What is a religious
A supply of a religious service
is GST-free if it is a supply of a service that:
- is supplied by a religious
- is integral to the practice of
The courts have determined that,
for a body to be regarded as a religious institution;
- its objects and activities must
reflect its character as a body instituted for the promotion of some religious
and practices of the members of that body must constitute a religion.
The two most important factors for
determining whether a particular set of beliefs and practices constitute a
- belief in a supernatural being,
thing or principle; and
- acceptance of canons of conduct
which give effect to that belief, but which do not offend against the ordinary
Religious institution is not
confined to the major religions.
Some examples of a religious
service would include, worship, Sunday School, a wedding, funeral or baptism
service, religious retreats, bible study groups etc.
The Vos report considered this
issue and stated that 'where the services were purely religious and there is no
commercial equivalent then it was appropriate for this to be
The following are examples of
services that have a commercial equivalent and thus are not GST-free, provision
of administrative and financial services, engagement of a minister of religion,
the civil or secular elements of religious services etc. Civil or secular
elements of a service would include, flowers, music, reimbursement of travel
expenses, accommodation and food at a religious retreat, library loan or hire
and items for private use in devotion.
Donations and offerings would not
be subject to GST as the donation or offering is not payment in return for the
supply of a good or a service.
Questions and Answers
- To what extent will
"religious service be applied where it occurs outside a place of worship? For
example, would religious residential retreats be classified as
If the residential retreat is
considered integral to the practices of the religion and is supplied by a
religious institution then it will be GST-free. It does not matter that those
practices occur outside a place of worship.
- Does expenditure incurred
have to be integral to the religious service to allow entitlement to an input
tax credit? What supplies are considered to be integral to the provision of
religious services like weddings and funerals and will therefore be
Expenditure incurred does not
have to be integral to the provision of a religious service to allow
entitlement to an input tax credit. However the expense does have to be
incurred in the course or furtherance of your enterprise, meeting the normal
requirements for a creditable acquisition. Creditable acquisitions may include
hymnbooks, candles, religious icons and flowers to decorate the church. Note:
supplies of flowers, or other goods by a religious institution will not be
GST-free. Supplies of flowers etc are not supplies of "religious services"
integral to the practice or religion, they are supplies of goods.
- Religious houses such as
vicarages, monasteries and the like undertake a number of activities which are
integral to the practice of that religion including the preparation of
sermons, hosting bible study groups, meeting with confirmation candidates and
new parishioners, etc. To what extent can these religious houses claim input
tax credits? Would it be possible, for example, to allow GST credits to be
claimed based on a percentage of total floor area which is then considered to
be used by clergy solely for the purposes of religious service related
A supply of residential
accommodation (other than commercial residential premises) is generally input
taxed under the GST legislation. This means that GST is not charged on the
supply, and input tax credits are not available in respect of GST paid on goods
and services acquired in providing the supply.
A supply of accommodation by a
charitable institution (including a religious institution) is GST-free provided
at least one of the following tests is satisfied;
- The supply is for consideration
that is less than 75% of the market value of the supply.
- The supply is for consideration
that is less than 75% of the cost to the supplier of providing the
Where a supply is GST-free, no GST
is charged on the supply, but the supplier is entitled to input tax credits in
respect of any GST paid on goods and services acquired in providing the supply.
As full input tax credits are available, it will not have any effect if part of
the property is set aside as a home office.
If a charity (including a religious
institution) fails to satisfy either of the above tests, the general rules
pertaining to residential rent ill apply and the supply of residential
accommodation will be input taxed.
- How will the clergy be
treated for PAYG purposes?
Consultations are currently
taking place with religious practitioners and institutions to clarify the
operation of the PAYG provisions to religious practitioners from 1 July 2000.
An announcement is expected in June 2000.
- Will payments made for the
accommodation and support of retired clergy within church owned aged care
facilities be subject to GST?
The answer to this question
depends on the type of accommodation and care provided, and the circumstances.
Where the supply is made in the course of provision of residential care (s
38-25), it would be GST-free. Where the accommodation is residential, it would
generally be input taxed. Where the accommodation is supplied by a charity for
less than 75% of the market value, or less than 75% of the cost of supply, it
will be GST-free.
- How will GST apply for
charities such as scripture unions and the like whose function it is to
further the practice, study and teaching of religious beliefs and whose
publications are sourced overseas but printed in Australia? These publications
are either distributed as individual products or as annual subscriptions.
Organisations also publish books and booklets printed in Australia and import
books printed overseas for distribution in Australia and in the Pacific. How
will GST apply when distribution occurs via churches and similar
Publications offered for sale by
scripture unions and similar organisations will generally be considered
taxable supplies. That is because the sale of the publications is considered
to be a commercial activity. Therefore the normal GST rules will apply, that
organisation will pay GST on
publications printed in Australia to the supplier, or to Customs in relation
to books and other printed matter imported into Australia. The organisation
will be entitled to an input tax credit in relation to the creditable
acquisition or importation provided that the organisation is registered for
If the scripture unions are
charitable institutions (there is insufficient information to determine one
way or the other) and sell the books for less than 50% of the GST inclusive
market value, the supply would be GST-free. The market value could be
determined from the cost of a similar publication in a bookshop. Alternatively
the supply of the publications would be GST-free if sold for less than 75% of
their cost of production.
The same principles would apply
where the distribution is by churches or other charitable organisations
registered for GST.
- How would payments be treated
under GST when made under maintenance contracts for the repair of
sisters/nuns/convent or clergy houses?
If the contractor is registered,
GST will be charged on payments made under a maintenance contract. Input tax
credits may then be available to the religious organisation making the
- Within diocesan operations
activities are conducted that would possibly fall within the definition of
financial supplies and as such would be Input Taxed. These activities occur to
support parishes, clerics, parishioners and other Anglican entities.
Activities include: Anglican Development Fund (equivalent to a small credit
union), Investment funds management, Motor Vehicle loans for clerics, and
Trust Management. Can guidelines be provided for what constitutes a financial
supply and whether it is possible to use a proportional basis to determine
what portion of GST paid is not eligible to be claimed as credits? Are
transactions internal to the diocese GST free, specifically relating to a
financial supply and a non-financial supply activity?
The Regulations list the categories
of financial supplies that are to be input taxed.
It appears from the limited
information supplied that the supplies mentioned in the above question would be
considered financial supplies.
GST groups are effectively treated
as a single entity. Supplies and acquisitions made wholly within a GST group are
taken out of the GST system. Supplies and acquisitions that are made outside the
GST group fall within the general rules. In determining the extent to which an
acquisition or importation made by a member of a GST group is for a creditable
purpose, you look at the creditable purpose of the group as a whole.
In principle, where a supply is
made by a charity and is for consideration less than 50% of the market value or
75% of the cost of supply' it would be GST free and the charity would be
entitled to full input tax credits for all its acquisitions that relate to that
supply. However, in practice the non-commercial rule' for charities may not be
easily applied to financial supplies because the predominant reason financial
supplies are input taxed is that there is no readily agreed identifiable value
for supplies consumed by customers of financial services.
If your annual turnover of
financial supplies does not exceed the lesser of $50 000 or 5% of your annual
turnover (including financial supplies), you will still be entitled to input tax
credits on acquisitions relating to those supplies.