Goods and Services Tax (GST) was introduced on 1 July 2000 as a 10 per cent broad range indirect tax that replaced several other taxes such as wholesale sales tax.
In addition to GST being introduced, two other indirect taxes were introduced: Wine Equalisation Tax and Luxury Car Tax. It was thought that removing the wholesale sales tax and replacing it with the much lower GST rate of 10 per cent would unfairly advantage these industries, so these taxes maintain equity.
GST is a tax on final consumption and is collected in a step process, so it is levied on each stage of production. The supplier of the goods and services may claim credits for the GST they have paid on their business inputs, thus leaving the end-user paying the GST.
CALCULATING GST
GST is calculated at 10 per cent of the taxable supply or by taking 1/11th of the total cost, including GST.
For example, the GST on a shirt (taxable supply) costing $20 (ex. GST) would be 10% of $20, $2. So, the total cost of the shirt, including GST, would be $22. Conversely, to work out the GST from the total cost of the item, you would take 1/11th of $22, which is $2.
SUPPLIES AND GST
There are three different types of supply for GST purposes:
- Taxable supply
- Input taxed supply; and
- GST-free supply.
A supply for GST purposes is a very broad term. It can be:
- A supply of goods
- A supply of services
- A provision of advice or information
- A grant, assignment or surrender of real property
- A creation, grant, transfer, assignment or surrender of any right
- A financial supply
- An entry into or release from an obligation to do anything, refrain from or tolerate an act or situation.
A supply occurs if:
- A supply is made for consideration
- The supply is made in the course of an enterprise (i.e., the business)
- The supply is connected with Australia; and
- The supply is made by an entity that is registered for GST or required to be registered for GST.
Supplies made for consideration
Consideration means any payment that is connected to a supply of anything. This is intended to be very broad and includes, but is not limited to:
- Money
- Inducements to act or not act
- Barter payments
- Forgiving a debt in exchange for a supply of something else; and
- Even if it is paid by the person who did not directly receive the supply, payment for a supply.
Enterprise
An enterprise is defined as an activity or series of activities done in the form of a business or the nature of trade.
Specifically excluded from the definition of ‘enterprise’ are activities or services of activities done:
- As an employee or other PAYG earner
- As a private recreational pursuit or hobby
- By an individual or partnership without a reasonable expectation of profit or gain; or
- As a member of a local governing body established by or under a State or Territory law.
Supplies connected with Australia
Goods are connected with Australia if the goods are:
- Delivered in Australia
- Made available in Australia
- Removed from Australia
- Imported into Australia; or
- Installed or assembled in Australia.
Anything other than goods or real property is connected with Australia if:
- The thing is done in Australia; or
- The supplier makes the supply through an enterprise the supplier carries on in Australia.
Required to be registered
An entity must be registered for GST if:
- It is carrying on an enterprise; and
- Its annual turnover is at or above the registration turnover threshold of $75,000 (or $150,000 for non-profit bodies).
An entity carrying on an enterprise that does not meet the turnover registration threshold can choose to register for GST.
The broadness of the definition of a supply is deliberate, so as many items are caught in the GST net as possible. Exemptions to certain supplies are then made to remove supplies of a specific nature. They are input taxed supplies and GST-free supplies.
TAXABLE SUPPLIES
Many GST registered businesses in Australia will make their supplies under this category.
These businesses are payers and collectors of GST, for example:
Taxable Supply: Television
Step One: Electronic Component Supplier
Sells components to television manufacturer for $300 plus $30 GST, ATO receives $30.
Step Two: Manufacturer
Buys components for $330 from a supplier and then sells manufactured television to the retailer for $600 plus $60 GST. ATO receives $30 (being $60 charged to the retailer, less $30 paid to the component supplier).
Step Three: Retailer
Buys television from a manufacturer for $660 and sells to a consumer for $1200 plus $120 GST. ATO receives $60 ($120 charged to the consumer, less $60 paid to the manufacturer).
Step Four: Consumer has paid $1320 for television (including $120 GST).
At the end of the supply chain, the ATO has only received a net GST amount of $120, the final amount paid by the consumer on the finished product. This is because each business claims an input tax credit on the supplies, they have purchased all along the supply chain.
INPUT TAXED SUPPLY
Input taxed supplies are not subject to GST as they are specifically excluded from the definition of a taxable supply. Importantly no input tax credits can be claimed on any items used to produce such supplies. Ultimately the pricing of an entity making input taxed supplies will pass on the cost of not being able to claim input credits to its clients and customers.
There are three main types of input taxed supplies:
- Financial supplies
- Supplies of residential rent
- Supplies of residential premises.
Financial supplies
Financial supplies mainly include:
- Lending or borrowing of money
- Granting credit on which interest is due
- Activities associated with clients’ bank accounts
- Conducting life insurance business
- Making certain dealings that relate to debt securities, equity securities, unit trusts or future contracts.
There is relief for businesses that are inadvertently caught under input taxed financial supplies.
For example, A furniture retailer offers finance terms for which it charges interest.
Ordinarily, this would form an input taxed financial supply; however, if input credits relating to those supplies are less than $50,000 and those credits are less than 10 per cent of the entities total input credit entitlement. The entity can claim 100 per cent of the input tax credits.
This assessment of input tax credits must be done on a rolling monthly or quarterly basis. You should also be assessing whether the business will stay compliant in future quarters.
If a business does not pass these tests, input credits must be apportioned according to the type of supply they are for.
For some businesses, a reduced input tax credit of 75 per cent is available where the financial supplies are outsourced, for example, debt collection.
Supplies of Residential Rent and Residential Premises
The lease of premises that are to be used for residential purposes is input taxed. Also, the sale of residential premises is input taxed unless it is a new premise which will then be subject to GST.
Commercial Premises
The main characteristics of commercial premises are:
- Commercial intention
- Multiple occupants
- Available to the general public at large
- Accommodation is the main purpose
- Guest services available
- Centralised management and or booking facility.
GST-FREE SUPPLIES
A GST-free supply is a supply that is deemed to be GST-free by the Act. However, input tax credits can be claimed on the purchases used to generate the GST-free supply. It is important to note that it is the supply that is GST-free and not the supplier.
For example, a bakery may sell GST-free items such as bread but also sell soft drinks that are taxable supplies.
Food
The broad approach of the Act is to make all food and beverages fit for consumption by humans GST-free and then remove specific items from the definition.
Most staple food items are GST-free, including meat, bread, vegetables, fruit, eggs, cheese, flour, sugar, plain milk, cereals and canned foods.
Other items of food that are specifically a Taxable Supply include restaurant food, takeaway food, most food that has been prepared and frozen meals.
Other examples of food that attracts GST are:
- Chocolate and other confectionaries
- Cakes, muffins, and puddings
- Pies and sausage rolls
- Bread and buns with sweet filling or coating
- Biscuits
- Soft drinks and alcohol.
Health
The provision of medical services is GST-free. In general, the service must be provided by an approved medical practitioner and be a recognised health service. Hospital care, medical aids, prescription drugs, and private health insurance are also all GST-free when provided in accordance with the Act.
Cars used by disabled people
For at least two years, cars used for personal transport by disabled people are GST-free, as long as they are used for that purpose.
Education
The supply of pre-school, primary education, secondary education, and tertiary education are GST-free. Some trade and professional courses are also GST-free. The exemption extends to excursions related to the curriculum and some other supplies related to education.
Childcare
The supply of childcare is GST-free, where it is supplied by a registered provider or Government-funded.
Exports
Exports are generally GST-free, provided they are not re-imported or where the export is not made with a set time from the invoice.
Duty-free
Supplies through an inward bound Duty-Free shop are GST-free. Care needs to be taken as specific limits apply to each traveller overall, especially alcohol and cigarettes. Amounts brought in excess of these limits will attract customs duty and GST.
Tourist refund scheme
A refund may be sought by tourists on items they take with them when departing Australia. The minimum value of the purchase from any single business total is $300 and not made more than 60 days prior to exit.
Travel
Travel from overseas to Australia and vice versa is GST-free. Also, internal travel by overseas people is GST-free when arranged as part of their international travel.
Religious services
Services provided in the practice of religion are GST-free provided they are done so by a religious institution.
Charitable institutions
Non-commercial activities will be GST-free. Commercial activities will fall under the normal GST provisions.
Supply of a going concern
The supply of an enterprise as a going concern is GST-free under the Act, provided:
- It is for consideration
- The purchaser is registered for GST
- Both parties agree in writing
- The supply is for all the items that the purchaser will need to continue to run the business
- The supplier carries on the business until the purchaser buys it.
Note: That by just selling parts of a going concern does not mean that you will be eligible for this exemption.
For example, A trucking company cannot sell one of its trucks (from a fleet) and call it a going concern.
Suppose the supply was a truck and other elements that enabled it to be a going concern in its own right – for example, a given right over an area to move freight and earn income –that may qualify as a going concern.
The determination of whether a supply is a going concern is a complex area and an issue that has come under the ATO’s scrutiny. It is recommended that professional advice always be sought in making this determination.
Farming land
The supply of farming land either through freehold or long-term lease is GST-free, provided that the land is intended to be used for farming purposes and the land has been used for farming for a minimum of five years prior to sale.
Exclusions exist where the land is to be subdivided into residential blocks.
INPUT TAX CREDITS
When an entity makes a purchase and is registered for GST, it will be able to claim a credit for the GST included in the price where it was for a creditable purpose.
An acquisition is for a creditable purpose if it is a purchase made in carrying on an enterprise. If something is acquired for making an input taxed supply or for a private purpose, it is deemed not a creditable acquisition, and you cannot claim any input credits.
As previously discussed, (under input taxed supplies), there may be circumstances where an input taxed financial supply may be below the thresholds for input credits, and those credits can be claimed as if they were a creditable acquisition.
When claiming an input tax credit and the purchase has been for a partly private purpose, you will need to apportion your claim accordingly. For small businesses, most of these adjustments can be done on an annual basis.
Small food retailers with a combination of GST-free purchases and sales have simplified accounting options made to them by the ATO to reduce GST compliance costs. These methods are only available for valuing trading stock; all other sales and purchases must be treated normally. The options are:
- Business Norms Method
- Snapshot Method
- Stock Purchases Method
TIPS FOR CLAIMING GST
You can claim GST credits for most business purchases. However, there are some things that are GST-free or that you can’t claim for various reasons.
- If your suppliers aren’t registered for GST, you can’t claim GST credits. That applies even if they give you a tax invoice with an ABN and GST amount on it.
- Things such as basic foods, some medical goods or services and other items are GST-free.
- Check your tax invoices and only claim the amount of GST shown.
- If you use an item for both personal and business use, you can only claim the business portion.
- There is no GST on wages you pay to staff.
- There are also some property transactions where you can’t claim GST credits. For example, you can’t claim GST credits when buying a property using the margin scheme or build-to-rent developments.
As part of your record-keeping, remember to keep your tax invoices.
Registered tax agents and BAS agents can help you with your tax.
Business Norms Method
Certain food retailers with an annual turnover of less than $2 million can elect to use the ATO standard percentages to calculate GST-free sales and purchases. These are:
| TYPE OF RETAILER |
GST-FREE SALES % |
GST-FREE PURCHASES % |
| Delis that do not sell | ||
| hot food or prepared meals | 85 | 90 |
| Convenience stores that | ||
| prepare takeaways | 22.5 | 30 |
| Convenience stores that | ||
| do not prepare takeaways | 30 | 30 |
| Cake shops | 2 | 95 |
| Hot bread shops | 50 | 75 |
| Health food shops that do | ||
| not prepare food | 35 | 35 |
| Fish shops that sell fresh and some | ||
| cooked food | 35 | 98 |
| Pharmacies with both taxable and GST-free food sales | ||
| Dispensary: non-claimable sales | 98 | Nil |
| Dispensary: over counter sales | 47.5 | 2 |
| Rural convenience stores that may sell fuel or have an Aust. | ||
| Post agency | ||
| Converter sales | 22.5 | 30 |
| Non-converter sales | 30 | 30 |
Snapshot Method
The retailers can take a snapshot of two two-weekly periods and estimate the GST-free purchases and sales over those periods. Alternatively, retailers can work out their GST-free purchases from invoices and estimate the GST-free sales.
Care must be taken to ensure a reasonable basis for the estimation, especially if the percentage differs greatly from the ATO estimated figures as listed above. This option is available to retailers with a turnover of less than $2 million.
Stock purchases method
Where a retailer is only a reseller of products (for example small convenience store that does not prepare takeaways), the stock purchases method is available.
Under this method, over two four-weekly periods, retailers take a snapshot of purchases only. They can estimate GST purchases and sales from this, which should have the same percentages, as they are only resellers. This option is available to retailers with a turnover of less than $2 million.
MORE SIMPLIFIED ACCOUNTING METHODS
Simplified accounting methods are allowed for small businesses (annual turnover less than $2 million).
Any small business that makes mixed (taxable and GST-free) supplies or mixed purchases is able to approach the Australian Tax Office (ATO) to discuss the development of a simplified accounting method for their use.
SPECIAL INPUT TAX CREDIT RULES
There are a number of circumstances where input credits are able to be claimed in full, at a reduced rate or not at all, depending on the scenario.
Non-deductible expenditure
Specifically, under the Act, if a non-deductible (for income tax) purchase is made in the following circumstances, no input tax credit is available:
- Fines and penalties
- Travel expenses for a relative
- Costs associated with maintaining your family
- Health club memberships
- Leisure facilities or boats
- Entertainment expenses
- Non-compulsory uniform expenses
- Non-deductible non-cash business benefits; and
- Some car parking expenses.
Pre-establishment costs
In general, where a company has not yet commenced business, an input tax credit can still be claimed for the costs of setting up the entity and acquiring trading stock. The requirements are:
- The expense is not private in nature
- The company is created and registered within six months of the expense being incurred
- The entity that first incurred the expense is reimbursed by the new company and becomes a member, officer, or employee of the new company.
Motor vehicles
If you purchase a car in an entity registered for GST and use it for business purposes, you will be able to claim input credits on its purchase and for running expenses.
The current depreciation cost limit is $60,733. Where your vehicle costs more than that, your input tax credit will be calculated at the depreciation cost limit amount and not the purchase price.
If you use the vehicle for part private use, an apportionment for private use will need to be made on the claimed input credits. The ATO sets out the following methods for individuals and certain partnerships:
Logbook method: A logbook of business trips is made for 12 weeks, and a business percentage usage is ascertained. Unless business use drops significantly, the logbook is valid for five years.
Set rate method: Where usage is below 5,000km, you can estimate your kilometres travelled and use the following rates:
| ESTIMATED BUSINESS
KILOMETRES |
ASSUMED ANNUAL
INCOME CREDIT CLAIM |
| 0-1,250 | 5% |
| 1,251-2,500 | 10% |
| 2,501-3,750 | 15% |
| 3,751-5,000 | 20% |
Formula method: You can make an estimate of business kilometres and apply this as a fraction over your total kilometres for the taxation year. This percentage is used to calculate the business portion of input credits.
For example, Julie estimates that of the 20,000km travelled during the year that 13,000km were work-related.
Her percentage would be 13,000/20,000 X 100 = 65% business usage.
Insurance
If you are registered for GST, you may be able to claim an input tax credit on your insurance payments made for business purposes.
You should inform your insurer of the amount of input credit you are claiming as if a claim is made. You will receive the payment net of GST (i.e. it will not require GST to be remitted to the ATO – it will still be assessable income).
You are able to claim input credits on the purchase of replacement items or the repair of an item damaged.
Second-hand goods
So that second-hand dealers are not unfairly disadvantaged when competing with private individuals not registered for GST, special rules apply. Even though a second-hand dealer may purchase an item from someone not registered for GST, they can claim an input tax credit on that purchase when they sell the item.
In this way, the second-hand dealer is only remitting to the ATO the GST that they have made on the mark-up.
Fringe benefits
GST does not apply to a fringe benefit made to an employee where fringe benefits tax has been applied. The FBT gross-up factor has taken the GST into account when calculating the taxable value of the benefit.
Where an employee does make a contribution towards the benefit, and the employer is registered for GST, that contribution will be deemed to include GST.
For example, Fred’s employer manufactures beds and sells a bed to Fred for $1,200, usually retailing for $2,500. The contribution by Fred to his employer is GST inclusive, and his employer would have to remit 1/11th or $109 to the ATO.
For detailed examples of how FBT is calculated, refer to the Fringe Benefits Tax chapter.
Real Property and the Margin Scheme
The margin scheme is one method used to calculate GST on the sale of real property no matter whether it was acquired before or after the introduction of GST on 1 July 2000.
For example, A developer purchased a block of land in 1998 for $200,000, and its value at 30 June 2000 was $400,000. On 31 December 2000, the developer sold the block for $440,000. Using the margin scheme, the developer could only pay GST on the margin of $40,000 –the difference between the valuation at 30 June 2000 and the sale price at 31 December 2000.
Importantly, under the margin system, the new purchaser would not be able to claim an input tax credit on the amount of GST included in the $440,000 purchase price, even if they were registered for GST. However, when the new owners sell, the margin would be the difference between $440,000 and the selling price.
The margin system is a complex and crucial area, so get professional advice from an accountant or lawyer as its application can vary greatly with significant consequences.
REGISTERING FOR GST
Businesses with an annual turnover of more than $75,000 are required to register for GST. In comparison, those with a turnover of less than $75,000 per annum have the option to register. The registration threshold for non-profit entities is $150,000.
To avoid having 47% withheld from payments, it is in the best interests of businesses to apply for an ABN. At the same time, entities can register for a Tax File Number, GST, and Pay As You Go Withholding.
You are not eligible to register for GST unless you are genuinely in business with an expectation to profit. This excludes activities undertaken as a hobby and salary and wage earners.
When registering for an ABN or GST, it is important to consider:
- The type of business you will be operating and your turnover
- Accounting systems you will employ
- Cash flow
- Whether you will be employing others
- Type of supplies you will be making, being taxable, GST-free, and input taxed
- The extent to which you will be able to claim input tax credits.
These are all important issues as they will help you determine the following:
- Should I register on the cash or accruals basis? (Businesses with a turnover of less than $10 million have an option).
- Should I lodge my BAS/IAS monthly or quarterly? (Businesses with a turnover of less than $20 million have an option).
- Do I have adequate systems in place to calculate and budget for my monthly or quarterly tax office remittances?
Many businesses will find that registering on the cash basis will be the best option for them. Under this option, GST is recorded when you physically pay or get paid for a service or item.
Under the accruals method, all debtors and creditors are included for GST purposes. This means that if you’re carrying a large number of debtors (accounts receivable), you will be remitting GST to the ATO that you have not physically received yet.
Conversely, those on the accrual’s method with high creditors (accounts payable) may benefit from this option.
The decision on whether to lodge monthly or quarterly depends on the taxpayer. Many find it easier to budget for GST payments when they lodge monthly. Others can manage with quarterly and see savings in reduced compliance costs.
Many businesses that make mostly GST-free supplies (for example, a doctor’s surgery) lodge monthly to improve cash flow as they are often refundable.
TAX INVOICES
In order to claim an input tax credit for an item costing more than $75, a tax invoice is required.
To be a tax invoice, it must:
- State that it is a tax invoice
- Contain the name and ABN of the supplier
- Have a description of the items supplied
- Note the total price, including GST, or the GST amount and the total price.
If the tax invoice is for over $1,000, it must include the name and ABN of the recipient and the quantity of each thing supplied.
From 1 July 2010, the change to what can be accepted as a tax invoice allows the ATO greater discretion to accept documents/invoices for the purposes of claiming input tax which previously would not have satisfied the strict criteria for ‘valid tax invoices’.
In addition, where a taxpayer makes all reasonable efforts to obtain a tax invoice but cannot, they can treat another suitable document as a tax invoice, provided they notify the Commissioner, and meet any other requirements as determined by the Commissioner.
The law has been clarified in respect of claiming input tax. Businesses may now claim input tax in a period after the period in which a tax invoice is received. This is not a GST mistake requiring notification to the ATO.
ADJUSTMENTS AND BAS
From time to time, situations will arise where an adjustment will need to be made on a BAS already lodged.
This may occur due to:
- a discount allowed or received
- a return of goods
- a bad debt being written off.
This is not an exhaustive list. However, there is no need to amend the already lodged BAS. An adjustment may be made on your next BAS lodged.
Adjustment notes
The threshold at which an adjustment note must be held has been increased from $50 to $75. For business to business transactions, there is an option to treat as fully taxable. Where a supply is made which is partly taxable and partly GST-free between two registered businesses, both parties can opt to treat the supply as fully taxable for convenience. This may be most applicable where the extent of the GST-free treatment is unclear. This does not apply to a supply where part or all of it is an input taxed supply.
MISTAKES AND BAS
Where there is an error, and the business turnover is less than $20 million, the ATO will allow the following:
- If an administration error leads you to paying too much GST (credit error), you can correct the error on a later BAS that starts within the four-year period review of the assessed BAS, which contains the GST error.
- If an administration error leads you to paying too little GST (debit error) and the total is less than $10,000, and the debit error is within the debit error time limit, you can correct the error on a later BAS.
For turnovers greater than $20 million, the following debit correction limits apply (within 12 months):
| TURNOVER | CORRECTION LIMIT |
| Up to $100 million | $20,000 |
| Up to $500 million | $40,000 |
| Up to $1 billion | $80,000 |
| Over $1 billion | $450,000 |
If the correction falls outside these parameters, a request to amend the original BAS must be made. The ATO may impose fines and interest on outstanding amounts owing to them.
From 11 May 2010, the law has been amended to limit claims for input tax credits to a four-year period in line with the time limit on refunds and credits in the Tax Administration Act. Previously there was no cap.
The GST has been amended to provide higher thresholds, together with fewer and shorter adjustment periods. The changed law will apply for adjustments, e.g., two years for acquisitions less than $100,000, five years for those over $100,000 and ten years for real property. Where possible, the existing provisions will be consolidated within the GST law and aligned with other relevant rules elsewhere in the tax system (i.e., the private use percentage will be the same as the direct tax calculation).
OMITTANCE BAS
Claiming an input tax credit on a later BAS because you failed to claim it in an earlier activity statement is not a GST error. If you did not claim a GST credit for a purchase you were entitled to claim on in an earlier BAS, you are entitled to claim it later.
Generally, a four-year time limit applies to input tax credit claims.
GST GROUPING
The GST Act allows for certain groups of entities to register as a GST group. This means that intragroup transactions are ignored for GST purposes.
Also, grouping can lessen the compliance costs as only one BAS is prepared. Furthermore, if some entities are payable and some refundable, you only make one’ net’ payment/refund to the ATO. Members of the group still need to account for GST in their financial accounts individually.
GST groups can consist of two or more companies, trusts, partnerships, and individuals; and can register as a group if:
- They are registered for GST
- They have the same tax periods (i.e., quarterly, or monthly)
- They account for GST on the same basis (cash or accruals)
- They are not members of another GST group; and
- There is like ownership.
Like ownership for trusts and partnerships usually requires a 90 per cent common ownership.
GST liabilities on insolvency
In response to the Federal Court of Australia’s decision in a GST test case, DCT v PM Developments Pty Ltd (2008) FCA 1886. The Government has amended the GST law (with retrospective effect to 1 July 2000) to ensure that representatives of incapacitated entities (e.g., administrators and liquidators) remain liable for GST when selling the assets of those insolvent entities.
In other words, the representative will stand in the shoes of the insolvent entity, and the sale will attract the same GST consequences that would have applied had the insolvent entity made the sale. The amendment is intended to restore the original policy intent underlying Division 147 of the GST Act.
OTHER DEVELOPMENTS
GST changes to Hire Purchase (HP) contracts effective 1 July 2012
Significant changes have applied since 1 July 2012.
Formerly, under the Hire Purchase contract, only the financier’s upfront sale of the asset to the customer is considered taxable. Term charges imposed on the amount financed and all related fees and charges are considered input taxed, with no GST being levied.
From 1 July 2012, this distinction has been removed, and all Hire Purchase contracts are treated as fully taxable.
This means that term charges imposed on the Hire Purchase product, including all fees and charges related to a Hire Purchase, are subject to GST and payable upon settlement of the contract.
This new GST treatment differs from the GST treatment of a Lease agreement, where the GST is charged progressively on the rentals and residual.
The finance company is now liable for all of the GST on the terms, charges and fees upfront and will pass the liability onto the hirer by issuing a tax invoice.
The customer then has two options:
- Pay the GST directly to the financier from their own funds, at settlement; or
- Elect to have the GST liability in the amount financed under the Hire Purchase contract.
GST on Netflix and more on the way
The Federal Government has moved to impose the goods and services tax on services such as Netflix.
This change will apply GST to imports of “intangibles” such as downloaded books, music, videos, and software. The GST already applies to imported parcels worth more than $1,000.
This will increase the price of a Netflix subscription by 10 per cent.
This change is easily accomplished, requiring little redrafting of the Tax Act.
This change was confirmed in the May 2016 Federal Budget the changes and applied from 1 July 2018.
The liability for the GST will be imposed on overseas suppliers using a vendor registration model. This means that suppliers with an Australian turnover of $75,000 or more will be required to register for, collect, and remit GST for all goods supplied to consumers in Australia, i.e., regardless of value.
Prior to 1 July 2018, a GST threshold exemption of $1,000 applied to purchases of imported goods (relevant for online purchases).
Rather than lower the threshold, the Government reduced the threshold to zero. This means that all goods supplied by registered foreign vendors are subject to GST from 1 July 2018.
COMPLIANCE IN FOCUS 2020/21
As the ATO continued to target GST in its 2021 compliance program, it became clear that errors were being made in preparing Business Activity Statements. Below is a list (by no means exhaustive) of some common errors.
- Are you conducting an enterprise? If you are in any doubt, refer to Miscellaneous Taxation Ruling MT2006/1. If it’s still not clear, take professional advice.
- For “one-off” large transactions, always take professional advice.
- Be very careful when claiming motor vehicle input tax credits either on purchase of the vehicle (G10) or vehicle expenses (G11). Refer to our comments earlier in this Chapter.
We have put the ATO factsheet “Common BAS errors – Business Portal general problems and solutions” on our website for easy reference.
Always take care when preparing your BAS. A failure to do so could result in a penalty of 50%.
GST REPORTING REQUIREMENTS SIMPLIFIED FOR SMALL BUSINESSES
From 1 July 2017, all small businesses with less than $10 million turnover have more easily classified transactions and prepared and lodged their business activity statements.
A trial of the new simpler reporting arrangements commenced on 1 July 2016.
GST ON NEW PROPERTY TRANSACTIONS IS NOW TO BE COLLECTED BY PURCHASERS
From 1 July 2018, purchasers of new residential premises will remit the GST amount directly to the ATO as part of the settlement process.
This measure now requires developers to change the way they disclose the price of newly constructed residential premises to ensure the GST liability is disclosed as a separate line item to enable the purchaser to remit the appropriate amount of GST to the ATO.
Those involved in the settlement process (e.g. financiers, lawyers, and conveyancers) will also need to be mindful of their obligations to ensure the purchaser meets their obligations.
There were no significant changes to GST announced in the May 2021 Federal Budget.