GST for all organisations:
Let’s just do a quick recap of the basics first. 

GST is a tax on goods and services provided by organisations/businesses for other organisations/businesses/people. It is a BtoB (Business to Business) and a Bto C (Business to End Consumer) Tax. The GST Legislation began 1st July 2000 along with many other tax reforms.  

Businesses/organisations who are registered for GST: 

  • Must charge GST, and 
  • Can claim a refund on the GST that they pay 

Monthly or quarterly businesses/organisations must submit a Business Activity Statement (BAS) to the ATO. This comprises the GST they have charged for the period less the GST they are claiming. Payment is made to the ATO when the Charges are greater than the Claims. Refunds are paid from the ATO when the Claims are greater than the Charges. 

 The claiming and charging of GST must follow some rules/laws. 

Some are: 

 Some business payments are not part of the GST Legislation and therefore GST cannot be claimed. Eg 

  • Payments to employees, superannuation 
  • Loan repayments (including Credit Cards) 
  • Govt Fines & Stamp Duties 

In Xero, these transactions should be allocated the BAS Excluded Tax Code 

Goods and services that are included in the GST legislation are classified into three groups: 

  1. GST Free 
  2. Input Taxed 
  3. GST 

GST free 

Many Goods and services are classified GST Free. GST can not be charged on its sale and GST cannot be claimed on its payment.
Some of these items include: 

  • Fresh Food & Water 
  • Education, Health Services, Child Care Services 
  • Goods and Services provided by a business that is not registered for GST 
  • Some Exports/Imports 

Input Taxed 

GST can not be charged on its sale and GST cannot be claimed on its payment. If you earn income from Input Taxed items you must not charge GST and you cannot claim any GST that you have paid in the provision of this item. 

Some of these items include: 

  • Sale of Residential Rent 
  • Sale of Bank Interest & fees 

GST
Most Goods and services are classified GST 

Collecting and claiming GST on different types of sales 

Type of sale  Do you collect/charge GST on your sales?  Can you claim GST credits on your purchases? 
GST  Yes  Yes 
GST-Free  No  Yes 
Input Taxed  No  No 

 To Claim a GST refund you must 

  • Have a valid Tax Invoice for transactions $82.50 and over
    If the Transaction is $1,000 or over, the buyer’s identity or ABN must also be included on the Tax Invoice 

See this ATO link for more details: https://www.ato.gov.au/Business/GST/Issuing-tax-invoices/ 

Special GST Concessions for NFP organisations 

There are some special GST concessions for NFP’s.  Some of these include 

  • NFP’s no not need to register for GST until the turnover/revenue is $150,000 
  • No GST on Gifts and Donations 
  • No GST between Grouped organisations 
  • Fundraising events 
  • Non-commercial activities – this is particularly important for churches that rent houses/Apartments and halls 
  • Reimbursement of Volunteer Expenses 
  • Donated Second Hand Goods 

 Fundraising Events GST Concessions
A registered charity, gift deductible entity or government school may choose to treat certain fundraising events as input taxed. If an organisation chooses to treat a fundraising event as an input taxed fundraising event, it will have to treat all sales it makes in connection with the event as input taxed. The choice must be made before any sales take place. 

The organisation will not be entitled to claim GST credits for any purchases for the event and it will not be required to remit GST on the sales it makes. The organisation will not be entitled to claim GST credits regardless of whether the supply would have been GST-free had it not made the election. 

Non-commercial activities GST Concessions – please see our separate article with more information about non-commercial activities. 

The commercial activities of an endorsed charity, gift deductible entity or government school are taxable but the non-commercial activities of these organisations may be GST-free dependent upon whether certain threshold tests are met . 

The term ‘non-commercial activities’ refers to sales made when the payment received for the sale is less than a specified amount. The sale is GST-free if the amount charged is either of the following: 

  • less than  50% of the GST-inclusive market value 
  • less than  75% of the amount the endorsed charity, gift deductible entity or government school paid to purchase the item that is subsequently sold. 

When the sale is a supply of accommodation (Residential Rent) by a NFP the sale is GST-free if the amount charged is either of the following: 

  • less than  75% of the GST-inclusive market value of the accommodation 
  • less than  75% of the cost of providing the accommodation. 

Reimbursing volunteer expenses 

Where an endorsed charity, gift deductible entity or government school reimburses an individual person for an expense they have incurred that is directly related to their activities as a volunteer of that organisation, the organisation can claim a GST credit for the GST included in the price of the item purchased if the organisation is registered for GST. 

A payment is a reimbursement where the recipient is compensated exactly (meaning precisely, not approximately), whether wholly or partly, for an expense already incurred although not necessarily disbursed. 

To enable the charity, gift deductible entity or government school to claim the GST credit, the volunteer must provide the organisation with the tax invoice for the purchase they have made. 

Donated second-hand goods
A sale of donated second-hand goods by an endorsed charity, gift deductible entity or government school is generally GST-free provided there is no change in the original character of the goods. 

Click on this link to see more details about GST Concessions for NFP’s: https://www.ato.gov.au/non-profit/your-organisation/gst/gst-concessions/ 

Please contact us if you would like to discuss this article or you need any help with your financial management processes at [email protected] or 1300 138 627 

 

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