Fundraising, Gifts and Donations (Part 1)
How will revenue-raising activities such as sponsorships (including "in kind" sponsorships and "contra's"), gala events and membership fees be treated?Written by the ATO
There is a need to differentiate between the different types of revenue raising activities.
Sponsorships usually require the recipient to do something, for example, provide advertising. The provision of these rights is a taxable supply. The sponsor will generally be entitled to input tax credits where it has been made as part of carrying on their enterprise.
Membership fees and gala events are generally payments in return for services or rights and therefore will be subject to GST.
Other revenue raising events by a charity which is registered for GST and where the supplies are non-commercial or a supply of second hand goods will be GST-free. Raffles and bingo conducted by charities are GST-free. Most other supplies made by charities will be taxable. Charities will be able to claim input tax credits for acquisitions used to make taxable or GST-free supplies.
How will gifts and donations be treated under GST?
Gifts to non-profit bodies are not consideration
For a payment to be considered a gift it must be unfettered, that is, there must be no obligations to do anything in recognition of the gift and no expectation on the part of the donor to receive anything in return for donation. The definition of a gift is contained in Division 30 ITAA 1997.
Paragraph 9-15(3)(b) specifically excludes a gift made to a non-profit body from being consideration for a supply. Gift' and non-profit body' are the essential terms in this paragraph. It follows that if there is a gift to a non-profit body there will not be a taxable supply, unless there is another supply made for the consideration (gift).
A payment will not be a gift where there is a contractual obligation on the part of the charity or non-profit organisation to use the funds in a specified way or the provision of a material benefit to the donor.
A payment made in return for a material benefit or an enforceable obligation to use the funds for a specified purpose is consideration for a supply. The organisation receiving the payment has supplied something in return for the payment.
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