GST not just another tax

The Government has been forced to back down on some of its GST 
provisions regarding charities and non-profit organisations. Negotiations 
continue as The Guardian goes to press with the legislation still to 
be finalised.

What is not in doubt is that the GST is generating a whole new industry of 
tax avoidance, particularly big business.

Small businesses, charities, trade unions, political groups and other 
organisations are trying to sort out where they stand.

Some may need to restructure into smaller economic units. Others will have 
to replace their voluntary lay treasurer with a paid professional or send 
staff on training programs.

The Australian Tax Office (ATO) is running seminars around the country to 
inform businesses, charities and non-profit organisations of the changes.

The meeting in Sydney last week for charities and non-profit organisations 
left many more questions unanswered than answered.

When representatives of charities heard that grants (e.g. for refuges, 
health, research or jobless programs) would be taxed at 10 per cent they 
were astounded.

The Government has since promised to increase its grants to charities by 10 
per cent to fund the GST that will be repaid to it. But what about grants 
from State Governments or corporations?

Gifts and donations, however, will not be subjected to the GST — as long 
as they are not linked to a specific purpose or something in return.

The Taxation Office will have 4,000 officers in the field next year to go 
into workplaces and offices to look at books and record keeping and assist 
with compliance.

It is still not clear which organisations — trade unions, political 
parties, environmental groups, etc — will have to register and become part 
of the GST system.

To register they will first need an Australian Business Number (corporate 
version of the Tax File Number).

Charities and non-profit organisations (as defined by the ATO) with an 
income of less than $100,000 and other organisations with an income of less 
than $50,000 are not obliged to register for GST. They have a choice. Most 
others must register. (Income does not include gifts, donations and asset 
sales.)

All organisations — whether registered or not — will pay GST on their 
purchases (e.g. stationery, printing, phone calls, postage, publications, 
room hire, etc).

There are pluses and minuses to registration.

Those who are registered must charge GST on sales. They will be eligible to 
claim the GST they have paid on purchases as input tax credits. The whole 
process could involve considerable book keeping, and quarterly or monthly 
returns to the Tax Office, at a considerable cost and effort.

Unregistered organisations pay GST on purchases but they do not receive tax 
credits and do not charge GST on their sales or keep such detailed records.

Once the criteria for registration becomes clear then each organisation 
will have to weigh up its own situation.

The only other option is to defeat the GST.