1 Principles of GST
This document describes the basics of how GST works and the effects it has on bridge clubs who may need to budget for running larger events etc. Figures are correct as of 1 December 2014.
Note on GST terminology:
"Net" means excluding GST
"Gross" means including GST
1.1 Registration for GST
Not for profit entities (i.e. most bridge clubs) only need to register for GST if their annual turnover exceeds $150,000.
Entrepreneurial clubs run for profit need to register if their annual turnover exceeds $75,000.
Consequently only the largest bridge clubs will need to concern themselves with GST registration. If you do, you will be required to complete BAS returns. More information is available on the ATO website.Australian Taxation Office - GST
1.2 Budgeting for events
This section is relevant if you are running a larger event (e.g. a congress) requiring a budget and describes the impact that GST can have on it.
1.2.1 If the organising body is not GST registered
If the organising body is not GST registered then it is simple:
- You get to keep all your income.
- If you are charged GST on an expense it doesn't matter - the total amount is your expense and that's the end of the matter.
For budget and accounting purposes, all your numbers should include GST.
1.2.2 If the organising body is GST registered
If the organising body is GST registered then matters are more complex:
- Income you receive will almost always be treated as including GST - that is 1/11th of it is not really your income - because you have to pay that to the ATO.
- Any GST you pay on expenses is not really an expense to you - because you reclaim it from the ATO.
- For budget and accounting purposes, all your numbers should exclude GST.
[Many people seem to assume that the GST you pay on expenses is a cost to you. Wrong - it is the other way around. The amount you have to pay to the ATO is based on your income not your expenses. You are a GST collection agent for the ATO, that is all.]
Example 1 - you pay $11,000 to hire a venue. The company sends you an invoice for $11,000 described as $10,000 plus $1,000 GST. The real cost to your event is $10,000 not $11,000. Yes you pay $11,000 cash to the company providing the venue but you later reclaim $1,000 from the ATO. Net cost to you is $10,000 - this is what should be in your budget and financial statements.
Example 2 - you charge $110 per pair for an event and get 10 tables. The total income you receive in cash is $2,200. But you are required to charge GST to your entrants. That means the $2,200 is treated as $2,000 plus $200 GST. So the real income to you is $2,000 not $2,200. Yes you receive $2,200 in cash from your players but you have to pay $200 of that to the ATO. Net income to you is $2,000 - this is what should be in your budget and financial statements. Note that the amount of GST works out to be 1/11th of the cash you receive, not 1/10th.
1.2.3 Complication with expenses
For bridge events, the vast majority of your income will probably be table money and entry fees - which are all subject to GST. So if you just take 1/11th off the total income you receive, your estimate of GST will be pretty accurate.
For expenses it is not so simple. Some expenses (e.g. wages, some food) are not subject to GST. So you might pay $1,100 wages - this time your real cost is the full $1,100.
Expenses therefore tend to be a mix of GST related items and non-GST related items. When budgeting, it is important to identify which is which. It is usually necessary to keep separate columns. For example:
Description of expense
|Net expense||GST||Gross expense|
You will spend $10,800 cash here but the cost to your event is $10,000. That is what should be in your budget and financial statements.