Fed: Charities grapple with GST implications

AAP General News (Australia)
12-10-1999
Fed: Charities grapple with GST implications

By Stephen Spencer, Economics Correspondent

CANBERRA, Dec 10 AAP - Red noses and Legacy badges will be GST-free, and the daffodils
may be - but charity dinners and auctions will be hit by Australia's new consumption tax.

This week's deal between the government and the Australian Democrats should help lessen
the impact of the GST on charities, but it still leaves a number of grey areas.

Charitable activities such as operating soup kitchens or providing cheap meals for
pensioners, emergency accommodation, food hampers and blankets will be free of tax.

Charities will can also claim back any GST they have paid to provide the meals, accommodation
or other services.

"All charitable activities are GST-free," Treasurer Peter Costello today promised.

"Only if you got into commercial activities can you come into the system."

The problem for charities is that the money for their work is often raised through
commercial activities.

"It's simply untrue that charities will be exempt," opposition community services spokesman
Wayne Swan told ABC Radio today.

"They will pay the GST whether they are under $100,000 or whether they are over $100,000."

The red noses that raise more than $3 million for research into cot death each year
will be exempt from GST because they are considered tokens in return for a donation, and
all donations are GST-free.

Legacy badges fall into the same category, as does sponsorship of people in the 40-Hour
famine, and money handed over to street collectors and doorknockers such as those collecting
for the Salvation Army's Red Shield Appeal.

However, there's a question mark over whether daffodils sold every year by the Cancer
Council are tokens - or goods.

"This year we raised $2.1 million from Daffodil Day, and if the GST applied we would
lose $210,000 to the federal government in tax," the council's chief executive, Dr Andrew
Penman, said.

Sponsorships such as a donation to a church building fund in return for a plaque could
also be taxed.

But the GST will definitely apply to charity gala dinners where businesses and the
wealthy fork out hundreds, and some times thousands, of dollars for a seat at a fundraising
event.

The same applies to charity auctions, with charities now likely to have to deduct a
10 per cent GST from the inflated prices usually paid for items of sporting or entertainment
memorabilia.

When it comes to lamington drives or church fetes the situation is less clear-cut.

If the church or charity running the event has a turnover of less than $100,000, it
does not have to charge GST.

It can also artificially structure its affairs to take advantage of this provision,
by carving itself up into smaller divisions, each with a turnover of less than $100,000.

However, charities that choose this option also deny themselves the ability to claim
back any GST they have paid, raising their costs and cutting into their profits.

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KEYWORD: TAX NIGHTLEAD

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