Concepts
Membership fees
Membership fees are payments made to join or stay in a club, association or organisation, and GST applies if the organisation is registered and the fee is for a taxable supply.
Membership fees are amounts paid to belong to a club, association, trade body, gym or similar organisation. The fee might be annual or monthly and might give the member access to facilities, publications, events, discounts or voting rights. For GST, the key question is whether the organisation makes a supply in exchange for the fee and whether that supply is taxable, GST-free or input-taxed, and whether the organisation is registered for GST.
Where the organisation carries on an enterprise and is registered, membership fees are generally consideration for the supply of membership benefits and so are generally taxable. The fee is GST-inclusive and one-eleventh of the total is the GST amount reported on the BAS. This is the usual position for gyms, professional bodies and many business associations, which treat their membership income as sales.
Not every organisation is in the same position. Non-profit organisations only need to register for GST at a turnover of $150,000, rather than $75,000, and many smaller clubs are not registered and so do not charge GST on their fees. Some activities may also be treated as non-commercial, and some organisations have special concessions. Because the rules for non-profits and charities can be detailed, such an organisation should check ATO guidance on its own entity type before deciding how to treat fees.
Membership fees must be distinguished from donations. If a payment is a true gift with nothing material given in return, it is not consideration for a supply and no GST applies. If the person receives benefits for what they pay, even small ones, the payment is more likely to be a membership fee or sponsorship type supply. Mixed arrangements, where part of a payment is a gift and part is for benefits, need an apportionment.
For members who are registered businesses, membership fees can be a legitimate business expense. The member can claim the GST included as a credit if the fee relates to the business, a valid tax invoice is held for purchases over $82.50 and the organisation actually charged GST. If the fee is partly private, for example a gym membership that also benefits the owner personally, only the business portion qualifies. Some memberships, such as social or sporting clubs, may not be deductible at all for income tax, even though they are paid by a business.
Common misunderstandings include assuming that all membership fees are GST-free because the body is a club, expecting a credit for a fee on which no GST was charged and confusing a donation with a membership. Treasurers also sometimes forget that annual fees paid in advance affect the timing of GST depending on whether the organisation reports on a cash or accrual basis.
The correct GST treatment depends on the type of organisation and the benefits provided. This is general information only, so please check your own circumstances with the ATO or a registered tax professional.
Worked example
A registered industry association charges an annual membership fee of $440 including GST. GST in the fee is $440 divided by 11, which is $40, and the fee excluding GST is $400. If the association has 200 members, it receives $88,000 in total and reports $8,000 as GST on sales. A registered member who uses the membership for business claims a credit of $40 with a valid tax invoice.
Practical tips
- Check whether your club or association is registered for GST before expecting GST on the invoice or before charging it. Non-profits have a higher registration threshold.
- Separate any genuine donation component from the membership fee on receipts so each part is treated correctly.
- Remember that GST credits are only available when GST was actually charged and a tax invoice is held for larger amounts.