1. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 1 Goods and Services Tax Chapter 5 GST

2. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 2 OVERVIEW OF THE GST SYSTEM GST is a flat rate tax (currently 10%) on the supply of goods and services in Australia. The GST applies to the supply of Goods and Services. Most suppliers of goods and services must register for GST.

3. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 3 GST Registration Suppliers of goods and services in Australia must register if they: Who must register? –are entities carrying on an enterprise. –have an annual turnover of $50 000 or more: –($100 000 or more for non-profit organisations) –(No threshold for taxi drivers).

4. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 4 An individual A body corporate A partnership An incorporated association A Trust A superannuation fund. An Entity

5. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 5 Refers to any commercial activity. Not private pursuits such as hobbies. An Enterprise

6. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 6 Annual turnover, for threshold purposes, excludes any GST included in the sales price. It is optional for suppliers to register for GST if their annual turnover is less than $50 000 or $100 000 for non-profit organisations. Annual Turnover

7. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 7 Suppliers are required to register within 21 days of being eligible for registration. To register, a supplier must apply for an ABN as well as specifically registering for GST. The ABN is also the GST registration number. THE REGISTRATION PROCESS

8. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 8 They may lodge an application on the approved form to the ATO; or Register electronically online via www.business.gov.au. www.business.gov.au Registration by Suppliers for GST A business with an ABN might not need to register for GST initially, but may do so later.

9. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 9 To charge GST in the price of taxable supplies. To issue tax invoices to customers who request them. To report and remit GST charged for taxable supplies to the ATO at regular intervals. Claim input tax credits for GST paid on purchases. Consequences of Registration The business may claim the GST paid as a credit against any GST remitted to the ATO.

10. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 10 TAXABLE TRANSACTIONS Under the GST system transactions are broadly categorised as either ‘supplies’ or ‘acquisitions’.

11. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 11 Supplies Supplies are goods and services sold by a business. 1.TAXABLE SUPPLIES 2.GST FREE SUPPLIES 3.INPUT TAXED SUPPLIES. There are three types of supplies:

12. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 12 Taxable Supplies Goods and services tax is paid only on taxable supplies made by the business. With taxable supplies, the business supplier collects the GST on behalf of the ATO. The GST is subsequently remitted to the ATO.

13. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 13 1.The supplier must be registered for GST. 2.The supply must be for a price. 3.The supply is made in the course of a business. 4.The supply is made within Australia. REQUIREMENTS FOR A TAXABLE SUPPLY

14. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 14 TAXABLE SUPPLIES Registered suppliers of taxable supplies must include the GST charged in the price of goods and services sold. The total invoice price is usually shown at the GST-inclusive price. To work out the GST included in the invoice price of a taxable supply, use the following calculation: GST = GST- inclusive invoice price 11

15. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 15 GST-FREE SUPPLIES Any GST-free supplies are non-taxable supplies-no GST is charged. The total invoice price is usually shown at the GST-inclusive price

16. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 16 GST-Free Supplies Most food Exports Most health services Most educational supplies Most childcare services Sales of businesses as going concerns Water and sewage.

17. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 17 INPUT TAXED SUPPLIES Input-taxed supplies are tax-exempt supplies. No GST is charged in the price of the supply (nor is any input tax credit claimed) by the supplier.

18. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 18 Input Taxed Supplies FINANCIAL SUPPLIES Loans, bank accounts, shares, superannuation, life insurances. Supplies of residential premises for sale (except the sale of new homes, which are taxable supplies). Supplies of residential premises for rent.

19. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 19 Acquisitions Acquisitions are the goods and services bought by a business.

20. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 20 TYPES OF ACQUISITIONS Creditable acquisitions GST ‑ free acquisitions Imports (special case)

21. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 21 CREDITABLE ACQUISITIONS Creditable acquisitions are acquisitions (i.e. purchases) for which businesses are entitled to claim input tax credits.

22. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 22 Requirements for a Creditable Acquisition The business purchaser must be registered for GST. The GST is included in the price of the acquisition. The acquisition is for business purposes (not private purposes).

23. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 23 GST ‑ FREE ACQUISITIONS Any acquisition (purchase) where GST is not charged by the supplier is a GST ‑ free acquisition. The GST ‑ free acquisitions involve purchases where no GST is included in the price. Because no GST is included in the price, there is no input tax credit to claim for these purchases.

24. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 24 GST ‑ Free Acquisitions Wages and salaries paid for the supply of labour services. Payments for financial supplies (e.g. loan interest, account charges or superannuation contributions. Payments for any tax ‑ free supply. Any payment for goods or services from an unregistered supplier.

25. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 25 IMPORTS Importers must pay GST on any goods imported into Australia, regardless of whether or not they are registered for GST. Only registered persons, however, can claim an input tax credit for GST paid on imports. Importers who are registered for GST may be able to defer the payment of GST.

26. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 26 GST RECORDS All GST ‑ registered businesses are required to regularly lodge a Business Activity Statement (BAS) to the ATO. A BAS is a report of the GST (and other taxes) payable by the business for each tax period. Records are also required to verify GST transactions reported in the BAS.

27. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 27 GST SOURCE DOCUMENTS Businesses must keep records for GST purposes for at least five years. TAX INVOICES ADJUSTMENT NOTES

28. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 28 Tax Invoices Tax invoices are issued by suppliers for taxable supplies. They are issued to allow purchasers to claim input tax credits for their purchases. Purchasers cannot claim input tax credits on their BAS without tax invoices from suppliers. Suppliers of taxable supplies must issue tax invoices within 28 days of being requested to do so by purchasers.

29. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 29 Exemption Tax invoices are not required if the GST exclusive value of the supply is $50 or less. Records still need to be kept, though, to support any input tax credit claims.

30. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 30 REQUIREMENTS FOR TAX INVOICES Tax invoices under $1000 Tax invoices over $1000 Tax invoices with a combination of taxable and non-taxable supplies

31. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 31 ADJUSTMENT NOTES An adjustment note is, in effect, a refund notice to adjust a paid tax invoice for GST purposes.

32. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 32 REPORTING AND REMITTING STEPS Determine the tax period (monthly or quarterly) Determine the tax period (monthly or quarterly) Determine the accounting method to use (cash or accruals) Determine the accounting method to use (cash or accruals) Calculate the net GST payable for each tax period (payable or refundable) Lodge a BAS after the end of each tax period (plus payment) Lodge a BAS after the end of each tax period (plus payment)

33. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 33 THE TAX PERIOD The tax period for reporting and remitting GST by suppliers will be either monthly or quarterly Suppliers whose annual turnover is less than $20 million can choose either monthly or quarterly tax periods. Monthly tax periods are compulsory for suppliers with an annual turnover of $20 million or more.

34. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 34 The Cash Method The cash method of accounting means sales are recognised at the time of receipt, and purchases at the time of payment. Suppliers may select the cash method if: In all other cases, suppliers must use the accruals method of accounting. The supplier's annual turnover is $1 million or less; or The supplier already uses the cash method of accounting for income tax purposes.

35. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 35 The Business Activity Statement (BAS) Suppliers registered for GST purposes must prepare and lodge a Business Activity Statement (BAS) for each quarterly or monthly tax period. A completed BAS shows the net amount of GST payable (as well as other taxes) payable for the period.

36. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 36 Due Dates for Quarterly BAS The monthly BAS is due within 21 days after the end of the month. Quarter 1 (July–September) 28 October Quarter 2 (October– December) 28 February Quarter 3 (January–March) 28 April Quarter 4 (April–June) 28 July

37. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 37 Lodgement The BAS can be lodged by mail or electronically through a tax agent. Payment method options The GST records, including the completed BAS and work papers showing calculations, must be retained for at least five years. Mailing Paying personally at Australia Post Or electronic funds transfer into the ATO account.

38. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 38 QUARTERLY REPORTING AND PAYMENT OPTIONS Registered businesses with a turnover of less than $20 million per annum Registered small businesses with an annual turnover of $2 million or less Option 3 Report (minimum information) and pay GST calculated by ATO. Option l Report and pay GST calculated by taxpayer. Option 2 Report (minimum information) and pay GST.

39. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 39 OFFENCES Failure to lodge GST returns. Late lodgement of GST returns. Late payment of GST assessed. Deliberate/careless understatement of GST liability.

40. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 40 EXCISE AND CUSTOMS DUTIES Excise and customs duties are separate federal taxes to GST. Excise duty is a federal tax on specific types of goods manufactured or produced in Australia. These goods include alcohol, tobacco, petroleum and oil products.

41. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 41 Discusses Fringe Benefits Tax CHAPTER 6