• Non-profit organisations

    If your preschools is a non-profit organisation, you may need to know about:

    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.

    Find out more

    End of find out more

    Concessions available

    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 GST applies to sales commonly made by charities

    Sales commonly made by charities include:

    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
    End of example

    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 the goods have been either:

    • donated
    • 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.

    End of example

    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.

    End of example

    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.
       
    • it maintains an independent system of accounting
    • it can be separately identified by the nature of its activities or by its location.

    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.

    End of example

    Find out more

    GST and fundraising dinners or similar functions

    End of find out more

    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.

    Registering 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.

    End of example

    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
    • 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 Concessions available).

    Find out more

    Charities and deductible gift recipients – Non profit

    End of find out more
    Last modified: 23 May 2014QC 17807