Goods and Services Tax

What is the GST? The GST is a broad-based, indirect tax, imposed on private consumption in Australia. It replaced the wholesales tax on 1 July 2000.

What is the GST? It was designed to collect tax on the value-added at each stage of the production and supply of goods and services. It is a tax on the consumption in Australia, including goods and services that are imported.

How to register for GST To register you need to complete an application which is available form the ATO. You use the same application to register for an Australian Business Number (ABN). The GST registration number and the ABN will be the same.

How to register for GST You can register electronically through the Business Entry Point at www.business.gov.au or send your completed application form to the ATO. Your Tax Agent can also lodge your application through the Electronic Lodgement System.

Who registers for GST? An entity carrying on an enterprise can register for GST. You MUST register for GST if you are an entity carrying on a business in Australia and your turnover is $75,000 turnover per annum. For non-profit organisations, turnover is $150,000 per annum.

Who registers for GST? You MAY choose to register if you are an entity carrying on an enterprise with an annual turnover of less than $75,000 ($150,000 for non-profit organisations).

Who registers for GST? If you are registered for GST you MUST add 10% on taxable supplies sold to customers. By registering for GST, you are entitled to claim Input Tax Credits for the GST included in the price paid for things purchased and the GST paid on importations if they are for use in your enterprise.

What if the business in not registered for GST? It does NOT include GST in the price of its sales. It CANNOT claim Input Tax Credits for the GST included in the price of its purchases, even if they are for business use – resulting in higher business costs. If you are not registered for GST, businesses WILL NOT be able to claim Input Tax Credits for supplies from your enterprise.

What is an Entity? An entity is: An individual A body corporate A sole trader A body politic A partnership An unincorporated association or body of persons A trust A superannuation fund

What is an Enterprise? Basically an enterprise covers commercial activities but does not include hobbies. So a business is an enterprise for GST purposes.

What is subject to GST? Most goods, services and anything else consumed in Australia are subject go GST. These are defined as Taxable Supplies. Other supplies that are not subject to GST are referred to as: GST free supplies Input taxed supplies

What is a Supply for GST purposes? A supply includes any of the following: A supply of goods – buying a TV A supplies of services – hairdressing Provision of advice or information – an accountant providing income tax advice A creation, grant, transfer, assignment or surrender of any right – granting a sub-lease of your commercial premises.

Types of Supplies Depending on the nature of its activities, a supply provided by a business can be classified as: Taxable Supply Input Tax Supply GST-Free (zero-rated) Supply

Taxable Supplies Apart from Input Tax Supplies and GST-free Supplies any other supply is subject to GST and is called a Taxable Supply.

Input Taxed Supplies If a supply is classified as Input Taxed Supply, NO GST is applied to the selling price. A supplier of Input Taxed Supplies IS NOT ENTITLED to claim Input Tax Credit for anything acquired to make the supply.

Examples of Input Taxed Supplies Financial supplies such as loans, bank fees, dealings in money and issuing securities Residential rent (but NOT commercial rent, such as hotel and motel rent) Sales of residential premises (but not new homes or commercial premises) Food at school canteen (optional) Certain transactions involving precious metals

GST-Free Supplies Like Input Taxed Supplies, NO GST is applied to the selling price of a GST-Free Supply. It is different from an Input Taxed Supply in that a supplier of GST-Free Supplies IS ENTITLED to claim Input Tax Credit for anything acquired to make the supply.

Examples of GST-Free Supplies Exports Certain health and medical care Certain education courses, course materials and related excursions or field trips Some basic food items Child care Charities and gift-deductible bodies Religious services Water and sewerage International travel

Examples of GST-Free Supplies Certain transactions involving certain precious metals Supplies through inwards Duty Free shops Crown land Farm land Subdivision of farm land for residential purposes Cars for disabled people International mail Salaries and Wages Capital contributions and withdrawals

How does GST work? GST is charged at each stage of the production and supply, with businesses charging GST in the price of goods, services or anything else they supply.

How does GST work? 10 When you sell or supply goods or services as part of your business, you must add a 10% GST to the selling price. This is called GST Payable. The buyer of the supply will pay the amount to you. When you acquire goods or services for your business, you can claim a refund on the GST you have paid on those purchases. This is called Input Tax Credits.

How does GST work? The GST liability flows along the supply chain and is actually included in the price paid by the customer, who, CANNOT, claim input tax credits.

How does GST work? Suppliers who are registered and who are supplying Input Taxed Supplies ARE NOT allowed to charge GST. However they are allowed to pass on the added costs to their customers through higher selling prices.

How does GST work? At the end of each tax period the supplier will calculate the total amount of GST collected from sales (GST Payable) LESS the amount of GST paid on purchases (Input Tax Credits). If the amount collected is greater than the amount paid, the supplier will remit the difference to the ATO. If the supplier has paid more GST than was collected, he will get a refund from the ATO.

How often is GST paid? Monthly. If GST turnover is $20 million or more, or choose to pay monthly. Quarterly. If GST turnover is less than $20 million and the ATO has not advised you that you must pay monthly. (This applies to most small businesses). Annually. If you are voluntarily registered for GST (GST turnover less than $75,000 of $150,000 if a charity).

When is GST paid? If pay quarterly: Quarter Due date September (July, August, September) 28 October December (October, November, December) 28 February March (January, February, March) 28 April June (April, May, June) 28 July

When is GST paid? If pay monthly: If pay annually: To be submitted 21 days after the end of each month. If pay annually: To be submitted the date your income tax return is due or 28 February following the end of the financial year covered by that return or information report, if you are not required to lodge an income tax return.

Paying and Reporting GST GST can be paid: Electronically, via Direct Debit, BPAY ® or Direct Debit. By mailing a cheque or money order to the ATO or By taking the original pre-printed payment advice to any Post Office and paying by cheque or EFTPOS (from a savings or cheque account only, not a credit card account) or In cash (up to $3000). Only the net amount of GST is paid to the ATO, ie, the GST to be paid less GST credits plus or minus any adjustments required.

Business Activity Statement To reduce the number of forms you have to fill in, the GST return has been made part of the Business Activity Statement (BAS). A BAS calculation sheet is available to assist with the calculation of the amount of GST that must be remitted to, or is to be refunded by, the ATO. Businesses can submit their BAS returns electronically if they have set this facility up with the ATO. A BAS return is emailed to the business before the due date.

Assessment Working out your GST liability and entitlements to Input Tax Credits is your responsibility. If you are not happy with a decision/ruling from the Commissioner of Taxation, you have the right to challenge and lodge an objection.

Issuing Tax Invoices for Taxable Sales If a business makes Taxable Sales, its GST registered customers and clients will need Tax Invoices to claim their GST credits for purchases of more than $82.50 (including GST). Different requirements for sales under $1,000 and those over $1,000.

Tax Invoice under $1,000 Tax Invoice Ross Moonlite Pty Ltd 15 Point Road Perth WA 6000 ABN: 32 123 456 789 Date: 1 October 2009 To: T Bird 354 1st Avenue Mt Lawley WA 6023 Description of Supply Total Wood supplies $825.00 Total price includes GST

Tax Invoice over $1,000 Tax Invoice Ross Moonlite Pty Ltd 15 Point Road Perth WA 6000 ABN: 32 123 456 789 Date: 1 October 2009 To: T Bird 354 1st Avenue Mt Lawley WA 6023 Qty Description Unit Price GST Total 50 Wooden beams $150.00 $15.00 $8250.00 10 Support posts $40.00 $4.00 $440.00 Total Amount Payable $8690 Total price includes GST of $790.00

Purchases that relate to private use A GST credit may NOT be claimed for any portion of a business’ purchase that is used for private purposes. If a business purchases goods or services that are used for both business and private use, a GST credit can only be claimed for the portion of the purchase relating to the intended business use. If it transpires that the actual use of the goods or services purchased differs from the intended business use, the business may need to adjust the amount of GST credits claimed.

Accounting for GST Cash basis: A business with an annual gross revenue of less than $2 million may use either the cash or the accrual basis. Pay over GST on sales when the cash is received for the sale. If part payment is received, GST is remitted on the part received and Claim GST on purchases when those purchases are paid for AND a tax invoice is held for those purchases.

Accounting for GST Accrual basis: A business with an annual gross revenue of more than $2 million must use the non-cash/accrual basis of GST. Pay over GST on sales when the sales invoice is issued for that sale, and Claim GST on purchases when the tax invoice is received for purchases made or services received.

Acknowledgement This slide show was produce from material gathered from the following sources: Financial Management in School, DET, WA. Mark Chamberlain, BEWA Seminar, Perth, WA. GST Principles and Features, Evelyn Hogg.