Chapter 6: Religious Services


The Government’s Policy

The Government announced in Tax reform: not a new tax, a new tax system that:

‘Religious services will be GST-free. Churches and other institutions that supply religious services will not charge tax on those services and will be able to claim input tax credits for tax paid on their inputs.’

It was further announced that items for private use in devotion will be taxable. The precise range of religious services that qualify as GST-free would be for the Committee to consider.

The Committee’s framework for assessing the scope of GST-free religious services

The Committee notes that its Terms of Reference requires it to ensure business and charitable organisations are treated on an equivalent basis where they provide similar goods and services on a commercial basis to consumers. The Committee considers this principle should equally apply to religious institutions providing religious services. However, the Committee considers that where the services provided are purely religious and there is no commercial equivalent, then it would be appropriate for this to be GST-free.

Key issues for consideration

Ensuring business and religious institutions are treated on an equivalent basis

Where a religious institution conducts any commercial activities, the Committee was satisfied that these activities should be subject to GST. In considering when GST should apply, the Committee considered that they should not have regard to the purpose of the sale, as it is the nature of the activity itself that is relevant for GST purposes. Examples of commercial activities that a religious institution may undertake include hire of church facilities to other organisations, operating book shops and running fundraising events such as cake stalls and concerts. Clearly, to the extent that these activities compete with commercial entities, and are conducted by registered organisations, they should be subject to the GST.

However, there are a range of services where the result is not as obvious.

For example:

Marriage ceremonies can be conducted by authorised religious practitioners or by licensed marriage celebrants. Both services are likely to be provided for a fee and both services include a civil element.

Fees for the marriage service may include hire of facilities, flower arrangements, music, reimbursement for the practitioner or celebrant’s travel expenses, and a fee for meeting the requirements of the Marriage Act. If a religious practitioner conducts the service, the fee may also be for the religious service that is provided in addition to the civil or secular services.

It is the Committee’s view that the civil or secular element of these services should have equivalent treatment under the GST so as not to discriminate between religious and non-religious service providers. They both should be subject to the GST.

A further example deals with religious retreats.

A person with religious beliefs may attend a religious retreat to pray, study religious texts and undertake other activities that are integral to the practice of their religion. Where a fee is charged for attendance at the retreat, the fee may cover the cost of religious instruction or services as well as the cost of accommodation, food and transport.

In such a case, it would be up to the religious institution to determine how much of the fee is for the religious services and how much for the other, secular elements. The religious service component should be GST-free while the remainder should be subject to GST.

Definition of religious services

The Committee considers the definition of religious services is intrinsically linked to the notion of a religious institution. The term ‘religious institution’ is used in other instances in the tax law, both at Federal (income tax) and at State (payroll tax) level.

  • The meaning of the term ‘religious institution’ was considered in the Scientology case (The Church of the New Faith v Commissioner of Pay-roll Tax (Vic) 83 ATC 4652).
  • This decision suggested that the criteria of religion are twofold:
    • belief in a supernatural Being, Thing or Principle; and
    • the acceptance of canons of conduct in order to give effect to that belief.

Taking into account the above and the Committee’s guiding principle that the GST should not introduce a competitive advantage for any sector, the Committee recommends that the definition of a religious service should be a service provided by a religious institution, which is:

  • integral to the practice of that religion, and
  • is not of a kind ordinarily delivered by a non-religious organisation.

Impact of GST on religious institutions

The Committee has been advised that religious institutions will have the option of registering for the GST, even if they do not meet the specified turnover threshold. Once a religious institution registers for GST, the institution can claim credits for GST paid on all inputs, even if no ‘sales’ are generated. The Committee felt that this is quite concessionary, especially when compared with the existing WST arrangements.

Where religious goods, such as bibles, prayer candles, religious images and so on, are purchased by a religious institution, the religious institution will claim input credits for any GST paid on those inputs. Where religious goods are purchased by an individual, however, those goods will be subject to GST. Where a religious institution operates a library and charges a fee for the loan or hire of items from the library, those charges will be subject to GST.

Donations and offerings would not be subject to GST as the donation or offering is not a payment in return for the supply of a good or service.

The Committee recognises that there will be some onus on the administrators of religious institutions to ensure proper self-assessment on the GST-free religious services they provide.


A significant proportion of religious services is provided free of charge. The Committee understands that one reason the Government decided to allow religious services to be GST-free is that it is reluctant to impose GST on the relatively few instances where fees are charged for such services. In addition, as there is no commercial or secular equivalent of a religious service, as defined above, there is no competitive neutrality to be preserved between religious and commercial or secular suppliers of the service.

Where there is a secular element to the service which is being charged for, such as the civil element of a marriage service, then, consistent with the Government’s policy and with the Committee’s Terms of Reference, the Committee considers it must recommend those elements should be subject to the GST.

Where services are provided by a religious institution and by a secular organisation, both services will be subject to GST, excluding the religious service element which can only be provided the religious institution.


The Committee recommends that religious services be GST-free where they are:

  • provided by a religious institution;
  • integral to the practice of that religion; and
  • not of a kind ordinarily delivered by a non-religious organisation.