When running a not-for-profit, it is still important to stay on top of your tax obligations.
A common misunderstanding is that being exempt from income tax means an organisation is exempt from all tax requirements. Unfortunately, that is not the case.
The Australian Taxation Office (ATO) has reminded not-for-profit organisations that income tax exemption does not automatically mean exemption from Goods and Services Tax (GST).
If your organisation meets, or expects to meet, the not-for-profit GST registration threshold, registration may be required. Below is a summary of the registration rules, what to include when calculating turnover, and the practical steps your board or committee should consider.
1. The $150,000 GST registration threshold
For GST purposes, religious institutions generally fall under the same not-for-profit turnover rules as other eligible NFP organisations.
– What you need to know: A not-for-profit organisation must register for GST if its current or projected GST turnover is $150,000 or more. This is higher than the $75,000 threshold that applies to most commercial businesses.
– Timing: If your projected GST turnover reaches, or is likely to reach, $150,000 over a 12-month period, your organisation must register for GST within 21 days of reaching that threshold.
– EMspire Advisory tip: Do not wait until the end of the financial year to review your position. If your organisation is starting a new program, increasing venue hire, holding paid events or expanding its activities, it is worth checking your rolling 12-month turnover regularly.
2. Calculating GST turnover: what is included?
Working out GST turnover is not always as simple as looking at total money received. Some income is excluded, while other income must be counted.
– Income generally excluded: Genuine gifts, tithes and voluntary donations are generally excluded from GST turnover where the donor does not receive goods, services or another material benefit in return. Certain eligible fundraising events may also be excluded.
– Income generally included: Taxable sales and other business-like income streams usually need to be counted. This may include venue or hall hire, bookshop or merchandise sales, paid programs, catering, and ticketed events.
– GST-free activities: Some activities of religious institutions registered with the Australian Charities and Not-for-profits Commission (ACNC) may be GST-free, such as certain religious services, retreats, weddings, funerals or study classes. However, GST-free sales may still count towards the $150,000 GST registration threshold.
– EMspire Advisory tip: For example, an organisation may receive $200,000 in genuine donations, $60,000 from hall hire and $100,000 from GST-free retreat fees. While the donations may be excluded, the hall hire and retreat fees may still bring countable turnover to $160,000, meaning GST registration may be required.
3. Voluntary GST registration and input tax credits
Even if your organisation is under the $150,000 threshold, voluntary GST registration may still be worth considering.
– What this means: Religious bodies with turnover below $150,000 may choose to register for GST voluntarily if they are carrying on an enterprise.
– The benefit: Once registered, an organisation may be able to claim input tax credits for GST included in expenses such as building maintenance, equipment, utilities and professional fees, provided the usual GST rules are met.
– EMspire Advisory tip: If your organisation is planning renovations, capital works or major equipment purchases, voluntary registration may improve cash flow by allowing eligible GST credits to be claimed back from the ATO.
The team at EMspire Advisory are qualified Chartered Accountants, tax agents and small business accountants. We work closely with our clients to provide practical advice and support tailored to their circumstances. To find out more, please contact us.
This information is general in nature and should not be relied on as advice. Please contact us for advice specific to your organisation and circumstances.