GST treatment of admission fees to public museums, public art galleries and public libraries

Background

• Non-profit public museums, public art galleries and public libraries are often charitable or gift deductible entities. As a result they are able to apply the provisions in the GST Act that specifically relate to charities.
• A gift deductible entity for the purposes of the GST legislation is an entity that is either gift deductible in its own right or an entity that maintains a fund that is a gift deductible recipient where that fund is not an entity in its own right.
• Public museums, public art galleries and public libraries are part of the cultural sector. There has been some concern in the cultural and performing arts sector about the application of subparagraph 38-250(2)(b)(ii) of A New Tax System (Goods and Services Tax) Act 1999 to supplies of tickets and admissions for performances and exhibitions.
• Subparagraph 38-250(2)(b)(ii) provides that supplies by a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school will be GST free if the consideration received for the supply is less than 75% of the cost to the supplier of acquiring the thing supplied.
• The following is a brief summary of the position the ATO has adopted concerning the interpretation of subparagraph 38-250(2)(b)(ii). The ATO position is one that is within the scope of the GST legislation whilst simplifying the administrative and compliance requirements for the sector.

Summary of GST treatment of supplies by organisations in the cultural and performing arts sector under subparagraph 38-250(2)(b)(ii) of the GST Act.

1. The ATO has approved the following methodology for applying subparagraph 38-250(2)(b)(ii) for organisations in the cultural and performing arts sector that cannot establish their actual costs at the time of supply. This method is set out below.
2. To correctly calculate whether a supply is GST-free or taxable an organisation must.
   
   Step 1
   Estimate the projected costs for an exhibition or event and divide that estimate by the total number of admissions (all classes) that they estimate they will sell. This calculation provides the cost of providing an admission.

   Note:
   It is accepted that when applying subparagraph 38-250(2)(b)(ii) an organisation can include all direct costs and a reasonable apportionment of indirect costs. Costs used must be real costs however. Things like voluntary labour and donations, depreciation and imputed costs can not be included. All projections must be realistic and must be aligned with other costing conducted when an organisation determines admission prices and the costs of providing an event or exhibition.

   Where public museums or public art galleries hold special "one-off" exhibitions, they may account for these exhibitions by either:

   • including projected costs and attendances for the special exhibition in the overall cost of admission calculation for the period; or
   • treating the general operations and the special "one-off" exhibitions separately. If a public museum or public art gallery chooses this option, they will be required to isolate those projected costs and admissions for the special exhibition and calculate a separate cost of admission. In allocating costs to the special exhibition, both direct costs and an appropriate proportion of indirect costs must be taken into account. To the extent that projected costs and admissions have been included in the cost of admission for the special exhibitions, they will not be included in the cost of admission for the general operations. An example of these options is set out in Attachment A.

   Step 2
   For each class of admissions the organisation should divide the price that is charged for an admission in that class by the estimated cost per admission. If the price charged for that admission is less than 75% of the cost of the admission (worked out in step 1) the supply will be GST free. If the price charged is 75% or more than the cost of providing the admission, the supply will be subject to GST. All admissions in a class of admissions will be treated in the same way.

   Additional Information

   The organisation should calculate the amount of GST they need to remit in each Business Activity Statement based on this methodology. An example of this methodology is set out in Attachment A.

   • The problem of applying 38-250(2)(b)(ii) is unique to the cultural and performing arts sector where the actual cost of providing an admission to an exhibition or event might not be known until well after an admission is paid. To ensure that such organisations are able to apply subparagraph 38-250(2)(b)(ii) with certainty and without the undesirable outcome of having to apply the cost of supply rules twice, once to projected figures to establish whether supplies are taxable and once to actual figures (after the event) to establish whether they calculated their GST liability accurately in the first place, Division 123 will be applied.
   • The Commissioner will make a determination under Division 123 to allow charitable organisations in the cultural and performing arts sector that are applying subparagraph 38-250(2)(b)(ii) to use their projected costs to establish the GST treatment of supplies when the actual costs will not be known until after the supplies have taken place. Where actual costs are available those figures should be used. If organisations calculate their GST liability on this basis, the amount of GST calculated on supplies affected by subparagraph 38-250(2)(b)(ii) will be the GST liability for those supplies in any given tax period.
   • If you are unsure about the application of subparagraph 38-250(2)(b)(ii) to supplies made by your organisation you should contact the GST Charity and Non-Profit Team in the Australian Taxation Office by:
     • Writing to GPO Box 9935 in your capital city, attention Non-profit team; or
     • E-mailing your question to Replyin5@ato.gov.au, attention Non-profit team

Attachment A

Museum A has the following admission prices

General Operations
Concessional Admission $ 5
General Admission $ 12

Special Exhibition
Concessional Admission $ 10
General Admission $ 10

Museum predicts total attendance for their exhibition as follows
General Operations 165,000
Special Exhibitions 15,000
Museum A receives several government grants to help fund their activities. These grants are consideration for an agreement to supply services, and do not reduce the calculation of the cost of the performance

Option 1: Calculate the cost per admission for the total activities

The estimated costs are $ 4,200,000
$ 4,200,000 divided by 180,000 = $23.33
The cost per admission is $ 23.33
75% of the cost of supply is $ 17.50
Admissions for less than $ 17.50 will be GST free.
Looking at the different classes of admissions:
$ 5 admissions will be GST free - 5/23.33 = 21%
$ 10 admissions will be GST free - 10/23.33 = 43%
$ 12 admissions will be GST-free - 12/23.33 = 51%
The other admissions (general admission to the special exhibition) will be taxable because the admission fee is greater than 75% of the cost per admission.

Option 2: Treat the special exhibition separately

General operations
Estimated costs associated with general operations $ 3,800,000
Projected admissions 165,000
The cost per admission is:
$ 3,800,000/165,000 = $ 23.03
75% of $23.03 = $ 17.30

All admissions to the general operations will be GST-free as the admission fees are less than 75% of the cost per admission.

Special exhibition
Costs $ 600,000
Projected admissions 15,000
The cost per admission is:
$ 600,000/15,000 = $ 40
75% of $ 40 = $ 30
All admissions to the special exhibition will be GST-free as the admission fees are less than 75% of the cost per admission.