Specific church transactions

Prizes

The only circumstance in which a prize is subject to GST is when the winner of the event is registered for GST and they participate in the event as part of their business.  Therefore, prizes that are subject to GST are generally those that are provided to a professional sportsperson or race horse winner.  

Generally prizes given out in events held by churches such as trivia night or sports day are not subject to GST.  This is because the participants of such event is unlikely to be registered for GST and have not participated in the event as part of their business. 

The only GST implications that may arise from such events held by churches would be the entry fees charged.  The entry fees are subject to GST unless:

  such events are for fundraising purposes and an election has been made to treat it as an input taxed fundraising supply
  treat the event as an unregistered non-profit sub-entity, or
  non-commercial supply exemption applies - fee charged is less than 50% of market value or less than 75% of cost. 

The church is unlikely to ever be able to claim back any input tax credits for expenses incurred in running such social event. 

Input tax credits on acquisitions made in relation to social event that was treated as an input taxed fundraising event or under an unregistered non-profit sub-entity will not be claimable as it is not in relation to making a taxable supply or GST-free supply.   

Even when the event is fully taxable or a GST-free supply under the non-commercial supply exemption, it is unlikely for the church to recoup input tax credits on such acquisitions because the social event will most likely fall into the category of entertainment by way of food, drink or recreation.  Any expenses incurred in respect of providing entertainment will be non-deductible and input tax credits not be claimable.   

Sponsorships

Sponsorship is considered in greater detail later in this chapter. But where a sponsor provides goods or services to a church that are then given as the prize, there is a supply by the sponsor to the church. Whether this is a taxable supply for GST purposes depends on whether the sponsor receives “consideration”.

If the church provides advertising, signage or naming rights, then consideration has been provided. Both the church and the sponsor will have a taxable supply. The church has supplied advertising and received the prize as consideration. The sponsor has supplied the prize and received advertising as consideration.  In an arm's length transaction, the net effect will be nil to both parties as the value of advertising and prizes will be the same and therefore the GST payable will be cancelled out by the equivalent amount of input tax credit.   

Although it is a revenue neutral transaction, the church and the sponsor will still need to account for both transactions and give each other the relevant tax invoices.

Note that a brief acknowledgment of the church’s support for the organisation is not treated as consideration.