NO.084

CHARITABLE SECTOR AND THE GST

The Government has reviewed the report of the Charities Consultative Committee which

was established by the Australian Tax Office as part of the Government’s agreement with

the Australian Democrats.

I am pleased to announce that the Government will continue the work of this Committee

which has now resolved a very large number of questions.

The Government has already introduced amendments in response to the Committee

recommendations such as provisions to allow small branches of charities to opt out of the

system and the Government will be taking these amendments further in some significant

respects by lifting the opt-out turnover threshold to $100,000.

The Government has discussed its response with the Australian Democrats and come to an

agreement on implementing the recommendations which will ensure more certainty and more

favourable treatment for the charitable sector under the legislation.

The changes are included in my letters to Senator Woodley (attached).

Some of the important changes are:

• the Government moving an amendment today to make the cost of supply test for

  non-commercial supplies by charities more generous by lifting it from 50% to 75%

• amending the GST Act at a later date to allow non-profit entities to choose either a

  quarterly or monthly tax period, regardless of the date on which they balance their

  accounts. This will reduce compliance costs for these organisations

• Rulings from the ATO to clarify that newsletters, magazines and journals sold by

  charities which are not commercial sales are GST free.

The Government has also decided to gross-up grants to charities by 10 per cent. This

means charities will get the benefit of the cost savings because the grants will be the

same (after GST) but costs will be lower.

The Government will hold further discussions with the Democrats on the possibility of

an inquiry to examine definitional issues relating to charities, given that the common law

definition of charity is based on a legal concept originating in the sixteenth century.

This is separate from GST treatment and relates more to qualification for income tax

deduction and income tax exemption. Discussion will be held on this next year.

I thank the Australian Democrats for the constructive role they have played in this

process.

9 December 1999

Attachments

Letter 1

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Click to enlarge page 4

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Letter 2

Click to enlarge letter 2