Circular 1A: Private Service Providers and the GST
- Any Questions on this Circular
- Registration for an Australian Business Number
- Why Register for GST?
- Tax Invoices
- Your Responsibilities
- Sources of Advice
- Further Information
The Department of Social Services Requirements for Grants under the New Tax System
The points raised in this letter should be familiar to you from the broader publicity given to The New Tax System and GST. However some of the implications may not be as well understood, and this and subsequent circulars will help to ensure that we all comply with our GST obligations.
Any Questions on this Circular
If you have any other queries please refer to the information on government agencies available to help organisations prepare for the GST given at the end of this circular. If you have any specific questions about how the GST affects your funding arrangement with the Department, call our Tax Manager on (02) 6146 6893.
Registering for an Australian Business Number
The Government has established a single identifying number for each organisation or person engaged in business in Australia. This is called an Australian Business Number.
Your organisation needs to register for an Australian Business Number. This number will be a single identifier for your dealings with the Australian Tax Office and for future dealings with the Department or other government departments and agencies. It will not replace the tax file number but will eventually replace Australian Company Number or Australian Registered Body Number.
You must register for an Australian Business Number by contacting the Australian Tax Office.
We will need to know your Australian Business Number before we enter into any funding arrangement with you.
One reason that we insist that you have an ABN to enter into an agreement with us is that, otherwise, the provisions for Pay As You Go-Withholding would come into effect. We would be required to withhold funds at the top marginal tax rate plus the Medicare levy from the grant and remit this to the Australian Tax Office on your behalf. Any funds withheld under the Pay As You Go system would be quarantined until a tax assessment is made.
Why Register for GST?
If you are registered for GST you may have to pay one-eleventh of any payment you get for providing a service or goods to people, to the Australian Taxation Office. For example, you may have to pay the Australian Taxation Office one-eleventh of any funding you receive from us under one of our funding initiatives. At the same time you can claim back the 10% GST you pay on purchases relating to the initiative.
Some of the services you provide to people may not be subject to GST. If you are not sure as to whether GST applies to your services, you should contact the Australian Taxation Office or your accountant for advice.
In order to ensure that we correctly treat any funding to you, we will need to know whether or not you have registered (or intend to register) for GST purposes at the time we commence the funding arrangement.
If your business has an annual turnover of less than $75,000 ($150,000 for non-profit organisations) you do not have to register for GST. However you should carefully consider the advantages and disadvantages of registration. If you intend not to register for GST purposes, we need to know this.
If your GST registration changes at any time during the period of the contract (ie you do not initially register but do so later, or you cease to become registered) you should let us know immediately. Funding to the organisation may need to be adjusted from the time that your registration status changes.
Where the the Department payment is subject to GST, the Department is entitled to claim back the GST component (10%) from the Tax Office. In order to claim back the GST paid, we need to have a tax invoice for every payment in a prescribed format. We propose that we automatically generate these invoices (i.e. recipient created tax invoices) and save you this effort. We will include an appropriate written agreement as part of your funding agreement that allows us to do this, if this is relevant in your case.
It is your responsibility to determine the appropriate tax status for your structure, financial threshold and nature of your work, and your responsibility to register and meet any subsequent tax obligations.
Sources of Advice
The Australian Tax Office has responsibility for determining issues of liability to tax. If you have any queries on how the tax arrangements affect the individual circumstances of your organisation, we strongly suggest that you contact the Australian Tax Office.
The Commonwealth Ombudsman's Office is available to assist organisations experiencing particular difficulties in resolving GST problems through the ATO. The Office's National Complaints Line number is 1300 362 072.
If you have any questions, or would like a copy of this circular, please telephone the the Department Tax Manager on (02) 6146 6893.
People considering issues relating to the application of the GST should not solely rely on the information in this Circular. Further, comprehensive advice relevant to your particular circumstances should be obtained either from the Australian Taxation Office or from an appropriate tax advisor.
Prepared: March 2000
Revised: July 2016
The Department Tax Manager, Financial Accounting Branch
The Australian Government Department of Social Services
Phone: (02) 6146 6893