24/07/2007 - 22:00

Not for profit : GST, gift deductibility boost

24/07/2007 - 22:00

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Western Australian not-for-profit groups will move to capitalise on changes to GST and deductible gift recipient legislation in the recent federal budget, which will come into effect this month.

Not for profit : GST, gift deductibility boost

Western Australian not-for-profit groups will move to capitalise on changes to GST and deductible gift recipient legislation in the recent federal budget, which will come into effect this month.

Smaller not-for-profit organisations will benefit from changes to the GST registration threshold for annual turnover, which has been increased from $100,000 to $150,000 (gifts are not included in assessing turnover).

Organisations with a turnover below $150,000 may elect not to register for GST, while those with a turnover between $100,000 and $150,000, previously required to register for GST, are now eligible to deregister if appropriate.

If these organisations are voluntarily registered, they have the option of reporting annually, rather than quarterly or monthly.

The threshold for tax invoices has also been increased, from $50 to $75, meaning invoices are not required for supplies worth up to $75, exclusive of GST.

More extensive changes have been made at a federal level to the legislation governing deductible gift recipients – organisations and funds that are eligible to receive tax deductible gifts. 

The new amendments, passed in April, build on legislation introduced in 2004, which sought to protect gifts made by a donor who received a minor benefit from the transaction.

Previously, gifts were not eligible to be tax deductible if there was a benefit received by the donor, such as a meal at a charity event.

The 2004 legislation ruled that tax deductions were only available for donations over $250, where the value of the minor benefit received was either less than $100 or 10 per cent of the donation, whichever was smaller.

Under the recent changes to threshold levels, donations of $150 or more may be tax deductible, and the minor benefit value may be up to $150, or 20 per cent of the donation.

PricewaterhouseCoopers tax partner Frank Cooper said the new thresholds for tax deductible benefits would provide more certainty around donations made at charitable events, such as fundraising dinners and charity auctions.

“Many would say these changes are a bit more realistic,” he said.

“It helps the not-for-profit sector have more confidence when dealing with the public at charitable events.”

Other legislative changes include making all DGRs eligible for review by the Australian Tax Office, and allowing organisations with multiple gift funds to consolidate them into one fund, provided clear accounting records are kept to demonstrate gift monies are used for their donated purpose.

Organisations holding DGR status for all of their activities are no longer required to maintain a separate bank account for their gift fund, with the exception of those working in cultural and environmental areas, or harm prevention.

Where a DGR gift fund has been codified in an organisation’s constitution, the new changes cannot be applied until the constitution is amended.

The changes also allow donations of shares in listed public companies to be eligible for tax deductions, according to the market value of the shares on the day the gift is made to a DGR.

The shares must have been held for at least 12 months and have a market value of $5,000 or less.

This particular amendment was passed in June, but is awaiting royal assent.

Mr Cooper said the general changes would both improve accountability and enhance the practicality of requirements.

“Most of the changes are around good governance and record keeping, tightening the administrative side,” he said.

There are more than 450 active DGR-listed funds in WA, including school building funds, arts groups, hospital funds and environmental organisations.

Other not-for-profit organisations are registered outright as a DGR, including some large charitable groups.

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