There are a number of ways you can structure your not-for-profit (NFP) organisation for goods and service tax (GST) purposes.
If your GST registered organisation operates through a branch structure you may choose to register a branch (or branches) separately for GST, provided your organisation meets certain requirements.
Two or more entities may form a GST group provided the entities meet certain requirements, including satisfying the membership requirements for the GST group. This may be useful for entities who regularly make sale and purchases between each other.
A GST group is treated as a single entity for GST purposes.
One of the group members manages the affairs of the group and is responsible for accounting for the GST transactions of the whole group. 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.
The Commissioner may approve 2 or more entities as a GST religious group. The membership requirements of a GST religious group include:
- The entity must be registered for GST.
- The entity and all other members of the GST religious group are endorsed as exempt from income tax.
- The entity and all other members are part of the same religious organisation.
- The entity is not a member of any other GST religious Group.
The benefits of being approved as a GST religious group is that the entities are not liable to pay GST on sales between the GST religious group members. However each member is also unable to claim GST credits on transactions between members. Each member must be individually registered for GST and account for all its transactions with parties outside of the GST religious group by lodging individual activity statements.
This is different to a GST group whereby only the representative member of the group lodges activity statements. .
Your organisation may choose to have some (or all) of it 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:
- endorsed 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. The main entity must also make a note in its records that its separately identifiable branch is to be treated as a separate entity (being a non-profit sub-entity) for GST purposes.
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 branch/ 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.
A non-profit sub-entity is a separate entity for GST purposes only. Non-profit sub-entities can access the same GST concessions as their parent entity. 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,
Other obligations like fringe benefits tax (FBT) and income tax are not affected by this arrangement.
- Charities consultative committee resolved issues document: Issue 2 - What flexibility exists for non-profits in registering for GST?