CHOICE membership

GST Charged on a Donation?

gst
charities

#1

This is most definitely the most confusing invoice i even got online, I chose the round up to nearest $10 for charity option

Is 10% of my donation going to the tax man or
was the site just extra lazy with their invoice math

Order total: $152.02
Online Only 30% Discount -$45.61
$10 off Loyalty -$10.00
Charity Donation: $3.59
Total Due: $100.00
GST inclusive: $10.00
You saved: $55.61

#2

Curious … so I read that as- you bought a product that as part of the settlement of the debt you were offered the option by the vendor of the product to donate up to 10$ to some charity by rounding the final cost of the product up to the next 10$?

Total price of order: 152.02
You got a 30% discount equal to 45.61 bringing the total down to 106.41
You got a further loyalty discount of 10.00 bringing the total down to 96.41 - still just for the purchase
Rounding up to the next 10.00 for the charity donation added 3.59 - the rounded up total now 100.00
Of that 100.00, exactly 10.00 was the GST component (inclusive), so the GST Exclusive amount is 90.91

Or to put that another way:

	                         GST Inc        GST Ex
Order	                     $152.02       $138.20
Discount  (30%)               $45.61        $41.46
Loyalty Discount              $10.00         $9.09
Total Due (Excl Donation)     $96.41        $87.65
Donation                       $3.59         $3.26
Total Due (Incl Donation)    $100.00        $90.91
Saving                        $55.61        $50.55

So all the numbers they are using are GST inclusive ie have a GST component, therefore you paid GST on the $3.26 donation of $0.33 making the GST inclusive donation $3.59 … The saving is the order amount minus the total due excluding the donation.

Note I am not an accountant … yes, somewhat confusing - not sure I’ve got it right. I’d welcome someone with a clearer head at this time of night (or at any time) to correct my attempt …

I didn’t think charity donations attracted GST and I’m not sure I’ve ever seen the words ‘Tax Invoice’ on a pure donation receipt.

More info here from the ATO …

The following page also looks deceptively helpful:

The type and status of the charity seems to have significant bearing, along with a number of other possible considerations …


#3

Wonderful maths @draughtrider.
Interpretation is reliant on how @carlos has presented the details.
Notably that the gst amount was $10.00 and the total payment was $100.00 gst included. The saving of $55.61 aligns with the total.

The interesting question here is how the business reports the sale on their quarterly BAS (That’s the form the company sends to the Tax Office aka ATO to report sales, and show how much gst they owe the government for those not familiar with the system).

In the example the business might simply report sales as the amount of $96.41 gst inclusive with gst owing of $8.76. Or $9.09 due on sales of $100 gst included.

If the alarm bells are not ringing they should be. @carlos had indicated gst of $10.00 on sales of $100.00 gst included. Not $9.09 per @draughtrider which I agree with.

Option one is the business does not have any idea about how gst to works. There is no way of determining what money is going where.

Option two is they are genuinely passing on the donation. Option one still applies in principle. Further they will have a discrepancy in reconciliation between their sales invoice record and actual financial records for tax purposes.

Option three is they do know what they are doing and are cooking the books, relying on some dodgy accounting. Note if any donation is made by the business it may be treated as a business donation. There is some scope for naive manipulation of the amount as a tax deduction or simply a misrepresentation of public goodwill from the business.


#4

Option 3b or is this 4 – that the round up amount going to charity is not the customers donation to charity, it is the business’ donation to charity. Thus the round up is taken as an agreed ‘purchase price’ against the order. The business then makes the donation from its profits and takes the deduction itself.

Also not being an accountant I won’t venture whether that would withstand scrutiny, but it would not surprise if it did. Are there any clarifying words in the business’ T&C on how they do it?


#5

Last night I heard the alarm bells vaguely in the distance, I had some music on that didn’t need more cowbell … but I missed this rather obvious discrepancy even though I’d calculated the SGT ex amount - and it was staring (and ringing) - I did mention I wasn’t an accountant :slight_smile: If $10.00 was the GST then the GST ex amount was $100.00 - I’ve tried making the figures line up but can’t - even if I try paying GST on the GST and adding GST on the donation I come up short at $9.97 … of course that is silly, but :slight_smile:

Agreed. I’ve seen some hair-raising calculations that accountants claim are legitimate and made the ‘mistake’ of asking for an explanation … As soon as tax of any kind is involved it seems to blend science with philosophy and religion … at least that’s how it seems to me!

It would be interesting to see the vendor’s explanation …


#6

I contacted the store, we’ll see if they give me a donation receipt
I believe the invoice should be more like

Order = $96.41 includes GST of ~$8.76
Plus Donation $3.59 includes GST of exact 0

Total Order $100 includes GST of ~$8.76

But like someone said the rounding up may simply be a donation to the corporations profits that they then pass off as their own tax deduction, which I would certainly consider dishonest but legal.