I have been operating a small fund for the environment for some time now and all the money has been actually coming from my own pocket mainly.
Now we are getting larger and more sophisticated, I dont want to do anything wrong by the ATO so I would like to know when a charity can start to pay some higher workers who do fulltime hours and contractors who provide major services?
I know the money or profit as such (takings/gifts etc) cannot be distributed to the owners or members but are you allowed to legally pay a fulltime worker?
I am led to beleive that MBF medical for example is a non profit organisation but they surely pay their staff a wage to answer calls etc?
When does this become legal to do or is it ok at any level of funding or any size of charity to start paying fulltime workers who have no part of ownership etc of the charity?
3 responses so far ↓
1 diogenese19348
To keep a tax exempt status, you need to account for a certain percentage of your donations going directly to the use of whatever you are a charaty for (be it school, research, whatever. Administrative and contribution costs DO NOT count towards this percentage. I do not remember what the percentage is, but it is well over 50%. It was a former roomate that was involved in the March of Dimes that explained it to me.
Now there are two levels for tax exempt, one for the organization, and one for the person giving the donation. For a donor’s contribution being tax deductable, the percentage is much higher. That is why certain organizations such as police brotherhoods may be tax exempt, but contributions are not tax deductable.
Aside from all that, you are allowed to pay full time workers whatever you feel their work is worth.
The rules and regulations are quite complex, you need to get some compitent advice on it, I only mean to give you the broad outlines of it.
-Dio
2 elliebear
Hasn’t your Tax Preparer told you about this?
Let me guess, you don’t have one.
You should have one for your personal accounts,
and an Accountant for the Charity.
There is a percentage amount allowed for Workers.
Check on it.
3 dpanic27
Not for profit organizations can always have paid employees it just a matter of what percentage of funds are being used to pay them and how you get the money. Additionally you will still be subject to employment tax, and FICA even if you are a tax-exempt organization. You are correct about not being able to pay owners or members, but employees are a legitimate exspense for the organization and you are also allowed to pay a Director of the organization so long as you stay within certain guidelines.