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When you're finalising objects for an exhibition, auditioning for a play or coordinating a festival, tax is probably the last thing on your mind& However the GST comes into effect in less than a year, and there are implications for the cultural sector. Here are some common questions and answers to help you get a handle on the new tax system.

 What is the GST? The GST is a broad-based tax of 10 per cent on most supplies of goods and services in Australia.

When will the GST become effective? The GST comes into effect on 1 July 2000.

What impact will the GST have on business? Registered entities will be required to pay a 10 per cent GST on sales of most goods and services. If you are registered, you will be able to offset any GST paid on business inputs against GST on sales, and remit the balance to the Australian Taxation Office. If you have paid more GST on inputs than you collected on sales, you will be entitled to a refund.

Who has to register? Any organisation or business with an annual turnover exceeding $50 000 ($100 000 for non-profit bodies) must register for GST. Businesses or organisations below these limits may also choose to register.

How will GST apply to grants? The GST will apply to all payments provided to GST registered organisations in exchange for goods or services. The GST will apply where a grant payment is made to a registered organisation in exchange for a supply of goods or services or where there is a specified outcome for the payment. The supply can be either to the granting organisation or to a third party (in the case of a grant this is usually the public). GST will not apply to unconditional grants (i.e. the granter makes a general payment and does not receive any specific benefits or rights in return, and the recipient does not have to use the money for a specific purpose).

What if the grant recipient is not registered for GST purposes? GST will not apply to grant payments where the recipient organisation is not registered for GST.

How can grantees prepare for the GST? In making grant applications or requesting payment on current projects, organisations should consider potential GST liability on grants payments for activities to be carried out after 1 July 2000. If a GST liability exists, grant recipients will be required to provide a GST invoice to the Department. The Department will provide assistance in this process to grant recipients if required.

What about donations? Donations (which are not payments in return for goods and services) will be GST-free. All donations made under the Commonwealth Government's cultural tax incentive programs - the Cultural Gifts and Bequests Programs and the Register of Cultural Organisations - will not be subject to the GST.

And sponsorships? Corporate sponsorship will attract GST where it is in exchange for a benefit such as naming rights. While businesses providing sponsorship will be required to pay GST on the sponsorship, they will generally be able to receive input tax credits for the GST. This will mean that the business net financial position will not be affected.

More information? The Australian Tax Office (ATO) is running a comprehensive campaign to provide the information you require to operate under the new tax system. This includes a series of seminars and a booklet designed specifically for the cultural sector. A Charities Consultative Committee will be established to assist charitable and not for profit organisations and an Advisory Board will advise government on all aspects of implementing the new tax system. The ATO will run a public rulings program and you can also apply for private rulings on the application of GST law to specific circumstances. The GST Start-Up Assistance Office will administer the $500 million GST assistance program for small and medium sized businesses, charities and education enterprises preparing for the GST.

Contact

More information on the GST and other elements of the Government's tax reform package as well as the registration process is available from:

• the ATO business information line 13 24 78 (TTY 1300 130 478);
• the ATO website www.taxreform.ato.gov.au;
• Fax From Tax
• on 13 28 60; and
• the ATO at PO Box 9935 in your capital city.

• Document ID: 11371 |
• Last modified: 5 February 2008, 6:00pm