1. GST & FBT for Accounts Payable Anne Harvey – Group Tax Manager, Corporate Finance Eric McCallum – Group Tax Accountant, Corporate Finance 24 August 2012

2. Objectives When does GST apply What are the GST Codes What is FBT What does Taxable Value mean Types of benefits which attract FBT When is FBT charged Vendors Thesis Examiners

3. When is it applicable Taxable supply  for consideration  in course of furtherance of carrying on enterprise  connected with Australia  registered or required to be registered  not GST free or input taxed Taxable sales  price includes GST  pay GST on sales  claim GST on purchases  1/11 th of Total invoice/sale price When is it not applicable GST free sales  Basic food - meat, milk, bread, fruit and vegetables  Most education, child care, health  Some exports Input Taxed sales  Residential property  Financial transactions  Cannot claim GST credit When does GST apply

4. How Does GST work Issue Tax invoice $1100 Taxable Sale $1000 GST on sale $100 Total Sales on BAS $1100 Sales $1000 Remit GST 1/11 th to ATO $100 Cash Received $1100 Net revenue $1000 GST paid to ATO $100 Receives Tax Invoice $1100 Purchases $1000 GST charged $100 Total Acquisitions on BAS $1100 Acquisition $1000 Claim ITC for GST $100 Cash Payment $1100 Net Expense $1000 GST claimed from ATO $100 Supplier Raises Tax Invoice Purchaser Receives Tax Invoice Sponso r Vendo r UNSW

5. 1.Taxable – AC/AO 2.GST Free – FRAC/FRAO 3.Imports – IMAC/IMAO 4.Input Taxed – ACIT/AOIT 5.Non deductible – NIAC/NIAO 6.Out of scope – EXCL 7.Advances - EXAD 1.Most goods and services 2.Basic food; consumed/used overseas i.e. international airfare, accommodation 3.Customs clearance e.g. Equipment; overseas subscriptions 4.Financial supplies, residential accommodation 5.Cannot claim GST, no Tax Invoice, student entertainment 6.Taxes, wages, donations 7.Travel Allowance, Advance GST Codes: Acquisitions – AP/ Expenses/Credit Card “C” in AC, FRAC, etc refers to Capital. “O” in AO, FRAO, etc refers to Other.

6. University of New South Wales ABN 57 195 873 179 GST Codes Used In NS Financials SHORT DESCRIPTION LONG DESCRIPTION GST CODE Capital >=$5,000 Other <=$5,000 ACQUISITIONSPurchase Orders, Credit Card Reconciliation, AP Vouchers & Journals.GL 3505 GST In Price, Claimable The purchase of taxable goods or services where GST is charged and it can be claimed (i.e. as an Input Tax Credit – ITC). This applies to the majority of purchases. ACAO GST In Price, & Input Taxed Supply The purchase of taxable goods or services which are input taxed supplies but the GST charged (i.e. an ITC) cannot be claimed. E.g. financial supplies (financial services), and certain supplies relating to residential accommodation. ACITAOIT GST In Price, GST Not Claimable The purchase of taxable goods or services which are specific non-deductible items but the GST charged cannot be claimed. E.g. fines and penalties. Also used for transactions where the original tax cannot be obtained. Note: For meal entertainment expenses, where FBT is not payable. NIACNIAO GST Free Purchase The purchase of goods or services with no GST in the price. These are referred to as GST Free purchases. E.g. GST-free basic food; water; sewerage and drainage; also used for purchases made which are consumed or used overseas e.g. accommodation; international air fares, taxi fares etc. If imported into Australia use the Import codes below. FRACFRAO No ABN or Declaration Used where the Supplier you are buying from does not have an ABN number, and hasn’t provided a declaration form (Statement by Supplier). UNSW are required to withhold 46.5% of the payment as withholding tax. Supplier to be notified. NABCNABN Importation Of Taxable Goods And Services The overseas purchase of goods and services imported into Australia, where, had they been purchased in Australia instead, would have been subject to GST. E.g. machinery, equipment, computers, software etc. IMACIMAO Importation of GST-Free Goods & Services The overseas purchase of goods and services brought into Australia, where, had they been purchased in Australia instead, would have been GST-Free anyway. E.g. Pharmaceutical and medicinal drugs. Also for goods imported into Australia that don’t require customs declaration. IMFCIMFO Out Of Scope Payments Not reported on the ATO Business Activity Statement (BAS). E.g. transactions between members of same GST group, payments of taxes (e.g. PAYG, payroll tax, employer payments such as wages, super, donations) EXCL Interim Advances This code is used for initial transactions in relation to Travel Allowances and Cash Advances. Other items where no GST is charged. EXAD Journals SSJ or ONL GST adjustment journals maybe raised by the Client Service Accountants or Financial Control. Please refer to the journals procedure. EXCL Kensington College Input tax purchases where 44% can be claimed as an "Input Tax Credit". AC01AO01

7. Supply and Consideration Lab Equip Coy UNSW Supply (goods) Payment Consideration ($) Employee UNSW Travel Advance – Funds Payment only Goods used in business, can claim GST charged Cash advance EXAD No supply for consideration ATO UNSW Pay Taxes – Funds Payment only Out of Scope EXCL AC, AO, FRAC, FRAO

8. Tax Invoice showing GST or GST inclusive price Can rely on other supporting documentation issued by supplier if minor defects in Tax Invoice Purchase $82.50 or less (including GST) with Tax invoice, Receipt, invoice, docket Sale < $1,000 – Tax Invoice, name & ABN of supplier, date, description, if each item is taxable sale, $ GST or Total price includes GST. Sale $1,000+ also show buyer’s name or ABN Claiming ITC for GST charged

9. Mixed Supplies – need to enter Taxable items and GST free items on separate lines with GST code (Telstra bills, Cabcharge, Hotels, Qantas, basic food) Assume GST applies to total – check for GST free Use GST code from PO - check if agrees to Tax Invoice Relying on default GST codes in EMS Tax calculated in system not agree to GST on Tax invoice – may need to split lines Deposits – claiming GST on deposit. Adjust on final Tax invoice Credits from prior month. Check GST charged on Invoice. Common GST Mistakes

10.  No entitlement to ITC if GST not charged, or no Tax Invoice held (except for low value items, i.e. < $82.50)  No entitlement to ITC if goods or services not used for creditable purpose (used in business)  No entitlement to ITC if expense non deductible for Income Tax under Income Tax rules Private or domestic in nature – if pay FBT(AO). No FBT (NIAO) Entertainment If pay FBT (staff & associates), can claim ITC (AO) If don’t pay FBT (students, clients, guests) cannot claim ITC (NIAO)  Audit risk – inadequate processes and controls  Penalties and Fines  Reputational risk  BAS amendments Risk to UNSW if GST Not correct

11. Mixed Supply – GST free and Taxable Supply

12. Mixed Supply How to create two voucher lines from one line Entry fields are green, all other fields are derived from the entry fieldsInput Total GST is not 10% of the total invoice value Enter the total value of the tax invoice (inc GST)(Total cash payment inc GST) 167.14 Calculated GST value by NS Financials 15.19 Enter the total GST on the suppliers tax invoice(Total GST on the tax invoice) 14.49 Value of the tax invoice (excluding GST) 152.65 GST CodeBase AmountGSTGross Amount Total to enter as AO including GST AO144.9014.49159.39 Total to enter as FRAO FRAO7.750.007.75 This should equal the total value of the invoice (inc GST) 152.6514.49167.14 Comments: If the non-taxable supplies on the invoice relate to residential rent, financial supplies, or long term student accommodation please use the code AOIT instead of FRAO

13. GST Calculated Processed 3.07 93.10 9.31 $105.48

14. GST(VAT) calculated not agree to GST entered VAT entered ≠ VAT calculated As FRAO used VAT on Invoice of $8.46 shows as Non Recoverable. GST does not go the GST account in GL

15. Cabcharge Mixed Supply Mixed Supply How to create two voucher lines from one line Entry fields are green, all other fields are derived from the entry fieldsInput Total GST is not 10% of the total invoice value Enter the total value of the tax invoice (inc GST)(Total cash payment inc GST)105.48 Calculated GST value by NS Financials 9.59 Enter the total GST on the suppliers tax invoice(Total GST on the tax invoice)8.46 Value of the tax invoice (excluding GST) 97.02 GST CodeBase AmountGSTGross Amount Total to enter as AO including GSTAO84.628.4693.10 Cabcharge service fee no GSTFRAO9.310.009.31 Liquidated damages no GSTFRAO3.070.003.07 This should equal the total value of the invoice (inc GST) 97.008.46105.48 Comments: If the non-taxable supplies on the invoice relate to residential rent, financial supplies, or long term student accommodation please use the code AOIT instead of FRAO

16. Fringe Benefits Tax - Facts FBT year 1 April to 31 March Tax Rate 46.5% - Calculated on Grossed Up Taxable Value FBT paid by employer – UNSW Includes benefits under a salary sacrifice arrangement Reportable Fringe Benefit included on Payment Summary in June, if > $2000 FBT is tax on benefits (right, privilege, service or facility)  provided to employees & associates (relative, partner/ spouse, child)  by an employer, associate of employer or under an arrangement with a third party  in respect of employment – reward for service “Employee” includes current, former and future employees No FBT for students, clients, volunteers or independent contractors  If pay Salary  PAYG deduction  Employee pays tax  If provide fringe benefit  no PAYG deduction  Employer pays tax

17. FBT Calculated on Taxable Value What is Taxable Value Determined by the rules applying to each category of fringe benefit Generally the cost of the benefit Some benefits concessional tax, e.g. Motor Vehicles Some reductions and exemptions provided in legislation GST Impact Taxable Value based on GST inclusive amount FBT payable depends on whether entitlement to ITC credit Can claim Input Tax Credit for GST paid Important correct GST codes are used and GST amount is correct.

18. When Does FBT apply Employee receives benefit/privilege due to employment Private or domestic in nature Not related to work/ not for business purpose No concessions, reductions or exemptions in legislation FBT applies For student client, guest For Business purpose/ incurred in earning income Exemption, concessions or reduction in legislation Entitled to income tax deduction if incurred expense themselves Pay personally from after tax dollars Deceased employee Capital nature for legally enforceable contract or Personal injury No FBT applies

19. FBT Applicable Accounts in General Ledger GL Account 6457 6459 6501 6613 6619 6623 6624 6626 6630 Description Entertainment Entertainment – Recreational Uniforms FBT Payable Staff Exp Membership Fees Staff Gifts & Awards $300+ Staff Exp –Recognition Awards Staff Exp - Education Staff Exp – Childcare Staff Expenses FBT FBT Accrual A/c 6662 6687 6663 6664 6687 - 6692 6682 6687 If expenses charged to the GL account, FBT will be accrued at month end

20. Salary packaged Motor Vehicles or UNSW provided – personal use. Medical Insurance - inpatriates Permanent Residency – application, police & medical checks, lawyers fees (Exempt if to enter Australia on relocation) Gifts, awards and prizes - $300 or more Travel for family – SSP, accompany employee on business (exclude relocation) VC Child care support Furniture purchase in lieu of relocation transport/ relocation allowance Kensington College accommodation and meals – provided to tutors/employees Reimburse deferred HECS/HELP fees Write off Advance - Debt waiver Outstanding Advance not acquitted within 6 months  Loan – calculate interest Home phone/ internet – private % Dual purpose travel – business and private Entertainment – tax exempt body Examples of Benefits Incurring FBT

21. Exemptions, Concessions or reductions in legislation Exemptions – No FBT work related item - provided for work purpose. Limit one item per type pa – e.g. laptop, mobile phone, electronic diary, tool of trade, protective clothing minor benefit < $300 and infrequent / irregular (consider associated benefits) relocation – Required to change usual place of residence for employment. Flights including family, relocation consultant, etc. HR administer Airport lounge, professional subscriptions, child care/gym on premises, car parking LSL awards Concessions – Lower TV e.g. Cars, Car Parking benefits holiday transport for overseas employment – 50% concession. Limit of one trip per FBT year. Temporary accommodation on relocation. HR administer Reductions – TV reduced otherwise deductible with declaration reduced by % of business use, e.g. home internet use full time education of children of Overseas employees. Less than 25 years. At school, college, university or by tutor.

22. On premises – less likely entertainment Off premises – more likely entertainment Overtime – Sustenance Employee travelling – Sustenance After work - FBT How elaborate Sit down meal – FBT With alcohol - FBT Finger food – sustenance Coffee - sustenance Social – FBT Complete working day in comfort – Sustenance CPD seminar - sustenance WhyWhat WhereWhen Entertainment v Sustenance

23. Entertainment – FBT Social function, farewell Party, Christmas party Restaurant meals Business lunch & drinks Celebrations, Dinners Spouse meal of employee travelling on business Non travelling employee (when dines with travelling employee) Morning, afternoon tea, light lunches – associates Leisure or amusement activities Sporting activities, golf days Gym membership, sporting club memberships Holiday Theatre/movie ticket Cruises  Account 6457 Sustenance – no FBT (6611) Morning and afternoon tea for employees Birthday cake – morning tea for employees Light lunches, sandwiches, finger food, salad, juice, etc for employees Light breakfast at training seminar – incidental to seminar Finger food and light refreshments (with moderate alcohol) immediately after training or CPD seminar – incidental to seminar Meal at seminar that goes for over 4 hours Meal (with alcohol) while travelling on business - employee Tea / coffee – employee Overtime meal in office  Account 6611

24. GST - claiming ITC and interaction with FBT Entertainme nt (includes GST) FBT liability? Yes FBT Employees, Associates AO – can claim ITC for GST, as pay FBT FRAO – no GST charged, overseas No FBT Students, Clients, Guests NIAO – cannot claim ITC for GST

25. Travelling on business ATO view of travelling on business is away for short periods - up to 21 days at a time Stay in hotel, motel, serviced apartment Unaccompanied by family ATO set Travel Allowance rates – based on Salary band and destination Travel Allowance rates based on 1 July to 30 June year Travel Allowance for Payroll Tax (State based tax) to be split between Taxable and Non taxable  Tax Exempt (Domestic 7014, International 7114)  Taxable component (Domestic 7013, International 7113)  For 2012/2013 year tax exempt portion is  Accommodation $189.00 per day  Food and Drink $98.40 per day  Incidentals $17.85 per day  Any excess above these rates to 7013/7113

26. Business Purpose Predominantly business undertaken Considered Incidental to business – extra day to acclimatise Weekends during business period, e.g. 2 week business trip Day to prepare/ wrap up Make Flight connections Due to flight availability/ delays 1 day Stopover en route – no extra cost Day between business meeting Dual Purpose Travel to conference then holiday Holiday at same or different location Book Annual Leave days in myUNSW Family accompanies Private portion 40% or more of total days Travel Allowance only for business days Frequency of trips No restrictions on private travel  Flight cost split 50/50 between business (7103) and private (6630)  FBT on 50% private  If employee pays 50% of airfare directly to Travel Agent  No benefit  No FBT Travel Benefits

27. ABN Australian Business Number – www.abr.gov.auwww.abr.gov.au  Shows type of entity – company, sole trader, partnership, etc  If registered for GST – charge GST on invoices Must withhold 46.5% of total payment for supply unless  Invoice with ABN quoted  ABN of agent quoted where supply made through agent  Exception to withholding applies  Supplier not entitled to ABN Exceptions – no Withholding  Payment $75 or less, excluding GST  Not entitled to ABN - not carrying on enterprise or business in Australia  Statement by Supplier provided – ATO declaration of reason ABN not quoted

28. Contractors and VN1 Form All new Vendors to complete VN1 form – process and system to manage VN1 form has questions in relation to the services provided and ABN status To assess if employee or contractor Assess for PAYG withholding, Superannuation and Payroll Tax Vendor Classification assists in identifying for upfront Payroll Tax exemption, ongoing Payroll tax assessment or SGC. If “Refer HR” – needs to be referred to HRC for setting up in HR system. Cannot be paid through AP. Standard UNSW Contact  Sole Trader Contractor Agreement  Other Entity Contractor Agreement (Company, Partnership, Trust)

29. Service Provider – Payment for Service Individual – No ABN Process via H.R PAYG, Super, Payroll Tax Sole Trader-ABN Process via H.R Super, Payroll Tax Company, Partnership s & other structures Process Via A.P Payroll Tax Note: Some Sole Traders may be assessed(VN1 result) to be paid via A.P, if no Superannuation or PAYG obligations

30. Pay in AP  Payment to Non Individuals/ Non residents Payment to another University Payment to Organisation/ Company Overseas Individual  non resident of Australia  No Australian bank account  Cannot be paid in HR  Statement by Supplier required Pay in HR  Payment to individuals in Australia  Subject to PAYG deduction  TFN Declaration Existing employees Individuals – in Australia Sole Trader entity with/without ABN Thesis Examiners

31. Questions Further Information Finance website: http://www.fin.unsw.edu.au/PoliciesProcedures/AccountingManual/FBT.html http://www.fin.unsw.edu.au/PoliciesProcedures/AccountingManual/FBT.html Contact: Anne Harvey - Ext 51635. Email: a.harvey@unsw.edu.au a.harvey@unsw.edu.au Eric McCallum – Ext 52825, Lucy Lowe – Ext 51204