Business Tax Services - Goods and Services Tax GST

GST Basics:

Businesses are required to charge GST at the rate of 10% on goods and services that they supply to customers. The GST payable is included in the price paid by the recipient of the goods and services. The supplier must pass on this amount of GST to the Tax Office

Offsetting:

If the recipient of goods or services is a registered entity (business), it will normally be able to claim a credit for the amount of GST it has paid, provided it holds a tax invoice. This credit -called an input tax credit is offset against any GST which the business itself charges on goods and services it has supplied to its own customers.

The net effect is that businesses charge GST but do not keep it, and pay GST but get a credit for it. This means that they act essentially as collecting agents for the tax. The ultimate burden of the tax falls on the private consumer of the goods and services, as this person gets no credit for the GST he or she pays.

Accounting for GST:

Tax periods may be monthly, quarterly or, in some limited situations, annual. Monthly tax periods are compulsory in some situations, such as where turnover is $20 million or more. GST and credits are allocated to particular tax periods either on a cash basis (based on when amounts are received or paid out) or on an accruals basis (based on when invoices are sent or received). There are restrictions on who can use the cash basis.

Businesses account to the Tax Office for the GST they charge and the credits they claim by making a GST return in their Business Activity Statement. A separate GST return is made for each tax period, which may be monthly or quarterly.

Refund or payable?

If the GST allocated to a tax period is more than the credits for that period, the business pays the balance to the Tax Office. If the credits exceed the GST, the business gets a refund. Adjustments may need to be made later if there is a change of circumstances.

Exemptions:

Some transactions are outside the scope of GST altogether because, for example, they are gifts, or made by unregistrable people, or have no connection with Australia. Others are "GST-free" which means that the supplier does not charge GST, but can claim credits for the GST on its own acquisitions. The main GST-free items are exports, health, food, education, international travel and certain charitable activities.

Registration:

Most businesses will have to register for GST, although there are some exceptions. If a business is not registered, it normally cannot charge GST and cannot claim credits for the GST it pays.

You are required to be registered if you are carrying on an enterprise, and your annual turnover is $75,000 or more. This is called the registration turnover threshold. For non-profit bodies, the corresponding threshold is generally $150,000. If you are required to register, but fail to do so, you become liable for penalties and even prosecution.

The world of tax can be extremely complex and if obligations are not adhered to it can often become quite stressful, not to mention costly. The accountants, lawyers and tax agents at The Quinn Group are able to assist you with all tax and ATO related matters. For advice or more information contact us now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166.

For more detailed information on Goods and Services Tax, visit our dedicated website GST solutions.

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