GST branches, groups and non-profit sub-entities
There are a number of different ways you can structure your not-for-profit (NFP) organisation for goods and service tax (GST) purposes.
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 goods and services 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.
Some 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 not-for-profit organisations.
NFP organisations that are members of the same NFP 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.
GST religious groups
Charities that are endorsed by us to access income tax exemption and which 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 must be individually registered for GST and account for all its transactions with parties outside of the GST group by lodging individual activity statements.
GST religious group – notification of forming, changing or cancelling
Some 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:
- registered charities
- gift deductible entities
- government schools
- other NFP organisations that are income tax exempt.
To use this option, the main organisation must be registered for GST and remain registered.
A non-profit sub-entity is a separate entity for GST purposes only. Other obligations like fringe benefits tax (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
- can be separately identified from the main organisation by its location or by its activities.
Example – Non-profit sub-entity
An NFP school has decided to treat its annual fete as a non-profit sub-entity. At the annual general meeting, the minutes of the meeting are updated to reflect this decision and a separate bank account is established for that event.
End of example
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 GST turnover of $150,000 or more, it must 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.
Non-profit sub-entities can access the same GST concessions as their parent entity. Depending on the entity type of the parent entity these concessions include:
- gifts to not-for-profit bodies not being treated as payment
- GST-free raffles and bingo
- input taxed fundraising events
- accounting on a cash basis
- GST credits for reimbursement of volunteer expenses
- GST-free sales of donated second hand goods and GST-free sales for nominal payment
- input taxed sales of food by school tuckshops and canteens
- GST-free supplies associated with the operation of a retirement village
- providers of gifts do not need to make adjustments for their gifts.
For those GST concessions that require a choice to be made, the non-profit sub-entity of an eligible entity can choose to access the concession even if the parent entity has chosen not to apply the concessions to its own activities.
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.
A non-profit sub-entity of an eligible entity cannot make the choice to create further non-profit sub-entities.
GST turnover threshold is explained at GST registration.
There are a number of different ways you can structure your organisation for goods and service tax (GST) purposes.