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Note: This document forms part of our publication Tax basics for non-profit organisations. To view the full publication, click here. The information in this document has been updated for changes that have occurred since the publication was released in June 2007.
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Activity statements
You use an activity statement to report your business tax entitlements and obligations, including GST, PAYG instalments, PAYG withholding and FBT instalments. You can offset tax payable against tax credits to arrive at a net amount.
Associates
Associates include people and entities closely associated with you, such as relatives, or closely connected companies or trusts. A partner in a partnership is an associate of the partnership.
Australian business number (ABN)
Your ABN is your identifier for certain dealings with the Tax Office and other government departments and agencies.
Charity
A charity is an institution or fund established for a charitable purpose.
Examples of charities include:
- religious institutions
- aged persons homes
- homeless hostels
- primary or secondary schools run by churches
- organisations relieving the special needs of people with disabilities, and
- societies that promote the fine arts.
For more information on charities, refer to Income tax guide for non-profit organisations (NAT 7967).
Charitable fund
A charitable fund is a fund established under an instrument of trust or a will for a charitable purpose. The purposes set out in the will or instrument of trust must be charitable. Charitable funds mainly manage trust property, and/or hold trust property to make distributions to other entities or people. In contrast, if the trustee mainly carries on activities that are charitable, the fund will be treated as a charitable institution and not as a charitable fund.
For more information on charities, refer to Income tax guide for non-profit organisations (NAT 7967).
Charitable institution
A charitable institution is an institution that is established and run to advance or promote a charitable purpose. An organisation’s purposes can be found in its governing document/s and from its activities, history and control. A charitable institution will carry on charitable activities while a charitable fund mainly manages, and/or holds trust property.
For more information on charities, refer to Income tax guide for non-profit organisations (NAT 7967).
Charitable purpose
A charitable purpose is one which the law regards as charitable. The term ‘charitable’ has a technical legal meaning which is different from its everyday meaning. Charitable purposes are any of the following purposes:
- the relief of poverty or sickness or the needs of the aged
- the advancement of education
- the advancement of religion
- the provision of child care services on a non-profit basis, and
- other purposes beneficial to the community.
Deductible gift recipient (DGR)
A DGR is an organisation that is entitled to receive income tax deductible gifts. All DGRs have to be endorsed by the Tax Office, unless they are listed by name in the income tax law.
There are two types of endorsement:
- where an organisation is endorsed as a DGR in its own right, or
- where an organisation is endorsed as a DGR for a fund, authority or institution that it operates.
For the second type, only gifts to the fund, authority or institution are tax deductible.
For more information on DGRs, refer to GiftPack for deductible gift recipients & donors (NAT 3132).
Endorsement
Endorsement is the process under which organisations apply to the Tax Office for approval to:
Enterprise
An enterprise includes a business and other commercial activities. It does not include:
- private recreational pursuits and hobbies
- activities carried on as an employee, labour hire worker, director or office holder, or
- activities carried on by individuals (other than trustees of charitable funds) or partnerships (in which all or most of the partners are individuals) without a reasonable expectation of profit.
It includes the activities of entities such as charities, deductible gift recipients, religious and government organisations, and certain non-profit organisations.
Entity
For the purposes of this publication, an entity means an individual, a body corporate, a corporation sole, a body politic, a partnership, an unincorporated association or body of persons, a trust or a superannuation fund.
In addition, the trustee of a trust or superannuation fund is taken to be an entity consisting of the people who are trustees at the time. That entity is a different entity to the person acting in their personal capacity. If reference is made to an entity of a particular kind (for example, trustee), it refers to the entity only in its capacity as that kind of entity.
Fringe benefits tax (FBT)
FBT is a tax payable by employers who provide fringe benefits to their employees or associates of their employees. For example, a fringe benefit is generally provided when an employer:
- allows an employee to use a work car for private purposes
- gives an employee a cheap loan, or
- pays an employee’s private health insurance costs.
Gift deductible entity
An entity is a gift deductible entity if gifts or contributions made to it can be deductible under income tax law.
Goods and services tax (GST)
GST is a broad-based tax of 10% on the supply of most goods, services and anything else consumed in Australia and the importation of goods into Australia.
Government school
A government school is a school run by a Commonwealth, state or territory government that provides pre-school courses, full-time primary or secondary courses.
GST credit
A GST credit is what you claim to get back the GST you pay in the price of goods and services you purchase for your business or enterprise. You are entitled to a GST credit for the GST included in the price you pay for a purchase, or included in the price you paid on an import, if it is for use in your business or enterprise, but not to the extent that you use the purchase or import to make input taxed sales, or if the purchase or import is a private or domestic nature. You must have a tax invoice before you can claim a GST credit on your activity statement (except for purchases of $75 or less excluding GST).
GST-free sales
You do not include GST in the price of GST-free sales that you make, but you are entitled to GST credits for things you have purchased or imported for use in carrying on your activities. Some examples of GST-free sales include basic food, exports, sewerage and water, the sale of a business as a going concern, non-commercial activities of charities and most education and health services.
Health promotion charity
A health promotion charity is a non-profit charitable institution whose principal activity is promoting the prevention or control of diseases in human beings. The characteristics of a health promotion charity are:
- its principal activity is promoting the prevention or control of diseases in human beings, and
- it is a charity which is a charitable institution.
Examples of activities that can promote the prevention or control of disease include:
- providing relevant information to sufferers of a disease, health professionals, carers and to the public
- researching how to detect, prevent or treat diseases, and
- developing or providing relevant aids and equipment to sufferers of a disease.
For more information on health promotion charities, refer to GiftPack for deductible gift recipients & donors (NAT 3132).
Income tax exempt charity
An income tax exempt charity is a charity that has been endorsed by the Tax Office as exempt from income tax.
Input taxed sales
You do not include GST in the price of input taxed sales you make, but neither are you entitled to GST credits for things you have purchased or imported that relate to making those input taxed sales. In some cases you may be entitled to claim reduced GST credits. Some examples of input taxed supplies include most financial supplies and supplies of residential rent and residential premises.
Instalment income
Generally, instalment income is your total ordinary income for the period for which you are paying your PAYG instalment.
Instalment rate
Your instalment rate is a percentage figure that approximates the proportion of your business and investment income that is paid as tax. It is worked out by the Tax Office based on information in your most recent income tax assessment. You multiply your instalment rate by your instalment income for a quarter (or year) to work out the amount to pay in your PAYG instalment. We will give you an instalment rate if you are required to pay PAYG instalments.
Non-profit
An organisation is non-profit for determining income tax exempt status if it is not carried on for the profit or gain of its individual members. This applies for direct and indirect gains, and both while the organisation is being carried on and when it is winding up. The Tax Office accepts an organisation as non-profit if its constitution or governing documents prohibit distribution of profits or gains to individual members and its actions are consistent with the prohibition.
Non-profit company
A non-profit company for determining rates of income tax and whether to lodge income tax returns is:
- a company that is not carried on for the purposes of profit or gain to its individual members and is, by the terms of the company’s constituent document, prohibited from making any distribution, whether in money, property or otherwise, to its members, or
- a friendly society dispensary.
Pay as you go (PAYG) instalments
PAYG instalments is a system for paying amounts towards the expected tax liability on your business and investment income for the financial year.
Pay as you go (PAYG) withholding
PAYG withholding requires an entity to withhold an amount if it makes certain listed payments including salary, wages, commission, bonuses or allowances to an employee, directors’ fees, payments for a supply (goods or services) to another business which does not quote an ABN, and certain dividend, interest and royalty payments.
Public benevolent institution (PBI)
A public benevolent institution (PBI) is a non-profit institution organised for the direct relief of poverty, sickness, suffering distress, misfortune, disability or helplessness.
The characteristics of a PBI are:
- it is set up for needs that require benevolent relief
- it relieves those needs by directly providing services to people suffering them
- it is carried on for the public benefit
- it is non-profit
- it is an institution, and
- its dominant purpose is providing benevolent relief.
Examples of PBIs are organisations that:
- provide hostel accommodation for the homeless
- treat sufferers of disease
- provide home help for the aged and the infirm
- transport the sick or disabled, or
- rescue people who are lost or stranded.
For more information on PBIs, refer to our publication GiftPack for deductible gift recipients & donors (NAT 3132).
Religious institution
A religious institution is a non-profit institution operated for the public benefit to advance religion in a direct and immediate sense. Religion involves belief in a supernatural being, thing or principle and the acceptance of canons of conduct which give effect to that belief. Examples of religious institutions include:
- bible colleges
- churches and other religious congregations
- institutions of missionaries, and
- seminaries.
Tax invoice
A tax invoice is a document generally issued by the seller. It shows the price of a sale, indicating whether it includes GST, and may show the amount of GST. It must show other information, including the Australian business number of the seller. You must have a tax invoice before you can claim a GST credit on your activity statement for purchases of more than $75 (excluding GST).
Tax period
A tax period is the length of time for accounting for GST in your activity statement. It may be quarterly or monthly. Quarterly tax periods are periods of three months ending on 30 September, 31 December, 31 March and 30 June. Monthly tax periods end on the last day of each calendar month. An activity statement must be lodged for each tax period.
Last Modified: Wednesday, 12 September 2007
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