Supplies of tickets by organisations in the cultural and performing arts sector

• Non-profit organisations in the cultural and performing arts sector 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.
• 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 for performances and events.
• 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 a season of performances, exhibition or event and divide that estimate by the total number of tickets (all classes) that they estimate they will sell. This calculation provides the cost of providing a ticket.

   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 ticket prices and the costs of providing an event or performance.

   Step 2
   For each class of tickets the organisation should divide the price that is charged for a ticket in that class by the estimated cost per ticket. If the price charged for that ticket is less than 75% of the cost of the ticket (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 ticket, the supply will be subject to GST. All tickets in a class of tickets will be treated in the same way.

   Additional Information
   Season tickets should be treated as a bundle of rights to attend performances. The cost of a season ticket would be worked out as the sum of the costs of the individual performances covered by the ticket. That cost is then compared to the price of the season ticket in establishing whether or not the season ticket is GST free. A similar approach should be taken where a bulk discount is given for purchasing a certain number of tickets at the same time.

   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

3. The problem of applying 38-250(2)(b)(ii) is unique to the cultural and performing arts sector where the actual cost of providing a ticket to a performance, exhibition or show might not be known until well after the event, and tickets are often sold well in advance. 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.
4. 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.
5. 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 GSTmail@ato.gov.au, attention Non-profit team

Attachment A

Worked Example of calculating GST treatment of tickets under subparagraph 38-250(2)(b)(ii).

Organisation A estimates that a season of performances will cost them $4,200,000 to produce

They have 4 Classes of tickets

Organisation 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

They estimate that they will sell approximately 65,000 of the available tickets

Their estimated costs are $4,200,000
$4,200,000 divided by 65,000 = $64.62

The cost per ticket is $64.62

75% of the cost of supply is $48.47

Any tickets sold for less than $48.47 will be GST free.

Looking at the different classes of tickets:

$25 tickets will be GST free - 25/64.62 = 38%
$45 tickets will be GST free - 45/64.62 = 69%

The other tickets will be taxable because the consideration received per ticket is greater than the cost per ticket.