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

1. GOODS AND SERVICES TAX GST As It Affects SMEs

2. www.lewistaxation.com.au 1. GST Defined

3. 1st July 2000 www.lewistaxation.com.au 2. Commencement Date

4. 10% www.lewistaxation.com.au 3. GST Rate

5. 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 www.lewistaxation.com.au 4. GST Scheme

6. 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? www.lewistaxation.com.au 5. Registration Packages – The New Tax System

7. All enterprises engaged in a taxable activity Must register if turnover exceed $75,000 per annum All taxi drivers must register Includes: Business Trade Profession www.lewistaxation.com.au 6. Registration For GST – The New Tax System

8. 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 www.lewistaxation.com.au 6. Registration For GST – The New Tax System cont'd....

9. 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 www.lewistaxation.com.au 6. Registration For GST – The New Tax System cont'd....

10. 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; www.lewistaxation.com.au 7. Groups And Branches

11. 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 www.lewistaxation.com.au 7. Groups And Branches cont'd....

12. 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 www.lewistaxation.com.au 7. Groups And Branches cont'd....

13. 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 www.lewistaxation.com.au 7. Groups And Branches cont'd....

14. 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 www.lewistaxation.com.au 7. Groups And Branches cont'd....

15. If turnover under $75,000 per annum Cannot charge GST Cannot claim GST on inputs www.lewistaxation.com.au 8. Option Of Not Registering For GST

16. 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 www.lewistaxation.com.au 9. Taxable Activity

17. 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) www.lewistaxation.com.au 10. “GST Free Supplies” Goods And Services

18. 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 www.lewistaxation.com.au 10. “GST Free Supplies” Goods And Services cont'd....

19. Sales of farm land Private Sales (garage sales) Hobbies Private Recreational Pursuits Wages www.lewistaxation.com.au 10. “GST Free Supplies” Goods And Services cont'd....

20. 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” www.lewistaxation.com.au 11. Food – GST Free Unless …

21. 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 www.lewistaxation.com.au 11. Food – GST Free Unless cont'd....

22. Live animals Any grain, cereal, sugar cane not processed Plants under cultivation Food unfit for human consumption Prepared foods Confectionery Savoury snacks Bakery products www.lewistaxation.com.au 12. Food That Is Not GST Free

23. Ice cream food Biscuit goods (except breakfast foods or rusks) Food for consumption on premises where it is supplied Hot take away food www.lewistaxation.com.au 12. Food That Is Not GST Free cont'd....

24. GP Medical Consultations Specialist Ambulance Services Aboriginal and Torres Strait Islander Health Diagnostic, Surgical and Therapeutic Procedures Audiology Chiropody Chiropractic www.lewistaxation.com.au 13. Medical And Health Services That Are Free Of GST

25. Dental Dietary Nursing Optical Occupational Therapy Pharmacy Psychology Physiotherapy www.lewistaxation.com.au 13. Medical And Health Services That Are Free Of GST cont'd....

26. 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 www.lewistaxation.com.au 13. Medical And Health Services That Are Free Of GST cont'd....

27. Pre School Primary School Secondary School College TAFE University Adult Education for employment related skills www.lewistaxation.com.au 14. Education Services That Are Free Of GST

28. GST not charged Entitled to Input Tax Credits www.lewistaxation.com.au 15. GST Free Activities

29. Exempting from charging GST: Financial Services Residential Rent Supplies of Residential Premises (other than sale of a new house) www.lewistaxation.com.au 16. Input Taxed Supplies/Activities (Exempt Supplies And Goods)

30. Applies to Input Taxed Supplies/Activities GST not charged – but Not entitled to Input Tax Credits www.lewistaxation.com.au 17. Input Taxed

31. 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 www.lewistaxation.com.au 18. Input Tax Credit

32. Must be acquired for carrying on business Not if an Input Taxed Supply Not if for private purposes www.lewistaxation.com.au 19. Creditable Purpose

33. Calculated: Gross value of turnover x 10% or 1/11 of total price including GST www.lewistaxation.com.au 20. GST On Taxable Supplies

34. Output Tax less Input Tax Credit Adjustments equals GST Payable or Refundable www.lewistaxation.com.au 21. GST Payable/Refundable

35. Monthly Electronically Refunds can be offset against income tax owing www.lewistaxation.com.au 22. Business Activity Statement For $20m Plus Sales

36. Quarterly Can elect to lodge monthly Lodgement and payment dates: 28th February 28th April 28th July 28th October www.lewistaxation.com.au 23. Business Activity Statement For Sales Under $20m – Standard Method of Lodgement

37. Taxpayers who are required to lodge Business Activity Statements on a quarterly basis, have an option known as Option 2 "Streamlined Quarterly Remittance Form" www.lewistaxation.com.au 24. Business Activity Statement For Sales Under $20m - Streamlined Quarterly Remittance Form

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. www.lewistaxation.com.au 25. Business Activity Statement For Sales Under $2m - Small Business Option

39. 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 www.lewistaxation.com.au 26. Turnover Level “Cash” Or “Accruals” Basis

40. “Cash basis” means GST delayed until money received but cannot claim input tax credits until payment made “Accruals basis” means GST payable in period invoice prepared and can claim input tax credit www.lewistaxation.com.au 26. Turnover Level “Cash” Or “Accruals” Basis cont'd....

41. Subject to GST Does not apply to “Private” Sales: family car garage sale Dealer gets Input Tax Credit for purchases from an unregistered person www.lewistaxation.com.au 27. Second Hand Goods

42. Will pay GST on imports whether registered or not Input Credits only allowed to registered enterprises www.lewistaxation.com.au 28. Importers

43. Must include GST GST should not be shown separately www.lewistaxation.com.au 29. Displayed Prices

44. Paid direct to business’ bank, building society or credit union account May be offset against other tax debts www.lewistaxation.com.au 30. Refunds Of GST

45. 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 www.lewistaxation.com.au 31. Tax Invoices

46. 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 www.lewistaxation.com.au 31. Tax Invoices cont'd....

47. Suppliers of $1,000 or more Additional information required: Recipient name Recipient’s address or Australian Business Number Quantity or volume of goods provided www.lewistaxation.com.au 31. Tax Invoices cont'd....

48. Taxable and Non Taxable Supplies Additional information required: Each taxable supply The amount excluding GST for the supply The amount of GST payable Total amount payable for the supply www.lewistaxation.com.au 31. Tax Invoices cont'd....

49. “Non Tax Invoice” Must deduct Withholding Tax www.lewistaxation.com.au 32. Invoice Without An Australian Business Number

50. 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 www.lewistaxation.com.au 33. Recipient Created Tax Invoice

51. Key requirements: “Recipient Created Tax Invoice” ABN of supplier and recipient “GST shown is payable by the supplier” www.lewistaxation.com.au 33. Recipient Created Tax Invoice cont'd....

52. Cannot charge GST Cannot claim Input Tax Credits Withholding Tax will be deducted by Payers www.lewistaxation.com.au 34. Unregistered Businesses (Without Australian Business Number Or GST Registration)

53. 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 www.lewistaxation.com.au 35. Statement By A Supplier

54. Issue an invoice quoting ABN Not a “Tax Invoice” Payers do not deduct Withholding Tax www.lewistaxation.com.au 36. Business With An Australian Business Number – But Not Registered For GST

55. Discount allowed Return of faulty goods Bad Debts www.lewistaxation.com.au 37. Adjustments

56. 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 www.lewistaxation.com.au 38. Adjustment Notes

57. 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; www.lewistaxation.com.au 38. Adjustment Notes cont'd....

58. 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 www.lewistaxation.com.au 38. Adjustment Notes cont'd....

59. 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 www.lewistaxation.com.au 39. Insurance

60. 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 www.lewistaxation.com.au 40. Accounting Records For GST

61. The financial records of an enterprise need to produce sufficient information for the completion of the Business Activity Statement www.lewistaxation.com.au 41. GST Control Accounts

62. Your professional advisor has invested in: training material seminars check lists procedural matters Your professional advisor can assist www.lewistaxation.com.au 42. Professional Assistance