Trade

Trade means the exchange of goods or services. It sits at the heart of what makes a social enterprise. It is widely understood in Australia that social enterprises primarily trade, from the Finding Australia's Social Enterprise Sector (FASES) research, to the definition of a social enterprise under the Classification of Social Sector Initiatives and Entities (CLASSIE). When Social Enterprise Australia asked the sector what makes a social enterprise, a key theme was clear: core to what a social enterprise is, is that they primarily trade.

But what counts as trade is often misunderstood, and how it has been assessed in different contexts varies. This has created real confusion in the sector.

Trade is the exchange of goods or services. A social enterprise sells something, whether that is a product, a service, or a programme, and receives payment in return. This is different from receiving a gift or donation, where money is given freely without anything being provided in exchange.

Where it gets more complicated is with grants. Not all grants are the same. Some grants are gifts or donations. They are not trade. Others are used to purchase goods or services, and they are trade.

In Australia, GST is a useful guide:

• If GST applies, the grant is for a good or service. It is trade. 
• Gifts and donations do not attract GST. They are not trade.

There are exceptions where GST may not apply to a grant that is for goods and services, including when:

• It is for GST-free goods or services (such as most basic foods, some education courses, and some medical, health, and care products),
• It is for an input-taxed activity (such as residential rent or certain financial services),
• The organisation is not registered for GST.

Where GST does not apply, the practical question is: would GST apply if these exceptions did not exist? 

Getting this right matters. Many funding bodies, government programmes, and certification frameworks assess whether a social enterprise earns a substantial portion of its revenue from trade. How each revenue stream is classified affects whether an organisation qualifies for various opportunities. Being clear and consistent about what counts as trade helps social enterprises present an accurate picture of their business model and builds credibility with funders, partners, and government.