GST as it Affects SMEs

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Introduction to GST series: GST as it affects SMEs. Paper 20.02

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GST as it Affects SMEs

  1. 1. GOODS AND SERVICES TAX<br />GST As It Affects SMEs<br />
  2. 2. www.lewistaxation.com.au<br />1. GST Defined<br />
  3. 3. 1st July 2000<br />www.lewistaxation.com.au<br />2. Commencement Date<br />
  4. 4. 10%<br />www.lewistaxation.com.au<br />3. GST Rate<br />
  5. 5. Imposed on goods and services supplied<br />Tax of 10% on the consumption of most goods and services in Australia will not apply to the export of goods or services<br />www.lewistaxation.com.au<br />4. GST Scheme<br />
  6. 6. Two registrations<br />Australian Business Number<br />GST<br />Businesses should register for ABN<br />If turnover under $50k might be good reasons not to register for GST<br />Group Registration?<br />Branch Registration?<br />www.lewistaxation.com.au<br />5. Registration Packages – The New Tax System<br />
  7. 7. All enterprises engaged in a taxable activity<br />Must register if turnover exceed $75,000 per annum<br />All taxi drivers must register<br />Includes:<br />Business Trade Profession<br />www.lewistaxation.com.au<br />6. Registration For GST – The New Tax System<br />
  8. 8. Can include some activities of:<br />government<br />Government Corporations<br />Charities<br />Gift Deductible Funds, Authorities or Institutions<br />Religious Organisations<br />A lease or license to an interest in property<br />www.lewistaxation.com.au<br />6. Registration For GST – The New Tax System cont&apos;d....<br />
  9. 9. Enterprise does not include:<br />Hobbies <br />Recreational activities – not for commercial reasons<br />Activities where there is no expectation of profits<br />Employee activities<br />Non profit organisations have to register if turnover and membership fees, excluding donations, exceed $150,000<br />Must register within 21 days of become liable to do so<br />www.lewistaxation.com.au<br />6. Registration For GST – The New Tax System cont&apos;d....<br />
  10. 10. Group Registration<br />Companies, Trusts or Partnerships with common ownership or membership often operate as a group<br />Companies can form a GST group if each company:<br />is a member of the same (at least 90% owned) group as all other members of the GST group or proposed GST group;<br />www.lewistaxation.com.au<br />7. Groups And Branches<br />
  11. 11. Companies can form a GST group if each company (cont’d):<br />is registered for GST;<br />has the same tax periods as all the other members;<br />accounts for GST on the same basis (i.e. cash or non cash) as all the other members;<br />does not belong to another GST group; and<br />has not “branched” for GST purposes<br />www.lewistaxation.com.au<br />7. Groups And Branches cont&apos;d....<br />
  12. 12. The 90% ownership requirement does not apply to non profit bodies, however non profit bodies may only form a group where:<br />all members of the GST group or proposed GST group are non profit bodies; and<br />all members are members of the same non profit association<br />www.lewistaxation.com.au<br />7. Groups And Branches cont&apos;d....<br />
  13. 13. Trusts and Partnerships may also become members of a GST group if they satisfy the regularity requirements<br />A Partnership and a Trust can form a group<br />Two Partnerships and a Trust can form a group<br />GST groups are effectively treated as a single entity<br />www.lewistaxation.com.au<br />7. Groups And Branches cont&apos;d....<br />
  14. 14. Joint application to ATO to nominate members<br />An entity may also register its branches as GST branches if it wishes to have them as separate entities for GST purposes<br />GST is payable on transactions between GST branches<br />www.lewistaxation.com.au<br />7. Groups And Branches cont&apos;d....<br />
  15. 15. If turnover under $75,000 per annum<br />Cannot charge GST<br />Cannot claim GST on inputs<br />www.lewistaxation.com.au<br />8. Option Of Not Registering For GST<br />
  16. 16. Supply of goods or services<br />For payment – either cash or kind<br />Not including private nature activities<br />Not on salaries or wages<br />Not on sale of the family home<br />www.lewistaxation.com.au<br />9. Taxable Activity<br />
  17. 17. Food (special provisions)<br />Exports<br />International Air and Sea Travel<br />Health (virtually all)<br />Education (virtually all)<br />Child Care Services (virtually all)<br />Religious Activity (virtually all)<br />Charitable Activities (virtually all)<br />www.lewistaxation.com.au<br />10. “GST Free Supplies” Goods And Services<br />
  18. 18. Water and Sewerage Rates<br />Cars for disabled persons<br />Health Insurance Premiums<br />Precious metals<br />Sale of a business (as a going concern)<br />Supplies through inwards Duty Free Shops<br />Grants of freehold land<br />Subdivided farm land<br />www.lewistaxation.com.au<br />10. “GST Free Supplies” Goods And Services cont&apos;d....<br />
  19. 19. Sales of farm land<br />Private Sales (garage sales)<br />Hobbies<br />Private Recreational Pursuits<br />Wages <br />www.lewistaxation.com.au<br />10. “GST Free Supplies” Goods And Services cont&apos;d....<br />
  20. 20. GST free unless specifically included<br />Food defined as:<br />food marketed for human consumption<br />beverages<br />mixtures with food<br />fats and oils<br />Food that is GST free will be GST free throughout the food chain – so long as it is marketed – “Fit for Human Consumption”<br />www.lewistaxation.com.au<br />11. Food – GST Free Unless …<br />
  21. 21. Beverages GST free include:<br />milk products<br />soy milk and rice milk<br />tea<br />coffee<br />fruit and vegetable juices<br />beverages for infants or invalids<br />water<br />Packaging necessary for supply of food is GST free<br />www.lewistaxation.com.au<br />11. Food – GST Free Unless cont&apos;d....<br />
  22. 22. Live animals<br />Any grain, cereal, sugar cane not processed<br />Plants under cultivation<br />Food unfit for human consumption<br />Prepared foods<br />Confectionery<br />Savoury snacks<br />Bakery products<br />www.lewistaxation.com.au<br />12. Food That Is Not GST Free<br />
  23. 23. Ice cream food<br />Biscuit goods (except breakfast foods or rusks)<br />Food for consumption on premises where it is supplied<br />Hot take away food<br />www.lewistaxation.com.au<br />12. Food That Is Not GST Free cont&apos;d....<br />
  24. 24. GP Medical Consultations<br />Specialist<br />Ambulance Services<br />Aboriginal and Torres Strait Islander Health<br />Diagnostic, Surgical and Therapeutic Procedures<br />Audiology<br />Chiropody<br />Chiropractic <br />www.lewistaxation.com.au<br />13. Medical And Health Services That Are Free Of GST<br />
  25. 25. Dental<br />Dietary<br />Nursing<br />Optical<br />Occupational Therapy<br />Pharmacy<br />Psychology<br />Physiotherapy <br />www.lewistaxation.com.au<br />13. Medical And Health Services That Are Free Of GST cont&apos;d....<br />
  26. 26. Speech Pathology and Therapy<br />Social Work<br />Health Care provided at Hospitals and Nursing Homes<br />Nursing Care Services provided to patients at home<br />Wheel chairs, crutches, artificial limbs, modifications to motor vehicles for the disabled<br />www.lewistaxation.com.au<br />13. Medical And Health Services That Are Free Of GST cont&apos;d....<br />
  27. 27. Pre School<br />Primary School<br />Secondary School<br />College<br />TAFE<br />University<br />Adult Education for employment related skills<br />www.lewistaxation.com.au<br />14. Education Services That Are Free Of GST<br />
  28. 28. GST not charged<br />Entitled to Input Tax Credits<br />www.lewistaxation.com.au<br />15. GST Free Activities<br />
  29. 29. Exempting from charging GST:<br />Financial Services<br />Residential Rent<br />Supplies of Residential Premises (other than sale of a new house)<br />www.lewistaxation.com.au<br />16. Input Taxed Supplies/Activities (Exempt Supplies And Goods)<br />
  30. 30. Applies to Input Taxed Supplies/Activities<br />GST not charged – but<br />Not entitled to Input Tax Credits<br />www.lewistaxation.com.au<br />17. Input Taxed<br />
  31. 31. Supplier entitled to a credit on GST paid<br />Called “Input Tax Credit”<br />Only available to enterprises registered for GST<br />Only get full credit if acquisition 100% creditable purpose<br />Not available for Input Taxed Supplies<br />www.lewistaxation.com.au<br />18. Input Tax Credit<br />
  32. 32. Must be acquired for carrying on business<br />Not if an Input Taxed Supply<br />Not if for private purposes<br />www.lewistaxation.com.au<br />19. Creditable Purpose<br />
  33. 33. Calculated:<br />Gross value of turnover x 10%<br /> or<br />1/11 of total price including GST<br />www.lewistaxation.com.au<br />20. GST On Taxable Supplies<br />
  34. 34. Output Tax<br /> less<br /> Input Tax Credit<br /> Adjustments<br /> equals<br /> GST Payable or Refundable<br />www.lewistaxation.com.au<br />21. GST Payable/Refundable<br />
  35. 35. Monthly<br />Electronically<br />Refunds can be offset against income tax owing<br />www.lewistaxation.com.au<br />22. Business Activity Statement For $20m Plus Sales<br />
  36. 36. Quarterly<br />Can elect to lodge monthly<br />Lodgement and payment dates:<br />28th February<br />28th April<br />28th July<br />28th October<br />www.lewistaxation.com.au<br />23. Business Activity Statement For Sales Under $20m – Standard Method of Lodgement<br />
  37. 37. Taxpayers who are required to lodge Business Activity Statements on a quarterly basis, have an option known as Option 2 &quot;Streamlined Quarterly Remittance Form&quot;<br />www.lewistaxation.com.au<br />24. Business Activity Statement For Sales Under $20m - Streamlined Quarterly Remittance Form<br />
  38. 38. Businesses with an annual turnover under $2m have the option (known as Option 3) of lodging their Business Activity Statements on a quarterly basis.<br />www.lewistaxation.com.au<br />25. Business Activity Statement For Sales Under $2m - Small Business Option <br />
  39. 39. If turnover under $2m – statement can be prepared on “Cash” basis:<br />no debtors<br />no creditors<br />If turnover over $2m – statement must be prepared on an “Accruals” basis including:<br />debtors<br />creditors<br />www.lewistaxation.com.au<br />26. Turnover Level “Cash” Or “Accruals” Basis<br />
  40. 40. “Cash basis” means GST delayed until money received<br />but<br /> cannot claim input tax credits until payment made<br />“Accruals basis” means GST payable in period invoice prepared<br />and<br /> can claim input tax credit<br />www.lewistaxation.com.au<br />26. Turnover Level “Cash” Or “Accruals” Basis cont&apos;d....<br />
  41. 41. Subject to GST<br />Does not apply to “Private” Sales:<br />family car<br />garage sale<br />Dealer gets Input Tax Credit for purchases from an unregistered person<br />www.lewistaxation.com.au<br />27. Second Hand Goods<br />
  42. 42. Will pay GST on imports whether registered or not<br />Input Credits only allowed to registered enterprises<br />www.lewistaxation.com.au<br />28. Importers<br />
  43. 43. Must include GST<br />GST should not be shown separately<br />www.lewistaxation.com.au<br />29. Displayed Prices<br />
  44. 44. Paid direct to business’ bank, building society or credit union account<br />May be offset against other tax debts<br />www.lewistaxation.com.au<br />30. Refunds Of GST<br />
  45. 45. Must have to claim Input Tax Credit<br />Must supply within 28 days of request for all invoices over $75<br />Must include:<br />Name of supplier<br />Words “Tax Invoice”<br />Australian Business Number of supplier<br />Date <br />www.lewistaxation.com.au<br />31. Tax Invoices<br />
  46. 46. Brief description of what supplied<br />GST inclusive price<br />When GST payable is exactly 1/11 of the total price “the total price includes GST for this supply”<br /> or<br />the supply value and the GST amount must be listed separately<br />www.lewistaxation.com.au<br />31. Tax Invoices cont&apos;d....<br />
  47. 47. Suppliers of $1,000 or more<br />Additional information required:<br />Recipient name<br />Recipient’s address or Australian Business Number<br />Quantity or volume of goods provided<br />www.lewistaxation.com.au<br />31. Tax Invoices cont&apos;d....<br />
  48. 48. Taxable and Non Taxable Supplies<br />Additional information required:<br />Each taxable supply<br />The amount excluding GST for the supply<br />The amount of GST payable<br />Total amount payable for the supply<br />www.lewistaxation.com.au<br />31. Tax Invoices cont&apos;d....<br />
  49. 49. “Non Tax Invoice”<br />Must deduct Withholding Tax<br />www.lewistaxation.com.au<br />32. Invoice Without An Australian Business Number<br />
  50. 50. Automatically approved to issue:<br />Agricultural Industries<br />Registered Government Entities<br />Recipients with a turnover over $20m<br />Other types of businesses must obtain ATO approval to issue<br />www.lewistaxation.com.au<br />33. Recipient Created Tax Invoice<br />
  51. 51. Key requirements:<br />“Recipient Created Tax Invoice”<br />ABN of supplier and recipient<br />“GST shown is payable by the supplier”<br />www.lewistaxation.com.au<br />33. Recipient Created Tax Invoice cont&apos;d....<br />
  52. 52. Cannot charge GST<br />Cannot claim Input Tax Credits<br />Withholding Tax will be deducted by Payers<br />www.lewistaxation.com.au<br />34. Unregistered Businesses (Without Australian Business Number Or GST Registration)<br />
  53. 53. Prepared and presented by a supplier to an enterprise as the reason for not quoting an Australian Business Number to the enterprise<br />If you receive a &quot;Statement By A Supplier&quot; you do not have to withhold any tax from the payment<br />You must retain the supplier&apos;s statement for five years<br />www.lewistaxation.com.au<br />35. Statement By A Supplier<br />
  54. 54. Issue an invoice quoting ABN<br />Not a “Tax Invoice”<br />Payers do not deduct Withholding Tax<br />www.lewistaxation.com.au<br />36. Business With An Australian Business Number – But Not Registered For GST<br />
  55. 55. Discount allowed<br />Return of faulty goods<br />Bad Debts<br />www.lewistaxation.com.au<br />37. Adjustments<br />
  56. 56. An Adjustment Note may have to be issued where an “adjustment event” occurs in a later tax period<br />An “adjustment event” is any event in relation to a supply which effectively:<br />cancels the supply i.e. for return of goods<br />changes the consideration e.g. prompt payment discounts, volume rebate<br />adjustment to prices<br />www.lewistaxation.com.au<br />38. Adjustment Notes<br />
  57. 57. Certain information must be known on Adjustment Notes, including:<br />the name or trading name of the supplier;<br />the words “Adjustment Note” stated predominantly;<br />the Australian Business Number of the supplier;<br />the date of issue of the original Tax Invoice;<br />www.lewistaxation.com.au<br />38. Adjustment Notes cont&apos;d....<br />
  58. 58. Certain information must be shown on Adjustment Notes, including (cont’d):<br />the number of the original Tax Invoice;<br />a brief description of the items for which there is an adjustment; and<br />the GST inclusive price of the adjustment<br />www.lewistaxation.com.au<br />38. Adjustment Notes cont&apos;d....<br />
  59. 59. GST on premiums<br />Registered enterprises can claim Input Tax Credit<br />No GST payable on claims<br />Must notify Insurer of GST status<br />If renewal is after 1st July 2000 – notify Insurer of status before 30th June 2000<br />www.lewistaxation.com.au<br />39. Insurance<br />
  60. 60. Accurate and current<br />Correct calculation of GST<br />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<br />www.lewistaxation.com.au<br />40. Accounting Records For GST<br />
  61. 61. The financial records of an enterprise need to produce sufficient information for the completion of the Business Activity Statement<br />www.lewistaxation.com.au<br />41. GST Control Accounts<br />
  62. 62. Your professional advisor has invested in:<br />training material<br />seminars<br />check lists<br />procedural matters<br />Your professional advisor can assist<br />www.lewistaxation.com.au<br />42. Professional Assistance<br />

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