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Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 07/12/99

Transcript No. 99/94

TRANSCRIPT OF

The Hon Peter Costello MP

TREASURER

Doorstop

Parliament House

Tuesday, 7 December 1999

9.00 am

SUBJECT: GST & Charities

JOURNALIST:

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

TREASURER:

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.

JOURNALIST:

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

TREASURER:

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.

JOURNALIST:

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

TREASURER:

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.

JOURNALIST:

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

TREASURER:

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.

JOURNALIST:

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.

TREASURER:

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…

JOURNALIST:

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

TREASURER:

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.

JOURNALIST:

If they’re outside the system does that mean that donations to those charities are also not tax deductible?

TREASURER:

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.

Thanks.