Transcript GST and FBT (for COFA)

GST and FBT Refresher for
COFA
Anne Harvey – Group Tax Manager, Corporate Finance
Eric McCallum – Group Tax Accountant, Corporate Finance
15 August 2012
Objectives
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When does GST apply
GST Codes
GST application-Courses,Workshop,Conference
What is FBT
What does Taxable Value mean
How is FBT calculated
Types of benefits which attract FBT
When is FBT charged
Update on LAFHA Reforms
When does GST apply
When is it applicable
• Taxable sales
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price includes GST
pay GST on sales
claim GST on purchases
1/11th of Total invoice/sale price
• Taxable supply
 for consideration
 in course of furtherance of
carrying on enterprise
 connected with Australia
 registered or required to be
registered
 not GST free or input taxed
When is it not applicable
• GST free sales
 Basic food - meat, milk, bread,
fruit and vegetables
 Most education, child care,
health
 Some exports
• Input Taxed sales
 Residential property
 Financial transactions
 Cannot claim GST credit
How Does GST work
Supplie
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Raises
Tax
Invoice
Purchase
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Receives
Tax
Invoice
Issue Tax
invoice
$1100
•Taxable
Sale $1000
•GST on
sale $100
Receives Tax
Invoice $1100
•Purchases
$1000
•GST
charged
$100
Total Sales
on BAS $1100
•Sales
$1000
• Remit GST
1/11th to
ATO $100
Total
Acquisitions
on BAS $1100
•Acquisitio
n $1000
•Claim ITC
for GST
$100
Cash Received
$1100
•Net
revenue
$1000
•GST paid
to ATO
$100
Cash Payment
$1100
•Net
Expense
$1000
•GST
claimed
from ATO
$100
UNSW
Sponso
Recipi
ent r
Claiming ITC for GST charged
• Tax Invoice showing GST or GST inclusive price
• Can rely on other supporting documentation issued by supplier if
minor defects in Tax Invoice
• Purchase $82.50 or less (including GST) with Tax invoice, Receipt,
invoice, docket
• Sale < $1,000 – Tax Invoice, name & ABN of supplier, date,
description, if each item is taxable sale, $ GST or Total price includes
GST.
• Sale $1,000+ also show buyer’s name or ABN
GST Codes: Acquisitions – AP/
Expenses/Credit
Card
Taxable – AC/AO
1. Most goods
and services
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2. GST Free – FRAC/FRAO
3. Imports – IMAC/IMAO
4. Input Taxed – ACIT/AOIT
5. Non deductible – NIAC/NIAO
6. Out of scope – EXCL
7. Advances - EXAD
2. Basic food; consumed/used
overseas i.e. international
airfare, accommodation
3. Customs clearance e.g.
Equipment; overseas
subscriptions
4. Financial supplies, residential
accommodation
5. Cannot claim GST, no Tax
Invoice,student entertainment
6. Taxes, wages, donations
7. Travel Allowance, Advance
“C” in AC, FRAC, etc refers to Capital. “O” in AO, FRAO,
etc refers to Other.
GST Codes: Supplies – Account
Receivable/ Billings
1.
2.
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4.
Taxable – SALE
GST Free – FREE
Exports – EXPT
Input Taxed – ITAX
5. Out of Scope - EXCL
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Most services
Accredited Education courses
Overseas customer
Some Kensington College
rent
5. Gifts, No supply made
Courses/ Workshop/Conferences
GST
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Non-accredited units (of Tertiary course)
Admin services not directly related to
education course - academic hire, nonresident application fee, textbook
Conferences
Seminars
Workshops
CPD training
Adult and community education available to
non- residents only
Hobby and recreational course
Self development, public speaking
Excursion/field trip – Food, accommodation
GST free
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Tertiary course determined by Education
Minister in Student Assistance Act 1973
section 5D(1)
Other course determined by Education
Minister
One unit of tertiary course – enrolment
Course materials, student amenities fee
Excursion/field trip –directly related to
course, not recreational (excl food, accomm)
Vocational course
Adult and community education
 Likely to add to employment related
skills
 Determined by Education Minister
 Run by Higher Education Institution/
recognised body
Course Materials – GST Free Conditions
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Provided by education provider to students - supplied
Necessarily consumed or transformed by students undertaking the course – essential, form changed
Necessarily consumed or transformed for the purpose of the course – used up/ converted by student
GST Free Examples
Taxable Examples
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Photocopied or printed educational material
specific to course
Course notes – content, reading list,
tutorials, seminar topics, assignments
Study guide – extract from textbooks,
journals, etc
Film and developing chemicals
Art supplies – paint, sketch pad, chalk
Ingredients - hospitality, chemicals
Consumables - wood, fabric, create models,
necessary/specified stationery
Workbooks to complete exercises
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Effective life limited to duration of course
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Textbooks
Textbooks written by lecturers at Uni sold
on/off campus
Binders for assignments, theses
Musical instruments
Computers
Calculators
Sporting equipment, clothing
Scissors, knives
Photocopying services
Items retain their generic application for
other purposes and not consumed or
transformed in required manner
Common GST Mistakes
• Mixed Supplies – need to enter Taxable items and GST free items on
separate lines with GST code
• Assume GST applies to total – check for GST free
• Use GST code from PO - check if agrees to Tax Invoice
• Relying on default GST codes in EMS
• Tax calculated in system not agree to GST on Tax invoice – may
need to split lines
• Deposits – claiming GST on deposit. Adjust on final Tax invoice
• Credits from prior month. Check GST charged on Invoice.
Risk to UNSW if GST Not charged
 If Taxable Supply UNSW still have to remit 1/11th of total amount to ATO
 Loss of revenue received by UNSW – only 10/11ths.
 Audit risk – inadequate processes and controls
 Penalties and Fines
 Reputational risk
 BAS amendments
Fringe Benefits Tax - Facts
FBT year 1 April to 31 March
Tax Rate 46.5% - Calculated on Grossed Up Taxable Value
FBT paid by employer – UNSW
Includes benefits under a salary sacrifice arrangement
Reportable Fringe Benefit included on Payment Summary in June, if > $2000
FBT is tax on benefits (right, privilege, service or facility)
 provided to employees & associates (relative, partner/ spouse, child)
 by an employer, associate of employer or under an arrangement with a
third party
 in respect of employment – reward for service
“Employee” includes current, former and future employees
If pay Salary  PAYG deduction  Employee pays tax
If provide fringe benefit  no PAYG deduction  Employer pays tax
FBT Calculated on Taxable Value
What is Taxable Value
Determined by the rules applying to each category of fringe benefit
Generally the cost of the benefit
Some benefits concessional tax, e.g. Motor Vehicles
Some reductions and exemptions provided in legislation
GST Impact
• Taxable Value based on GST inclusive amount
• FBT payable depends on whether entitlement to ITC credit
• Can claim Input Tax Credit for GST paid
Important correct GST codes are used and GST amount is correct.
FBT Calculation
Type 1
Entitlement to ITC
Gross Up rate
2.0647
Type 2
No entitlement to ITC
Gross Up rate 1.8692
Taxable Value – incl GST $1000.00
Taxable Value - no GST
* Gross Up rate
Grossed up TV
FBT rate
FBT cost
* Gross Up rate
Grossed up TV
FBT rate
FBT cost
2.0647
$2064.70
46.5%
$960.09
$1000.00
1.8692
$1869.20
46.5%
$869.18
PRT = $1000 * 1.8692 * 5.45% (NSW PRT rate) = $101.87
Examples of Benefits Incurring FBT
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Salary packaged Motor Vehicles or UNSW provided – personal use.
Medical Insurance - inpatriates
Permanent Residency – application, police & medical checks, lawyers fees
(Exempt if to enter Australia on relocation)
Gifts, awards and prizes - $300 or more
Travel for family – SSP, accompany employee on business (exclude relocation)
VC Child care support
Furniture purchase in lieu of relocation transport/ relocation allowance
Kensington College accommodation and meals – provided to tutors/employees
Reimburse deferred HECS/HELP fees
Write off Advance - Debt waiver
Outstanding Advance not acquitted within 6 months – Loan
Home phone/ internet – private %
Dual purpose travel – business and private
Entertainment – tax exempt body
Entertainment v Sustenance
• Social – FBT
• Complete working day
in comfort –
Sustenance
• CPD seminar sustenance
• Overtime –
Sustenance
• Employee travelling –
Sustenance
• After work - FBT
Why
What
When
Where
• How elaborate
• Sit down meal – FBT
• With alcohol - FBT
• Finger food –
sustenance
• Coffee sustenance
• On premises – less
likely entertainment
• Off premises – more
likely entertainment
Entertainment – FBT
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Social function, farewell
Party, Christmas party
Restaurant meals
Business lunch & drinks
Celebrations, Dinners
Spouse meal of employee travelling on
business
Non travelling employee (when dines
with travelling employee)
Morning, afternoon tea, light lunches –
associates
Leisure or amusement activities
Sporting activities, golf days
Gym membership, sporting club
memberships
Holiday
Theatre/movie ticket
Cruises
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Sustenance – no FBT
(6611)
Morning and afternoon tea for employees
Birthday cake – morning tea for
employees
Light lunches, sandwiches, finger food,
salad, juice, etc for employees
Light breakfast at training seminar –
incidental to seminar
Finger food and light refreshments (with
moderate alcohol) immediately after
training or CPD seminar – incidental to
seminar
Meal at seminar that goes for over 4
hours
Meal (with alcohol) while travelling on
business - employee
Tea / coffee – employee
Overtime meal in office
Travel Benefits
Business Purpose
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Predominantly business undertaken
Considered Incidental to business – extra
day to acclimatise
Weekends during business period, e.g. 2
week business trip
Day to prepare/ wrap up
Make Flight connections
Due to flight availability/ delays
1 day Stopover en route – no extra cost
Day between business meeting
Dual Purpose
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Travel to conference then holiday
Holiday at same or different location
Book Annual Leave days in myUNSW
Family accompanies
Private portion 40% or more of total days
Travel Allowance only for business days
Frequency of trips
No restrictions on private travel
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Flight cost split 50/50 between business
and private  FBT on 50% private
If employee pays 50% of airfare directly to
Travel Agent  No benefit  No FBT
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Gifts and Awards
No FBT
FBT
Minor benefit < $300 and
provided infrequently and
irregularly – 6617
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Gift of $300 or more – 6619
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Teaching Award
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Student gift – not employee
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Movie ticket/ vouchers –
Recreational entertainment
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Westfield Gift voucher
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FBT Applicable Accounts in
General Ledger
GL Account
Description
6457
6459
6501
6613
6619
6623
6624
6626
6630
Entertainment
Entertainment – Recreational
Uniforms FBT Payable
Staff Exp Membership Fees
Staff Gifts & Awards $300+
Staff Exp –Recognition Awards
Staff Exp - Education
Staff Exp – Childcare
Staff Expenses FBT
FBT Accrual A/c
6662
6687
6663
6664
6687
6692
6682
6687
If expenses charged to the GL account, FBT will be accrued at month end
Accrued FBT v Actual FBT
Throughout Year
Expense – FBT account
FBT accrual
FBT Return
Actual FBT cost
V
Accrued FBT cost
Adjustment to FBT charge
Overcharged - Credit
Undercharged - Debit
Living Away From Home
Currently
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FBTAA provides concessional taxation
to LAFH benefits
LAFHA is compensation for additional
expenses & disadvantages suffered
due to employee being required to live
away from usual place of residence in
order to perform employment duties
Required by employer to move
Temporary period – fixed term contract
Intention to return to live at former
locality
Employee provides a LAFHA
declaration each FBT year
Tax Implications
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Employee Salary Sacrifices for Rent
and F&D
Managed by HR
Rent – No PAYG, No FBT
F&D – No PAYG, No FBT on exempt
statutory amount (i.e. >$42pw per
adult up to ATO rate)
No Payroll Tax - Exempt Fringe Benefit
LAFHA not subject to SGC
No Workers Compensation - Exempt
Fringe Benefit
Living Away From Home Reforms Background
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2010 - ATO started to take stricter view on LAFHA in Private Rulings issued
Mid 2011 – ATO sent review letters to some organisations requesting information
Mid 2011 – ATO audit letters
29 November 2011 – Treasury released Consultation paper on proposed LAFHA reforms
3 February 2012 – Submissions due on Consultation paper
UNSW as part of Go8 made submission to Treasury outlining significant impacts of
reforms
Large number of Accounting bodies and other organisations also made submissions
Late 2011 – HR advised Faculties to be aware of changes in recruitment discussions
February 2012 – HR arranged for PwC to provide information session to LAFHA recipients
8 May 2012 – in Federal Budget further details released on proposed reforms – expected
start date 1 July 2012
Exposure Draft and Explanatory Materials released
28 June 2012 – Bill introduced to winter sitting of Parliament
Bill not yet been passed – new start date 1 October 2012
Living Away From Home Reforms
Proposed
Reforms
Transitional
Rules
• Employment contract entered into after 8 May
2012
• Any material change to existing employment
contract e.g. time extension, working hours,
salary (except EBA), related entity
• Permanent residents who have employment
arrangements in place prior 8 May 2012
• Foreign/temporary residents maintaining
Australian home that required to live away from
and employment arrangement prior 8 May 12
• 12 month time limit not apply
• LAFHA until 1 July 2014 or new employment
contract
Living Away from Home Proposed Reforms
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Treat LAFHA as part of
employee’s assessable income
Allow an Income Tax deduction to
employees eligible for LAFHA
 For reasonable expenses
incurred and substantiated for
accommodation
 For food beyond statutory
amount. If exceed specified
amount, substantiate full
expense
 Maximum period of 12 months
 Retain written evidence for 5
years
Eligibility
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Required by employer to live away
from Australian residence
Maintain a home in Australia
Ownership interest in home
Home which living away from must
be available for their personal use
and enjoyment at all times
Cannot be rented out or sublet
Expectation to return to live at
former residence
Living Away From Home Reforms
Who impacted
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Fixed term employees from Overseas no longer eligible LAFHA from 1 Oct
2012
Domestic employees on LAFHA if
change to contract
Visiting Academics Living Allowance –
from 1 Oct 2012 no longer exempt from
FBT as not living away from Australian
residence
SSP – accommodation or living expense
paid/reimbursed – from 1 Oct 2012 only
exempt if satisfy proposed LAFHA rules
Tax Implications
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Employee - Overseas employee now
taxable salary from 1 October 2012
Employer
 Additional Payroll Tax - no longer
LAFHA
 Additional Workers Compensation
 Additional SGC
Employer subject to FBT on LAFHA
benefits provided to employees not
eligible to claim income tax deduction
Employer subject to FBT on F&D for
employees eligible for LAFHA on first $42
per week per adult, $21pw per child
Contractors and VN1 Form
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All new Vendors to complete VN1 form – process and system to manage
VN1 form has questions in relation to the services provided and ABN status
To assess if employee or contractor
Assess for PAYG withholding, Superannuation and Payroll Tax
Vendor Classification assists in identifying for upfront Payroll Tax
exemption, ongoing Payroll tax assessment or SGC.
If “Refer HR” – needs to be referred to HRC for setting up in HR system.
Cannot be paid through AP.
Standard UNSW Contact
 Sole Trader Contractor Agreement
 Other Entity Contractor Agreement (Company, Partnership, Trust)
Service Provider – Payment for
Service
Individual
–
No ABN
Sole
Trader-ABN
Company,
Partnership
s & other
structures
Process
via H.R
Process
via H.R
Process
Via A.P
PAYG,
Super,
Payroll
Tax
Super,
Payroll
Tax
Payroll
Tax
Note: Some Sole Traders may be assessed(VN1 result) to be paid via A.P, if no Superannuation or PAYG obligations
Service Provider – Payment for
Expenses
Individual
Employee
ID – Pay
by HR
No
Employee
ID – Pay
by AP
Sole
Trader-ABN
If
Service
Payment
in HR –
Pay by
HR
If
Service
Payment
in AP –
Pay in
AP
Company,
Partnership
s & other
structures
N/A - HR
Process
Via A.P
Questions
Further Information
Finance website:
http://www.fin.unsw.edu.au/PoliciesProcedures/AccountingManual/FBT.html
Contact: Anne Harvey - Ext 51635. Email: [email protected]
Eric McCallum – Ext 52825, Lucy Lowe – Ext 51204