GST branches, groups and non-profit sub-entities - Tax basics for non-profit organisations

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

Introduction

There are a number of options available to non-profit organisations in relation to how they structure their organisation for GST purposes.

GST branches

A GST-registered organisation that operates through a branch structure may choose to register a branch (or branches) separately for GST, provided the organisation meets certain requirements.

This means the branch will be liable for GST on its sales and will be entitled to a credit for the GST in the price of things it buys in carrying on the activities of the branch. Transactions between the branch and the parent entity, and between branches, will be subject to GST.

To register a GST branch, complete the Application to register a GST or PAYG withholding branch (NAT 14834).

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GST groups

Certain organisations can form a GST group if they satisfy the 90% ownership test. The ownership test requires that each group member share substantially the same (at least 90%) ownership.

The 90% ownership requirement for a GST group does not apply to non-profit organisations.

Non-profit organisations that are members of the same non-profit association may find it useful to form a GST group if they regularly make sales and purchases between each other.

A GST group is treated as a single entity for GST purposes. This means no GST is payable and no GST credits can be claimed on transactions between group members.

One of the group members manages the affairs of the group and is responsible for accounting for the GST transactions of the whole group. This group member is known as the representative member. However, each group member must be individually registered for GST to form part of a GST group.

When GST group members make sales outside the group, the representative member is responsible for accounting for GST on the sales.

Similarly when GST group members make purchases from outside the group, the representative member claims the GST credits on the purchases on behalf of the group.

For more information refer to GST groups (NAT 3089).

To register a GST group complete the Goods and services tax (GST) group – Application to register or change details (NAT 2952).

To obtain these publications, see More information.

GST religious groups

Non-profit organisations that are income tax exempt charities and belong to the same religious organisation can form a GST religious group, provided they meet certain requirements.

This means no GST is payable and no credits can be claimed on transactions between group members. However, each member of the GST religious group is still required to be individually registered for GST and account for all its transactions with parties external to the GST group by lodging individual activity statements.

Non-profit sub-entities

Certain organisations may choose to have some (or all) of their separately identifiable branches or units treated as separate entities for GST purposes. The separate units are called non-profit sub-entities.

Organisations eligible for this concession are:

charitable institutions
charitable funds
gift deductible entities
government schools, and
other non-profit organisations.

To be able to use this option the main organisation must be registered for GST and continue to remain registered.

A non-profit sub-entity is a separate entity for GST purposes only. Other obligations like PAYG, FBT and income tax are not affected by this arrangement.

A unit will be considered to be independent if it:

maintains an independent system of accounting, and
can be separately identified from the main organisation by its location or by its activities.

For example, a unit could comprise of a separately located branch of an organisation or a fundraising activity such as a fete, lamington drive or fundraising dinner. If you choose to treat a unit of your organisation as a non-profit sub-entity, you must make a note in your records, such as your accounts or the minutes of a meeting, that the unit is to be treated as a separate entity for GST purposes.

A unit cannot be a non-profit sub-entity if its activities are related to the main purpose of the organisation. For example, an organisation cannot treat its membership activities as the activities of a non-profit sub-entity.

Where the unit’s GST turnover is less than $150,000, the unit can choose whether or not it registers for GST. Where the unit has a turnover of $150,000 or more, it is required to register separately for GST and will have the same rights and obligations as other GST-registered entities. The GST obligations of the unit will be imposed on the people responsible for the management of the unit.

Once the organisation makes a choice to treat a unit as a non-profit sub-entity, it cannot revoke that choice for 12 months. The organisation cannot make a further choice to treat the unit as a non-profit sub-entity within 12 months after the previous choice was revoked.

More information

Unless otherwise directed, for more information on a GST concession, refer to the Charities Consultative Committee Resolved Issues Document.

Last Modified: Monday, 12 November 2007

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