
Issue No 31		17 September 1999

Trades Hall

What the GST Means for Unions

The Labor Council auditors, A J Williams & Co, have provided the following information in respect of the impact of GST on affiliated unions. These comments are based on the prevailing GST legislation at the date of writing (10 September 1999).

GST taxation payable on union income

Unions will be subject to GST on goods and services provided in respect of periods after 30 June 2000. Income which will be subject to GST includes:

� Membership fee income

� Rental of leased premises (unless residential)

� Advertising in union journal

The GST impost on this income, and other income subject to GST, is referred to as output tax, which equals one eleventh of the income received.

Interest on investments will not be subject to GST and some other income also may not attract a GST output tax liability . Unions should seek their own advice in respect of other forms of income they receive.

GST incurred by unions on goods and service acquired

Unions will be paying GST at the rate of 10% on most goods and services acquired after 30 June 2000. Generally, (subject to certain exceptions), unions will be able to recover this tax, by claiming it as an input tax credit, offsetting it from the output tax referred to above and paying the difference to the taxation office.

It is most important that unions take advice in this area so as to ensure that they claim all the input tax credits to which they are entitled, but no more. It is equally important to ensure that the necessary documentation is kept on hand in order to establish, to the satisfaction of a tax office auditor, the entitlement to the input tax credits which are claimed.

Transitional issues - supplies spanning 1 July 2000

Where a membership receipt covers a period which spans the GST commencement date of 1 July 2000, the proportion of the receipt which relates to the pre commencement period is GST free and the balance which relates to the post commencement period is subject to GST.

Fees received from members on or after 1 July 2000 in respect of periods prior to that date are not subject to GST. Fees received from members before 1 July 2000 in respect of periods subsequent to that date are subject to GST.

A typical situation is where a member pays for the whole 2000 calender year in one payment. An apportionment will be required irrespective of the date of receipt.

Similarly, contracts which span the GST commencement date, such as leases of property or service contracts, will need to be reviewed in order to establish the GST impact.

Registration of Branches

Where unions operate through divisional or branch structures, they may account for GST on that basis (subject to certain conditions which most unions would satisfy).To take advantage of this, the Federal Office will need to apply to the Commissioner of Taxation for branch registration.

Where the branch approach is adopted, each branch will be treated on a stand alone basis for GST. Transactions between the Federal Office and branches will be treated for GST as if they were with external parties. Thus sustentation fees paid by branches to the Federal Office will be subject to GST. This does not result in tax being paid on 'internal' transactions as the branches will have the benefit of an input tax credit.

Cash or Accrual Basis

Unions with an annual turnover of $1m or more are required to account for GST on an accrual basis, unless the Commissioner of Taxation approves the cash basis. The accrual basis would result in the GST output tax payable in respect of membership fees becoming due at the time members are billed. Clearly, this would be unsatisfactory for many unions.

The Commissioner has a discretion to permit cash accounting if he is satisfied that it is appropriate, having regard to certain criteria specified in the GST legislation.

Our auditors, in conjunction with the ACTU, have prepared a submission to the Taxation Office seeking approval, in principle, that unions be permitted to use the cash basis.

Accounting for GST

The recommended accounting treatment for GST in your accounting records is to use a general ledger clearing account.

It will be necessary to identify payments for acquisitions on which GST has been incurred. One eleventh of the consideration (which represents the GST paid) is allocated to the clearing account with ten elevenths being charged to the normal expense or capital account.

Similarly, one eleventh of the consideration received in respect of GST taxable income (including membership contributions) will be credited to the clearing account with the balance being credited to income.

The balance of the clearing account at the end of each GST payment period will represent the amount payable to the Australian Taxation Office. If the annual turnover of the union is less than $20m, GST will be paid quarterly. Where turnover exceeds $20m per annum, the frequency is monthly.

Adjusting membership fees

Most unions will find it necessary to adjust fees as from 1 July 2000 in order to recover the GST. The increase needed to preserve the union's pre GST financial position will be 10% less the savings which should result from the removal of sales tax on many of the goods which the union presently purchases. This sales tax may be the amount of tax added directly to the cost of goods (and often shown separately on supplier's invoice) and also the sales tax embedded in supplier's charges (that is, sales tax paid by the supplier which is built into his selling price). Failure to take account of sales tax savings will mean that unions are contravening the price exploitation provisions which have been introduced into the Trade Practices Act.

It follows from the above, that overall increases in membership fees should be something less than 10%.

Conclusion

These are just some of the GST issues which are expected to impact unions. Unions are strongly advised to become conversant with these and other issues and to address them as soon as possible, seeking appropriate advice as required.

For further information, contact the Labor Council or Peter Wales at A J Williams & Co (telephone 9286 5555)

Disclaimer: This information is issued exclusively for the general information of unions, their officers and staff. The contents are not a substitute for specific advice and should not be relied upon as such. Accordingly, whilst every care has been taken in the preparation of the information, no responsibility is accepted for persons acting on this information.

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Issue 31 contents

Interview: Sadly Vindicated
Labor�s foreign affairs spokesman Laurie Brereton has spent the past year warning that East Timor would explode without a UN peacekeeping force. Now he�s had to watch his predictions come true.

International: In the Bunker
One of the last reporters to leave East Timor, Workers Online's HT Lee remembers the week that Dili burned.

Republic: Tarred With the Same Brush
Neville Wran asks why it is that the most fervant monarchists are also the most eager union-bashers.

Unions: Hard Labour
Prisoner educators argue more attention needs to be given to rehabilitation through teaching, but they�re facing an uphill battle to convince authorities.

History: Labour and Community
A history conference in Wollongong next month will look at the changing role for labour into the next century.

Review: Bobbin' Up - 40 Years On
Forty years after its first publicaton and several European translations Bobbin Up, a classic of industrial fiction, is coming home.

Satire: East Timor Poll Triumph: Support for Jakarta Up 21 Per Cent
The Indonesian Government has declared that it is pleased with the result of the independence referendum in which 21% of East Timorese voted in support of maintaining links with Indonesia.

» Asylum Call for Independence Supporters

» Nurses Collect Vital Medical Supplies

» Industrial Faction for Pre-Conference Caucus

» Lees Backs Freeloader Laws

» Outsourcing Decision - Banks Under the Gun

» Reith Forces Truckies to Speed

» He Talks the Talk - But Can He Walk the Walk?

» Commission Tells AGC to Get Into the Nineties

» Cost-Cutting Puts Clinical Waste in Landfill

» Prisons Reject Free Computers

» US Defence Giant Eyes Welfare Sector