Gst Implmentation

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GST IMPLEMENTATION

Following the passage of the Commonwealth

Government's tax reform package through

Federal Parliament, the Goods and Services Tax

(GST) will become operational on 1 July 2000.

The Northern Territory Government, as with all

governments, will become a GST taxpayer in the

same way as private businesses, and will be liable

to pay GST and entitled to claim input tax

credits. This is a significant change for all

governments and has required substantial policy

and administrative effort in ensuring GST

readiness.

The Territory has also had to respond effectively

to the Pay As You Go (PAYG) tax changes

which include substantial revisions to various

tax withholding arrangements. Other issues such

as embedded tax savings and price effects for

general government agencies and Government

Business Divisions (GBDs) are outlined.

The effective implementation of all of these new

and wide ranging arrangements and obligations

has required a considerable whole of government

coordinated effort.

NORTHERN TERRITORY GOVERNMENTAPPROACH

The key to achieving GST compliance is theidentification, analysis and effective

management of all business processesaffected by GST. The approach taken by theTerritory Government was to establish aGST Implementation Project whichencompassed all areas of Government andto assign clear roles as follows:

Northern Territory Treasury

coordination and overall projectmanagement role

development and communication ofpolicy advice and implementationrequirements at a whole of governmentlevel

Department of Corporate and InformationServices (DCIS)

as the Government's central provider ofaccounting and transaction processingservices, responsible for implementingchanges to the Government's corporatefinancial system, the GovernmentAccounting System (GAS) and changesto the processing of Governmentpayments and receipts

production and lodgement of theTerritory's monthly Business ActivityStatements

Each Agency and Government BusinessDivision

responsible for implementing GST in theagency or GBD, including the analysisof, and where required, modification to,agency/ GBD business processes,systems and operational practices

PROJECT PLAN

The Government's GST ImplementationProject is based on the followingfour-phased project management p lan.

Phase 1: Scope and Plan

establish project teams, develop broadproject plans and prepare GST ImpactStatements

Phase 2: Determine Business Changes

develop and document changespecifications for business processes,


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financial systems and any other changes

identifiedPhase 3: Implement Changes

introduce the changes to systems andbusiness processes required to properlycomply with the GST

Phase 4: Post Implementation Review

assess effectiveness and compliance ofthe revised systems and businessprocesses

GST POLICY FRAMEWORK

Within the scope of complying with the GSTlegislation the need for a range ofGovernment policies, at both the whole ofgovernment and agency level, wasrecognised. A policy framework w as createdthat specifies the rules under which theGovernment will manage its GSTobligations.

With the GST being a transaction-based tax,the GST policy framework is categorised

into three main areas.

ESTABLISHMENT ISSUES

registration obligations

recording, including accounting,information technology (IT) systemsand record keeping requirements

reporting, primarily Business ActivityStatement (BAS) obligations and reportsto agencies

REVENUE TRANSACTIONS

includes sales and Territory taxes, finereceipts and Commonwealth funding

EXPENDITURE TRANSACTIONS

includes purchases, under contract orby invoice; Government grants; andcapital acquisitions

The GST policy framework has been

designed to align, to the extent possible,with the Government's financialmanagement framework. This hasnecessitated meshing the GST legislativerequirements with the Territory's existingfinancial legislation base.

COMMITMENT AND COMMUNICATION

To achieve GST compliance in the necessarytimeframe for an organisation as diverse asthe Government, it has been essential to:

obtain commitment from all agenciesand GBDs;

develop policies in a timely fashionhaving regard to the circumstances ofthe Government and businesscommunity; and

communicate effectively with all thoseinvolved in the p rocess.

The following communication mechanismsoperate to advise the policy framework andassociated imp lementation issues.

PROJECT MANAGERS' FORUM

comprises GST Project Managers fromeach agency and GBD

meets regularly to exchange project andtechnical information, with over fifteenmeetings held to May 2000

special forum available for smalleragencies, usually follow the ProjectManagers' Forum

SEMINARS AND TRAINING

training provided by Treasury on policyframework topics, with twelve seminarsconducted to May 2000

specific training for Governmentprovided by Australian Taxation Office(ATO) and Australian Competition and


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Consumer Commission (ACCC), with

three rounds of briefing seminarsalready conducted and another tworound s planned for May and June 2000

agencies encouraged to make use ofcommercially provided training

training provided within agencies

AGENCY MEETINGS

meetings held individually with eachagency and Treasury, with some fiftymeetings held

specific agency issues discussed andresolved either by Territory experts orATO

TREASURY GST CIRCULARS

a new series of Treasury Circularsspecifically to address GSTrequirements, which are issued inconjunction with DCIS

ten Circulars have been issued withmore in progress

these Circulars are expected to continueas more GST information from theATO, such as further public rulings,becomes available

ATO ISSUES LOG

agencies provided access to ATO's logof government GST issues acrossAustralia, and ATO answers

the Territory continues to place queries

on the log

GST-RELATED INTRANET AND INTERNETSITES

primarily Treasury's GST intranet site,which has recorded over 6 000 hits fromAugust 1999 to May 2000

the site placed on the Governmentintranet to allow greater usage by

agency personnel, and is continually

monitored and improved to ensureinformation is relevant, current andeasily accessible

supp orted by DCIS and agency sites

Territory Business Centre's Internet siteprovides information for Governmentsuppliers

OTHER INFORMATION SERVICES

utilise commercial GST informationproviders

regularly disseminate informationreceived from CommonwealthTreasury, ATO and ACCC, for examplerulings and bulletins

Governm ent specific GST guides

GST REGISTRATION

The Government has developed a simpleand flexible Registration Model for GST andthe Australian Business Nu mber (ABN) that

meets the Commonwealth's registrationrequirements. The Model is designed to:

satisfy legislative obligations;

facilitate significant changes inGovernment administrative structureswithout GST consequences;

reduce complexity by minimising thenum ber of registrations; and

ensure GST is not incurred oninter-agency transactions.

A diagrammatic representation of thisModel is provided at Figure 4.1.

The Registration Model includes theGovernment body politic, which comprisesmost agencies, registered as a single GSTtaxpayer. Identified legal entities thatoperate as part of the Government areseparately registered for GST and haveindividual ABNs. These entities are known


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as 'government-related entities' and mostly

comprise professional registration boardsand agencies that have separate legalexistence, for example Northern TerritoryTourist Commission, and Parks and WildlifeCommission of the Northern Territory.

For GST purposes, the body politic andgovernment-related entities are groupedtogether to form the Northern TerritoryGovernment GST Group (the Group).Transactions between members of theGroup will not be su bject to GST.

Each GBD is individually registered for GST

and, for GST purposes, is effectively adistinct entity. This position has beenadop ted to accurately reflect the commercialnature of GBDs' operations. Transactionsbetween GBDs, and between the Group anda GBD, will be subject to GST.

In some isolated cases, the particularcircumstances of an entity may also warrant

separate GST registration in similar fashion

to GBDs. To date only the NorthernTerritory Treasury Corporation has falleninto this category. The Corporation's inputtaxed status make it preferable to beseparately registered.

In addition, the Government is involvedwith a number of entities that are not trulypart of the Government. Such involvementmay relate to establishment legislation,funding, and/ or administration with theentities having varying degrees ofautonomy.

Examples include the Northern TerritoryUniversity, Public Trustee Common Fund,superannuation funds, and NorthernTerritory Legal Aid Commission.

Although outside the Northern TerritoryGovernment Registration Model, assistanceis provided to a num ber of these entities andGST registration is undertaken inaccordance with the legislated requirements.

Bod y Politic(Most general government

agencies)

Aboriginal Areas Protection Authority

Government Related Entities(examp les below)

Electrical Workers and ContractorsLicensing Board

Nursing Board of the NT

Other legal entities

Darwin Port Corp oration

Territory Discoveries

Territory Wildlife Parks

Government Printing

Office

ITMS

Construction Agency

Darwin Bus Service

NT Fleet

Territory HousingBusiness Services

Separate Registrations

Darnor Pty Ltd

PAWA

Gasgo Pty Ltd

NT Treasury

Corporation

PAWA GST Group

Northern Territory

Government GST Group

Figure 4.1

NORTHERN TERRITORY GOVERNMENT GST REGISTRATION MODEL


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As separate entities, any transactions with

the Government (both the Group and GBDs)will be subject to GST.

REPORTS AND RECORDS

Following inclusion in the GST systemthrough the registration process, theGovernment will be required to provideregular reports to the ATO on GSTcollected, and on input tax credit refundsdue; and for GST paid on allowable businessexpenditure.

To produce the BAS and other reports,appropriate recording mechanisms havebeen established that efficiently andaccurately capture GST data. This hasinvolved the development of:

tax codes to depict the GST status ofeach transaction; and

a GST accounting methodology tofacilitate recording in GAS.

BUSINESS ACTIVITY STATEMENT

The BAS is a new style of tax returndeveloped by the Commonwealth and isintended to encompass all types of entitytaxation, including the GST, Pay As You Go(PAYG), and Fringe Benefits Tax. Thediscussion below relates to the GSTcomponent of BAS. The BAS will highlightan entitlement to a refund from the

ATO, where GST paid and able to be

refunded (input tax credits), exceeds GSTcollected. In cases where GST collectionsexceed input tax credits, the BAS will needto be accompanied by a payment to theATO.

Under the Government's GST RegistrationModel, only one consolidated BAS isrequired for the Group, with a BAS alsorequired for each GBD.

To facilitate the Government's internalaccountability requirements, a series ofinternal BAS' at agency level will be

generated and combined to form the overallGroup BAS. That is one for each agencyThese internal BAS' will not be given to theATO but will be provided to theAccountable Officer of each agency forverification. A formal verification processwill operate on a monthly basis. Figure 4.2demonstrates the process for thecompilation of the Group BAS.

The Group BAS will be in a net refundposition. The GST paid, and hence input taxcredits claimed, on Government

expenditure will be significantly greater thanthe GST collected on sales. This is becausemost of the Government's own-sourcerevenue is not subject to GST (either GSTexempt, per Northern Territory taxes,penalties and regulatory fees; or GST freeper health and education services). Inaddition, more than 75% of totalGovernment revenue is from theCommonwealth and is not subject to GST.

Refunds of input tax credits, net of GSTcollections, will be returned by ATO as one

combined amount for the Group. DCIS willsegregate the bulk monthly refunds into theamounts due to each agency and return thenet inpu t tax credit refunds to each agency'sGST control account to 'top up' the controlaccount. Figure 4.3 provides a d iagrammaticrepresentation of the refund process.


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Figure 4.2

NORTHERN TERRITORY GOVERNMENT GST GROUP BAS PROCESS

Agency A

$

GST Collected 20

Input Tax Credit due 80

Balance Payment/ (Refund) (60)

Business Activity Statement

(Prepared by DCIS)

$

GST Collected 100


Balance Payment / (Refund) (220)

Australian

Taxation

Office

Northern Territory

Government GST \ Group

GST Control Accounts

Agency B

$

GST Collected 50



Agency C

$

GST Collected 30



Figure 4.3

REFUND DISTRIBUTION PROCESS

Australian

Taxation

Office

Refund to

NTG $220

DCIS

$

In from ATO 220

to Agency A - 60

to Agency B - 90

to Agency C - 70

Retained Nil

Agency A

GST refund $60

Agency B

GST refund $90

Agency C

GST refund $70



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For GBDs, individual BAS will be prepared

with net input tax credits being refundeddirect to the GBD. GBDs, as commercialoperations, will generally have most of theirsales revenue subject to GST and thereforewill be expected to proportionately collectmore GST than the Group.

For a GBD where the majority of revenue issubject to GST and the GBD is not operatingat a loss, the BAS should reflect a netpayment situation. That is, GST collectionsexceed input tax credits. The BAS processwill be similar, with the GBD to pay the net

amount d irectly to the ATO.

A GBD should be in a net refund position

where one or more of the following apply:

services or goods provided are GSTfree, for example, water, and sewerageservices; or input taxed, for example,residential rent;

operations are conducted at a loss; and

Community Service Obligation (CSO)fund ing received is not subject to GST.

The BAS process for GBDs, showingsituations where both a refund is due and

where a payment is required, is depicted inFigure 4.4.

Figure 4.4

GOVERNMENT BUSINESS DIVISION BAS PROCESS

GBD A

$

GST Collected 40



Refund received 20

Australian Taxation

Office

GBD A BAS Processed

Refund to

GBD A $20

GBD B BAS Processed

Payment from GBD Breceived $10


BAS

BAS

GBD B

$

GST Collected 90



Payment to ATO 10

Payment

Refund


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TAX CODES

In order to correctly complete the BAS, it isnecessary to classify transactions accordingto their GST status. It is also important toautomate as much of the GST processingand recording as possible to keep w orkloadsmanageable. Additionally, BAS recordsneed to reconcile to agency accountingrecords.

To accomplish all of these requirements atax coding convention has been developed.From 1 July 2000, a four-digit tax code willbe recorded for each transaction in addition

to current ledger account codingrequirements. The tax code w ill describe theGST status of the transaction, with specifictax codes for taxable, input taxed, GST-freeand GST-exempt transactions. Separate taxcodes have been determined for bothrevenue and expenditure categories.

When the tax code for a transaction isentered into GAS the system will, inaccordance with programmed instructionsfor the particular tax code, correctly recordexpenditure/ revenue, adjust the GST

account balance, and identify the transactionfor specific report ing in the BAS. This meansthat much of the transaction processing andrecording for GST can occur automatically,once the GST status of the transaction isknown.

ACCOUNTING METHODOLOGY

The Government's methodology to accountfor GST is based on separating the GSTelement of transactions such that:

revenue and expenditure is recordednet of GST, that is, on a GST-exclusivebasis; and

GST collected and GST paid, in the formof input tax credits, is separatelyrecorded in a GST control account.

This methodology avoids financial recordsbeing distorted by GST collected (on behalfof the ATO) and GST payments (to be

refunded by the ATO). This approach is

consistent with the accounting treatmentsbeing advocated by the Australianaccounting profession's Urgent IssuesGroup for use by all businesses. Further, italigns with the methods being applied byState and Territory governments.

The alternative to this approach would havebeen to increase both expenditure andreceipts to reflect the payment of GST andthe receipt of input tax credits. Thisapproach would have produced anomalousresults and been inconsistent with thetreatments ad opted by like organisations.

The Government approach results in therebeing no effect on Allocations arising fromthe GST, with the exception of input taxedareas. Any input taxed areas will recordexpenditure on a GST-inclusive basis asthere is no capacity to claim input taxcredits. The expend iture rises by the amoun tof GST paid .

Figure 4.5 depicts accounting treatments fora typical expend iture transaction under bothtaxable and input taxed scenarios to

highlight the differences, particularly theeffect on expenditure and therefore onAllocations.

For general government agencies using cashaccounting, the GST control account will berepresented as miscellaneous revenue. Thismeans that this item can be negative if theamount of GST paid is greater than the GSTcollected.

For GBDs using accrual accounting, the GSTcontrol account w ill be represented in eitherof the following ways:

as an amount owed to the GBD whereinput tax credits exceed GST collections;or

as an amount due to the ATO whereGST collections exceed input tax credits.

For the first year of operation, GST willbegin to be p aid from 1 July 2000 but thefirst refunds of net input tax credits will not


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be due to be received until September 2000.

In recognition of the cashflow effect of thetiming difference between the payment ofGST and return of input tax credit refundsin the 2000-01 year, a funding adjustment,through increased transfer from theConsolidated Revenue Account to each

agency's and GBD's Operating Account is

anticipated, consistent with the net amountof input tax credit refunds outstanding atyear end. In future years the normal cycle ofbusiness operations should make furtherfunding adjustments unnecessary.

Figure 4.5

GST ACCOUNTING TREATMENTS EXAMPLE

Scenario (i): Agency is entitled to input tax credits

Purchase Accounts

Cost $100 Expenditure $100

GST $ 10 GST Control Account $ 10 (input tax credit to be claimedfrom ATO)

Total $110 Bank -$110

Scenario (ii) Agency is input taxed (that is, not entitlement to input tax credits)

Purchase Accounts

Cost $100

GST $ 10 Expenditure $100

Total $110 Bank


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INFORMATION TECHNOLOGY

The introduction of GST has promptedchanges to the Government's IT-basedfinancial systems, in particular GAS andagency financial systems. There are asignificant number of agency systemsdesigned to meet specific agency operationalneeds and that also include some financialtransaction data, most often to record thecollection of revenue relating to agovernment service. The vast majority ofthese systems interface with GAS and

contain transaction data necessary for GSTreporting.

A key element of the overall GST projectwas to establish a dedicated team with ITexpertise to liaise with agencies; advise andmonitor the GST compliance of systems; andreview adherence to relevant Governmentpolicies. The two most important aspects toIT systems compliance are identified as:

capacity to interface with GAS and meetnew GST data requirements; and

ability to produce compliant tax

invoices from receipting systems.

All agency financial systems have beenreviewed and the GST compliance risk ofeach evaluated. Work being done byagencies to modify systems is now beingcarefully monitored in accordance with thesystem's assessed risk profile.

SUPPLIER POLICY

The Government is a significant purchaser

of goods and services in the Territory. Assuch, the Government's Supplier Policy forGST purposes was developed to explainhow the Government will handle suppliesand purchases, both leading up to and post,the introduction of GST.

The Policy is designed to ensure thatGovernment purchasers and suppliers arefairly treated; Government's position is

known and understood; and impacts on

business practices are minimised.The Policy focuses on the Government'spolicy positions as both a supplier and apurchaser of goods and services. Thefollowing is a list of the main policy pointsfor these two categories.

NORTHERN TERRITORY GOVERNMENTAS A SUPPLIER

The Government w ill:

only charge GST on taxable supplies,

that is, no GST levied on fines, penalties,exempt taxes, fees and charges,GST-free supplies, or input taxedsupplies;

as a general principle, not charge GSTon taxable supplies pr ior to 1 July 2000;

from 1 July 2000 provide compliant taxinvoices for taxable sup plies; and

adjust the prices of public tradingenterprises to pass on any embeddedcost savings.

NORTHERN TERRITORY GOVERNMENTAS A PURCHASER

CONTRACTS

Where the Government is a purchaser and acontract is used to facilitate the purchase, thefollowing p olicy position has been adop ted:

include appropriate GST clause incontracts expected to span 1 July 2000;

have a strong preference to useGovernment's stand ard GST clause;

adopt a requirement to obtain legalclearance to use alternative or modifiedGST clause;

invite contract renegotiation wheresupplier will be liable for GST but notable to ad just contract price;


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limit renegotiation to GST issues only,

require embedded savings to be passedon and incorporate an appropriate GSTclause;

for contracts with a GST clause, adjustprice as provided by clause, whichallows for inclusion of GST and requirespass through of embedded savings; and

arrange for contract renegotiation tooccur in sufficient time for issues to beresolved prior to the contract's GSTapplication date (can be either1 July 2000, first review opportunity or

1 July 2005 depending upon thecontract's classification under the GSTlegislation's transitional rules).

INVOICES

For Government purchases where invoicesare used , the policy is set out below:

for invoices received prior to1 July 2000, delay GST payment untilGST is operational;

agencies to use guidelines provided inmaking p ayment decision in recognitionof circumstances where GST paymenttiming will need to vary;

ensure invoices with GST received priorto 1 July 2000 meet ATO requirementsto enable input tax credits to be claimed;

from 1 July 2000 require compliant taxinvoices and adjustment notes;

central group in DCIS to operate forperiod immediately following GST

commencement to monitor invoices andtake action to maximise receipt ofcompliant tax invoices; and

where invoice does not record an ABNand this cannot be rectified withintwenty-eight days, process invoice inaccordance with PAYG taxationrequirements.

A communication campaign, coordinated by

Treasury and the Department of Industriesand Business, was conducted for theSupplier Policy, to ensure that allGovernment suppliers were informed of thepolicy.

The communication campaign involved amessage from the Treasurer to eachsupplier; newspaper advertising across theTerritory; briefing seminars held in eachregional centre, in conjunction with speakersfrom ATO and ACCC; and a TerritoryBusiness Centre Internet site and help d esk.

NORTHERN TERRITORY GRANTS

The Government, as with all Australiangovernments, expends substantial sums inproviding grants to a range ofnon-government and community-basedorganisations. Grants are primarilyprovided in the health, education, arts andindustry sectors.

Determination of the GST effect on grantsand finalisation of the Government's policy

position has been delayed by the ATO's GSTPublic Ruling on Grants. This Ruling wasreleased on 10 May 2000 and provides thatgrants will be subject to GST where therights and obligations associated with thegrant agreement are binding on the parties.Examples of grant agreements that wouldbe considered binding include:

a contract, such as a purchaser-provideragreement;

a provision that the money grantedmust be repaid in specified

circumstances;


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a guarantee or lien over property of the

grantee; and an agreement, such as a deed, that is

enforceable on its own terms evenwithout specific remedies beingprovided for in the event of a breach.

As the Ruling has only very recently beenreleased, the effect on Government grantshas yet to be fully determined. Theclassification of individual grants as taxable,that is, subject to GST, or non-taxable isbeing undertaken by agencies with grantsprograms. However, most Government

grants wou ld not contain binding conditionsspecifying repayment arrangements orincluding security and thus should beclassified as non-taxable.

Consistent with the Government's businessphilosophy and its approach to dealing withGST-related matters, as articulated in theGovernments Supplier Policy, theGovernment's position on grants is that allgrant recipients will be fairly treated. Fornon-taxable grants, no change to previousarrangements is required. Where a grant is

taxable and is made to a registered entity itwill be 'grossed up' so that the grantrecipient is not disadvantaged. This meansthat the grant amount will be increased tocover the GST, such that the recipient will bein the same financial position whether thegrant is taxable or not.

Comprehensive rules and guidelines arenow being developed to assist agencies inclassifying their grants according to theirGST status, that is, taxable or non-taxable.

PAY AS YOU GO

The PAYG tax regime is explained in detailin Chapter 3, National Tax Reform.Although a separate tax regime, the PAYGchanges are part of the Commonwealth'soverall tax reform package. PAYGimplementation is

often combined with GST implementation

into a broader tax implementation p roject asPAYG has:

the same commencement day,1 July 2000;

links to the GST through the treatmentprescribed for invoices not showing thesupp lier's ABN;

similar BAS reporting requirements;and

a focus on business transactions.

All State and Territory governments havecombined their GST and PAYGimplementation.

PAYG ISSUES FOR THE TERRITORYGOVERNMENT

With regard to Government operations,PAYG will primarily affect:

purchases of services and/ or goodswhere the supplier does not provide anABN on its invoice;

services provided by a range of smallsuppliers, primarily in the Territory'sremote localities; and

income tax withholdings for employees,that is, the current Pay As You Earnsystem.

Within the PAYG withholding arm, anum ber of the identified w ithholding eventsoccur not at all or infrequently in theGovernment, for instance labour hirearrangements, and company director

remuneration. The Government is not liablefor income tax and consequently will not fallwithin the instalment arm of PAYG.

WITHHOLDING WHERE NO ABN PROVIDED

In relation to the failure of businesssuppliers to record an ABN on their


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invoices, a number of such situations are

expected in the period immediatelyfollowing 1 July 2000. As suppliers eitheradjust their systems and processes torecord their ABN or recognise thesignificance of an ABN and registeraccordingly, the number of no ABNprovided' transactions is expected todiminish quite rapidly.

Although applicable to all purchasecategories where a tax invoice is required,the no ABN provided on invoice' situationwhich results in a PAYG obligation isexpected to mostly arise in the purchase ofservices from small sole traders. The ATOhas conducted a communication campaignaimed at advising sole traders and othersmall businesses of PAYG implications ofnot registering for an ABN. In addition, inMarch 2000, the Government conducted aseries of seminars for its suppliers whichincluded ATO presentation on PAYGrequirements.

The Government is establishing a centralisedgroup in DCIS from 1 July 2000 to monitorthe GST compliance status of all

Government invoices. Where thenon-recording of an ABN is an omission,arrangements will be made to rectify orreissue the invoice. Where no ABN isavailable, the supplier will be reminded ofthe Government's PAYG obligations and thetransaction will be paid with PAYG taxwithheld.

SUPPLIERS IN SPECIAL CIRCUMSTANCES

Consideration is being given to

resolving PAYG issues associated withparticular situations, many arising in theTerritory's remote areas, where smallsuppliers provide services to theGovernment. Examples include:

remote locality police station andschool cleaning;

Aboriginal custodian sacred siteinspections;

witnesses for court cases;

jury service;

interpreting services; and

retired people sitting on boards forsmall remuneration.

Such transactions will come within thePAYG regime, generally by virtue of thesupplier not being registered for an ABN,with adverse consequences for both thesupplier and the Government. A formalapproach to ATO is being prepared to seekthe determination of appropriate PAYG

withholding rates for these specialcategories.

EMPLOYEE WITHHOLDINGS

In relation to employee income taxwithholdings, whilst conceptually there arefew changes, at a practical level a number ofaspects are being add ressed, including:

modifications to existing groupemployer arrangements to facilitatealignment with the Government's GST

Registration Model, which willultimately enable GST and PAYG to bereported in a single BAS and willprovide substantial cashflow benefits;

changes to the payroll system toproduce payment summaries for eachemployee, instead of group certificates;and

data capture from the payroll andpersonnel, and accounting systems forinclusion in the BAS.

PAYG REMITTANCE

The frequency of PAYG remittance to theATO depends on the annual amount ofwithholding. The Government will beclassified as a large withholder. Thisrequires the Government to provide PAYGtax payments to the ATO on, potentially, aweekly basis and to lodge PAYG paymentselectronically. Recent advice from ATO


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indicates a relaxation of PAYG reporting

and remittance requirements such that aBAS for PAYG, encompassing details of 'noABN' withholding events, will only berequired monthly. Weekly remittances willbe focused on employee tax withholdingevents (essentially the current PAYErequirements).

EMBEDDED SAVINGS

The Commonwealth has announced aprogram of funding reductions to the Statesand Territories for assessed embeddedsavings to commence 2000-01. This fundingreduction is in recognition of savings theCommonwealth expects States andTerritories to realise as a result of theelimination of Wholesale Sales Tax, dieselexcises and other indirect taxes on1 July 2000.

For 2000-01 the Territory's fundingreduction is $12.5M, which has requiredadjustments to Allocations in the Territory's2000-01 Budget.

The Territory Government, like othergovernments in Australia, has used afinancial modelling package called theEcontech Model to determine the expectedembedd ed cost savings that can be achievedfor each Agency. The Model considersagency inputs by expenditure category and,using predetermined industry costreduction factors, predicts the savings foreach category.

Agencies are to ensure that these embeddedsavings are realised by negotiating the pass

through' of savings from suppliers in theform of reduced p rices.

Whilst there remains some uncertaintyregarding the timing of savings to be passedon by suppliers, the Commonwealth's newprice exploitation legislation and expandedACCC powers, including substantialpenalties, exist to provide a deterrent tonon-compliance.

NORTHERN TERRITORY GOVERNMENT

PRICING ISSUES

As a GST taxpayer, the Government hasconsidered the effect of GST and other taxreform changes on the p ricing of goods andservices it p rovides.

GOVERNMENT BUSINESS DIVISIONS ANDGENERAL GOVERNMENT AGENCIES

National tax reform will result in changes tothe prices charged by GBDs and generalgovernm ent agencies from 1 July 2000.

Consistent with the pricing guidelinesissued by the ACCC, the Governmentrequires GBDs to pass on the full extent ofcost savings resulting from tax reform, suchas from the removal of Wholesale Sales Taxand reductions in fuel excise, before addingon the GST, where applicable. As a result,GBD prices will generally rise by less than10%.

A wide range of general government feesand charges, including for most health and

education services, will be GST-free orGST-exempt. However, where generalgovernment fees and charges are subject tothe GST, these will rise by the full 10%. Thissituation arises because the Commonw ealth,in determining the level of funding it willprovide to the Territory has already takenthe cost savings for general government,arising from national tax reform, intoaccount. The approach being taken isconsistent with that adopted by State andTerritory governments and is in line withadvice provided by the Commonwealth to

the ACCC.

Compensation for the price increasesresulting from tax reform is being providedby the Commonwealth in the form ofincome tax cuts and increased benefitpayments.

Bus fares are the only general governmentcharge where it is proposed to vary from the10% approach. The Territory's bus fares are


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the lowest in the country and have not

increased since July 1998. Bus fares currentlyonly recover some 40% of the cost ofproviding bus services. In recognition thatthis level of subsidy is not sustainable, theGovernment will increase bus fares on1 July 2000 by an average of 3.5% on top ofthe 10% increase related to the GST. Thisadditional increase is aimed at improvingthe level of cost recovery and is not aconsequence of tax reform.

DIVISION 81 LIST OF GST-EXEMPTGOVERNMENT TAXES, FEES AND

CHARGES

The GST legislation provides a mechanismfor ensuring that certain government taxes,fees and charges are not subject to GST.Division 81 provides for the Comm onwealthTreasurer to issue a determination listingthose taxes, fees and charges.

The list is based on an underlying principlethat compulsory taxes and regulatorycharges should not be subject to GST.

On 1 March 2000, the Comm onwealth

Treasurer issued the first determinationsetting out the list of taxes and charges thatwill not be subject to GST. The list wascompiled in conjunction with theCommonwealth and all States andTerritories.

The list of taxes and charges that are notsubject to the GST is detailed in Chapter 3,National Tax Reform.

CONCLUSION

The Government is working assiduously toimplement GST and achieve compliance bythe 1 July 2000 start date. The framework isin place with detailed requirements nowbeing addressed.

In accordance with the Project Plan androles outlined above:

Treasury will continue to monitor theprogress of the Implementation Projectacross Government;

DCIS will ensure that BAS requirementscan be met and that GAS is GST ready;and

agencies will finalise the introduction ofsystem and process modifications andreview their effectiveness.

The implementation of GST and PAYG is asignificant undertaking for all businessesacross Australia. For governments, the effectis exacerbated by governments beingpreviously tax exempt and thus not having

systems or processes designed to capturetax information. Within the TerritoryGovernment, GST and PAYG complianceare seen as significant goals that will requireongoing commitment and monitoring as theCommonwealth supplements its taxlegislation with further amendments andpublic rulings, and as new transactionarrangements emerge.

Gst Implmentation

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Transcript of Gst Implmentation