The 75% Rule and GST-Free Supplies

An entity which has been endorsed as a Deductible Gift Recipient (DGR) and/or as an Income Tax Exempt Charity (ITEC) may be able to provide its services on a GST-free basis.

This will apply where the price that someone pays for the good or service is less than 75% of what it cost the supplier.

For example:

The Tom Thumb Theatre Company (TTTC) is endorsed as both an ITEC and DGR. TTTC receives annual funding from the Company’s State arts funding body, project grants, memberships and box office. It puts on a play Nothing Like Bucket, tickets for which are priced at $20.

TTTC has drawn up a budget for the season which shows:

Ticket sales (320 bums on seats)
Project Grant 

Total income

Artist and performers fees
Hire, AV equipment
Office overheads
Set Construction
Superannuation Work Cover Insurance
Travel & per diems

Total expenses





The price per ticket expected to be sold is $20 and the cost to TTTC, per ticket sold is $51. Since $51 is more than 75% of the ticket price, then no GST has to be remitted on ticket sales. Note that if you had “premium” tickets which were priced at $100, 75% of that amount is $75 and since that is more than the per ticket cost to TTTC, then GST would be payable on those ticket sales.

The 75% rule may apply to workshop fees, seminar and conference registrations, sale of merchandise, and perhaps membership fees, depending on the cost of what members get for their subscription.

If you are able to take advantage of this provision, make sure you keep records to clearly establish the price/cost relationships, and the basis on which the budgets were drawn up to establish the GST-free status of the good or service.