GST as it Affects SMEs

GOODS AND SERVICES TAXGST As It Affects SMEs

Alan Lewis AAccccoouunnttaannttss

www.lewistaxation.com.au

1. GST Defined


1st July 2000

2. Commencement Date


10%

3. GST Rate


Imposed on goods and services supplied

Tax of 10% on the consumption of most goods and services in Australia will not apply to the export of goods or services

4. GST Scheme


Two registrations◦ Australian Business Number◦ GST

Businesses should register for ABN If turnover under $50k might be good

reasons not to register for GST Group Registration? Branch Registration?

5. Registration Packages – The New Tax System


All enterprises engaged in a taxable activity

Must register if turnover exceed $75,000 per annum

All taxi drivers must registerIncludes: Business Trade Profession

6. Registration For GST – The New Tax System


Can include some activities of:◦ government◦ Government Corporations◦ Charities◦ Gift Deductible Funds, Authorities or Institutions◦ Religious Organisations

A lease or license to an interest in property

6. Registration For GST – The New Tax System cont'd....


Enterprise does not include:◦ Hobbies ◦ Recreational activities – not for commercial reasons◦ Activities where there is no expectation of profits◦ Employee activities

Non profit organisations have to register if turnover and membership fees, excluding donations, exceed $150,000

Must register within 21 days of become liable to do so

6. Registration For GST – The New Tax System cont'd....


Group Registration Companies, Trusts or Partnerships with

common ownership or membership often operate as a group

Companies can form a GST group if each company:◦ is a member of the same (at least 90% owned)

group as all other members of the GST group or proposed GST group;

7. Groups And Branches


Companies can form a GST group if each company (cont’d):◦ is registered for GST;◦ has the same tax periods as all the other

members;◦ accounts for GST on the same basis (i.e. cash or

non cash) as all the other members;◦ does not belong to another GST group; and◦ has not “branched” for GST purposes

7. Groups And Branches cont'd....


The 90% ownership requirement does not apply to non profit bodies, however non profit bodies may only form a group where:◦ all members of the GST group or proposed GST

group are non profit bodies; and◦ all members are members of the same non

profit association



Trusts and Partnerships may also become members of a GST group if they satisfy the regularity requirements

A Partnership and a Trust can form a group

Two Partnerships and a Trust can form a group

GST groups are effectively treated as a single entity



Joint application to ATO to nominate members

An entity may also register its branches as GST branches if it wishes to have them as separate entities for GST purposes

GST is payable on transactions between GST branches



If turnover under $75,000 per annum

Cannot charge GST Cannot claim GST on inputs

8. Option Of Not Registering For GST


Supply of goods or services For payment – either cash or kind Not including private nature

activities Not on salaries or wages Not on sale of the family home

9. Taxable Activity


Food (special provisions) Exports International Air and Sea Travel Health (virtually all) Education (virtually all) Child Care Services (virtually all) Religious Activity (virtually all) Charitable Activities (virtually all)

10. “GST Free Supplies” Goods And Services


Water and Sewerage Rates Cars for disabled persons Health Insurance Premiums Precious metals Sale of a business (as a going concern) Supplies through inwards Duty Free

Shops Grants of freehold land Subdivided farm land

10. “GST Free Supplies” Goods And Services cont'd....


Sales of farm land Private Sales (garage sales) Hobbies Private Recreational Pursuits Wages

10. “GST Free Supplies” Goods And Services cont'd....


GST free unless specifically included Food defined as:

◦ food marketed for human consumption◦ beverages◦ mixtures with food◦ fats and oils

Food that is GST free will be GST free throughout the food chain – so long as it is marketed – “Fit for Human Consumption”

11. Food – GST Free Unless …


Beverages GST free include:◦ milk products◦ soy milk and rice milk◦ tea◦ coffee◦ fruit and vegetable juices◦ beverages for infants or invalids◦ water

Packaging necessary for supply of food is GST free

11. Food – GST Free Unless cont'd....


Live animals Any grain, cereal, sugar cane not

processed Plants under cultivation Food unfit for human consumption Prepared foods Confectionery Savoury snacks Bakery products

12. Food That Is Not GST Free


Ice cream food Biscuit goods (except breakfast foods or

rusks) Food for consumption on premises where

it is supplied Hot take away food

12. Food That Is Not GST Free cont'd....


GP Medical Consultations Specialist Ambulance Services Aboriginal and Torres Strait Islander Health Diagnostic, Surgical and Therapeutic Procedures Audiology Chiropody Chiropractic

13. Medical And Health Services That Are Free Of GST


Dental Dietary Nursing Optical Occupational Therapy Pharmacy Psychology Physiotherapy

13. Medical And Health Services That Are Free Of GST cont'd....


Speech Pathology and Therapy Social Work Health Care provided at Hospitals and

Nursing Homes Nursing Care Services provided to patients

at home Wheel chairs, crutches, artificial limbs,

modifications to motor vehicles for the disabled

13. Medical And Health Services That Are Free Of GST cont'd....


Pre School Primary School Secondary School College TAFE University Adult Education for employment

related skills

14. Education Services That Are Free Of GST


GST not charged

Entitled to Input Tax Credits

15. GST Free Activities


Exempting from charging GST: Financial Services Residential Rent Supplies of Residential Premises (other

than sale of a new house)

16. Input Taxed Supplies/Activities (Exempt Supplies And Goods)


Applies to Input Taxed Supplies/Activities

GST not charged – but Not entitled to Input Tax Credits

17. Input Taxed


Supplier entitled to a credit on GST paid Called “Input Tax Credit” Only available to enterprises registered

for GST Only get full credit if acquisition 100%

creditable purpose Not available for Input Taxed Supplies

18. Input Tax Credit


Must be acquired for carrying on business Not if an Input Taxed Supply Not if for private purposes

19. Creditable Purpose


Calculated:Gross value of turnover x 10%

or1/11 of total price including

GST

20. GST On Taxable Supplies


Output Taxless

Input Tax CreditAdjustments

equalsGST Payable or Refundable

21. GST Payable/Refundable


Monthly Electronically Refunds can be offset against income tax

owing

22. Business Activity Statement For $20m Plus Sales


Quarterly Can elect to lodge monthly Lodgement and payment

dates:◦ 28th February◦ 28th April◦ 28th July◦ 28th October

23. Business Activity Statement For Sales Under $20m – Standard Method of Lodgement


Taxpayers who are required to lodge Business Activity Statements on a quarterly basis, have an option known as Option 2 "Streamlined Quarterly Remittance Form"

24. Business Activity Statement For Sales Under $20m - Streamlined Quarterly Remittance Form


Businesses with an annual turnover under $2m have the option (known as Option 3) of lodging their Business Activity Statements on a quarterly basis.

25. Business Activity Statement For Sales Under $2m - Small Business Option


If turnover under $2m – statement can be prepared on “Cash” basis:◦ no debtors◦ no creditors

If turnover over $2m – statement must be prepared on an “Accruals” basis including:◦ debtors◦ creditors

26. Turnover Level “Cash” Or “Accruals” Basis


“Cash basis” means GST delayed until money received

butcannot claim input tax credits until payment made

“Accruals basis” means GST payable in period invoice prepared

andcan claim input tax credit

26. Turnover Level “Cash” Or “Accruals” Basis cont'd....


Subject to GST Does not apply to “Private” Sales:

◦ family car◦ garage sale

Dealer gets Input Tax Credit for purchases from an unregistered person

27. Second Hand Goods


Will pay GST on imports whether registered or not

Input Credits only allowed to registered enterprises

28. Importers


Must include GST

GST should not be shown separately

29. Displayed Prices


Paid direct to business’ bank, building society or credit union account

May be offset against other tax debts

30. Refunds Of GST


Must have to claim Input Tax Credit Must supply within 28 days of request for all

invoices over $75 Must include:

◦ Name of supplier◦ Words “Tax Invoice”◦ Australian Business Number of supplier◦ Date

31. Tax Invoices


◦ Brief description of what supplied◦ GST inclusive price◦ When GST payable is exactly 1/11 of the total

price “the total price includes GST for this supply”

or◦ the supply value and the GST amount must be

listed separately

31. Tax Invoices cont'd....


Suppliers of $1,000 or moreAdditional information required: Recipient name Recipient’s address or Australian

Business Number Quantity or volume of goods

provided



Taxable and Non Taxable SuppliesAdditional information required: Each taxable supply The amount excluding GST for the supply The amount of GST payable Total amount payable for the supply



“Non Tax Invoice”

Must deduct Withholding Tax

32. Invoice Without An Australian Business Number


Automatically approved to issue:◦ Agricultural Industries◦ Registered Government Entities◦ Recipients with a turnover over $20m

Other types of businesses must obtain ATO approval to issue

33. Recipient Created Tax Invoice


Key requirements:◦ “Recipient Created Tax Invoice”◦ ABN of supplier and recipient◦ “GST shown is payable by the

supplier”

33. Recipient Created Tax Invoice cont'd....


Cannot charge GST Cannot claim Input Tax Credits Withholding Tax will be deducted by

Payers

34. Unregistered Businesses (Without Australian Business Number Or GST Registration)


Prepared and presented by a supplier to an enterprise as the reason for not quoting an Australian Business Number to the enterprise

If you receive a "Statement By A Supplier" you do not have to withhold any tax from the payment

You must retain the supplier's statement for five years

35. Statement By A Supplier


Issue an invoice quoting ABN Not a “Tax Invoice” Payers do not deduct

Withholding Tax

36. Business With An Australian Business Number – But Not Registered For GST


Discount allowed Return of faulty goods Bad Debts

37. Adjustments


An Adjustment Note may have to be issued where an “adjustment event” occurs in a later tax period

An “adjustment event” is any event in relation to a supply which effectively:◦ cancels the supply i.e. for return of goods◦ changes the consideration e.g. prompt

payment discounts, volume rebate◦ adjustment to prices

38. Adjustment Notes


Certain information must be known on Adjustment Notes, including:◦ the name or trading name of the supplier;◦ the words “Adjustment Note” stated

predominantly;◦ the Australian Business Number of the

supplier;◦ the date of issue of the original Tax Invoice;

38. Adjustment Notes cont'd....


Certain information must be shown on Adjustment Notes, including (cont’d):◦ the number of the original Tax Invoice;◦ a brief description of the items for which there

is an adjustment; and◦ the GST inclusive price of the adjustment

38. Adjustment Notes cont'd....


GST on premiums Registered enterprises can claim Input Tax

Credit No GST payable on claims Must notify Insurer of GST status If renewal is after 1st July 2000 – notify

Insurer of status before 30th June 2000

39. Insurance


Accurate and current Correct calculation of GST Payment for the GST has to be made three

weeks after the end of a month and 28 days after the end of a quarter, except the December quarter, when payment is to be made by 28th February

40. Accounting Records For GST


The financial records of an enterprise need to produce sufficient information for the completion of the Business Activity Statement

41. GST Control Accounts


Your professional advisor has invested in:◦ training material◦ seminars◦ check lists◦ procedural matters

Your professional advisor can assist

42. Professional Assistance

GST as it Affects SMEs

Business

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