Background
1. On 8 June 2000, the Government introduced an amendment to the GST Act creating a GST Religious Group to provide for all internal transactions within the Religious Group to be GST exempt without the Religious Group needing to consolidate financial accounts. The amendment became law on 30 June and the Anglican Church welcomes the change to the Act as it will provide significant benefits and cost savings to the churches.
2. In response the Anglican Church plans to form one national Anglican GST Religious Group. All entities joining a religious group will gain the benefit of internal transactions being GST exempt but avoid the problem of having to consolidate the accounts of all group members and provide one Business Activity Statement.
Benefits of membership in the Anglican GST Religious Group
3. Through membership of the Anglican GST Religious Group, all assessments paid by a parish to the diocese will be not be subject to GST, this also applies to all membership fees for any organisations within the Anglican Church across Australia. All other payments between members of the GST Religious Group, eg: between General Synod and dioceses, diocese and parish (and vice versa) and all payments between dioceses, parishes and agencies of the Church, will be not be subject to GST. This exemption will substantially reduce the paper work and cash flow management issues for the diocese, parishes and agencies of the church.
Treatment of Internal Transactions
4. All payments made between registered members of the GST religious group are not subject to GST and therefore fall outside the GST system. Please note that these transactions should be distinguished from GST-free supplies.
This means that internal transactions are not accounted for in terms of GST and therefore do not feature on the Business Activity Statement. Standard accounting treatment and invoicing policies for these internal supplies will remain as usual, however GST treatment will not apply and therefore a tax invoice is not required. Accounting systems should have a category of supplies called "not subject to GST" for items that fall outside the GST system. Items such as salaries & wages fall into this category, as will internal transactions.
Membership
5. To belong to the Anglican GST Religious Group, an entity needs to have an ABN, be registered for the GST and endorsed for ITEC (or have applied for endorsement). Because the transaction tracking requirements under the GST Religious Group are far less onerous than would have been the case prior to the amendment to the GST Act, parishes that have decided not to register may wish to rethink their decision. The ATO has agreed to fast track any late applications from churches.
6. There is no cost to become a member of the Anglican GST Religious Group and each member of the Group will continue to have responsibility to prepare and submit a BAS. Each member of the GST Religious Group must submit a BAS monthly or quarterly as planned. There are no requirements to operate a July-June financial year.
7. It is proposed each Registrar/General Manager list members of the GST Religious Group from within their diocese and provide the list of members in an approved form for inclusion in the national application. Constituent members of national organisations of the Anglican Church, such as Anglicare Australia members, mission agencies, others such as MU and GFS within the Anglican network will be listed nationally after a completed application form is received by Anglicare Australia. Schools and theological colleges may be listed by a diocese or listed nationally. Anglicare Australia is assisting the General Synod Office to compile the national membership list.The formation of the GST Religious Group will not impinge on the autonomy and functioning of any of the Group's members. There is no joint liability implications by joining the GST Religious Group; all members will retain their existing legal and tax status and responsibilities.
Group within the GST Religious Group
8. Where a diocese has formed a GST group under the provisions of the GST Act, (eg a group of all Trusts in the Diocese) the Group can be a member of the Anglican GST Religious Group. (The legislation does not prevent a GST Group from being a member of a GST Religious Group).
Liability
9. Tax liability rests primarily with the registered tax entity (the GST registered entity responsible for compiling and submitting the BAS). Thus for a GST registered parish, tax liability rests with the parish, although ultimate legal liability may rest with the legal entity - the Diocese or the diocesan property trust. This is currently the case under the GST Act. The Anglican GST Religious Group will not be a legal entity nor will it register for an ABN.
10. The General Synod Office will be the "principal member" which is the member nominated in the application to the Tax Commissioner to become a GST Religious Group. The "principal member" is responsible for listing the members of the GST Religious Group and to act as the point of contact for the GST Religious Group, but has no other responsibilities or status for tax purposes. Each of the members of the GST Religious Group retain their existing responsibilities under the GST Act and other related laws.
Financial Supplies
11. Under the GST Act financial supplies are classified as input taxed supplies. This means that input tax credits on acquisitions used to make these financial supplies cannot be claimed. A number of entities within the Anglican Church make financial supplies (eg: a Diocesan Development Fund) and may be unable to claim these associated input tax credits. This will result in a substantial drain on internal funds of the church.
12. The advantage of the GST Religious Group is that all internal supplies made to entities within the group are exempt for GST purposes. This means that members of the GST Religious Group are entitled to claim input tax credits on acquisitions relating to financial supplies made to other members of the group. The new GST Religious Group does not prevent members from forming their own GST sub-groups as per the original grouping provisions. These sub-groups may be formed in an attempt to apply the de minimus test on their remaining external financial supplies. If this test is passed, all input tax credits on acquisitions can be claimed. The de-minimus test will apply to transactions of a single registered entity or GST sub-group rather than to transactions of the whole GST Religious Group. Membership of the Anglican GST Religious Group will not affect the application of the de-minimus test to individual members of the GST Religious Group. This is our current understanding of the law as a result of consultation with the ATO.
Ecumenical Ventures
13. The membership of an ecumenical body in a GST Religious Group remains an unresolved issue. The ecumenical body could be a member of the GST Religious of any one of the participating denominations but it cannot be a member of more than one GST Religious Group. Yet, an ecumenical body is very likely to have transactions with all of its participating denominations. Ecumenical bodies could form their own GST Religious Group but transactions between the ecumenical body and the participating denominations will be GST liable. Discussions are continuing with the ATO on this issue.
Membership Lists
Please find below a list of GST Religious Group Members with the Anglican Church of Australia General Synod being the Representative of the Group:
GST Group List as at 25 Jan 2012
1. On 8 June 2000, the Government introduced an amendment to the GST Act creating a GST Religious Group to provide for all internal transactions within the Religious Group to be GST exempt without the Religious Group needing to consolidate financial accounts. The amendment became law on 30 June and the Anglican Church welcomes the change to the Act as it will provide significant benefits and cost savings to the churches.
2. In response the Anglican Church plans to form one national Anglican GST Religious Group. All entities joining a religious group will gain the benefit of internal transactions being GST exempt but avoid the problem of having to consolidate the accounts of all group members and provide one Business Activity Statement.
Benefits of membership in the Anglican GST Religious Group
3. Through membership of the Anglican GST Religious Group, all assessments paid by a parish to the diocese will be not be subject to GST, this also applies to all membership fees for any organisations within the Anglican Church across Australia. All other payments between members of the GST Religious Group, eg: between General Synod and dioceses, diocese and parish (and vice versa) and all payments between dioceses, parishes and agencies of the Church, will be not be subject to GST. This exemption will substantially reduce the paper work and cash flow management issues for the diocese, parishes and agencies of the church.
Treatment of Internal Transactions
4. All payments made between registered members of the GST religious group are not subject to GST and therefore fall outside the GST system. Please note that these transactions should be distinguished from GST-free supplies.
This means that internal transactions are not accounted for in terms of GST and therefore do not feature on the Business Activity Statement. Standard accounting treatment and invoicing policies for these internal supplies will remain as usual, however GST treatment will not apply and therefore a tax invoice is not required. Accounting systems should have a category of supplies called "not subject to GST" for items that fall outside the GST system. Items such as salaries & wages fall into this category, as will internal transactions.
Membership
5. To belong to the Anglican GST Religious Group, an entity needs to have an ABN, be registered for the GST and endorsed for ITEC (or have applied for endorsement). Because the transaction tracking requirements under the GST Religious Group are far less onerous than would have been the case prior to the amendment to the GST Act, parishes that have decided not to register may wish to rethink their decision. The ATO has agreed to fast track any late applications from churches.
6. There is no cost to become a member of the Anglican GST Religious Group and each member of the Group will continue to have responsibility to prepare and submit a BAS. Each member of the GST Religious Group must submit a BAS monthly or quarterly as planned. There are no requirements to operate a July-June financial year.
7. It is proposed each Registrar/General Manager list members of the GST Religious Group from within their diocese and provide the list of members in an approved form for inclusion in the national application. Constituent members of national organisations of the Anglican Church, such as Anglicare Australia members, mission agencies, others such as MU and GFS within the Anglican network will be listed nationally after a completed application form is received by Anglicare Australia. Schools and theological colleges may be listed by a diocese or listed nationally. Anglicare Australia is assisting the General Synod Office to compile the national membership list.The formation of the GST Religious Group will not impinge on the autonomy and functioning of any of the Group's members. There is no joint liability implications by joining the GST Religious Group; all members will retain their existing legal and tax status and responsibilities.
Group within the GST Religious Group
8. Where a diocese has formed a GST group under the provisions of the GST Act, (eg a group of all Trusts in the Diocese) the Group can be a member of the Anglican GST Religious Group. (The legislation does not prevent a GST Group from being a member of a GST Religious Group).
Liability
9. Tax liability rests primarily with the registered tax entity (the GST registered entity responsible for compiling and submitting the BAS). Thus for a GST registered parish, tax liability rests with the parish, although ultimate legal liability may rest with the legal entity - the Diocese or the diocesan property trust. This is currently the case under the GST Act. The Anglican GST Religious Group will not be a legal entity nor will it register for an ABN.
10. The General Synod Office will be the "principal member" which is the member nominated in the application to the Tax Commissioner to become a GST Religious Group. The "principal member" is responsible for listing the members of the GST Religious Group and to act as the point of contact for the GST Religious Group, but has no other responsibilities or status for tax purposes. Each of the members of the GST Religious Group retain their existing responsibilities under the GST Act and other related laws.
Financial Supplies
11. Under the GST Act financial supplies are classified as input taxed supplies. This means that input tax credits on acquisitions used to make these financial supplies cannot be claimed. A number of entities within the Anglican Church make financial supplies (eg: a Diocesan Development Fund) and may be unable to claim these associated input tax credits. This will result in a substantial drain on internal funds of the church.
12. The advantage of the GST Religious Group is that all internal supplies made to entities within the group are exempt for GST purposes. This means that members of the GST Religious Group are entitled to claim input tax credits on acquisitions relating to financial supplies made to other members of the group. The new GST Religious Group does not prevent members from forming their own GST sub-groups as per the original grouping provisions. These sub-groups may be formed in an attempt to apply the de minimus test on their remaining external financial supplies. If this test is passed, all input tax credits on acquisitions can be claimed. The de-minimus test will apply to transactions of a single registered entity or GST sub-group rather than to transactions of the whole GST Religious Group. Membership of the Anglican GST Religious Group will not affect the application of the de-minimus test to individual members of the GST Religious Group. This is our current understanding of the law as a result of consultation with the ATO.
Ecumenical Ventures
13. The membership of an ecumenical body in a GST Religious Group remains an unresolved issue. The ecumenical body could be a member of the GST Religious of any one of the participating denominations but it cannot be a member of more than one GST Religious Group. Yet, an ecumenical body is very likely to have transactions with all of its participating denominations. Ecumenical bodies could form their own GST Religious Group but transactions between the ecumenical body and the participating denominations will be GST liable. Discussions are continuing with the ATO on this issue.
Membership Lists
Please find below a list of GST Religious Group Members with the Anglican Church of Australia General Synod being the Representative of the Group:
GST Group List as at 25 Jan 2012