GST issues registers

Charities consultative committee resolved issues

Part 6 - Second hand goods

Issue 1: How will second hand goods that are donated to a charity be treated under GST?

Non-interpretative - straight application of the law

Principle

The donated second-hand goods rules provide that a supply of second hand goods is GST-free if:

•

the organisation that is supplying the second hand goods is an endorsed charity, a gift-deductible entity (GDE) or a government school, and

•

the goods were a gift to the organisation or were supplied by another GDE, endorsed charity or government school to which the goods were also donated.

However, the supply is not GST-free if the endorsed charity, GDE or government school has dealt with the goods in such a way that the goods no longer have their original character.

Specific questions and answers

Question 1. What is the definition of a second hand good?

Non-interpretative - straight application of the law

A second hand good is a good that has been used previously. However, a second-hand good also includes a new good that has been bought by an individual or organisation with the intention of donating it to an endorsed charity, GDE or government school. However, if the new good was originally bought for the purposes of manufacture, sale or exchange, it will not be considered as a second hand good for GST purposes.

Question 2. In practice, opportunity shops supplement their supplies from outside sources. At the point of sale, it will not be known which goods were donated second hand goods and which came from outside sources.

Non-interpretative - straight application of the law

An endorsed charity must be able to distinguish its donated second hand goods from other goods in order to ensure that the donated second hand goods are supplied to its customers GST-free. The ATO recommends that a charity records whether a good is a donated second hand good at the time it is received.

Question 3. Where donated second hand goods are received by an endorsed charity, GDE or government school and sold without changing their character, the sale will be GST-free. What approach should an endorsed charity employ in distinguishing between 'new' and 'second hand' goods received as donations in collection bins?

Non-interpretative - straight application of the law

Where donated goods are received by an endorsed charity in collection bins, the Commissioner will accept that all goods received in this manner are second hand, unless the charity has information to the contrary. For example, if a clothing manufacturer has advised the charity that it will be depositing 500 new shirts in their charity bin, and these shirts are identifiable because of their labelling, packaging etc., they would not be considered second hand goods. Where however an isolated shirt appears in a collection bin with labels attached and in its original packaging, this will still be considered second hand.

Question 4. Does the same rationale apply to donations of second hand goods made direct to the endorsed charity's premises?

Non-interpretative - straight application of the law

Yes - unless the charity has information to the contrary, the donated goods would be considered second hand.

Question 5. Where an endorsed charity receives donated second hand clothing, removes the buttons and/or lace, and sells them, do the buttons and lace retain their original character?

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