Transcript No Slide Title

Chapter 5
Goods and Services Tax
GST
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
1
OVERVIEW
OF THE GST SYSTEM
• GST is a flat rate tax (currently 10%)
on the supply of goods and services in
Australia.
• The GST applies to the supply of
Goods and Services.
• Most suppliers of goods and services
must register for GST.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
2
GST Registration
Who must register?
• Suppliers of goods and services in
Australia must register if they:
–are entities carrying on an enterprise.
–have an annual turnover of $50 000 or
more:
–($100 000 or more for non-profit
organisations)
–(No threshold for taxi drivers).
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
3
An Entity
•
•
•
•
•
•
An individual
A body corporate
A partnership
An incorporated association
A Trust
A superannuation fund.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
4
An Enterprise
• Refers to any commercial activity.
• Not private pursuits such as hobbies.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
5
Annual Turnover
• Annual turnover, for threshold
purposes, excludes any GST included
in the sales price.
• It is optional for suppliers to register
for GST if their annual turnover is less
than $50 000 or $100 000
for non-profit organisations.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
6
THE REGISTRATION PROCESS
• Suppliers are required to register within
21 days of being eligible for registration.
• To register, a supplier must apply for an
ABN as well as specifically registering for
GST.
• The ABN is also the GST registration
number.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
7
Registration by Suppliers for GST
• They may lodge an application on the
approved form to the ATO; or
• Register electronically online via
www.business.gov.au.
A business with an ABN might not need to register for
GST initially, but may do so later.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
8
Consequences of Registration
• To charge GST in the price of taxable
supplies.
• To issue tax invoices to customers who
request them.
• To report and remit GST charged for
taxable supplies to the ATO at regular
intervals.
• Claim input tax credits for GST paid on
purchases.
The business may claim the GST paid as a credit against any
GST remitted to the ATO.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
9
TAXABLE TRANSACTIONS
Under the GST system transactions
are broadly categorised as either
‘supplies’ or ‘acquisitions’.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
10
Supplies
Supplies are goods and services sold by a business.
There are three types of supplies:
1. TAXABLE SUPPLIES
2. GST FREE SUPPLIES
3. INPUT TAXED SUPPLIES.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
11
Taxable Supplies
• Goods and services tax is paid only
on taxable supplies made by the
business.
• With taxable supplies, the business
supplier collects the GST on behalf of
the ATO.
• The GST is subsequently remitted to
the ATO.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
12
REQUIREMENTS FOR A TAXABLE SUPPLY
1. The supplier must be registered for
GST.
2. The supply must be for a price.
3. The supply is made in the course of
a business.
4. The supply is made within Australia.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
13
TAXABLE SUPPLIES
• Registered suppliers of taxable supplies
must include the GST charged in the price of
goods and services sold.
• The total invoice price is usually shown at the
GST-inclusive price.
• To work out the GST included in the invoice
price of a taxable supply, use the following
calculation:
GST = GST- inclusive invoice price
11
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
14
GST-FREE SUPPLIES
• Any GST-free supplies are non-taxable
supplies-no GST is charged.
• The total invoice price is usually shown
at the GST-inclusive price
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
15
GST-Free Supplies
•
•
•
•
•
•
Most food
Exports
Most health services
Most educational supplies
Most childcare services
Sales of businesses as going
concerns
• Water and sewage.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
16
INPUT TAXED SUPPLIES
• Input-taxed supplies are tax-exempt
supplies.
• No GST is charged in the price of the
supply (nor is any input tax credit
claimed) by the supplier.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
17
Input Taxed Supplies
FINANCIAL SUPPLIES
• Loans, bank accounts, shares,
superannuation, life insurances.
• Supplies of residential premises for sale
(except the sale of new homes, which are
taxable supplies).
• Supplies of residential premises for rent.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
18
Acquisitions
Acquisitions are the goods and
services bought by a business.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
19
TYPES OF ACQUISITIONS
• Creditable acquisitions
• GST-free acquisitions
• Imports (special case)
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
20
CREDITABLE ACQUISITIONS
Creditable acquisitions
are acquisitions (i.e.
purchases) for which
businesses are entitled to
claim input tax credits.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
21
Requirements for a Creditable
Acquisition
• The business purchaser must be
registered for GST.
• The GST is included in the price of
the acquisition.
• The acquisition is for business
purposes (not private purposes).
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
22
GST-FREE ACQUISITIONS
• Any acquisition (purchase) where
GST is not charged by the supplier is
a GST-free acquisition.
• The GST-free acquisitions involve
purchases where no GST is included
in the price.
• Because no GST is included in the
price, there is no input tax credit to
claim for these purchases.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
23
GST-Free Acquisitions
• Wages and salaries paid for the supply of labour
services.
• Payments for financial supplies (e.g. loan
interest, account charges or superannuation
contributions.
• Payments for any tax-free supply.
• Any payment for goods or services from an
unregistered supplier.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
24
IMPORTS
• Importers must pay GST on any goods
imported into Australia, regardless of
whether or not they are registered for
GST.
• Only registered persons, however, can
claim an input tax credit for GST paid
on imports.
• Importers who are registered for GST
may be able to defer the payment of
GST.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
25
GST RECORDS
• All GST-registered businesses are
required to regularly lodge a Business
Activity Statement (BAS) to the ATO.
• A BAS is a report of the GST (and
other taxes) payable by the business
for each tax period.
• Records are also required to verify
GST transactions reported in the BAS.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
26
GST SOURCE DOCUMENTS
• TAX INVOICES
• ADJUSTMENT NOTES
Businesses must keep records for GST purposes
for at least five years.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
27
Tax Invoices
• Tax invoices are issued by suppliers for
taxable supplies.
• They are issued to allow purchasers to claim
input tax credits for their purchases.
• Purchasers cannot claim input tax credits on
their BAS without tax invoices from
suppliers.
• Suppliers of taxable supplies must issue tax
invoices within 28 days of being requested
to do so by purchasers.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
28
Exemption
Tax invoices are not required if
the GST exclusive value of the
supply is $50 or less.
Records still need to be kept, though, to
support any input tax credit claims.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
29
REQUIREMENTS FOR TAX INVOICES
• Tax invoices under $1000
• Tax invoices over $1000
• Tax invoices with a combination of
taxable and non-taxable supplies
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
30
ADJUSTMENT NOTES
An adjustment note is, in effect, a
refund notice to adjust a paid tax
invoice for GST purposes.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
31
REPORTING AND REMITTING STEPS
Determine the tax period
(monthly or quarterly)
Determine the accounting method to use
(cash or accruals)
Calculate the net GST payable for each tax
period (payable or refundable)
Lodge a BAS after the end of each tax period
(plus payment)
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
32
THE TAX PERIOD
The tax period for reporting and remitting GST by
suppliers will be either monthly or quarterly
• Suppliers whose annual turnover is
less than $20 million can choose
either monthly or quarterly tax
periods.
• Monthly tax periods are compulsory
for suppliers with an annual turnover
of $20 million or more.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
33
The Cash Method
The cash method of accounting means sales are
recognised at the time of receipt, and purchases at
the time of payment.
Suppliers may select the cash method if:
• The supplier's annual turnover is $1
million or less; or
• The supplier already uses the cash
method of accounting for income tax
purposes.
In all other cases, suppliers must use the
accruals method of accounting.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
34
The Business Activity Statement
(BAS)
• Suppliers registered for GST purposes
must prepare and lodge a Business
Activity Statement (BAS) for each
quarterly or monthly tax period.
• A completed BAS shows the net
amount of GST payable (as well as
other taxes) payable for the period.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
35
Due Dates for Quarterly BAS
• Quarter 1 (July–September) 28 October
• Quarter 2 (October– December) 28 February
• Quarter 3 (January–March) 28 April
• Quarter 4 (April–June) 28 July
The monthly BAS is due within 21 days after
the end of the month.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
36
Lodgement
The BAS can be lodged by mail or
electronically through a tax agent.
Payment method options
• Mailing
• Paying personally at Australia Post
• Or electronic funds transfer into the ATO
account.
The GST records, including the completed BAS and work papers
showing calculations, must be retained for at least five years.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
37
QUARTERLY REPORTING AND PAYMENT
OPTIONS
Registered businesses with a turnover of less
than $20 million per annum
• Option l
Report and pay GST calculated by
taxpayer.
• Option 2
Report (minimum information) and pay GST.
Registered small businesses with an annual
turnover of $2 million or less
• Option 3
Report (minimum information) and pay GST
calculated by ATO .
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
38
OFFENCES
• Failure to lodge GST returns.
• Late lodgement of GST returns.
• Late payment of GST assessed.
• Deliberate/careless understatement
of GST liability.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
39
EXCISE AND CUSTOMS DUTIES
• Excise and customs duties are
separate federal taxes to GST.
• Excise duty is a federal tax on
specific types of goods
manufactured or produced in
Australia.
• These goods include alcohol, tobacco,
petroleum and oil products.
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
40
CHAPTER 6
Discusses
Fringe Benefits Tax
Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a
Tax Procedures for your Business by Ian Birt,
Slides prepared by Peter Miller
41