GST and variation to a pre-arranged funeral plan

Is the entity, a funeral parlour, making a GST-free supply under subsection 15(2) of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act), when it provides funeral services after 30 June 2000, under a funeral agreement that was entered into before 1 December 1999 and there is a variation to the venue for the pre-arranged funeral plan after 1 December 1999?

Yes, the entity is making a GST-free supply under subsection 15(2) of the Transition Act, when it provides funeral services after 30 June 2000, under a funeral agreement that was entered into before 1 December 1999 and there is a variation to the venue for the pre-arranged funeral plan after 1 December 1999.

The entity is a funeral parlour. The entity supplies pre-arranged funeral plans. The entity entered into an agreement for the funeral before 1 December 1999. The entity receives consideration for the funeral plan before 1 July 2005. The entity provides the funeral service after 1 July 2000. There is a variation in the venue for the pre-arranged funeral after 1 December 1999. The entity does not charge an additional cost for this variation.

The entity is registered for the Goods and Services Tax (GST).

Subsection 15(2) of the Transition Act provides that if an entity enters into an agreement for the provision of a funeral before 1 December 1999, the supply of a funeral under that agreement is GST-free to the extent that the consideration is paid before 1 July 2005 and the funeral is provided on or after 1 July 2000.

Subsection 15(2) of the Transition Act does not apply where the parties to the agreement vary a pre-arranged funeral agreement after 1 December 1999 and as a result, a new agreement is created. However, a variation that has no affect on the supply identified in the agreement or the consideration identified in the agreement does not result in a new agreement.

Where an agreement for a pre-arranged funeral is entered into before 1 December 1999 and at a later date a different venue is substituted for no additional cost, the essential character of the supply of a funeral service, identified in the agreement, has not varied. As the consideration remains unchanged, it is the ATO view that no variation has occurred.

Therefore, the entity is making a GST-free supply under subsection 15(2) of the Transition Act, when it provides funeral services after 30 June 2000, under a funeral agreement that was entered into before 1 December 1999 and there is a variation to the venue for the pre-arranged funeral plan after 1 December 1999.