Registering with the ATO
To be able to comply with taxation obligations and to apply for taxation concessions, an association may need to register for an ABN.
An ABN is an identifier that an incorporated association would use to:
- register for GST and claim input tax credits;
- register for PAYG withholding;
- deal with investment bodies;
- apply to the ATO for endorsement as a deductible gift recipient or a tax concession charity;
- deal with other government departments and agencies; and
- deal with the ATO on other taxes.
An association must have an ABN in order to be endorsed as a tax concession charity and/or a deductible gift recipient (DGR). (DGRs are explained in Fundraising.)
When applying for an ABN, an association is able to register for GST, PAYG and FBT all on the same application form. A Tax File Number will also be issued with the ABN.
How to apply for an ABN
Registration with the ATO is conducted through the Australian Business Register (ABR). You can apply:
- Electronically though the Australian Business Register (www.abr.gov.au);
- By downloading an application form from the ATO website;
- In paper form through the Tax Office 1300 130 248; or
- Through a tax agent.
Goods and Services Tax (GST)
Goods and Services Tax (GST) is a tax on transactions. Where goods and services are sold, the amount received for the sale may be subject to GST. Similarly, where goods and services are purchased, the purchaser may be able to claim a GST credit for the GST included in the amount paid. Charities that are registered with the ACNC may apply to access a number of GST concessions if they are also registered for GST.
The GST is a broad-based tax of 10 per cent on the sale of most goods, services, real property or other things consumed in Australia.
GST is a tax on transactions that is paid at each step in the supply chain. GST-registered businesses (or those required to be registered) are liable for GST on the goods and services they supply, which they generally aim to recover from the buyer or recipient by 'grossing up' the sale price of their goods and services. These businesses can also generally claim back the GST they paid on business purchases or supplies as input tax credits. An input tax credit is what you claim to get back the GST you pay on the price of goods and services you purchase for the business or association. The cost of GST flows along the supply chain and is finally included in the price paid by the end consumer. End consumers can't claim input tax credits, so while the liability for paying the GST rests with GST-registered businesses and organisations, the economic cost is intended to be borne by the end consumer.
The most obvious GST concession for not-for-profit associations is a higher GST registration threshold. Associations must register for GST only if their annual turnover is $100,000 or more, but can choose to register if their annual turnover is lower. Other organisations or businesses must register for GST if their annual turnover is $50,000 or more.
Associations that are also charities can access a broader range of GST concessions including:
- GST-free status for non-commercial activities;
- GST-free sales of donated second-hand goods;
- GST-free status for raffles and bingo tickets;
- Sales in connection with certain fund-raising events may be input taxed (that is, no GST liability is imposed, however no input tax credits will be available for purchases made in respect of those sales); and
- GST credits for volunteer expenses.
Remember that an association that is a charity must be endorsed by the ATO as a tax concession charity in order to access any of these additional concessions.
More information on GST concessions and how to register for GST may be found on the ATO website.
Fringe Benefits Tax (FBT)
Fringe Benefits Tax (FBT) is a tax paid on any benefits that an employer provides to their employees outside their salary or their superannuation, such as the use of a work car, phone or any other benefit.
If your organisation is a registered charity (other than a registered charity that is an institution established by a law of the Commonwealth Government, a state or a territory) it may apply for the FBT rebate (capped at $30 000).
If an association provides fringe benefits to its employees, the association may be liable to pay FBT. This is quite separate from income tax, and even if the association is exempt from income tax, it may still incur an FBT liability.
Benefits exceeding the total value of $2000 in an FBT year (which runs from April 1 to March 31) must be reported on an employee’s payment summary as a 'grossed-up' amount. Grossing-up means increasing the value of the benefit to reflect the gross salary that the employee would have to earn to buy the benefit using after-tax dollars. These amounts must also be reported to the ATO.
Please note that reimbursing an unpaid volunteer for out-of-pocket expenses does not make them an employee. Generally, benefits provided to volunteers do not attract FBT.
The FBT concessions that will apply to some incorporated associations include:
- an exemption from FBT; and
- the FBT rebate.
Associations that are public benevolent institutions or health promotion charities may be eligible for an exemption from FBT. The exemption is subject to a cap on the annual fringe benefit amount that can effectively be paid to an employee. For the latest threshold cap that applies to your association, consult the ATO. If the cap is exceeded for any employee, the association would be liable for FBT on the excess.
Associations that are ‘rebatable employers’ may be entitled to a rebate on the gross FBT payable. Rebatable employers are certain non-government, non-profit organisations. Organisations that qualify for the FBT rebate include:
- certain religious, educational, charitable, scientific or public educational institutions;
- trade unions and employer associations;
- not-for-profit organisations established to encourage music, art, literature or science;
- not-for-profit organisations established to encourage or promote a game, sport or animal races;
- not-for-profit organisations established for community service purposes
- not-for-profit organisations established to promote the development of aviation or tourism
- not-for-profit organisations established to promote the development of Australian information and communications technology resources, and
- not-for-profit organisations established to promote the development of the agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources of Australia.
Remember, an association that is also a charity (including a PBI) must be endorsed by the ATO as a tax concession charity in order to access the FBT exemption or the FBT rebate.
More information on FBT and how to register for FBT may be found on the ATO website.
Deductible gift recipient (DGR) status
As well as applying for the tax concessions listed above, charities can apply for DGR status when registering with the ACNC.
The benefit of being a deductible gift recipient is that donations made to your organisation may be tax deductible. If a donation is tax deductible, donors can deduct the amount of their donation from their taxable income when they lodge their tax return.
Donors can find out more about making tax deductible gifts and contributions on the ATO's website.
If your organisation is a charity that wants to apply for DGR status, you will need to be registered with the ACNC first.
If your charity is already a DGR, check the ACNC Register to see if it has automatically been registered with the ACNC. If it is not registered, you will need to apply to register with them so you can continue to receive tax deductible donations. You must do this by 2 December 2013.
All DGRs should review whether they are required to register with the ACNC by following the guidance provided by the ATO. For a short summary, you can also read the factsheet on DGR’s.
Public benevolent institutions (PBI)
Some incorporated associations that are charities will also qualify for public benevolent institution (PBI) status. This is different from being classified as a charity. Only some charities will be classified as PBIs. A PBI has to be a not-for-profit institution set up for the relief of poverty, sickness, suffering, distress, misfortune, disability or helplessness. For PBI status, the emphasis is on the provision of a service directly to those people requiring 'benevolent relief' in order to meet their particular needs.
Examples of public benevolent institutions are: women's refuges, hostels for homeless people, disability support, crisis care and emergency relief services.
Not-for-profit associations that do not provide direct benevolent relief will not be assessed as public benevolent institutions, despite their good deeds.
Examples of associations that are generally not regarded as public benevolent institutions are: social groups, associations that charge a fee, self-help groups, Boy Scouts and Girl Guides, cultural groups, hobby clubs and conservation groups.
More detailed information can be accessed about PBIs on the ACNC website.