The IRD has just released for consultation a “Questions we’ve been asked” draft paper on the GST treatment of lotteries, raffles, sweepstakes and prize competitions.
You can find it here: http://www.ird.govt.nz/resources/a/1/a1b5b4ef-32bc-4315-9c80-09d5b70712f1/qwb0121.pdf
Submissions are due by 24 October.
I recommend all not for profit organisations and others running raffles, lotteries or prize competitions have a read and make sure they understand the implications.
If the entity on whose behalf the raffle, sweepstake or lottery is being run is registered for GST, or required to be registered for GST, then that entity is required to account for GST on the proceeds.
GST is calculated based on net revenue after deducting cash prizes payable. Where prizes are purchased GST incurred on those purchases can be claimed as an input tax deduction. Obviously GST cannot be claimed on donated prizes.
Even if the prizes were donated GST will still apply to the raffle/sweepstake/lottery proceeds.
According to IRD someone conducting a raffle which will have revenue exceeding the GST registration threshold of $60,000 will be liable to register for GST and account for GST.
Much of what is in this document won’t come as a surprise to most raffle/lottery organisers and they will already be complying.
However, a point needing more clarity in my view is when a one-off raffle organised by someone which takes place over a short period of time will be considered a “taxable activity” for GST purposes, thus requiring the organiser to register and account for GST on the raffle (assuming the proceeds are over $60,000.