Common GST categories
Religious services
Religious services supplied by a religious institution, such as worship, ceremonies and pastoral care, can be GST-free, while commercial activities run by religious organisations are generally taxable.
Religious services are one of the areas where the GST law gives special treatment. Certain supplies made by a religious institution are GST-free where they are directly connected with religious worship, instruction or similar activities and meet the conditions in the law. Examples include conducting a worship service, a baptism, wedding or funeral ceremony performed in the religious capacity of the institution, and pastoral care. The aim is to avoid taxing the core religious activities of recognised institutions.
The GST-free treatment depends on who is making the supply and what is being supplied. The supplier must be a religious institution, and the service must be of a kind that is generally provided as part of the practice of the religion, rather than a commercial activity that happens to be run by a church. A religious organisation that sells books, runs a cafe, rents out a hall or operates a commercial school makes other supplies that are tested under the ordinary rules.
Many religious organisations are also charities or other non-profit bodies. This opens up additional GST concessions that are separate from the religious services rule, such as the treatment of supplies made below a set percentage of market value and the higher registration threshold for non-profit organisations. The two sets of rules can apply at the same time, which means the GST analysis for a single organisation can be complex.
If a religious organisation is registered for GST, GST-free sales still count towards its GST turnover but it can claim credits for the GST on its related business costs. Donations and gifts received by the organisation are generally not payments for a supply, so they do not usually attract GST, though that depends on whether the donor receives something of value in return. Sponsorship and fundraising events need to be looked at carefully.
Common misunderstandings include thinking that everything a religious organisation does is GST-free, or that registered charity status automatically makes all income GST-free. It does not. Hall hire, commercial sales, courses that are not religious instruction, and similar activities might be taxable. Another mistake is assuming that a religious organisation does not need an ABN. Most organisations still need an ABN to deal with businesses and claim concessions.
If you manage a religious organisation, keep records that distinguish religious services from commercial activities, review each income stream and consider seeking advice on registration, endorsement and reporting. This page is general information only, so confirm your position with the ATO or a registered tax professional.
Worked example
A registered church-run op shop sells donated clothing, and the church hires its hall for $220 including GST to a community group. The hall hire is a taxable supply, with GST of $220 / 11 = $20 payable. Weekly worship services and pastoral care are not charged for, and donations received are generally not subject to GST.
Practical tips
- List each activity separately and decide its GST status instead of treating the whole organisation the same way.
- Check whether your organisation also qualifies for charity concessions, since they may affect hall hire, fundraising and thrift shops.
- Keep a short written policy on how each income stream is treated, so volunteers and treasurers apply it consistently over time.