Circular 3: Funding from FaCSIA 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 Department of Families, Community Services and Indigenous Affairs (FaCSIA) and organisations with whom we have a funding relationship.
- Who should read this circular?
- What is the purpose of this circular?
- Providing FaCSIA with details of your ABN registration
- Endorsement of Income Tax Exempt Charity status
- Issuing invoices for tax purposes
- GST clauses for funding arrangements with FaCSIA
- Further Information
Who should read this circular?
Any enterprise - whether an incorporated company, association, sole trader or other entity – that receives funding from FaCSIA to provide services to people in the Australian community. Some of the services that FaCSIA 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.
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What is the purpose of this circular?
Circular Issue 3 seeks to inform and update you about the key issues that impact on the grants/payments you receive from FaCSIA as a result of The New Tax System.[ top ]
Providing FaCSIA with details of your ABN registration
- 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 FaCSIA 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 FaCSIA with your ABN registration, and if applicable GST registration and income tax exempt charitable status details.
Endorsement of Income Tax Exempt Charity status
The current system of self-assessment or confirmation by the Australian Taxation Office of charities' gift deductibility status and income tax exempt status ceased on 30 June 2000. Charities must have endorsement as a deductible gift recipient or an income tax exempt charity to receive these concessions from 1 July 2000.If you are currently:
- An income tax exempt charity you must obtain endorsement as an income tax exempt charity from the ATO to maintain your income tax exempt charitable status from 1 July 2000.
If you did not seek endorsement, did not apply sufficiently early, or have completed the ABN application form without indicating that you wish to be endorsed as an income tax exempt charity, you will lose your income tax exemption from 1 July 2000. In that case, contact the ATO and seek advice on what steps you can now take to recover income tax exempt status. There may be a delay in recovering that status.
- An income tax exempt organisation and are not a charity, or do not meet the definition of a charity, you do not need to seek endorsement and you maintain your income tax exempt status.
- An income tax exempt organisation and are not a charity, but think you might meet the definition of a charity, you must apply to the ATO to be endorsed as an income tax exempt charity.
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 FaCSIA 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 FaCSIA 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 FaCSIA with a copy of your Endorsement Application form(s).
Then as soon as the ATO confirms your status, you must provide FaCSIA 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 FaCSIA 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 FaCSIA with a copy of your ABN application form.
As soon as the ATO confirms your status, you must provide FaCSIA with a copy of income tax exempt charity endorsement letter from the ATO. FaCSIA will not consider your organisation to be a charity until you have provided this letter.
- If you are currently an income tax exempt charity and are not seeking, or do not intend to seek, endorsement as an income tax exempt charity, then…
You must inform FaCSIA of your decision, as you are not considered a charity from 1 July 2000.
Issuing invoices for tax purposes
A tax invoice is an invoice in a special form that the supplier of taxable supplies must provide for a purchase of more than $50 (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
- An ABN and are not registered for GST and you receive continuing or recurrent funding from FaCSIA, no tax invoice is required.
- An ABN and are not registered for GST and provide goods and services to FaCSIA and FaCSIA pays you on receipt of an invoice, from 1 July 2000 this invoice is still required and is not a Tax Invoice.
- An ABN and are registered for GST and your funding agreement specifies that FaCSIA 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 FaCSIA and FaCSIA pays you on receipt of an invoice, from 1 July 2000 you must provide FaCSIA with a tax invoice.
The above ABN for FaCSIA is to be used for all payments of grants to service providers of FaCSIA. If you are providing FaCSIA with a tax invoice with a value of $1,000 or more then this ABN, or FaCSIA's address, must be quoted on the invoice. If FaCSIA is providing you with a recipient created tax invoice we will quote our ABN and your ABN on the invoice.
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GST clauses for funding arrangements with FaCSIA
All funding arrangements, including contracts and agreements, which you have with FaCSIA, include GST clauses. These clauses outline the GST requirements that enable FaCSIA 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 FaCSIA
- the requirements of the funding agreement with your organisation where your organisation either is registered or not registered for GST
- that FaCSIA is to issue you with a recipient created tax invoice or, in the case where FaCSIA does not issue you with this, that you must provide FaCSIA with a tax invoice for taxable supplies.
Further Information
If you have any questions, or would like a copy of this circular, please telephone the FaCSIA Tax Manager on (02) 6244 1414.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.
Revised: November 2004
FaCSIATax Manager, Financial Services Branch
Australian Government Department of Family and Community Services
Phone: (02) 6244 1414