Circular 2: Recipients of Funding from the Department
- Section 1 - Who should read this Circular?
- Section 2 - Register for an Australian Business Number
- Section 3 – Income tax exemption and charity status
- Section 4 - Register for GST
- Section 5 - Tax invoices
- Section 6 - Advice and further information
Section 1 - Who should read this Circular?
You should read this circular if you are an enterprise (such as an incorporated company, association, sole trader or other entity that provides goods and services) that receives funding from the former Commonwealth Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA ) to provide services to people in the community.
This includes (but is not limited to) grants/payments for disability services, children's services, family relationship services and emergency relief services.
It does not include purchases made by the Department for its own internal use, such as stationery or computers.
This circular provides important information about how the Goods and Services Tax (GST) may affect the grant/payment that you receive. It will assist you in taking action that is essential if you wish to receive grants/payments from the Department.
- Register for your Australian Business Number by applying to the Australian Taxation Office (see section 2 of this circular)
- If you are an income tax exempt charity, apply to have this status endorsed by the Australian Taxation Office (see section 3 of this circular)
- If you are legally required to do so, you must register for the GST. Even if you are not required to do so, you may choose to register (see section 4 of this circular)
- If asked, agree, to allow the Department to produce Recipient Created Tax Invoices (see section 5 of this circular)
- Obtain any advice or information you need about The New Tax System to enable you to make informed decisions and comply with legal requirements (see section 6 of this circular)
Section 2 - Register for an Australian Business Number
An Australian Business Number, or ABN, is a single unique identifying number which will ultimately be used for dealings with government departments and agencies by anyone carrying on an enterprise such as providing goods or services for money in Australia.
The ABN is not the same as registration for GST. Even if you do not intend to register for GST, or if the services you provide are exempt from the GST, you should register for an ABN.
The Department will not provide you with funding unless you have provided us with your ABN.
We will do this because the law requires us to withhold 46.5 per cent of your payment as Pay As You Go-Withholding and send this to the Australian Taxation Office. You would not have access to this money until a tax assessment is made. We do not want to do this because it might reduce your ability to provide services to the community. The solution is for you to register for an ABN.
It is noted, some entities are not required to have an ABN. If this is you, you will be required to provide a 'statement by a supplier' declaration (available from the ATO at www.ato.gov.au) to ensure we do not have to withhold from your payment.
Have you registered for an Australian Business Number?
If you have not already done this, register now. It is a simple process. To register for an ABN:
- go to the Australian Taxation Office website and complete the online form, or
- phone the Australian Taxation Office Business Tax Enquiry Infoline on 13 28 66, obtain a hard copy of the registration form, complete it, and mail it, or
- get a copy of an ABN registration package from your local newsagent, post office or ANZ, Commonwealth, National Australia or Westpac banks, complete the ABN registration form and mail it to the Australian Taxation Office.
Section 3 – Income tax exemption and charity status
Depending on your grant/payment arrangements, staff from the Department may ask you if you have been endorsed as an income tax exempt charity. You need to be ready to provide this information.
Further information can be obtained from the ATO.
Section 4 - Register for GST
This section has four (4) parts.
You must register for the GST if you are carrying on an enterprise such as providing goods or services for money and have an annual turnover of $75,000 or more ($150,000 or more in the case of non-profit organisations). Turnover includes any grants/payments from government.
If your turnover is less than these limits you do not have to register for GST, but may choose to do so. You should consider the nature of your activities and seek tax advice. There is considerable information available to assist you in making your decision (see Section 6 of this circular).
Staff from the Department will be asking you about your GST registration. You need to be ready to provide this information and must tell us if you change your registration status.
PART A - If you are required (or choose) to register for GST
IIf you register for GST then you will have to send the Australian Taxation Office one-eleventh of the payments you get that are associated with any supply (providing goods or services for money or other benefits) or obligation to supply that is subject to GST.
Your grant/payment from the Department may be subject to GST and, if so, you will have to pay one-eleventh to the Australian Taxation Office. Your grant/payment will be increased to help cover this cost.
The payment that you receive from your customers or clients in return for supply of some goods or services may be exempt from GST (for example disability services and childcare) - you should seek tax advice to see if your services are exempt.
Finally, you can claim back (as an input tax credit) 10 per cent of the price of anything you purchase to help you provide your services, where the price includes GST.
PART B - If you choose not to register for GST
If you choose not to register for GST then you will not need to pay GST to the Australian Taxation Office on your the Department grant/payment or on any payments from customers or clients. Because you will not be paying the GST, your the Department grant/payment will not need to be increased.
Also, you will not be able to claim any input tax credit for the GST that you pay on your purchases..
If you are not registered for GST and if your payment from the Department comes after you have provided a service and raised an invoice for that service, then your invoice does not have to specify the words 'tax invoice' (see Section 5A). However, you should include your ABN on any invoice to assist us with administrative procedures.
PART C - Which is the right decision for you?
The Department cannot assist you in making this decision. You should seek tax advice (see Section 6).
PART D - Special structures for GST
You need to read this part only if you have adopted a special structure for GST purposes.
The tax legislation allows you to structure your organisation into separate parts, some of which you might register for GST and some of which you might not register. Examples are branches or sub-entities. You are likely to have obtained tax advice in making this decision and will understand the benefits and requirements.
When the Department staff ask for information on the GST registration status of your enterprise, in respect of specific services you supply and grants/payments that we make for that service, we need to know whether or not you have registered the specific part of your organisation (e.g. branch or sub-entity) that makes the supply and receives the grant/payment.
If you do not understand what is required, then please discuss this with your tax adviser.
Section 5 - Tax invoices
You need to read this section only if you have registered, are going to register, or are required to for GST.
This section has two (2) parts.
If you register for GST you will be issuing and receiving tax invoices. Tax invoices are evidence of the amount of GST that has been paid so that purchasers can claim input tax credits from the Australian Taxation Office. If you are not sure how Tax Invoices will apply to your enterprise you should seek tax advice.
PART A – Payments made on invoice
If your payment from the Department comes after you have provided a service and have raised an invoice for that service, then you need to ensure that your invoice meets the requirements for a Tax Invoice.
That is, it must have:
- A description and quantity of goods or services supplied
- The price of goods or services supplied
- The GST component of that price
- Your organisation's name and ABN
- The Department's name and ABN (36 342 015 855) or address
- The words 'tax invoice'
PART B – Payments made automatically
Where a prior written agreement is executed, the Department will create and fax to you the Recipient Created Tax Invoice we generate on your behalf when we make each payment of your grant/payment. If you do not have a fax number, then you should provide the number of a suitable fax - possibly that of your Treasurer or Accountant. We will not mail Recipient Created Tax Invoices.
Section 6 - Advice and further information
There is considerable government assistance directed to help enterprises understand GST. Some of the sources of this information are listed in this section.
Australian Taxation Office
There are several Australian Taxation Office booklets that are relevant to the enterprises that receive grants/payments from the Department. To find out the booklets and other documents that are available for your organisation, contact the Australian Taxation Office by:
- using the business Tax Reform Infoline on 13 28 66, or
- visiting the Australian Taxation Office website
The Australian Taxation Office website has other general information about the GST, and questions and answers for particular industries.
When you are ready to apply for an ABN, use the Business Entry Point website to lodge your application form electronically. On the Australian Taxation Office website you can download forms that will allow you to amend your ABN registration or to open new business accounts with the ATO. Completed forms should be mailed to the ATO.
The Department's Tax Manager
If you have any questions, or would like a copy of this circular, please telephone the the Department's Tax Manager on (02) 6244 8647.
We cannot help you with general tax questions and cannot provide tax advice. But we can explain what this circular means and what you will need to do to ensure that you can receive, or continue to receive, funding from the Department.
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 professional advisor.
Revised: July 2008
FaHCSIA Tax Manager, Financial Accounting Branch
The former Australian Government Department of Families, Housing, Community Services and Indigenous Affairs
Phone: (02) 6244 8647