NO.073

GST Flexibility for Non-Profit Organisations

The Government will make important changes to assist non-profit organisations in

complying with the GST.

Consultation has shown the need for flexibility in GST registration, grouping and

branching to reflect the sometimes complicated structural arrangements in this sector.

Currently, the GST law requires non-profit organisations to register for GST if their

annual turnover is $100 000 or more, compared to a $50 000 threshold for business

entities. Under the existing rules, non-profit entities can choose not to register for GST

if their annual turnover is less than

$100 000.

The proposed changes will give non-profit organisations with small, independent

branches (“units”) the option of treating their units as if they were separate

entities for GST purposes and not a part of the main organisation. A unit will be

considered to be independent if it keeps its own accounting records and can be separately

identified by the nature of its activities or by its location.

This means that, where the unit’s turnover is less than $50 000, the unit can

choose whether it registers for GST or not. If the unit decides not to register, it will

neither have to remit GST in respect of supplies it makes, nor will it be entitled to

input tax credits for GST on its acquisitions such as taxable supplies received from the

main organisation. Where the unit has a turnover of $50 000 or more, it will have to

register separately for GST. The unit will then have the same rights and obligations as

other GST registered entities. For example, the unit will be able to group with other

registered entities including the main organisation.

Non profit organisations operating on a small scale or that are not subject to direct

control by a head office, will be the main beneficiaries of this measure.

The additional flexibility will enable many non profit organisations to achieve a

substantial reduction in their compliance costs.

The option will be available to charitable institutions, trustees of charitable funds,

gift-deductible entities as defined in the GST Act and also certain non-profit bodies that

are income tax exempt. This will encompass a broad range of organisations including

charities, community service organisations, public educational institutions and religious

institutions.

The Government will introduce this measure into Parliament before the end of the Spring

sittings and seek passage by the end of the year.

The registration process for GST commences on 1 November. However, organisations

affected by this concession may wish to delay their registration until the measure passes

through the Parliament.

29 October 1999