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 unitÂ’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.