you are registered, or required to be registered for GST. Note that the supply is not taxable to the extent that it is GST-free or input taxed. In your case, you supply sporting facilities to your members. For this supply your members are required under your Constitution to pay you fees, including fee A. The supply is also made in the course or furtherance of your enterprise (the promotion of your sport), the supply is connected with Australia as it is made in Australia and you are registered for GST. There are no legislative provisions in the GST Act or any other Act that would allow the supply of your sporting facilities to be input taxed. However, there are legislative provisions in Division 63 of the GST Act that may allow you to treat the supply as being outside the scope of the GST system. Division 63 of the GST Act concerns itself with non-profit sub-entities and is discussed below. Note that in the case where a non-profit sub-entity can be used, the entity has the choice of whether they use it for their supply. This aside, the supply of your sporting facilities is subject to GST under section 9-5 of the GST Act with the consideration for your supply being all the fees paid by your members. Non-profit sub-entity The type of non-profit organisations listed in section 63-5 of the GST Act, given certain requirements, may choose to have some (or all) of their separately identifiable activities (each known as a branch) treated for GST purposes as non-profit sub-entities. One benefit of splitting separately identifiable activities into a branch and treating it as a non-profit sub-entity is that the non-profit sub-entity will only need to register for GST if the GST turnover of the non-profit sub-entity exceeds the registration threshold (currently $150,000 for a non-profit body). In your case, you are a non-profit organisation that is exempt from income tax under item 9.1 of section 50-45 of the Income Tax Assessment Act 1997 as you provide sport. This exemption makes you a non-profit organisation that is listed in section 63-5 of the GST Act and therefore you are entitled to use non-profit sub-entities for your branches provided each branch meets the necessary requirements. Branch requirements Subsection 63-15(1) of the GST Act provides the requirements for a branch to be treated as a non-profit sub-entity. One of the requirements is that the branch should be separately identified by reference to the nature of the activities carried on through the branch. The ATO view on non-profit sub-entities is provided by the Charities Consultative Committee resolved issues document (available from the ATO website www.ato.gov.au ). This document provides that a non-profit sub-entity cannot be used for a branch where the branch incorporates activities that are related to the main purpose of the organisation. In your case, the fees paid to you, including fee A, is consideration for your supply of sporting facilities. This is demonstrated by your Constitution that allows for the cessation of membership where the fees are not paid. Also, your supply of the sporting facilities is your core activity, that is, it is the main method you have adopted to promote your sport. Further to this, your Constitution requires that the fees, including fee A be used in carrying on your enterprise. Given all of this, it is clear that fee A is payment related to your main purpose, that is, the supply of your sporting facilities to your members which in turn promotes your sport. Consequently, you would not be entitled to use a non-profit sub-entity to exempt fee A from GST. There are no other legislative provisions in the GST Act or any other Act that would allow fee A to be exempt from GST. Consequently, fee A is subject to GST given it is payment for your taxable supply of sporting facilities.

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.