GST Concessions for Non profit orgaznization: If you are a non-profitable organisation in Australia or an accountant or bookkeeper who works with charities and non-profit organisations, you need to understand the GST obligations. Here’s all you need to know.
What is GST?
GST is a tax that is levied on a variety of products and services that are purchased and used in Australia. The GST rate in Australia is 10%.
It was implemented in Australia on July 1st, 2000, with the goal of creating a more reliable and modern tax system, broadening the revenue base, and supporting economic growth.
Understanding GST for Non-profit organisations
If an organisation’s GST turnover is $150,000 or more, it is required for not-for-profit (NFP) organisations to register for goods and services tax (GST). If an organisation’s GST turnover is less, it can choose to register voluntarily.
In general, your sales are taxable sales if you are registered for GST, or if you are obliged to be registered, and you include GST in the price that you charge for your products and services.
Other kinds of sales do not require GST to be included in the sale price. These are referred to as input-taxed or GST-free sales.
Having a GST registration indicates that your business:
- Has to pay the GST included in its sales.
- You are eligible to claim GST credits for any GST included in the cost of any purchases you make to run your business.
- To record its taxable sales and obtain GST credits, the company needs to fill out an activity statement.
A GST Credit: What Is It?
Businesses can reduce their overall tax burden by deducting the GST paid on purchases from the GST collected on sales by using a GST Credit, also known as an Input Tax Credit (ITC).
Consequently, it promotes equitable taxes on the value added to goods and services and double taxation is prevented.
Business Activity Statements (BAS): What Is It?
If you have to pay GST, you have to fill out and send a BAS to the ATO on a quarterly basis. A BAS is a single form that shows:
- Your quarterly income.
- Your PAYG instalment payments.
- The amount of GST that you must pay (or the amount that you should receive back if you paid out more than you got from clients).
- Any additional earnings.
The Repercussions of neglecting to register for GST
If you are not registered and are exempt from the GST registration requirement ,you cannot claim GST credits for the GST that is included in the cost of the purchases you make to conduct your business as GST is not included in the price of your sales.
Cancellation of GST registration
If your non-profit organisation satisfies each of the following criteria, you may cancel its GST registration:
- Has been registered for at least 12 months
- If the GST registration for your business has been in effect for less than a year, it may in some cases be terminated.
- Has a GST turnover of less than $150,000, and has asked for registration cancellation.
When you cancel your GST registration, you could have to pay back some or all of the GST credits you had previously claimed.
How to register for GST as a charity Australia?
Here’s how you can register for your non-profit organisation:
- Get an Australian Business Number (ABN) if you don’t already have one because it is required in order to register for GST.
- Collect all the required information about your business and create an account on myGov if you don’t already have one.
- Link your myGov account to the ATO.
- Using your myGov account, go to the ATO Business Portal and choose the option for GST registration.
- Select if you would like to file your GST quarterly or monthly.
- Review your information and submit. You will then receive a message confirming that your registration was successful along with your GST registration number.
Several GST-free concessions are offered to specific nonprofit organisations such as:
- Government schools
- Australian Charities and Not-for-profits Commission (ACNC) registered charities that have been approved to get GST charity concessions
- gift-deductible entities
These concessions must need “registered charity” registration with the Australian Charities and Not-for-profits Commission (ACNC).
They are usually related to particular activities such as:
- Sales relating to raffles
- Fundraising events
- Sales of second-hand goods
- Non-commercial transactions
- Volunteer expenses
Businesses that have to account for GST either use the cash method or the non-cash (accruals) method.
If a business’s GST turnover is less than the cash accounting turnover level, it can choose to account for GST on a cash basis.
Regardless of turnover, an approved charity, gift-deductible organisation, or government school has to use the cash basis of accounting (with the exception of situations in which the gift-deductible organisation manages a fund, authority, or institution that is eligible to accept tax-deductible donations or contributions).
Other than that, you are allowed to account for GST on a cash basis.
In conclusion, charities and non-profit organisations have seen a great deal of changes as a result of the Goods and Services Tax (GST) being implemented in Australia.
The GST structure has made it possible for charities to reallocate funds to their main goals by providing targeted concessions; this has strengthened and sustained the charity sector.
Maintaining open channels of communication and collaboration is crucial for both the government and non-profit institutions to ensure that the GST system evolves in a way that supports the essential work that these organisations do in the Australian community.
We hope this article has helped you with all your doubts.