Basics of Goods & Services Tax

Goods & Services Tax has been a major talking point recently in the media with the discussion of potential changes to GST. The Goods and Services Tax in Australia is a value added tax of 10% on most goods and services transactions. GST is levied on most transactions in the production process, but is refunded to all parties in the chain of production other than the final consumer. There are many basics that both individuals and businesses need to know about GST and how it affects them.

So how exactly does Goods & Services Tax work? According to the ATO, businesses registered for Goods & Services Tax will include GST in the price of sales to their customers, and claims credits for the GST included in the price of their business purchases. If you run a business and your GST turnover is $75,000 or more, then you must register for Goods & Services Tax. Alternatively, non-profit organisations have a threshold of $150,000 or more. One exception however is that taxi drivers must register for Goods & Services Tax regardless of their turnover.

If you are registered, the goods and services you sell are generally taxable under Goods & Services Tax. If they are taxable, you can include GST in the price. Basic foods, some education courses and some medical and health care products/services are often GST free. Often at the supermarket, you will see an asterisk next to the items that are or aren’t GST inclusive on your receipt.

In terms of claiming Goods & Services Tax credits when you buy something, you can claim a credit for any GST included in the price you pay for things for your business. However, you may need a tax invoice in order to claim the credit.

As a Goods & Services Tax-registered business, you must issue tax invoices to your customers, collect GST and send it to the ATO with your Business Activity Statement (BAS). By lodging a BAS, you are reporting and paying GST amounts to the ATO and claiming GST credits.

The Australian National University (ANU) made a list of the top 10 basics you need to know about Goods & Services Tax. They are as follows:

1. The Goods & Services Tax treatment of a transaction is dependent on the type of supply that is made in return for the payment. There are four broad types of supply under the Goods & Services Tax Act including; taxable, Goods & Services Tax-free, input taxed and out of scope.

2. It is the supplier’s responsibility to make sure a transaction is treated correctly for Goods & Services Tax purposes.

3. Goods & Services Tax is levied at a rate of 10%.

4. Goods & Services Tax is generally not a “real cost to businesses” as most of the time you can claim it back as a credit from the ATO if you are registered.

5. A business needs a tax invoice to claim back the Goods & Services Tax on purchases.

6. A business that is registered for Goods & Services Tax is required to legally issue a valid invoice within 28 days of request.

7. The Goods & Services Tax component of a GST inclusive price is worked out by dividing it by 11. This is because the cost of the product (100%) plus the GST (10%) equals 110% in total.

8. A business can only charge Goods & Services Tax if it’s registered.

9. If you have an Australian Business Number (ABN) that doesn’t necessarily mean you’re registered for Goods & Services Tax.

10. Everyone is subject to the same rules for GST including Government organisations, departments and public universities, however, not all transactions are treated the same and this is where we need to be careful.

Fortunately, the team at Fortis Accounting Partners are available to help and can assist you with Goods & Services Tax advice on certain transactions, lodging your Business Activity Statements, and corresponding with the ATO in GST related matters. Our team have years of experience and we are happy to assist you in anyway possible.

If you have any questions about how we can help you, please don’t hesitate to get in touch with us today.  You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.

 

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Reshika Kumar

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With her kind, caring and approachable nature, Reshika never fails to provide a positive, welcoming experience for our clients, assisting them as they walk in our door or call our office. She understands the power of customer service and is always willing to lend a hand.

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