Goods and services tax (GST) is a 10% board-based tax imposed on most goods, services and other items sold or consumed in Australia. Generally, companies registered with GST will include GST in the price of their goods and services, and GST credits included in the price of the goods and services they purchase for their business.
Conditions for GST registration
If you run a business and its GST turnover reaches or exceeds $75,000 (for nonprofit organisations, it is $150,000 or more), or you provide travel expenses (including bicycle purchase), you need to register GST.
The simple process of GST tax
First, you need to determine whether your sales category is taxable (that is, you pay GST), and include GST in the taxable sales price. Then you need to issue tax invoices for your taxable sales and obtain tax invoices for your business purchases. Then get the GST credit in the price purchased by your business. After that, you need to submit a BAS form to ATO to declare the sales and purchases, and pay GST to ATO or get a GST refund.
GST taxation is not a very complicated matter, but there are some areas that require additional attention. The following article will select a few key points in GST tax but may be easily overlooked for an in-depth analysis, so that everyone can process GST more smoothly and quickly.
Voluntary registration of GST
First of all, except for companies that meet the conditions for GST registration, if your business is not within the GST registration conditions, you can voluntarily choose to register for GST, which means that your business can apply to ATO for credits paid for in the business purchase GST (but must have invoices that meet the specifications as a voucher), and also need to charge customers 10% more GST (except for GST-free goods and services). Signing up for GST is an important step in bringing your business to the market.
When will the GST turnover threshold be reached? (GST threshold)
At the same time, there are generally two situations when an enterprise reaches the GST turnover threshold. Your “current GST turnover” (your current month and the previous 11 months’ turnover) totals $75,000 or more (for nonprofit organisations $150,000 or more), or your “estimated GST turnover” ( Your total turnover for the current month and the next 11 months) is expected to reach $75,000 or more ($150,000 or more for non-profit organisations).
When calculating the “estimated GST turnover”, we must remember to exclude these two aspects:
1. The amount you received for selling business assets (for example, selling capital assets); and
2. Any sales that you have made or may make only because you stopped operating the business, or any sales that permanently reduce the size of the business.
It should be noted that even if your current GST turnover reaches or exceeds the GST turnover threshold, it is not necessary to register GST if your expected GST turnover is below this threshold.
Goods and services without GST
General GST-free type (GST-free)
According to Australia Taxation Office – ATO: “You don’t include GST in the price if your product or service is GST-free. You can still claim credits for the GST included in the price of purchases you use to make your GST-free sales”. Generally speaking, those without GST include:
- most basic food
- some education courses, course materials and related excursions or field trips
- some medical, health and care services
- some menstrual products (from 1 January 2019)
- some medical aids and appliances
- some medicines
- some childcare services
- some religious services and charitable activities
- supplies of accommodation and meals to residents of retirement villages by certain operators
- cars for disabled people to use, as long as certain requirements are met
- water, sewerage and drainage
- international transport and related matters
- precious metals
- sales through duty-free shops
- grants of land by government
- international mail
- sales of businesses as going concerns
- some telecommunications supplies
- eligible emissions units.
The continuing operations sale without paying GST
The sale of an enterprise called “business as a going concern” requires the business to meet these following conditions without paying GST:
- First of all, everything the enterprise needs for continuous operation is provided to the buyer, and the seller has been operating the business until the day of sale.
- Moreover, the buyer has registered or needs to register the goods and services tax when the payment has been completed. And before the sale, the seller and the buyer agree in writing, that the sale is continuous.
It should be noted that all the conditions must be met before GST can be paid.
Tax invoice specifications
Small credit (less than $82.5)
When applying for a GST credit, companies need some proof of compliance. Small credits (referring to purchases of $82.5 or less, including GST) require one of these four items: tax invoice/cash transfer record/receipt/invoice.
If there are no more than 4 items, you need to make a purchase record, such as an account that contains the following information: the supplier’s name and ABN, the date of purchase, a description of the purchased item, and the amount paid
Medium credit (less than $1,000)
When taxable sales exceed $82.5 (including GST), a tax invoice is required as a voucher to deduct GST. When taxable sales are less than $1,000, it is necessary to pay attention to the following seven aspects of information that must be clearly determined:
1. The document is intended to be used as a tax invoice;
2. The identity of the seller;
3. The seller’s ABN;
4. The date of the invoice;
5. A brief description of the items sold, including quantity and price;
6. The amount of GST payable (if any)-can be displayed separately, or if the GST amount is exactly one-tenth of the total price, for example, there is a statement “total price includes GST”;
7. To what extent each transaction on the invoice is a taxable transaction (i.e., the GST-free part is removed).
Large credit (more than $1,000)
When the sales are $1,000 or more, the tax invoice must include the buyer’s basic identity information and ABN number.
Some notes in the credit
It should be noted that if a tax invoice includes both GST taxable and GST tax-exempt items, the invoice needs to clearly indicate which items are GST taxable. In addition, the invoice also needs information on each taxable item, the GST amount payable by each item, and the total amount to be paid.
If the invoice provided by the supplier includes incorrect or incomplete information, the invoice is not a valid tax invoice. However, if the missing information can be obtained from other documents provided by the supplier, it can be regarded as a tax invoice.
GST cannot be credited
Generally speaking, GST cannot be credited under the following circumstances:
1. If your business has not registered for GST;
2. For purchases that do not include GST in the price, including: the goods sold to you do not contain GST (such as basic food), and the goods sold to you have received input-taxed (such as housing, bank fees and loan interest), to purchase goods from suppliers who have never registered or need to register for goods and services tax (therefore cannot charge goods and services tax);
3. Wages you pay to employees (wages have no consumption tax);
4. In general, if you do not have a valid invoice with a purchase price of more than AUD 82.50 (including GST) when you submit the BAS, you cannot credit GST (there are exceptions).
At the same time, you cannot claim the GST credit for some purchases (even if the price includes GST), which includes:
- If the purchase is for private or family purposes
- The purpose of the purchase is to provide input-taxed supply (eg supply related to the provision of housing)
- Real estate purchased under a margin plan
- For certain purchases that you cannot deduct from income tax (eg entertainment expenses)
- The portion of the car purchase price that exceeds the car limit for the relevant fiscal year
- The deadline for claiming GST credits for purchased goods has ended.
In summary, the above points list some points that require additional attention in GST taxation. GST is a kind of tax that companies often deal with. It is a very important part of enterprise development to understand GST more comprehensively.