Advice from KPMG

GST for Australian Organizations, 9 August 1999

GST and annual membership fees

You have advised us that new and existing members of APNIC are concerned as to the reasons for the goods and services tax ("GST") being included in annual membership fees.

The purpose of this memo is to clarify the GST treatment of annual membership fees charged by APNIC during the transitional period leading up to the introduction of the GST on 1 July 1999.

Does the GST cover membership fees?

Although the tax is called a "goods and services tax", its application is not limited to supplies of goods and services. The definition of "supply" in the legislation means "any form of supply whatsoever". The definition includes (but is not limited to):

• a supply of goods;
• a supply of services;
• a provision of advice or information;
• a grant, assignment or surrender of real property;
• the creation, grant, transfer, assignment or surrender of any right;
• an entry into, or release from, an obligation to do anything.

Membership to APNIC entitles members to a range of services including assistance in the development of procedures, mechanisms, and standards to efficiently allocate Internet resources. It is the provision of access to these services through becoming a member that will be subject to GST (with the exception of those supplies that are excluded from GST where the supply is for consumption outside Australia and specific conditions are satisfied).

Transitional provisions

Even though the GST will not commence until 1 July 2000, the Government has introduced transitional provisions which have the effect of deeming certain supplies made for a period or progressively over a period as being subject to GST to the extent that those supplies are made on or after 1 July 2000.

These provisions impact many organizations that provide services or other supplies for a period. Examples include general insurance premiums and annual club, golf or gym membership.

Because APNIC membership entitles the member to services for a period of approximately one year, those services, under the transitional provisions, are considered to be provided by APNIC progressively over the period of membership.

This means that APNIC will be liable to GST on its membership fees to the extent to which the period of membership spans 1 July 2000. For example, if membership runs from 1 September 1999 to 31 August 2000, APNIC will be liable for GST on 2/12th of its annual membership fee.

Can members claim input tax credits?

Most entities that are registered for GST purposes will be entitled to claim input tax credits for the GST included in the majority of expenses incurred in carrying on their enterprises. This means that most members will be entitled to claim back as a credit the amount of GST included in the membership fees so that the net cost of membership does not increase. However, we recommend that members obtain independent advice as to their eligibility to claim input tax credits and in relation to GST generally.