VCE Accounting Unit 3. Video of this presentation can be found on my YouTube channel here https://www.youtube.com/channel/UCf5jyuJoYwie8tWfvjEc0zg.

1. 8.1
GST REFRESHSER

2. © Michael Allison. Author’s permission required for external use.
 Example:
 You go to the café and purchase a Coke for $3.00
 At the register, you are required to pay $3.30
 The 30 cents represents a Goods and Services Tax (GST) which is 10% of the
sale price
YOU CAFÉ
$3.30
8.1 GST REFRESHER

3. © Michael Allison. Author’s permission required for external use.
 Example:
 The café now has a total of $3.30 which is made up of two amounts…
CAFÉ
$3.30
Revenue $3.00
This belongs to the
café – it is theirs to
keep.
GST Liability $0.30
This isn’t the café’s
to keep – the café
must pay it to the
government
8.1 GST REFRESHER

4. © Michael Allison. Author’s permission required for external use.
 How the government designed the GST system to work:
Consumers
Purchase goods and
services. GST of 10% is
charged on most items.
Government
Collects GST from
consumers which it uses
to fund public spending
Businesses
Collect GST from
consumers every time
they sell a good or service
1. Consumers pay GST to
businesses who collect it on
behalf of the government
2. The business then owes the
government the GST. It has a
GST Liability. It pays this liability
every 90 days.
Tax 
Tax  Tax 
8.1 GST REFRESHER

5. © Michael Allison. Author’s permission required for external use.
 Summary of how GST works…
GST Liability [L]
Collect/charge GST
GST Liability

GST Liability

Pay/charged GST
8.1 GST REFRESHER

6. © Michael Allison. Author’s permission required for external use.
 The firm will have a GST Liability when…
 Example:
> = GST LiabilityGST PaidGST Collected
GST collected during
month
GST paid during month
GST Liability [L]
$200
$300
$100 $600
$100
$50
$50
$400
$400$200$600
8.1 GST REFRESHER

7. © Michael Allison. Author’s permission required for external use.
 The firm will then record a GST Liability under the Current Liabilities section of
the Balance Sheet…
Balance Sheet as at 31 December 2015
Current Assets $ $ Current Liabilities $ $
Non-Current Assets Non-Current Liabilities
Balance Sheet as at 31 December 2015
Current Assets $ $ Current Liabilities $ $
GST Liability 400
Non-Current Assets Non-Current Liabilities
8.1 GST REFRESHER

8. © Michael Allison. Author’s permission required for external use.
GST Liability
Characteristic #1
• There is a present obligation
• The firm has an obligation to repay the government
the GST it owes
Characteristic #2
• Arising from past events
• The firm engaged in transactions including GST, e.g.
GST paid, GST received
Characteristic #3
• Resulting in an outflow of future economic benefits
• The firm will have to pay cash to the government
8.1 GST REFRESHER

9. © Michael Allison. Author’s permission required for external use.
 The firm will have a GST Refund when…
 Example:
< = GST RefundGST PaidGST Collected
GST collected during
month
GST paid during month
GST Liability [L]
$200
$100
$300
$100$400$300
GST Refund $100
$100
$200
$100
8.1 GST REFRESHER

10. © Michael Allison. Author’s permission required for external use.
 The firm will then record a GST Refund under the Current Assets section of the
Balance Sheet…
Balance Sheet as at 31 December 2015
Current Assets $ $ Current Liabilities $ $
Non-Current Assets Non-Current Liabilities
Balance Sheet as at 31 December 2015
Current Assets $ $ Current Liabilities $ $
GST Refund 100
Non-Current Assets Non-Current Liabilities
8.1 GST REFRESHER

11. © Michael Allison. Author’s permission required for external use.
GST Refund
Characteristic #1
• A resource controlled by the entity
• The firm has a legal claim for a cash refund from the
government
Characteristic #2
• Arising from past events
• The firm engaged in transactions including GST, e.g.
GST paid, GST received
Characteristic #3
• From which future economic benefits will flow to the
entity
• The firm will receive cash from the government
8.1 GST REFRESHER

12. © Michael Allison. Author’s permission required for external use.
 In Australia we have a Goods
and Services Tax (GST) on
many business transactions
 The Australian government
has decided to apply a GST
of 10%
 Other countries apply
different amounts
10%
15%
19.6%
5%
8.1 GST REFRESHER

13. © Michael Allison. Author’s permission required for external use.
 However, the GST is not applied on all items…
Australian Tax Office guide to GST
8.1 GST REFRESHER

14. © Michael Allison. Author’s permission required for external use.
Do NOT have GST
Payments to
creditors
Wages
Loans
Loan
repayments
Drawings
Capital
contributions
Interest
revenue
Interest
expense
Receipts
from debtors
8.1 GST REFRESHER

15. © Michael Allison. Author’s permission required for external use.
 Items with GST are made up of three amounts:
 For example, the a business paid $300 plus GST for advertising… How much
did it pay?
+ =
GST
Exclusive
Amount
GST
10%
GST
Inclusive
Amount
+ =
GST
Exclusive
Amount
GST
10%
GST
Inclusive
Amount
$300 $30 $330
8.1 GST REFRESHER

16. © Michael Allison. Author’s permission required for external use.
 The GST inclusive amount can be given rather than the GST exclusive
amount. How do you find the GST?
 The formula is:
+ =
GST
Exclusive
Amount
GST
10%
GST
Inclusive
Amount
/= 11GST
10%
GST
Inclusive
Amount
8.1 GST REFRESHER

17. © Michael Allison. Author’s permission required for external use.
 For example, a business paid $484 for rent inclusive of GST…
 So the GST exclusive amount would be the difference between the two
figures…
/= 11GST
10%
GST
Inclusive
Amount
11$44 $484
= -
GST
Exclusive
Amount
GST
10%
GST
Inclusive
Amount
$440 $44$484
8.1 GST REFRESHER

18. © Michael Allison. Author’s permission required for external use.
 Some examples…
+ =
GST
Exclusive
Amount
GST
10%
GST
Inclusive
Amount
+ =$700 $70 $770
+ =$1100 $110 $1,210
+ =$500 $50 $550
+ =$330 $33 $363
8.1 GST REFRESHER

19. © Michael Allison. Author’s permission required for external use.
TASK
In-class Homework
SQ6 X
SQ8 X
SQ10 X