Written by the ATO
will second hand goods that are donated to a charity be treated under
Donated second hand goods will be
GST-free where supplied by charitable institutions and provided they retain
their original character. Second hand goods are goods which have been
used previously. The supply of donated new goods will be subject to
Questions and Answers
- What is the definition of
used as opposed to second hand?
The definition of used is not
relevant to the second hand goods provisions for charities. Second hand goods
are goods that must not have previously been held for manufacture, sale or
exchange. Other goods that are donated to charities may be assumed to be
second hand with the exception of food items and animals unless the entity is
aware of the circumstances that indicate they are new goods.
- Subdivision 38-355 exempts
supply of second-hand goods, particularly where goods are supplied as a gift.
In practice, opportunity shops supplement their supplies from outside sources.
At the point of sale, it will not be known which goods were donated as gifts
and which came from outside sources.
A supply of donated second hand
goods to another charity is not a taxable supply. Purchases not made
from another charity are taxable. Where the purchase is a creditable
acquisition for a charity then tax is payable on the supply and the charity is
entitled to an input tax credit.
Note that proposed
Division 123 of the GST Act provides for simplified accounting methods for
non-commercial activities of charitable institutions etc. and could assist
with compliance costs.
- Where donated second hand
goods are received by a charity and sold without changing their character, the
sale will be GST-free. What approach should a charity employ in distinguishing
between 'new' and 'second hand' goods received as donations in collection
Where donated goods are received
by a charity in collection bins, the Commissioner will accept that all goods
received in this manner are second hand, unless the charity has information to
the contrary. For example, if a clothing manufacturer has advised the charity
that it will be depositing 500 new shirts in their charity bin, and these
shirts are identifiable because of their labelling, packaging etc., they would
not be considered second hand goods. Where however an isolated shirt appears
in a collection bin with labels attached and in its original packaging, this
will still be considered second hand.
- Does the same rationale apply
to donations of second hand goods made direct to the charity's
Yes - unless the charity has
information to the contrary, the donated goods would be considered second
- Where a charity receives
donated second hand clothing, removes the buttons and/or lace, and sells them,
have the buttons and lace retained their original character?
Yes. The character of
a button (even when attached to clothing) is to operate as a fastener. Merely
separating the buttons from the clothing does not change this character.
Similarly, the character of lace is to serve as decoration. The removal of lace
from clothing does not change this character. Accordingly, the sale of buttons and lace obtained from second hand clothing in this manner would be GST-free.