EDUCATIONAL BODIES COURSE 1: GST Introduction & Registration

SMALL BUSINESS, EDUCATIONAL AND COMMUNITY ADVISER EDUCATION PROGRAMME 1 EDUCATIONAL BODIES COURSE 1: GST Introduction & Registration

TAXREFORM A Better Tax System • Abolition of hidden indirect taxes • Substantial personal income tax reductions • The introduction of GST

TAXREFORM The introduction of GST • A very visible tax - enables hidden taxes to be abolished • GST does not increase costs for a GST registered educational body • Not all goods and services are subject to GST - many education services will be GST free

TAXREFORM Impact of GST • GST impacts on many facets of the operations of an educational body • Incorrect handling of GST can cause financial loss • Staff need to be informed and trained

TAXREFORM Government Assistance Initiatives • The New Tax System Advisory Board • The role of the Australian Taxation Office • The role of the GST Start-Up Assistance Office

TAXREFORM Role of the GST Start-Up Assistance Office • GST and Business Skills - an Action Guide • Organisation delivered assistance • Adviser education programme • Direct assistance programme

TAXREFORM The Role of the ACCC • Ensuring there is no price exploitation as a result of the tax changes • Ensuring that savings from the abolition of hidden taxes are passed on • Will oversee pricing changes from 9 July 1999 until July 2002

GSTTERMS Overview of GST • It is important to become familiar with the key GST concepts and correct GST terms • Understanding these terms and concepts is the easiest way to start implementing GST in your business • This section is an overview of these terms and concepts • Remember: GST is a tax on domestic consumption of goods and services

GSTTERMS Overview of GST Four kinds of GST supply • Taxable supply • GST-free supply • Input taxed supply • Supply by no-registered persons All the GST details flowfrom these concepts. These are the keys to understanding GST

GSTTERMS Enterprise • Getting things done • Providing the things we need • Delivering the goods and providing the services • Some enterprises are required to register for GST • Other enterprises have the option to register

GSTTERMS Entity • An entity is a person, or an organisation, or any other ‘body’ that has a separate legal identity • Single entities may be made up of several enterprises • When registering for GST care needs to be taken to register all entities that comprise a single enterprise • Group registration may be an option

GSTTERMS Australian Business Number (ABN) • When an educational body registers for GST it will receive an ABN • An ABN can be obtained without registering for GST • All educational bodies should obtain an ABN

GSTTERMS Business Activity Statement (BAS) • Using this form, the educational body will advise the ATO of its GST liability or refund claim • This form will also be used for all tax payments in addition to GST • The GST section of this form will be completed every month, or every three months, depending on the basis of GST registration

GSTTERMS Goods and Services • Goods are the tangible things we consume • Services are things people do for others • Goods and services have a cost and, generally, a price • Goods and services are what an enterprise produces

GSTTERMS Taxable Supplies • Supplies of goods and services, connected with Australia, made by registered persons or entities, for consideration

GSTTERMS Input Tax Credits • GST is included in the price of ‘taxable supplies’ an educational body acquires • This GST can be claimed as an input tax credit if those supplies were acquired for creditable purposes • An educational body must have a Tax invoice to claim the input tax credits • The aggregate of input tax credits is deducted from GST collected from customers • The net GST is payable to the ATO, or a refund is due

GSTTERMS GST-free Supplies • GST is not included in the price of GST-free supplies • Therefore, no input tax credits are available when you purchase GST-free supplies • GST input tax credits can be claimed on taxable supplies acquired by a registered person to make GST-free supplies

GSTTERMS GST-free Supplies • Note the categories of supplies that include GST-free supplies • Many education supplies are GST, but this has a very specific meaning - CHECK before you decide not to charge GST

GSTTERMS Input Taxed Supplies • GST is not charged on input taxed supplies • Therefore, no input tax credits are available to the purchaser for input taxed supplies • GST input tax credits cannot be claimed on taxable supplies acquired to make input taxed supplies • Note the categories of input taxed supplies

GSTTERMS Consideration • Consideration is what is given in return for supplies made • Consideration can be in money • Consideration can be in goods or services that have worth in money terms

GSTTERMS Value • When used in a GST context, value means the GST exclusive price of the goods or services supplied • The price of goods or services consists of the value plus applicable GST

GSTTERMS Attribution Rules • Determine time of GST supplies • Cash basis rules • Accrual basis rules

The basics of GST GST affects almost all transactions • GST will apply to transactions that are not GST-free or input taxed • If a transaction is a taxable supply, GST is included in the price • The rate of GST is 10%

The basics of GST GST affects almost all transactions • GST collected by ‘educational bodies’ from its customers periodically gets paid to the ATO • In principle a registered educational body is able to get back the GST it has to pay on its purchases • GST this is not a tax on the educational body; it is not a cost to the educational body

The tax fraction The GST is 1/11th of the price charged or paid • The GST inclusive price includes both a GST element and the cost / income element

GST transactions Many transactions may involve a supply for GST purposes • For GST purposes transactions are called supplies • If a transaction is not treated as a taxable supply, there must be valid reasons why not

GST transactions Many transactions may involve a supply for GST purposes • If the transaction is a supply, it has GST implications • The attribution rules determine in which GST period: • GST output tax has to be accounted for • GST input tax credits may first be claimed

Contracts All contracts should address GST issues • If the contract doesn’t pass the GST on to the customer, the educational body will wear the cost • Special rules provide relief from GST for some contracts entered into pre 1 July 2000 but completed after 1 July 2000 • The ATO has released a fact sheet / charts which summarise these rules

Limits on Input Tax Credits There are some transactions for which you cannot claim input tax credits • An educational body cannot claim input tax credits on things bought to make input taxed supplies • Input tax credits are not allowed in some cases where income tax deductions are limited • Input tax credits are not available for private expenses

GST inclusive GST taxable supplies should always be priced GST inclusive • Setting prices / quoting • Signs, advertisements, price tags, catalogues • Alternative of GST inclusive pricing or the ‘value’ of the supply plus the amount of GST stated in dollars

Who can register for GST? To register for GST you must be an entity conducting an enterprise • Businesses, educational bodies and entities conduct enterprises • Generally the GST net extends only to supplies connected with Australia

GST Registration Most educational bodies should register for GST • Last registration date 31 May using ABN registration form • Consider cash or accrual basis • Consider monthly or quarterly returns • Choices exist for some organisations

Cash basis of registration The ‘cash basis’ allows for simpler accounting systems • Only pay to the ATO the GST included in the payments received • Only claim from the ATO the GST in the payments made that are covered by tax invoices

Accrual basis of registration Use an accrual basis only if required to, or it provides substantial cash flow or other commercial advantages • To calculate GST on an accruals basis include accounts owed by and owed to the business • Identify GST on “outputs” • taxable supplies made by the business

Accrual basis of registration Use an accrual basis only if required to, or it provides substantial cash flow or other commercial advantages • Identify receivable GST on “creditable inputs” • taxable supplies acquired to make taxable or GST-free supplies • Accrual basis available to all

Quarterly or monthly GST returns Many educational bodies may find monthly returns are best • Cash flow or other commercial advantages may prompt monthly GST reporting

Tax Invoice Always make sure a Tax Invoice is obtained • A tax invoice is your evidence to get input tax credits • Needs to contain certain information • Different tax invoice levels exist • Up to $50 (before GST) • More than $50 and up to $1,000 (before GST) • Greater than $1,000 (before GST)

Records Keep a record of all transactions to keep track of GST • Record all outflows • Record all inflows • File tax invoices received • Record debtors and creditors

Systems Make sure the GST Information needed to complete the BAS return is readily available • Keep GST records up to date on a regular basis • Ensure the GST information and records is accurate and readily available, when required

Controls Always have checks in place to make sure GST is calculated correctly • Make sure you get it right • Nothing missed - Nothing wrong • Automatic checks and balances • No tax invoice from a supplier - no payment!

Risks Always remember GST • Not identifying transactions which constitute taxable supplies • Misclassifying a taxable supply as a GST-free supply • Charging GST and not paying it to the ATO • Not including GST in prices

Risks Always remember GST • Not collecting and holding valid tax invoices covering input tax credit claims • Not identifying GST input tax credits and not claiming refunds • Claiming a GST input tax credit for costs of making input taxed supplies • Spending GST owing to the ATO

Transition Contracts entered into before 1 July 2000 and which span that date can have tax implications • Special transition rules apply • Need to check existing contracts now • Refunds available for WST paid on certain stock on hand at 30 June 1999

Planning items The planning for GST starts now • Register for GST • Printing invoices and price lists • Point of sale recording

GST REGISTRATION FLOW CHART BASIC REGISTRATION RULES Does the Organisation only make Input Taxed Supplies You are unable to register for GST YES NO Is this an organisation with a current annual turnover greater than $100,000? You must register for GST YES NO YES Do you expect your turnover to exceed $100,000 in the next 12 months You may choose whether to register or not NO

GST RETURN PERIOD FOLW CHART Does the business have a turnover of GST supplies and GST free supplies in excess of $20,000,000 NO Does the business primarily make GST supplies Does the business primarily make only GST free supplies NO YES YES YES Registration on a quarterly basis may improve your cash position Registration on a monthly basis may improve your cash position You must register on a monthly basis

EDUCATIONAL BODIES COURSE 1: GST Introduction & Registration