Doorstop Parliament House: GST & Charities

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Doorstop Interview: Banks, Current Account Deficit, WTO, Budget Surplus
December 1, 1999
Reappointment of Taxation Commissioner
December 8, 1999
Doorstop Interview: Banks, Current Account Deficit, WTO, Budget Surplus
December 1, 1999
Reappointment of Taxation Commissioner
December 8, 1999

Doorstop Parliament House: GST & Charities

Transcript No. 99/94


The Hon Peter Costello MP



Parliament House

Tuesday, 7 December 1999

9.00 am

SUBJECT: GST & Charities


Treasurer are you considering moving the thresholds for charities and their application

on the GST?


Well a charity is $100 000 and we’re going to make sure that is unequivocally

clear in the legislation, that unless you’re a charity that has a turnover of over

$100 000 you won’t come into the system. And what that means is, that pie drives and

lamington cake stalls and Christmas cakes and all of those sorts of things, they

won’t come into the system unless you’ve got a turnover on those projects of

over $100 000.


But is that on individual pie drives or does it take into account the income for the

whole year?


Well, they can structure their affairs so that they can take advantage of it on

individual fundraising activities. So that if a charity wants to stay outside the system,

and it’s up to it how it structures its activities, unless the project is going over

$100 000 they can stay right outside the system.


Aren’t there more costs, administration costs, to sort that out?


Well staying outside the system means that they don’t have any registration – they

don’t have any advantages of the GST – but of course they don’t have any price

requirements in relation to the GST. I make this point, I think there are 156 countries in

the world that have a GST. And there’s 156 countries in the world where they manage

to operate these systems. Australia’s not going it alone, Australia is now catching

up with the rest of the world. And there are enormous advantages of a broad-based indirect

tax system for charities. The most important of which by the way is that if you have a

broad indirect tax base, you’ve got the revenues which can run decent social

services. And the biggest threat to charities in this country would be a narrow and

declining tax base. Because you wouldn’t have money to run charities or give

Government grants to charities. So we’re going to have a rule which ensures that

nobody will come into the system, no charity need come into the system, unless it has a

turnover of over $100 000. So all of the concern that people might have about pie drives

or lamington drives, they needn’t worry about those sorts of things.


But if they’re not in the system, aren’t they paying GST on all of their



Well, if they’re not in the system, they don’t get their credits and

they’re not obliged to keep their accounts and to file them with the Tax Office. If

it actually gives them advantage, they can choose to come into the system. But it’s

their choice and some charities I think who have thought about it carefully will want to

come into the system because they know the benefits for the charity, but those charities

that have said they don’t want to come into the system because they don’t want

to keep records, they won’t have to do so.


But what you’re saying is they’ve got a choice. They can either stay outside

the system and not get any of the benefits and have to pay GST on all their inputs and all

of that. Or they can go into the system, have all the added administration and all the

effects of that system.


It’s a very long question, but the answer as you said, they’ve got a choice.

They don’t get a choice at the moment, they don’t get a choice at the moment.

Under the…


But at the moment they don’t pay tax on those items.


No hang on. At the moment charities pay embedded wholesale sales tax on everything they

buy. Every single thing they buy has embedded wholesale sales tax in it. And there is no

such thing as wholesale sales-tax-free. The category doesn’t exist. Under the new

system, we’re setting up a new category, GST free. It means no embedded tax on

anything for a charity in respect of its charitable work. That’s why costs for

charities under the indirect tax system, fall. And the only way that you can get the costs

to fall, is to have a new indirect tax system, because in the whole seventy years of

wholesale sales tax, there’s never been a category of wholesale sales-tax-free.

There’s been a category from time to time of exempt, you can get an exemption, but

you cannot get the tax back that is embedded in the things that you buy. So this will be a

dramatic improvement for the charities. Those charities that want to come into the system

can in relation to that get all of their inputs back free and I think they will in

relation to their charitable activities. In relation to their fundraising activities they

can stay out of the system if they want to do so and they only have to come into the

system if the fundraising goes above $100 000, and it’s a commercial activity.


If they’re outside the system does that mean that donations to those charities are

also not tax deductible?


Donations, donations are not subject to the GST. And if they have tax deductible

status, tax deductibility. What a great system, isn’t it? Full tax deductibility, all

GST back in respect of their charitable organisations and if they want to go into

profit-making activity, then they can stay outside the system, unless their profit making

activity goes above $100 000.