Page Contents

Exemptions for Churches – Overview
Religious Services
Non-Commercial Activities
Second Hand Goods & Opportunity Shops
Raffles and Bingo
Retirement Village
Medical Services
Annual conferences
Residential Rents
Non-profit Sub-entities
Fundraising Event

Exemptions for Churches – Overview

Churches must charge GST on any revenue transaction unless the transaction falls within an exemption category. Most church transactions will be exempt, but each must be considered separately. The church should never assume an exemption exists.

If the Taxation Office audits the church, it must be able to justify the exemption claimed. If found that the transaction should have been subject to GST, the church will need to pay tax, even if it cannot recover the GST from the buyer.

It is important to remember that if the church provides the good or service free of charge, no GST applies. However, GST may apply if the supply was provided to an unregistered associate of the church free of charge (see Taxable Supplies) . The church’s non-profit sub-entities are considered to be associates of the church. Please note that payment for a service or good is not limited only to monetary consideration but also includes non-monetary consideration provided.

List of Possible Exemptions
  • Religious services
  • Non-commercial transactions
  • Donated second hand goods
  • Retirement village accommodation and related supplies
  • Raffles and bingo
  • Medical supplies
  • Education

Special rules apply to input taxed transactions, including:

  • Residential rents
  • Sale of residential property unless it is a new residential premises; and
  • Fundraising activities

Furthermore, church activities treated as non-profit sub-entities are not subject to GST on the basis that the sub-entity is not registered for GST. However, a registered church is required to charge GST on supplies made to the sub-entities for example hall hire. If inadequate or no consideration is charged, the associates rule may deem the consideration at GST inclusive market value and the church will be required to remit GST on that supply to the Taxation Office. An unregistered sub-entity will not be entitled to claim any input tax credits on GST charged by the church.

Religious Services

A supply is GST free if it is a supply of service that:

  • is supplied by an ACNC-registered religious institution; and
  • is integral to the practice of that religion

ACNC-registered Religious Institution
AN ACNC-registered religious institution is an entity that is registered as a charity with the ACNC under the sub-type of advancing religion. It does not matter if the entity is also registered under other sub-types.

Advancing Religion

The ACNC’s view of what it means to be advancing religion is based on common law principles. A religion involves:

  • A belief in a supernatural being, thing or principle; and
  • Acceptance of canons of conduct which give effect to that belief

Charities that advance religion are not confined to the major religions. For example, Scientology has been held to be a religion at Common Law. Schools with religious beliefs can be advancing religion as well as advancing education.

Services provided by a religious institution may be GST-free. However, the same services provided by an organisation that is not a religious institution may be subject to GST. For example, a marriage ceremony conducted by a church is GST-free, whereas a wedding service conducted by a civil celebrant is not GST-free.

Integral to the Practice of that Religion

For a supply from a church to be GST-free under the religious services exemption it has to be:

  • a service (and not a supply of goods such as bible or other religious books)
  • provided by an ACNC registered religious institution
  • integral to the practice of the religion

The service is not confine only to those activities inside the church. Further, services provided free of charge, for example Sunday service, is of course free of GST as there was no consideration paid in relation to the supply of that service.

Examples of services that are GST exempt under religious services:

  • Religious celebration such as worship service, Sunday school, church wedding services, funerals, etc.
  • Religious courses, conferences and seminars such as annual conferences, Alpha courses, membership courses.
  • Spiritual retreats, church camps only if it has significant worship or religious study component
  • Bible study
  • Adult religious education classes.

Examples of supply that are considered not to be religious services:

  • Flowers, car hire, etc for church wedding services
  • Youth camp if mainly recreational
  • Books, CDs and DVDs, food/drinks, etc. sold at annual church conferences
  • Accommodation for a church camp
  • Course in religious pastoral ministry

Although the church’s primary purpose of the youth group may be to implant spiritual truths into peoples’ lives, it may be that the actual content of the program is primarily recreational. The time actually devoted to religious teaching may only be a small proportion of the total group time. The Taxation Office has often applied a more than 50% rule to various tax issues, but it is unknown whether this will be the case with religious services. Therefore, it is likely that the Taxation Office does not view most youth group activities as religious services.

The Taxation Office has held that a course in religious pastoral ministry is not a religious service. It believes that the training of students in pastoral ministry is not integral to the practice of that religion. This highlights the fact the Taxation Office takes a narrow view of the meaning of religious services and integral to the practice of the religion.

It is important that a church clearly documents why a particular supply is GST-free. For example, if you are treating a church camp as a GST-free religious service, you should maintain a copy of the camp program, together with an analysis of the religious content. There should be a significant spiritual teaching and worship component to justify the camp as a GST-free religious service.

Payments to visiting speaker

Payments made to other churches for a visiting speaker may qualify as a GST-free religious service where the visitor participates in the service. Making the payment to the person’s home church rather than to the individual may alleviate the need to deduct PAYG withholding. Note that if both churches are part of the same GST religious group, the issue of whether the supply is GST-free does not arise. GST does not apply to transaction between members of a same GST religious group.

Non-Commercial Supplies

Non-commercial supplies by endorsed charities are GST-free. This exemption is likely to be the one most used by churches.

A supply by an endorsed charity will be a non-commercial supply if the consideration received is less than :


  • 75% of the GST-inclusive market value of that good or service; or
  • 75% of the cost to the charity of providing that good or service.

All Other Goods and Services

  • 50% of the GST-inclusive market value of that good or service; or
  • 75% of the amount paid by the charity for acquiring that good or service.

In calculating cost, direct and indirect costs can be included. However, deemed amounts for volunteer labour or donated goods are not acceptable.

Capital assets that diminish in value over time can be considered. Any reasonable basis for apporting the value of capital assets to different supplies can be used.

Second Hand Goods and Opportunity Shops

The sale of second hand goods is exempt from GST if:

  • The sale is by a endorsed charity
  • The second hand goods were donated to the charity or acquired by the charity GST-free under the second hand goods provision; and
  • The goods retained their character when sold.

Remember that a church can be an endorsed charity and therefore a church can avail itself of this exemption.

The exemption is only available if the goods are not substantially altered. For example, if clothes are torn up and sold as rags, GST must be charged.

The exemption applies to the sale of goods through various charities. Charities often transfer surplus goods between organisations. The GST exemption will still apply.

Purchased Goods for Sale

The exemption generally applies only to donated goods. However, it can also apply to purchased goods provided that the purchased goods were GST-free under the second-hand goods exemption. Other goods that are bought by the charity are subject to GST when sold (unless the non-commercial exemption or any other GST exemptions apply). Therefore, opportunity shops will need to be able to separately identify these goods and capture the GST on sale.

Second Hand Goods

The Taxation Office accepts that donated goods received in collection bins are second hand unless the charity has reasons to believe otherwise. An isolated shirt with labels attached and in its original packaging that appears in a collection bin is still considered second hand. On the other hand, if a whole new shipment of clothing by a clothing manufacturer was donated to a charity, these clothing are considered to be ‘new’ and not second-hand even if it was dropped off in a collection bin provided that these clothing are identifiable because of labelling, packaging etc.

Claiming Notional GST Credits

Second hand dealers are able to claim a notional GST credit where goods are purchased from unregistered sellers.

Example – The opportunity shop buys $110 of goods from a garage sale. Although the seller does not charge GST, the opportunity shop can still claim 1/11 of the cost, being $10, as a GST credit.

Where the cost of the goods is $300 or less, the opportunity shop can choose to claim the GST credit at the time of purchase. If the cost is more than $300, the GST credit can only be claimed when the goods are sold. Further for second hand goods costing more than $300, the notional GST credit that is claimable is capped at the amount of GST payable on a taxable supply of that goods.

Example – The opportunity shop buys $330 of goods from a garage sale and resold it for $297. The sale is not entitled to the GST-free second hand goods exemption as the goods was neither donated nor acquired GST-free under the same provisions. The sale is subject to GST and the opportunity shop is required to remit 1/11th of GST on the sale price. However, the opportunity shop can also claim notional GST credits up to the amount of GST payable on the taxable supply being 1/11th of $297. Therefore, the net GST position will be nil.

If however the goods acquired from the garage sale is subsequently supplied as a fundraising input taxed supply, no notional GST credit is claimable because the goods was not used to make a taxable supply.

Composite Acquisitions

Where the purchase includes several items and one price is paid for the lot, a special “global” method can be used to claim GST credits. The GST credits are not actually claimed back. Rather they are offset against the GST payable on the sale of each item in the group until such time as all the GST credits have been used. Only GST collected in excess of the GST credits needs to be remitted to the Taxation Office.

Example – The opportunity shop pays $330 for a collection of goods from a deceased estate. Therefore, there is a GST credit of $30.
The shop sells a part of the goods for $220. The GST paid by the customer as part of the price is $20. This $20 is not remitted to the Taxation Office but is offset against the GST credit of $30.
The balance of the goods is sold for $165. The GST paid by the customer is $15. The $15 is firstly offset against the remaining GST credit of $10 and the balance of $5 is remitted to the Taxation Office.


Second-hand dealers, including opportunity shops, are required to prepare documents similar to tax invoices to substantiate the notional GST credit. The record must include the name and address of the supplier, describe the goods (including their quantity), the date of acquisition and the consideration paid.

Non-Commercial Supplies

Even where the sale of second hand goods does not meet the exemption requirements detailed above (eg the goods where purchased rather than donated to the church), the sale may still be GST-free under the non-commercial supplies rule. Under this exemption, where a church sells an item for less than 50% of market value or 75% of cost, the transaction is GST-free. In determining market value, you must take into account the fact that the item is second hand. Therefore you must compare your price with that being charged by other sellers of second hand goods. On this basis, a church is unlikely to sell many second hand items for less than 50% of market value. However, it may sell items for less than 75% of cost. This particularly applies to the sale of equipment, cars and books used by the church.

Raffles and Bingo

Raffles and bingo by an endorsed charity are exempt from GST provided they comply with government rules and regulations.

The exemption does not extend to activities, such as lotteries, that are subject to state taxes on gambling.

Retirement Village

Supplies of accommodation in a retirement village by an endorsed charity, together with any supplies of meals and other services relating to the supply of the accommodation, are GST-free. However, such supplies are only GST-free if they are provided to residents of the retirement village. Such supplies are not GST exempt if provided to staff or visitors.

Where supplies of accommodation fail to meet the exemption criteria for a retirement village, for example a retirement village without an onsite communal facility, it may be possible to rely on the non-commercial activity rule to treat the accommodation in the retirement village as GST free.

Retirement village

For premises to be considered a retirement village, the GST legislation requires that:

  • the retirement village is residential premises;
  • accommodation in the premises is intended to be for persons who are 55 years of age or older; and
  • the premises include communal facilities for use by the residents of the premises.

The GST legislation specifically excludes commercial residential premises and premises used, or intended to be used, for the provision of residential care (within the meaning of the Aged Care Act 1997) by an approved provider (within the meaning of that Act) from being a retirement village accommodation.

Communal Facilities

Most retirement villages meet the residential premises and accommodation intended for persons aged 55 or older criteria. Therefore whether a retirement village meets the GST definition of a retirement village generally hinges on whether the premises include communal facilities.

In order to meet the third criteria of a retirement village, that is the premises include communal facilities for use by the residents of the premises, the communal facilities provided need to:

  • meet the definition of communal facilities in the retirement village context
  • be included or form part of the retirement village; and
  • be for use by the residents of the retirement village.

The Taxation Office has issued a taxation ruling GSTR 2007/1 outlining its views on these three issues.

Communal facilities in the retirement village

It is the Commissioner’s view that a facility is only considered to be a ‘communal facility’ in the context of the retirement village when the facility is for the common and shared use of the village residents and the facility is intended and capable of group use by residents for recreational, sporting, social, religious or other similar uses that enhances the sense of community among the residents. This is in contrast to facility that is merely available for common or shared use by the residents. Examples of communal facilities includes a library, a dining hall, a recreation room, a barbeque area, a chapel, tennis court, etc. It does not include shared pathway, gardens, reception areas, etc.

Communal facilities that form part of the retirement village

In the Commissioner’s view, retirement village premises include communal facilities if:

  • the communal facilities are physical; and
  • the communal facilities are within, attached to, or connected to the residential buildings, or constructed on the surrounding land that actually or substantially contributes to the enjoyment of the buildings or to the fulfilment of its purposes as a residence.

It is not necessary for the communal facilities to be residential premises and they do not need to be constructed on the same land title as the residential premises of the retirement village. However it must then be constructed on the surrounding land. This means that offsite facilities are not considered to be communal facilities. It is not clear what the Taxation Office considers to be surrounding land and whether the surrounding land on which the communal facilities are constructed needs to be attached to the land which houses the residential premises.

Further, services provided as part of the residential contract such as maintenance services, laundry services, etc. are not considered to be communal facilities as they are not physical.

For use by the residents

Lastly, this ruling considers when communal facilities are ‘for use by the residents of the retirement village’. In order to be ‘for use by the residents’, the communal facilities must be in a practical sense, accessible, to and able to be used by the residents. There is no requirement that the facility be used exclusively by residents or that it is actually used by the residents. The ruling provides no further discussion or examples of when ‘the for use by the residents’ criteria is satisfied where the facility is not used exclusively by the residents. However, in our opinion, this criteria is likely to be met in the case where the facilities are used by both the residents and another other party if there is a written agreement that the residents have priority use. Further, we consider it important that the residential contract states the residents have a right not only to the accommodation in the retirement village but also a right to use the communal facilities of the retirement village. Without the ‘right to use the communal facilities’ drafted in the residential agreement it is becomes more difficult to argue that a communal facility is ‘for use by the residents’.

Supply of Services relating to the Supply of Accommodation

Supply of services relating to the supply of accommodation in a retirement village would also be GST-free. Examples include maintenance fee, gardening services, etc.

However, the Commissioner considers that a service is only related to the supply of accommodation if the service is for the maintenance of the residential premises or the communal facilities. As such, the Taxation Office does not consider the supply of services such as laundry services, hairdressing, personal care and bus services to be a supply of services relating to the supply of accommodation. Therefore these supplies are not GST exempt under the retirement village provisions.

Medical Services

Health and medical services are generally GST-free. Some churches provide counselling services. In certain circumstances, these services will qualify as medical services and be exempt from GST. GST exemption for medical services is available to all entity and is not limited only to endorsed charities.

Medical services must be provided by a recognised professional. This means that the practitioner must be approved or registered under the relevant state law or be a member of a professional organisation with uniform national registration requirements.

Therefore, counselling services provided by a registered psychologist will be GST-free. But if the same service is provided by a minister that does not have the relevant registration, the counselling service would not be GST-free.

Even if the counselling service is not exempt under this exemption category, the service may be exempt under the non-commercial exemption.

For example pre-marital counselling provided by churches are usually conducted by ministers and not registered psychologist and therefore subject to GST. However, if the service is provided for nominal fee, that is less than 50% of GST-inclusive market value, it is exempt under the non-commercial exemption. The market value is based on supply of same or similar quality, quantity and conditions such as pre-marital counselling services provided by another minister or other similar counselling services provided by a minister. The market value of such service cannot be benchmarked against price charged on counselling services provided by a qualified psychologist.

As such it is unlikely that the charge for the service is lesser than 50% of GST-inclusive market value and therefore will generally be subject to GST. There may be occasions where a church charges its member a nominal fee compared to non-members for the same service. In this case, the fee charged to its member may qualify for non-commercial exemption.

Annual conferences

Religious institutions are making a GST-free supply of a religious service when holding an annual conference.

The decision is based on the conference’s purpose and activities. It requires religious teaching to shape the content and nature of the activities provided, hence being “integral to the practice of that religion”. This means that the conference content would typically include presentations, talks and lectures by speakers credentialed in the institution’s religion, worship, prayer and music.

The decision relates to the registration fee paid by people attending the conference. It assumes that the conference may be attended by members, followers and the general public.

Associated payments

Whilst the registration fee is GST-free, other costs associated with the conference may attract GST. Some of the items mentioned in the announcement include:

  • The sale of DVDs and CDs of the current and previous annual conferences, speakers and other similar recordings
  • The sale of food and drink, servicing meals and the operation of a canteen
  • Accommodation

If these items are not included in the registration fee they do not exclude the other activities at the conference from being “integral to the practice of that religion”.

In summary, if the conference’s activities are sufficiently similar in content and nature to the usual activities regularly provided in the practice of the organisation’s religion then the supply of the conference is a GST-free supply of service.


This exemption is not limited to endorsed charities but available to any entities supplying exempt education courses.

Although a church often provides education, eg Sunday School, parenting courses, etc, this education will rarely be GST-free under this exemption.

Exempt education courses only cover:

  • Government recognised pre-school and primary courses
  • Secondary and tertiary courses which are recognised for student assistance by Centrelink
  • Masters and doctoral courses
  • Special education courses which cater for children or students with disabilities
  • Government approved adult and community education courses that provide employment related skills
  • English language courses for overseas students
  • First aid, resuscitation or lifesaving courses conducted by approved not-for-profit bodies
  • Professional and trade courses which lead to qualifications that are essential prerequisites to entering a particular profession or trade in Australia; and
  • Tertiary residential college courses.

Some churches run an associated school or college and these education services will generally be GST-free.

However, most courses put on by a church will not be GST-free under the education exemption. General personal enrichment courses on a non-award basis are not education courses and are not GST-free. However, such church run courses may be exempt under the non-commercial exemption (see non-commercial activities).

Fees charged for attendance at bible studies, Sunday school and other spiritual educational activities might be exempt under the religious services exemption. However, the Taxation Office has held that a pastoral ministry course is not a religious service. It stated that the training of a student is not the supply of a religious service integral to the practice of religion.

Occasionally a church might run a course that qualifies as an adult and community education course. The course must meet a number of criteria including it must be available to adults in the general community and it must be likely to add to the employment related skills of people undertaking the course.

Residential Properties

Residential Rents

Residential rents are input taxed. Therefore, no GST is charged on residential rents. However this also means that the church cannot claim back the GST it has paid in providing residential accommodation.

Accordingly, the church cannot claim the GST paid on insurance, repairs, new appliances, etc which relate to the residential premises.

However, the church can still apply the non-commercial exemption test for accommodation. If the church is letting the premises for less than 75% of the market rent, then the non-commercial exemption applies and the residential rent will be GST-free. Note that if a supply is both GST-free and input taxed, the GST-free provision takes precedence. This means that the church will still not be required to charge GST on the rent, but the church can claim back the GST paid on the related expenses. Examples of when a church normally uses the non-commercial exemption for accommodation are provision of a manse to a minister and crisis accommodation.

Residential Premises

Residential premises is defined in the GST Act to mean land or a building that is:

  • occupied as a residence or for residential accommodation; or
  • intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation.

Regardless of the term of the occupation or intended occupation and includes a floating home.

The Taxation Office considers the physical characteristics of a building that marks it out as residential. The premises must provide occupants with sleeping accommodation and basic facilities for day-to-day living in order to qualify as residential premises, but does not require any permanency in terms of occupation. Therefore, vacant land zoned as residential is not capable of human habitation and is therefore not residential premises and cannot be input taxed supply.

The terms of occupation are irrelevant. Therefore a temporary accommodation which is not established as a home or a permanent place of abode can still qualify as a residential accommodation so long as the physical characteristics of the accommodation are residential. As such accommodation in a serviced apartment can qualify as residential accommodation. However, special rules apply to residential premises that are commercial residential premises (see below).

Sale of Residential Property

The sale of residential property is also an input taxed supply (except if the sale is a sale of new residential premises or sale of commercial residential accommodation). The sale is not subject to GST, and the church cannot claim back GST on its selling costs, eg conveyancing, advertising, commission, etc.

The sale of new residential premises is a taxable supply and therefore subject to GST. Residential premises that have been built or converted will be considered new. Existing residential premises that are substantially renovated will also be considered new. However, if the premises are subsequently used to make input taxed rent supplies for at least five years, the premises will no longer be considered to be new.

If a church built a manse on a piece of land and let the manse to its minister for less than 75% of market value, the rent will be GST-free under the non-commercial activity exemption and not input taxed. If the property is eventually sold more than five years after it has been built, it will still be considered ‘new’ residential premises as it was never used to make input taxed residential rent and therefore the sale will be subject to GST.

Commercial Residential Accommodation

The main characteristics of a property considered to be commercial residential accommodation are:

  • there is a commercial intention
  • the property allows for multiple occupancy
  • the accommodation if held out out to the public
  • the main purpose is to provide accommodation
  • it has a central management
  • the management offers accommodation in its own right
  • services such as laundry services, phone and internet services are offered
  • occupant’s status is guests (as opposed to tenants).

Different rules apply for commercial residential accommodation, which include hostels and boarding houses. Commercial intention means that the establishment must have the characteristics of a business but does not necessarily preclude a non-profit run type of accommodation from being commercial residential accommodation. Therefore, crisis accommodation may fall into this category, although most often crisis accommodation will come under the non-commercial activity exemption which allows for input tax credit claims but exempts the supply from being subject to GST.

Commercial residential accommodation (that is not exempt under the non-commercial activity exemption) is subject to GST, unless the accommodation is for 28 days or more.

If the commercial residential accommodation is for more than 28 days, the church may either:

  • Treat the transaction as input taxed (i.e. do not charge GST and do not claim back GST on residential costs); or
  • Apply a concessional GST treatment.

The concessional GST treatment depends on whether the premises are primarily used for long-term accommodation.

  • If at least 70% of the building is used to provide accommodation for 28 days or more, the church need only charge GST on 50% of the price.
  • If the building is not used primarily for long term accommodation, then the church must charge GST at the full rate for the first 27 days and at only 50% of the price thereafter.

If the concessional GST treatment is adopted, the church can claim back the GST paid on its related expenses.

The sale of commercial residential premises is not an input taxed supply and therefore may be subject to GST. Input tax credits can be claimed on its selling costs.

Non-profit Sub-entities

A church can choose to treat a particular activity as a non-profit sub-entity of the church for GST purposes. If the turnover of the non-profit sub-entity is less than $150,000, it need not register for GST and therefore is not required to charge GST on supplies. However, the unregistered non-profit sub-entity cannot claim back any GST input credits in relation to that activity.

For example, a church may choose to treat a fete in this way. If the fete falls under the church’s GST registration, GST will need to be charged on some sales and not on others. Most items at the white elephant stall will be sold for less than 50% of their market value. However, many items at the cake stall may be sold for more than 50%. It is also very difficult to determine what is market value for many fete items. Therefore, a church may choose to treat the fete as a non-profit sub-entity for GST purposes. Provided the proceeds from the fete are less than $150,000, no GST need be charged on fete sales. However, no GST input credits can be claimed for fete expenses, eg. advertising. food purchases, equipment hire, etc.

This non-profit sub-entity treatment will be most useful where there are few expenses associated with the activity or where it is difficult to determine which sales are subject to GST and which are not.

In order to be eligible to elect to treat an activity as a non-profit sub-entity, the church must first and foremost be endorsed and must also satisfy the following criteria:

  • the sub-entity must keep an independent accounting system
  • the sub entity must be separately identifiable by the nature of its activities or by its location; and
  • a record must be held by the main entity indicating that the activity is treated as a non-profit sub-entity for GST purposes.

Non-profit sub-entity is discussed in greater detail in Non-profit Sub-entities.

Fundraising Event

Charitable organisations can choose to treat a fundraising event as input taxed where the event is:

  • A fete, ball, gala show, dinner, performance or similar event. A similar event may include a charity auction, a cake stall or a fashion parade.
  • An event comprising the sale of goods where the consideration received for the item does not exceed $20 and where the selling of such items is not a normal part of the church’s activities. It is envisaged that those events that involve the selling of small fund-raising items such as flowers, confectionery and chocolates will covered by this provision.

Where fundraising activities fall outside the above exemptions, specific advice on taxable status may be sought from the Commissioner of Taxation. Fundraising events cannot include the sale of alcohol or tobacco. In order for a fundraising event to be treated as input taxed, the church needs to keep records showing the event was input taxed. This record must be kept for five years. However, it must be remembered that in order for an event to be treated as input taxed fundraising event, it must be first and foremost for fundraising purposes and does not form any part of a series or regular run of like or similar events. The Commissioner has issued a determination that fundraising events can be held 15 times a year and still be treated as input taxed. Again, in order to access this concession, the church must have been an endorsed charitable organisation.