Goods and Services Tax (GST)
Everything you need to know about GST:
Businesses are required to charge Goods and Services Tax 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 Goods and Services Tax to the Tax Office.
We have a dedicated Goods and Services Tax page – visit GST Solutions to find out more.
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.
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.
If you have a question regarding Goods and Services Tax or have any other business questions, the accountants at The Quinn Group are here to help. For advice or more information contact us now by submitting an online enquiry form or call 02 9223 9166.