GST for preschool operators
GST for preschool operators
You can download a printable version of GST for preschool operators (NAT 12579, 419KB) in Portable Document Format (PDF).
You can order a printed copy by noting the full title of the publication and either:
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Terms we use
When we say:
- you, we mean you as the operator of a preschool offering a preschool course
- sales, we mean the GST term supplies
- purchases, we mean the GST term acquisitions
- GST credit, we mean the GST term input tax credit
- payments (made or payments received), we mean the GST term consideration.
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Getting started
What is GST?
Goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.
To meet your GST obligations, it is important that you understand:
- how the GST system works
- what you need to do to meet your GST obligations.
You also need to know:
- if you have to register for GST
- how to register for GST
- what being registered for GST means
- how to apply for an Australian business number (ABN).
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You only account for GST on your sales or claim GST credits on your purchases if you are registered for GST.
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For more information about GST and what you need to do to meet your GST obligations, see GST for small business (NAT 3014).
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Education courses and associated supplies
What is a preschool course?
A preschool course includes programs for the development and education of children in the years before they start primary school. Preschool programs operate with a curriculum model approved by the relevant state or territory authority. A preschool course is considered an education course for GST purposes.
Preschool courses do not include programs without a formal curriculum such as playgroups. Playgroups may fall under GST-free child care (for more information, see Preschool child care services).
How is GST applied to preschool courses?
Most education courses are GST-free, that is, you do not include GST in the price of education courses you supply.
If you have purchased or imported any goods or services to supply a course, you can claim GST credits for the GST you have paid.
A preschool course is GST-free if all of the following apply:
- the course is delivered in accordance with a preschool curriculum recognised by either
- the Department of Human Services in Victoria
- the Department of Community Services in New South Wales
- the relevant education authority in all other states and territories
- the course is delivered by a school that is recognised as a preschool under the relevant state or territory law.
What does the supply of a preschool course include?
The supply of a preschool course includes:
- tuition - the teaching or instruction of students
- access to facilities - including the provision and maintenance of buildings, grounds, libraries, as well as the provision of educational aids, sporting and musical equipment, classroom computers, printers, etc (the supply is only GST-free if you provide access to these goods - if you sell the goods to your students, the supply may be taxable)
- other curriculum-related activities and instruction associated with such a course - including excursions or visits by various groups.
Any fees charged for these supplies are not subject to GST.
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For more information about GST-free supplies, see Goods and Services Tax Ruling GSTR 2000/30 Goods and service tax: supplies that are GST-free for pre-school, primary and secondary education courses.
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Do fees have to be divided into GST-free and taxable parts?
If you charge a student a single fee for supplies that are both taxable and GST-free, for accounting and reporting purposes the fee must be divided between the GST-free and taxable parts of the supply.
You must work out what part of the fee relates to the taxable supply and what part relates to the GST-free supply.
Example
A preschool charges a total fee of $1,100 for a preschool course. The course includes teaching the student to play the recorder and includes the supply of a recorder to the student. The recorder is priced at $33 and becomes the student's property.
The preschool must divide the fee to account for $33 as the price of the taxable supply of the recorder and $1,067 as the price of the GST-free supply of the course. To do this, the preschool will report $1,100 at G1 (total supplies including GST-free supplies) and $1,067 at G3 (GST-free supplies) on its activity statement.
Accounting for GST on goods or services you provide or receive
There are two methods of accounting for GST:
- a cash basis
- a non-cash basis.
It is important that you are familiar with the accounting method you adopt when completing your activity statement.
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For more information about accounting for GST and keeping proper records, see:
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Preschool course related supplies
Administrative services
If you provide administrative services directly related to the supply of a preschool course, these services are GST-free if you are the supplier of both the services and the course.
Administrative services include:
- enrolment processing
- preparation and printing of student progress reports
- arrangement of meetings with students, parents, guardians
- record-keeping
- administration of other preschool activities.
Course materials
If you sell materials directly to your students and those materials are necessarily used up by the students in undertaking the course, the materials are GST-free. For example, the following sales would be GST-free:
- exercise or work books
- pens
- pencils
- crayons
- arts and craft materials.
The sale of goods such as story books, musical instruments or sporting equipment is not GST-free as these goods are not expended by use. Even though they may be necessary in order to teach the curriculum, they retain their character and have ongoing use as story books, instruments or sporting equipment after the completion of the course.
Supplying rights to attend a preschool course
If you charge a fee that creates a right for a student to participate in your preschool course (that is, you guarantee a position for the student), the fee is not subject to GST.
Such fees include those:
- for enrolling in a course
- to confirm a student's place at your preschool.
Where an agent, such as a local council or central enrolment authority, charges a fee on your behalf that legally binds you to provide education to a student, that fee is not subject to GST.
If you, or your agent, charge a fee that merely creates a right to be considered for a position in a preschool and does not guarantee entry (for example, adding a student's name to a waiting list) that fee is subject to GST.
Example
A local council organises the enrolment process for all children in its district to participate in preschool courses. Some of the preschool courses are conducted by the council and some are offered by private providers. The council charges parents a fee of $50 to guarantee each child a place in the preschool closest to their residence.
The council does not include GST in the fees because it is either:
- acting as an agent (by allocating rights on behalf of a private service provider)
- acting in its own right (by allocating rights as a service provider).
If the council collects course fees on behalf of a preschool, and subsequently passes on the collected fees to the preschool, the fees are GST-free.
If an agent (such as a local council) charges for collecting the fees, then the supply of the collection service by the council to the preschool is taxable.
Example
A local council organises the enrolment process for children to attend a privately run district preschool. As part of this process, the council collects course fees on the preschool's behalf. The preschool is registered for GST.
Course fees are charged at $111 per child. As the course is GST-free, the preschool reports each $111 fee as a GST-free supply on its activity statement.
The council retains an $11 administration fee per student for collecting the course fees and forwards the remaining $100 per student to the preschool. Each $11 administration fee is subject to GST, therefore, each fee includes GST of $1.
The preschool reports each $11 fee on its activity statement as an acquisition. The preschool also claims a GST credit of $1 for each $11 fee paid to the council.
Curriculum-related activities
Curriculum-related activities or instruction have a direct relationship to the education course and are generally provided by someone other than the preschool, such as an independent contractor.
If you purchase taxable supplies from a service provider and you are registered for GST, you are entitled to claim a GST credit for the GST you pay. In turn, you do not include GST in the price of these supplies to your students as the supplies are GST-free as part of an education course.
If your students pay fees directly to a service provider, the supply by the service provider is not GST-free as part of an education course.
Example
A preschool operator contracts for a petting zoo to visit the preschool. The zoo charges $5.50 per student (including GST) for 20 students.
If the preschool pays the zoo directly, it will pay $110 (including $10 GST). The preschool can then claim a GST credit of $10 on its next activity statement, reducing the total cost to $100.
If the zoo is not contracted by the preschool but visits the preschool and each student pays $5.50 to the zoo directly, the preschool will not be able to claim a GST credit.
Not all supplies made by service providers are curriculum related and, therefore, they may not be GST-free. Such supplies include:
- the sale of class photographs
- recreational activities such as excursions to amusement venues.
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Food provided to students whilst attending a preschool course or during an excursion is not GST-free as part of the education course or the excursion; however, the food may be GST-free for other reasons.
For more information, see GST food guide (NAT 3338).
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Maintenance and fundraising levies
If you charge maintenance or fundraising levies, the payment is not subject to GST as it forms part of the payment for a GST-free education course.
Even if you give parents the option to participate in a working bee or a fundraising activity rather than pay the levy, the levy is still GST-free for those parents who choose to pay it.
Grants
If you are registered or required to be registered for GST, any grants you receive are subject to GST if either:
- you supply goods or services in exchange for the grant
- you are obliged to do something in exchange for the grant.
If you make a taxable supply in exchange for a grant, you must pay GST equal to one-eleventh of the grant payment. If the grant is non-monetary (such as a grant of equipment), then you must work out the GST-inclusive market value of the item in order to calculate the GST payable.
If the grant provider only expects that you will do something with the grant but there is no binding agreement, the grant is not subject to GST. In such cases, the grant is not payment for any taxable supply you are making to the provider.
If you receive a grant in exchange for supplying goods or services to a third party (for example, students), the grant is only subject to GST if there is a binding agreement between yourself and the grant provider. This is the case even if the service provided to the student would have been GST-free if the student had paid for it.
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Grants from government are rarely gifts. However, if you are only required to report on how the grant was spent in exchange for the grant, the grant is not subject to GST.
Grants received in exchange for something you have already done (sometimes called reimbursement grants) are not subject to GST provided the grant is not connected to a supply of goods or services you make to the grant provider.
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Donations/gifts
If you operate as a non-profit organisation, any gifts (money, goods or services) you receive are not subject to GST. However, if you supply goods or services in exchange for the gift, the gift is deemed to be a payment for the goods or services you supply and is therefore subject to GST.
In general terms, gifts have all of the following features:
- are made voluntarily
- don't provide a material benefit to the donor
- are made in a spirit of generosity, with no expectation of receiving anything in return.
Co-payments made by parents and government
If the government pays part of the fees charged to a student for a GST-free supply, this is a third party payment, not a grant. A third party payment occurs where the supplier and the recipient agree that a third party will pay for all, or part, of the supply. Therefore, if a co-payment is made by the parent and the government for a student's fees, the co-payments are not subject to GST as they are payments made for the GST-free supply.
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Receiving 'per capita' funding (funding of a set amount per student) is not considered to be a third party payment. Per-capita funding is considered to be a form of grant and is subject to GST.
For more information, see Grants.
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Preschool child care services
If you provide before or after school child care services, or you are linked with a child care centre, the child care services may be GST-free if you meet one of the following requirements:
- The carer is registered with the Family Assistance Office.
Registered carers may be private preschools, kindergartens and some outside school hours care services.
- The child care service is approved by the Family Assistance Office.
An approved child care service may be a centre based long day care, occasional care or outside school hours care service.
- The child care service is funded by the Department of Families, Community Services and Indigenous Affairs.
The Minister for Family and Community Services may approve funding for occasional care, outside school hours care, or vacation care.
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If you provide food directly in conjunction with a supply of GST-free child care, the supply of the food is also GST-free.
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Non-profit child care services
If you provide child care services on a non-profit basis, you may be eligible to be treated as a charity for tax purposes.
As a charity, you are eligible to receive GST charity tax concessions.
Preschools and non-profit organisations
Is my preschool a charity?
If your preschool is conducted or administered by a non-profit body, you may qualify for status as a charity.
If your preschool wants to access GST charity concessions, you must be endorsed as a charity by us. Charities cannot self-assess their entitlement to GST charity concessions.
If you are already endorsed as a charity, there is no need to reapply for endorsement.
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For more information about charities and obtaining status as a charity, see:
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What concessions are available for charities?
If your preschool qualifies for status as a charity, which is endorsed to access GST charity concessions or is a government school (collectively referred to as 'charities'), you are eligible to access the following GST concessions:
- you do not need to account for GST for gifts you receive
- you may choose to account on a cash basis for GST purposes regardless of your turnover
- sales you make are GST-free if they are either
- made for nominal payment
- donated second-hand goods
- raffles or bingo
- sales you make in connection with certain fundraising events may be input taxed for GST purposes
- you can treat separately identifiable branches of your organisation as separate entities for GST purposes
- in certain situations, you can claim GST credits for reimbursements made to volunteers for expenses incurred on your behalf.
How does GST apply to sales commonly made by charities?
Sales of goods and services
The sale of a good or service is GST-free if the sale is for nominal payment. That is, the price is less than either:
- 50% of the GST-inclusive market value of the good or service
- 75% of the cost to the supplier of providing the good or service.
Example
A charity preschool purchases movie tickets at a cost of $10 each. The preschool sells the movie tickets to its students at a cost of $6.50 each. As the price charged by the preschool is less than 75% of the price they paid for the tickets, the movie tickets sold to the students are GST-free.
Where the sale is of accommodation, the sale is GST-free if the price is less than either:
- 75% of the GST-inclusive market value
- 75% of the cost to the supplier providing the accommodation.
Sales of second-hand goods
If you sell second-hand goods, the sale of those goods is GST-free provided the character of the goods has not been changed, and either:
- the goods have been donated
- the goods have been purchased from another charity (so long as the goods were originally donated to that charity).
Example
A charity preschool receives a donation of second-hand clothing to sell at a school fair. The preschool sells the clothing as is. As the preschool has not changed the character of the donated clothes, the sale of the clothes is a GST-free sale.
Sales of reprocessed goods
The sale of donated goods is not GST-free if the goods have been reprocessed, that is, if the character of the donated goods has changed before the sale.
Example
A charity preschool cuts-up some of their donated second-hand clothing to sell as rags. As the character of the goods has been changed from clothes to rags before the sale, the sale of the rags is taxable.
Sales of bingo and raffle tickets
Bingo and raffle ticket sales are GST-free provided that the preschool is a charity and is not contravening state or territory law by selling the tickets.
A raffle or bingo is treated as an input taxed sale where it is held as part of an input taxed fundraising event.
Fundraising events
If you conduct a fundraising event at which you make supplies of goods or services, sales made in connection with the event are generally subject to GST. Under some circumstances you may be eligible to treat your fundraising event as either:
- input taxed
- an event conducted by a non-profit sub-entity.
Each of these terms is explained below.
Input taxed fundraising events
When you make an input taxed sale, you do not include GST in the price of the goods or services you are supplying, even if those goods and services would normally be subject to GST. However, you are not entitled to a GST credit for the GST in the price of anything that you have purchased to make the sale.
You may elect to have your eligible fundraising events treated as input taxed sales if your pre-school is either:
- a charity
- a government school.
An eligible fund-raising event includes:
- a fete, ball, gala show, dinner, performance or similar event
- an event involving the sale of goods for $20 or less (or such other amount as the regulations specify) provided that this is not a normal part of the pre-school's business - the sale of any alcoholic or tobacco products will disqualify the event
- an event approved by us as a fundraising event - you must submit a written application to have your event approved, and we must be satisfied that
- your preschool is not in the business of conducting such events
- the proceeds from the event are for the direct benefit of the preschool.
If you hold the same type of fundraising event more than 15 times in a year, you cannot treat the sales at any of the events as input taxed.
Your election to treat a fundraising event as input taxed must be documented in the minutes of the meeting at which your decision was made.
If you do not elect to treat your fundraising event as input taxed, normal GST rules apply.
Example
A charity preschool elects to treat its annual fete as an input taxed fundraising event. The price of anything sold by the preschool as part of the fete will not include GST. The preschool cannot claim GST credits for any GST included in the price of goods or services purchased to run the fete.
Non-profit sub-entities
Non-profit organisations with small independent branches can choose to treat these branches as separate entities from the main organisation for GST purposes. These branches are known as non-profit sub-entities. If your preschool has an independent branch (such as a fundraising committee) you can choose to treat this branch as a non-profit sub-entity. You do not have to notify us of your choice; however, you must keep a record of your election to treat the branch as a non-profit sub-entity.
A branch can be treated as a non-profit sub-entity if the following applies:
- it maintains an independent system of accounting
- it can be separately identified by the nature of its activities or by its location.
If you choose this option, you must keep a record of each branch that is being treated as a separate entity.
Are non-profit sub-entities required to register for GST?
If your non-profit sub-entity has a GST turnover of less than $150,000, you may choose whether or not to register the non-profit sub-entity for GST. If the GST turnover is more than $150,000, you must register the non-profit sub-entity for GST. It will then have the same rights and obligations as other GST registered entities, except for the ability to form other non-profit sub-entities.
If you manage a non-profit sub-entity, you are responsible for all the GST obligations of the entity.
Example
A charity preschool committee decides to set up its fundraising sub-committee as a non-profit sub-entity. The turnover of the sub-committee is less than $150,000 and the preschool has decided not to register the non-profit sub-entity.
The sub-committee has no liability to account for GST on any supply it makes in the course of conducting its fundraising activities. However, neither the sub-committee or the preschool is entitled to GST credits for any GST included in the price of goods or services acquired by the sub-committee in undertaking its activities.
A preschool choosing to apply the provisions relating to non-profit sub-entities must be registered for GST and must be one of the following:
- an endorsed charity
- an endorsed trustee of a charitable fund
- a gift deductible entity which is a non-profit body
- a government school
- a non-profit body that is exempt from income tax under specific provisions of the income tax law.
Other points to note about non-profit sub-entities
A few other points to note about non-profit sub-entities are:
- non-profit sub-entities are separate entities for GST purposes
- non-profit sub-entities are for GST purposes only, not any of the following
- pay as you go (PAYG)
- fringe benefits tax (FBT)
- income tax.
- a preschool cannot create a non-profit sub-entity for its core activities, being the supply of preschool courses
- where a preschool creates multiple non-profit sub-entities and the turnover of the preschool is reduced to below $150,000, the preschool cannot elect to cancel its GST registration - in order to enjoy the flexible options of having non-profit sub-entities, the preschool must remain registered for GST.
- non-profit sub-entities can access the same GST concessions available to their parent entity (other than the ability to form further non-profit sub-entities) - for example, a non-profit sub-entity of a preschool that is an endorsed charity or a government school, can access GST concessions (see What concessions are available for charities?).
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For more information about non-profit organisations, charities and deductible gift recipients, go to www.ato.gov.au/nonprofit
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Completing your activity statement
For GST purposes, there are four options for lodging your activity statement. These are:
- Option 1 - calculate, report and pay GST either monthly or quarterly
- Option 2 - calculate and pay GST quarterly and report annually
- Option 3 - pay a GST instalment amount quarterly and report annually
- Option 4 - calculate, report and pay GST annually.
These lodgment arrangements relate only to your GST obligations - you may have other lodgment requirements such as PAYG withholding or PAYG instalments.
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For more information about completing your activity statement, see:
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Quick reference table
This table provides a summary of the information in this guide. Before deciding on the GST treatment of your supply, you should read the full explanations referred to in this table.
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are not subject to GST if:
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are subject to GST if:
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Education courses
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the course is a supply of an education course that includes
- tuition
- facilities
- other curriculum-related activities and instruction.
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the amount charged for curriculum-related activities and instruction is paid by the students directly to a service provider (not via the preschool).
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Administrative services
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they are a supply of administrative services by the provider of the course that are directly related to the supply of an education course.
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the administrative services are not provided by the supplier of the course (that is, if they are outsourced).
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Course materials
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the materials (for example, art supplies) are
- necessarily consumed or transformed in undertaking the course
- supplied directly to the students by the preschool.
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the materials are either
- not consumed or transformed in undertaking the course (for example, musical instruments and story books)
- supplied to the students by a third party
- goods other than course materials.
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Excursions, field trips and visits by external service providers
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the excursion or field trip is
- directly related to the curriculum of an education course
- not predominantly recreational.
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the excursion/field trip is either
- predominantly recreational
- supplied by a third party who is paid directly by the students.
Food provided during an excursion is not GST-free as part of the excursion; however, the food may be GST-free for other reasons.
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Fundraising events
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- the event is of the type set out under Sales of bingo and raffle tickets
- the preschool is eligible to and has elected to treat the event as input taxed
- the event is conducted through a non-profit sub-entity that is not registered or required to be registered.
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- the event is conducted through the preschool or a registered non-profit sub-entity, and
- the sale is not GST-free or the event is not treated as an input taxed event.
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Fees charged to attend an education course
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- the fees are charged in return for a right to receive GST-free education (for example, enrolment fees)
- an agent acting on behalf of the preschool charges a fee that legally binds the preschool to provide education.
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the fee only creates a right to be considered for a position in a preschool and does not guarantee entry.
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Grants
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- the grant is received with no binding obligation to do something with the grant
- the preschool is a non-profit body and receives the grant as a gift
- the only obligation stipulated is to report on how the grant was spent
- the preschool is not registered for GST.
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- the preschool is registered for GST, and makes a supply of goods/services or enters into a binding obligation to do something in exchange for the grant
- the grant is received to provide goods/services to students or another third party
- the grant is received to make GST-free supplies to students.
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Co-payments
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the co-payment of preschool fees is made by parents/government
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the co-payment takes the form of 'per capita' funding from the government.
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Child care
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the child care service meets one of the three requirements to be classified as GST-free child care.
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the child care service does not meet one of the three requirements to be classified as GST-free child care.
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For more information about preschools and GST or to obtain copies of our publications, you can:
- phone us on 13 28 66, or
- write to us at
Australian Taxation Office
PO Box 3524
ALBURY NSW 2640
If you do not speak English well and need help from us, phone the Translating and Interpreting Service on 13 14 50.
If you are deaf, or have a hearing or speech impairment, phone us through the National Relay Service (NRS) on the numbers listed below:
- TTY users, phone 13 36 77. and ask for the ATO number you need
- Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need
- internet relay users, connect to the NRS on www.relayservice.com.au and ask for the ATO number you need.
Last Modified: Wednesday, 14 November 2012
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