GST Registration for Not-for-Profits: The $150,000 Threshold

Introduction

Goods and Services Tax (GST) is a broad-based tax of 10% on most goods, services, and other items sold or consumed in Australia. For not-for-profit (NFP) organisations, understanding GST obligations is critical to avoid penalties and maximise input tax credits. The key trigger for GST registration is the $150,000 GST turnover threshold. This article explains how the threshold works, what supplies count, and how NFPs can manage their GST responsibilities effectively.

Understanding the $150,000 GST Turnover Threshold for NFPs

What is GST Turnover?

GST turnover is the total value of all supplies made by an entity in the course of carrying on an enterprise, excluding GST itself. For NFPs, this includes income from fundraising, grants, membership fees, sales of goods, and any other business-like activities. The Australian Taxation Office (ATO) uses two measures: current GST turnover (actual turnover for the current month and previous 11 months) and projected GST turnover (expected turnover for the next 12 months).

The $150,000 Threshold

An NFP must register for GST if its GST turnover (current or projected) is $150,000 or more. This threshold is higher than the $75,000 threshold for for-profit businesses, recognising the unique nature of NFP operations. Once registered, the NFP must charge GST on most supplies and can claim input tax credits for GST paid on business purchases.

Calculating Projected GST Turnover

Projected GST turnover is based on reasonable estimates. For a new NFP, you must estimate the first 12 months of turnover. For an existing NFP, you look at the current month and the next 11 months. If at any point your projected turnover exceeds $150,000, you must register within 21 days.

Example: NFP with Fundraising Events

Consider a small charity that runs two annual fundraising dinners. Each dinner raises $80,000 from ticket sales and donations. The total annual turnover from these events is $160,000, exceeding the $150,000 threshold. The charity must register for GST and charge GST on ticket sales (unless the supply is GST-free or input-taxed). Donations are generally not subject to GST, but the ticket component is a supply.

Exempt and Input-Taxed Supplies for NFPs

GST-free Supplies

Some supplies are GST-free, meaning no GST is charged, but the supplier can still claim input tax credits. For NFPs, common GST-free supplies include:

• Most basic food items (e.g., bread, milk, fruit)
• Medical services and health-related supplies
• Education courses (if accredited)
• Child care services
• Religious services (in some cases)

Input-taxed Supplies

Input-taxed supplies are those where no GST is charged, and the supplier cannot claim input tax credits for related expenses. For NFPs, common input-taxed supplies include:

• Residential rent (e.g., from housing projects)
• Financial supplies (e.g., interest income, loans)
• Sale of residential premises (unless new)

How These Affect the Threshold

When calculating GST turnover, you include all supplies, even GST-free and input-taxed supplies. However, input-taxed supplies are included in the turnover calculation but do not allow input tax credits. This distinction is crucial for NFPs that have mixed supplies.

Non-Profit Sub-entities and GST Grouping

What is a Non-Profit Sub-entity?

An NFP may have multiple branches, divisions, or chapters that operate independently. The ATO allows certain NFPs to treat each branch as a separate entity for GST purposes if they meet the sub-entity criteria. This can help smaller branches stay below the $150,000 threshold and avoid registration.

GST Grouping for NFPs

Alternatively, NFPs can form a GST group to consolidate GST obligations. This is useful when multiple related entities have combined turnover above the threshold but individually are below. Grouping simplifies reporting and allows input tax credits to be shared. Requirements include:

• All members must be registered for GST
• They must be under common control (e.g., same governing body)
• They must apply to the ATO for grouping

Advantages and Requirements

Grouping reduces administrative burden but requires careful record-keeping. Each member remains liable for GST, but one representative member lodges the BAS. NFPs should assess whether grouping or sub-entity treatment best suits their structure.

Voluntary Registration – When and Why?

Benefits of Voluntary Registration

Even if an NFP’s turnover is below $150,000, it may choose to register voluntarily. Benefits include:

• Claiming input tax credits on purchases (e.g., equipment, rent, professional fees)
• Enhancing credibility with donors and grant providers
• Simplified compliance if turnover is close to the threshold

Claiming Input Tax Credits

Voluntary registration allows the NFP to recover GST paid on business expenses. For example, if an NFP spends $10,000 on office supplies including $909 GST, it can claim that $909 back. However, the NFP must then charge GST on its supplies, which may affect pricing for members or beneficiaries.

Impact on Pricing and Grants

If an NFP charges GST, it must decide whether to absorb the cost or pass it on. For grants, many government grants are GST-inclusive, meaning the grant amount includes GST. The NFP must remit the GST portion to the ATO. Understanding these implications is vital before registering voluntarily.

Record-Keeping and BAS for NFPs

Specific Record-Keeping Requirements

All GST-registered NFPs must keep records for at least five years. Required records include:

• Tax invoices for purchases and sales
• Receipts and payment records
• Bank statements and deposit books
• GST returns (BAS) and working papers
• Records of grants and donations (to distinguish supplies from gifts)

Completing BAS for NFPs

Business Activity Statements (BAS) are used to report GST. NFPs typically lodge quarterly or annually. The BAS requires:

• Total sales (including GST-free and input-taxed supplies)
• GST on sales
• GST on purchases (input tax credits)
• Net GST payable or refundable

Reporting Grants and Donations

Grants are generally considered supplies (unless they are genuine gifts). If a grant is for a specific service or outcome, it is likely a supply subject to GST. Donations (with no strings attached) are not supplies and are not included in GST turnover. Proper classification is essential.

Common Pitfalls and How to Avoid Them

Misunderstanding the Threshold

Many NFPs mistakenly think the $150,000 threshold applies only to taxable supplies. In fact, it includes all supplies (GST-free, input-taxed, and taxable). For example, an NFP with $100,000 in GST-free food sales and $60,000 in input-taxed rent has a total turnover of $160,000 and must register.

Failing to Register on Time

If turnover exceeds the threshold, registration must occur within 21 days. Late registration can result in penalties and backdated GST liability. NFPs should monitor turnover monthly and use the ATO’s GST turnover calculator.

Incorrectly Treating Supplies

Classifying a supply as GST-free when it is taxable can lead to underpayment of GST. For example, selling merchandise at a fundraising event is generally taxable, not GST-free. Conversely, treating a donation as a supply may overstate turnover.

Not Claiming Input Tax Credits

Registered NFPs often miss claiming input tax credits on purchases because they lack proper tax invoices. Always request tax invoices for purchases over $82.50 (including GST).

GST Calculator & Tools

gstcalculatorau.com offers a suite of free tools to help NFPs manage GST. The GST Calculator can quickly determine the GST component of a transaction, while the turnover calculator helps estimate whether you exceed the $150,000 threshold.

Step-by-Step Guide to Using the GST Calculator for NFPs

1. Visit gstcalculatorau.com and select the “GST Calculator” tool.
2. Enter the total amount (including GST) or the GST-exclusive amount.
3. Choose whether you are adding or removing GST.
4. Click “Calculate” to see the GST amount and the base amount.
5. Use the “Turnover Calculator” to input your monthly supplies and project annual turnover.

Sample Calculation Table

Common GST Mistakes to Avoid

• Not registering when turnover exceeds $150,000 – Monitor monthly and register within 21 days.
• Confusing donations with supplies – Donations without reciprocal benefit are not supplies; grants for services are supplies.
• Failing to issue tax invoices – For taxable sales over $82.50, provide a tax invoice to allow the buyer to claim input tax credits.
• Overlooking input tax credits on purchases – Keep all tax invoices and claim credits on BAS.
• Incorrectly classifying supplies as GST-free – Only specific items are GST-free; most fundraising sales are taxable.
• Not adjusting for non-profit sub-entities – If you have branches, consider whether they can be treated separately.

Conclusion

Understanding the $150,000 GST turnover threshold is essential for not-for-profit organisations in Australia. By correctly calculating turnover, recognising exempt supplies, and maintaining proper records, NFPs can comply with GST laws and avoid costly mistakes. Whether you are below the threshold and considering voluntary registration, or already registered, the tools and resources at gstcalculatorau.com can simplify your GST management. Always consult a registered tax agent for advice specific to your situation.