Common GST categories
Charities and non-profit organisations
Charities and non-profit organisations have GST concessions, including a higher registration threshold and GST-free treatment for certain non-commercial activities, but they still must follow GST rules for taxable sales.
Charities and non-profit organisations are a distinct group under the GST law. A non-profit organisation is one that does not operate for the profit of its members and does not distribute its profits. Many are also registered charities, and some are endorsed to receive tax-deductible gifts. Each status can affect the GST treatment of their activities.
The most noticeable concession is the higher GST registration threshold. Non-profit organisations must register for GST once their GST turnover reaches the threshold for non-profits, which is $150,000, rather than the $75,000 that applies to other businesses. Below that, registration is optional. Many smaller organisations choose to stay unregistered to reduce paperwork, but registering voluntarily can allow them to claim credits.
Charities and certain other entities can also treat some of their supplies as GST-free, especially where the supply is of a non-commercial nature, such as sales of goods well below their market value or sales of donated second-hand goods. There are also concessions for fundraising events in some cases. These concessions allow the organisation to raise funds without charging GST on every transaction.
Not everything is concessional. When a charity or non-profit makes ordinary taxable supplies, such as hiring out its hall at market rates, running a commercial cafe or selling merchandise at normal prices, it must charge GST once it is registered. Grants, donations and gifts are generally not payments for a supply, so they do not typically attract GST, though sponsorship arrangements in which the sponsor receives advertising may be taxable.
Common misunderstandings include thinking that charity status exempts the organisation from all GST, or that an ABN is the same as GST registration. An organisation can hold an ABN and not be registered for GST. Another mistake is forgetting that endorsement and registration are separate processes with different regulators, such as the ACNC for charity registration and the ATO for tax concessions.
Charities and non-profits should keep careful records, separate commercial and non-commercial income streams, and revisit their position when turnover changes. This content is general information only, so confirm your organisation's position with the ATO or a registered tax professional.
Worked example
A non-profit sports club has annual GST turnover of $120,000 from membership fees and a canteen. Because this is below the $150,000 non-profit threshold, it is not required to register. If its turnover reached $150,000 or more, it must register, and a $55 canteen sale including GST would carry GST of $55 / 11 = $5.
Practical tips
- Keep an eye on turnover. Non-profits must register once they reach the non-profit threshold, which is $150,000.
- Separate donations and genuine gifts from sponsorship or sales in your accounts, because they may be treated differently for GST.
- Check your ACNC and ATO endorsement status regularly, because concessions depend on those registrations staying current.