Circular 3: Funding from the Department and the Impact of the GST
This is the third in our series of circulars about how the introduction of The New Tax System, and in particular the Goods and Services Tax (GST), affects the funding arrangements between the former Department of Families, Housing, Community Services and Indigenous Affairs and organisations with whom we have a funding relationship.
- Who should read this circular?
- What is the purpose of this circular?
- Providing the Department with details of your ABN registration
- Endorsement of Income Tax Exempt Charity status
- Issuing invoices for tax purposes
- GST clauses for funding arrangements with the Department
- Further Information
Any enterprise - whether an incorporated company, association, sole trader or other entity – that receives funding from the Department to provide services to people in the Australian community. Some of the services that the Department funds include grants/payments for disability services, children's services, family relationship services and emergency relief services. This Circular does not cover the Child Care Benefit payment as it is not affected by the GST.
Circular Issue 3 seeks to inform and update you about the key issues that impact on the grants/payments you receive from the Department as a result of The New Tax System.
- If you have not registered and need an ABN faster than the ATO's standard turnaround time, we advise you to contact the ATO. The ATO will require you to provide proof of your identity and then they will issue you with a safety net letter overnight that applies for 14 days, on the condition that you forward a full ABN application within the 14 day period.
If you wish to receive funding from the Department in future you should submit your application as soon as possible. We recommend that you use the electronic lodgement process for application, as the ATO is able to process these within a maximum of 7 days rather than use the paper applications as these take 14 days to process. Apply electronically through the Business Entry Point website or arrange registration through a tax agent's electronic lodgement system.
Alternatively, printed application forms can be obtained by contacting the ATO's helpline on 13 24 78, or from post offices, newsagents and branches of the Commonwealth, Westpac, ANZ or National Australia banks.
- If you are establishing a new enterprise and need to register for an ABN in order to have business dealings with us, there are two actions to take immediately:
- contact the ATO for advice on and any appropriate action for ABN registration, and
- provide the relevant part of the Department with your ABN registration, and if applicable GST registration and income tax exempt charitable status details.
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Charities must have endorsement as a deductible gift recipient or an income tax exempt charity to receive concessions.
How do you seek endorsement?
You must have an ABN before you can seek endorsement of deductible gift recipient status and/or income tax exempt charitable status. When you completed your application for an ABN you would have also indicated that your organisation is a charitable institution and that you intended to apply for endorsement as a deductible gift recipient. After you submitted this form to the ATO they will have sent you an endorsement application form to complete and return. Endorsement is necessary for all but a small number of organisations specifically listed in the tax law.
When to inform the Department of your Income Tax Exempt Charitable status
If you have sought and received confirmation from the ATO of your income tax exempt charitable status, then
You must provide the Department with a copy of the notification of income tax exempt charity endorsement letter from the ATO, confirming this status.
If you have sought, but not yet received, confirmation from the ATO of your income tax exempt charitable status, then
Provide the Department with a copy of your Endorsement Application form(s).
Then as soon as the ATO confirms your status, you must provide the Department with a copy of the income tax exempt charity endorsement letter from the ATO. This may reduce your grant/payment as a result of the savings that the Department is required to recover from all grants/payments to organisations that are not an endorsed charity.
If you are considering seeking ATO endorsement as a new income tax exempt charity, then
If you decide to seek endorsement, you must provide the Department with a copy of your ABN application form.
As soon as the ATO confirms your status, you must provide the Department with a copy of income tax exempt charity endorsement letter from the ATO. The Department will not consider your organisation to be a charity until you have provided this letter.
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A tax invoice is an invoice in a special form that the supplier of taxable supplies must provide for a purchase of more than $75 (GST exclusive).
There are two types of tax invoices that are issued for taxable supplies:
- tax invoice issued by the supplier
- recipient created tax invoice
If you receive funding from the Department and you have:
- An ABN and are not registered for GST and you receive continuing or recurrent funding from the Department, no tax invoice is required.
- An ABN and are not registered for GST and provide goods and services to the Department and the Department pays you on receipt of an invoice, this invoice is still required and is not a Tax Invoice.
- An ABN and are registered for GST and your funding agreement specifies that the Department creates a RCTI, we generate and fax you a recipient created tax invoice.
- An ABN and are registered for GST and provide goods and services to the Department and the Department pays you on receipt of an invoice, you must provide the Department with a tax invoice.
The Department's Australian Business Number is 36342015855-002.
The above ABN for the Department is to be used for all payments of grants to service providers of the Department. If you are providing the Department with a tax invoice with a value of $1,000 or more then this ABN, or FaHCSIA's address, must be quoted on the invoice. If FaHCSIA is providing you with a recipient created tax invoice we will quote our ABN and your ABN on the invoice.
All funding arrangements, including contracts and agreements, which you have with the Department, include GST clauses. These clauses outline the GST requirements that enable the Department to enter into a funding arrangement with you. These clauses specify:
- that you must have an Australian Business Number (ABN) and that you must quote the ABN to the Department
- the requirements of the funding agreement with your organisation where your organisation either is registered or not registered for GST
- that the Department is to issue you with a recipient created tax invoice or, in the case where FaHCSIA does not issue you with this, that you must provide FaHCSIA with a tax invoice for taxable supplies.
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 how your grants/payments are affected from 1 July 2000.
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.
Tax Manager, Financial Accounting Branch
The former Department of Families, Housing, Community Services and Indigenous Affairs
Phone: (02) 6244 8647