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					                                                                  SER Tax/Law




Tax Briefing – GST Basics

Achieving VPS Taxation Compliance

Presented by Greg Berry
Ernst & Young




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Agenda

    Introduction to GST

    Special Rules

    BAS Completion

    Correcting GST Mistakes and Penalties

    Case Studies




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
        What is the GST?
          A tax system which applies:

                  to supplies

                  for consideration

                  in the course or furtherance of an enterprise

                  connected with Australia

                  by a registered person

          NB. But some exclusions


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Types of Supplies

             Taxable Supply
                           Broad base
             GST-Free Supply
                           Education, Health, Exports, Some foods etc.
             Input Taxed Supply
                           Financial Services etc.
             Outside Scope
                           Salaries and wages, non-registered suppliers etc.




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Supply
    Any form of supply whatsoever

    Includes (but not limited to):
             Supply of goods/services
             Provision of advice or information
             A grant, assignment or surrender of real property
             A creation, grant, transfer, assignment or surrender of any right
             A financial supply
             An entry into, or release from, an obligation:
                      To do anything; or
                      To refrain from an act; or
                      To tolerate an act or situation



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Consideration

    Includes any payment, act or forbearance in connection
     with a supply of anything; and

    Any payment, act or forbearance in response to or for the
     inducement of a supply of anything

    Can be monetary or non-monetary




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
What is an enterprise?
             Series of activities
                           In the form of a business
                                             significant commercial activity
                                             intention to make profit
                                             size and scale of activity
                                             not a hobby, recreation or sporting activity

                           In the form of an adventure or concern in the nature of trade
                           Regular and continuous basis
                           By the trustee of a fund to which deductible gifts can be
                            made
                           By a trustee of a complying superannuation fund

Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
What is an enterprise?

             By a charitable institution or by a trustee of a charitable fund
             By a religious institution; or
             By a Commonwealth, a State or a Territory, or by a body
              corporate, or corporation sole, established for a public purpose by
              or under a law of the Commonwealth, a State or a Territory

    What is not an enterprise?
             Employee activities
             Private recreational pursuits or hobbies




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Connected with Australia

    Supply of goods wholly within Australia

    Supply of goods from or to Australia

    Supply of real property that is in Australia

    Supplies of anything else if either:
             The thing is done in Australia; or
             The suppler makes the supply through an enterprise that the
              supplier carries on in Australia (ie. permanent establishment)




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Registration

             Required to be registered if:
                           ‘entity’ ‘carrying on an enterprise’ and
                           annual turnover equals or exceeds $100,000 (non-profit
                            bodies) or $50,000 (all others)

             May choose to be registered if not required to be
              registered




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                             Taxable supplies

                                                                            ATO
                                $2                                     $4                      $4
                                                                                                            = $10


                                                                     $6 - $2           $10 - $6
                                                $22                             $66                 $110
           Manufacturer                                           Wholesaler            Retailer           Consumer



                 Price $20                                        Price $60           Price $100
                 Plus Tax $2                                      Plus Tax $6         Plus Tax $10
                         $22                                              $66                 $110


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                        GST-free supplies

                                                                      ATO
                                    $2                                  $4                 ($6)
                                                                                                             = $0


                                                                      $6 - $2           $0 - $6
                                                             $22                 $66                 $100   Consumer
                    Manufacturer                                    Wholesaler          Exporter
                                                                                                            (Overseas)


                      Price $20                                    Price $60           Price      $100
                      Plus Tax $2                                  Plus Tax $6
                              $22                                          $66


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
GST-free supplies - Examples

    Some Food
             For human consumption
             Place of consumption

    Health services
             Only where supplied to the end user

    Education
             Recognised courses only




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
GST-free Supplies - Examples
   Exported goods
            60 day time limit

   Exported services
            Rights etc.
            Some services to overseas entities will be GST-free
            To be GST-free, services
                     Must not be directly connected with goods or real property in Australia
                     Must not be a supply of work physically performed on goods situated
                      in Australia when the thing is done

            However, legislation has many other requirements


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
GST-free supplies - Examples
   Non-commercial activities of charitable institutions

   Water, sewerage, drainage

   Sale of a Going Concern
            All the things necessary for the continued operation of an
             enterprise must be supplied
            Supplier must carry on enterprise until the day of the supply
            Supplier and recipient must be registered for GST
            Supply must be for consideration
            Agreement in writing

   Grants of land by government

Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                 Input taxed supplies

                                                                     ATO
                                    $2                                $4                  ($0)
                                                                                                            = $6


                                                                     $6 - $2           $0 - $0
                                                        $22                     $66                 $100
                    Manufacturer                                  Wholesaler             Bank              Consumer



                      Price $20                                   Price $60           Price      $100
                      Plus Tax $2                                 Plus Tax $6
                              $22                                         $66


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Input taxed supplies - Examples

Financial Supplies
             Loans
             Sale and acquisition of shares
             Interest component of hire purchase
             Life insurance

    Residential rent and residential premises

    School tuckshops and canteens

    Fund raising events conducted by charitable institutions

Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
GST and input tax credits


Supply                                                            GST Payable   Input Tax Credit

Taxable                                                              Yes              Yes

GST-free                                                              No              Yes

Input Taxed                                                           No               No




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Acquisitions

    Creditable acquisitions – where an entity:
             Acquires anything for a ‘creditable purpose’ (defined)
             The supply of the thing was a taxable supply
             The entity provides, or is liable to provide, consideration for the
              supply
             The entity is registered or required to be registered

    Input tax credits can be claimed in relation to creditable
     acquisitions



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Acquisitions

    Creditable purpose – anything acquired in carrying on the
     entity’s enterprise that:
             Does not relate to supplies that would be input taxed; or
             Is not private or domestic in nature




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Importations
   An importation will be a creditable importation where:
            It is imported solely or partly for a creditable purpose; and
            The importation is a taxable importation
            The importer is registered or required to be registered

   Creditable purpose has similar meaning

   Taxable importation
            Goods must be imported and entered for home consumption
            Must not be a ‘non-taxable importation’
            GST paid to Customs or deferred


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Adjustments

    Adjustment events

    Bad debts

    Changes in extent of creditable purpose




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Adjustment Events

     An adjustment event is an event that:
               Cancels the original supply or acquisition;
               Changes the consideration for a supply; or
               Causes a supply or acquisition to stop being or become a taxable
                supply or creditable acquisition.


     An adjustment note for a taxable supply must be
     issued by the supplier within 28 days of the supplier
     becoming aware of the adjustment.


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Bad Debts
          Where a debt is treated as ‘bad’, an adjustment can be
           made

          If a debt has been overdue for 12 months an
           adjustment can be made

          Where a bad debt subsequently becomes good (ie.
           payment is received), entities will be required to pay
           the GST back to the ATO




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Change in extent of creditable
purpose
    Where an input tax credit is claimed based on extent of
     creditable purpose, and the extent of creditable purpose
     subsequently changes

    Need to make adjustments to take into account the
     change in extent of creditable purpose

    Special rules for timing of adjustments to be made




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Turnover Thresholds

    Registration

    Tax period

    Accounting for GST

    Electronic Lodgement

    Instalment




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Registration

             Required to be registered if:
                           ‘entity’ ‘carrying on an enterprise’ and
                           annual turnover equals or exceeds $100,000 (non-profit
                            bodies) or $50,000 (all others)

             May choose to be registered if not required to be
              registered




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Tax Periods

             May be monthly or quarterly

             Monthly if annual turnover equals or exceeds $20m

             Usually quarterly if annual turnover less than $20m




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Accounting for GST
               Cash basis if annual turnover less than $1,000,000

               Accrual basis if annual turnover equals or exceeds
                $1,000,000
                             pay GST on earlier of receipt of any consideration or
                              issue of invoice
                             claim credit on earlier of payment of any consideration or
                              receipt of invoice




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Others

    Electronic lodgement threshold
             $20 million

    Instalment turnover threshold
             $2 million




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Attribution of GST Payable

    Cash basis
             Attribute GST based on actual amounts of consideration received

    Accruals basis
             Total GST liability in relation to a taxable supply is attributable to:
                      The tax period in which any of the consideration is received for the
                       supply; or
                      If earlier, the tax period in which an invoice was issued relating to the
                       supply

             Note: ‘invoice’ can be any document notifying an obligation to
              make payment and can be different from a ‘tax invoice’

Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Attribution of input tax credits
    Cash basis
             Attribute credit based on actual amounts of consideration provided
             Must hold a tax invoice

    Accruals basis
             Input tax credit entitlement should be attributed to:
                      The tax period in which you provide any of the consideration for the
                       acquisition; or
                      If, before consideration is provided, the tax period in which an invoice
                       is issued

             Must hold a tax invoice


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Attribution of Adjustments

    An adjustment is attributable to the tax period in which you
     become aware of the adjustment

    Must hold an adjustment note before a decreasing
     adjustment can be made




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Documentation

    Tax invoices

    Adjustment notes

    Recipient created tax invoices and agreements

    Policies and procedures manuals




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Tax Invoices

     Need a tax invoice to claim input tax credits

     Suppliers have a legal obligation to issue a tax invoice
      within 28 days of a request (where the supply is at least
      $50)

     All tax invoices should be inspected to ensure they satisfy
      the tax invoice requirements




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
   Tax Invoice Format
           Format for supplies of $1,000 or more
            1.       the ABN of the supplier

            2.       the price for the taxable supply

            3.       the words “Tax Invoice” stated prominently;

            4.       the date of issue of the tax invoice;

            5.       the name of the supplier;




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Tax Invoice Format

         6.       the name of the recipient;

         7.       the address or ABN of the recipient;

         8.       a brief description of each thing supplied; and

         9.       for each description: the quantity of goods or extent of services supplied

         10.      A statement that the total includes GST, or the GST payable

        Format for supplies of less than $1,000
                 only items 1, 2, 3, 4, 5, 8 and 10 highlighted above




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
   Adjustment Notes
          An adjustment note for a taxable supply > $1000 must
           show:
                    the ABN of the entity issuing it;
                    the words “Adjustment Note” stated prominently (or “tax
                     Invoice” where a credit results);
                    the date of issue of the adjustment note;
                    the name of the supplier or agent of the supplier;
                    the name of the recipient or agent of the recipient;
                    the address or ABN of the recipient or agent of the recipient;




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Adjustment Notes

             a brief explanation for the adjustment (eg REF, REB);

             the difference between the price of the supply before and after the
              adjustment event; and

             the amount of adjustment to the GST payable or a statement that the
              difference in price includes GST.

    Adjustment notes for a taxable supply < $1,000

             No requirement to disclose
                      the name of the recipient or agent of the recipient
                      the address or ABN of the recipient or agent of the recipient



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Recipient created tax invoices

             May be issued in certain circumstances by the
              recipient of the supply.

             May need to apply to the ATO for permission to issue
              recipient created tax invoices

             Need to enter into an agreement

             Format similar to tax invoices

             May reduce administration in some situations


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
RCTI Agreements

    Must specify that:
             The recipient can issue tax invoices
             The supplier will not issue tax invoices
             That the supplier and recipient are registered for GST, and that
              each party will inform the other if registration ceases
             That the recipient will not issue a document that would otherwise
              be an RCTI if the supplier fails to comply with any of the
              requirements




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Policies and procedures manuals

    Policies and procedures should be documented
             Assists new staff taking over existing roles
             Assists in showing the ATO that an effort has been made to
              comply with relevant taxation requirements – PS 2002/8
             DTF Tax Compliance Framework requirement




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  SER Tax/Law




Special Rules




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Grants and Appropriations

    ‘Appropriations’ not subject to GST

    Grants may or may not represent consideration for a
     taxable supply made by the grantee

    Grantee may be required to issue a tax invoice to the
     grantor

    Alternatively, recipient created tax invoices may be issued




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
   Contra Arrangements

          Where Entity A provides goods and services, and
           receives payment “in-kind”, a contra arrangement
           exists.

          Both parties are liable for output tax on their respective
           supplies and must issue tax invoices.

          Both parties use the tax invoice received to offset their
           output tax liability and claim an input tax credit.




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Contra Arrangements

    The result is tax neutral unless:
             one party is not registered and can not issue a tax invoice; or
             the input tax credits are blocked for income tax purposes (eg
              hospitality).

    Example – sponsorship arrangements
             Where sponsor is registered for GST, need to ‘swap’ tax invoices’
              and value sponsorship provided

    Can also be a problem with timing


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Structures - GST Groups

    Membership requirements – company, trust, partnership
     etc

    Consequences of GST Group Approval
             GST liability
             Input tax credit entitlements
             Single entity treatment for calculating input tax credits and/or
              adjustments
             Intra-group transactions ignored




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Structures – GST Branches
    To be registered as a GST branch, the branch must have:
             An independent system of accounting
             Must be able to be separately identified by reference to:
                      Nature of activities carried on through the branch; or
                      The location of the branch

    The branch must carry on or intend to carry on an
     enterprise

    Consequences
             Branch effectively treated as a separate entity
             Main entity treated as a separate entity

Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Structures – Joint Ventures

    Membership requirements

    Consequences:
             GST payable is payable by the joint venture operator and not the
              participant
             GST input tax credits are claimable by the joint venture operator
              and not the participant
             Transactions between participants excluded




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Structures – Non-profit sub-
entities
    Special rule only applicable to charitable institutions, a
     trustee of a charitable fund, a gift deductible entity, a
     government school and certain non-profit bodies

    Any branch of the entity can be treated as a separate
     entity for GST purposes provided:
             It maintains an independent system of accounting; and
             It can be separately identified by reference to the nature of
              activities carried on through the branch or the location of the
              branch



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Special Rules – Government
entities
    Government entities can register for GST even where they
     are not an ‘entity’ and not ‘carrying on an enterprise’

    Special membership requirements for GST grouping
     purposes

    Some grants of land may be GST-free where supplied by
     governments




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Agents

    Special rules allow agents to issue and receive tax
     invoices on behalf of the principal

    GST liability and input tax credit entitlement remains with
     principal

    Communication between agent and principal important to
     ensure correct input tax credits are claimed

    Agent and principal can enter into an agreement to treat
     transactions as ‘principal to principal’ for GST purposes


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Fees and charges not subject to
GST
             List of various fees and charges to be exempt from the
              GST released in Determination format (over 300
              pages)

             Exempt fees and charges vary in each State and
              Territory




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Deposits
          Deposits given as security are not treated as
           consideration:
                   unless deposit is forfeited;
                   until later supply proceeds, then applied as part of
                    consideration

          Therefore, should be no requirement to attribute GST
           where only a security deposit is received




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Progressive and Periodic
Supplies
     Treat each progressive or periodic supply as a separate
      supply, then apply normal attribution rules

     If components of supply not identifiable, use proportion of
      consideration against total consideration as a proxy

     Overall supply partly connected with Australia
               Components not connected to Australia will be treated as
                separate supplies with no connection

     Includes treatment of leases and hire arrangements


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Anti-avoidance provisions

    Is the dominant purpose or principal effect of a ‘scheme’ to
     give an entity a GST benefit?

    Stronger than income tax anti-avoidance provisions –
     principal effect test

    Commissioner may negate the ‘avoiders’ GST benefit




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
   Second Hand Goods

               May have a ‘deemed’ input tax credit when acquired
                from an un-registered entity
                        Exception: where the supply to the entity is taxable or GST-
                         free

               ‘Deemed’ input tax credit amount (>$300 in
                consideration)
                        1/11 of consideration provided for acquisition;
                        If greater than the amount of GST payable on the taxable
                         supply of the goods purchased, then 1/11th of the amount of
                         GST on the taxable supply

Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Second Hand Goods

    Where GST payable on taxable supply < 1/11 of
     consideration, ITC is 1/11th of consideration provided

    Can only attribution input tax credits to period during
     which consideration is received, or invoice issued

    Substitute documentation required to claim ITC (when
     acquisition >$50)




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Vouchers
          Holder entitled to goods or services up to monetary
           value
                   Where consideration for supply < monetary value
                             Supply of voucher not taxable supply
                             GST payable when voucher redeemed

                   Where consideration for supply > monetary value
                             excess over monetary value treated as taxable supply when
                              voucher purchased




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Vouchers

    Holder entitled to specific goods or services
             GST payable when voucher purchased
             No GST payable when voucher redeemed

    Increasing adjustments for unredeemed vouchers




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Business Activity Statement
(BAS)
     Net amount recorded in GST Return, which is
      incorporated into a Business Activity Statement

     Enables GST liabilities to be off-set against other tax
      liabilities such as PAYG, FBT, WET, LCT

     Net amount must be substantiated by a tax invoice for
      every input tax credit

     Cannot record credit in Business Activity Statement
      unless you have the relevant Tax Invoice


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
BAS Completion

    The use of the two methods of calculating the GST net
     amount
             Calculation Sheet method of BAS completion
             Derived from Accounts method of BAS completion

    Monthly BAS and Quarterly BAS

    Annual instalments




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
BAS Completion

    Calculation Sheet Method
             All boxes to be completed and must be GST inclusive
             Only include items that will be taxable supplies or that “fall out”
              through G2, G3 or G4
             Adjustments can be included in G1 or separately at G7 but not
              both




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
BAS Completion

    Derived From Accounts Method
             Must have adequate accounting systems to calculate GST net
              amount and provide audit trails
             Specifically, accounting system must have at least:
                      GST payable control account
                      Input Tax Credit control account

             A GST adjustments control account is optional
             If meet these requirements, less detailed information may be
              provided on the BAS



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
BAS Completion
   Monthly or quarterly
            Subject to turnover thresholds – If annual turnover is greater than
             $20 million, must submit monthly returns
            If less than $20 million, can choose monthly or quarterly
                     Compliance costs
                     Ability to obtain refunds from ATO in a timely manner
                     Ability to delay GST liability

            Annual instalments
                     Must be under threshold
                     Must be in a ‘net refund’ position
                     Must have complied with all GST return obligations
                     Must have a current GST lodgement record of at least 4 months

Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Correcting GST Mistakes

    Applies to mistakes made when completing prior BASs

    Does not apply to adjustments, only to errors and
     omissions

    Input tax credits that could have been claimed on an
     earlier BAS
             eg. not aware that tax invoice was held

             Claim on any BAS, as long as tax invoice is held. No time limit




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Correcting GST Mistakes

    Time Limits

         Annual Turnover                                          Time limit in which you can correct
                                                                  errors

         Less than $20m                                           Up to 18 months

         $20m to less than $100m                                  Up to 3 months

         $100m to less than $500m                                 Up to 3 months

         $500m to less than $1bn                                  Up to 3 months

         $1bn and over                                            Up to 3 months



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Correcting GST Mistakes

    Correction Limits

         Annual Turnover                                          Correction Limits

         Less than $20m                                           Less than $5,000

         $20m to less than $100m                                  Less than $10,000

         $100m to less than $500m                                 Less than $25,000

         $500m to less than $1bn                                  Less than $50,000

         $1bn and over                                            Less than $300,000




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Correcting GST Mistakes

    If the limits are not satisfied, an amended BAS must be
     lodged for the relevant tax period/s.

    Must only correct genuine and reasonable mistakes

    Unable to use arrangements in fact sheet to correct errors
     if the ATO have advised of an intention to conduct a
     verification check

    Must keep records to explain corrections




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Penalties for non-compliance

    Penalties may be incurred where:
             Returns (BAS) are not lodged on time
             Incorrect amounts of GST are claimed/remitted to the ATO (ie.
              where there is a ‘shortfall’ amount)
             Documentation is not retained
             Tax invoices are not issued

    General Interest Charge

    Remission policy – PS 2002/8


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Case studies

    Company A carries on an enterprise and has an annual
     turnover of $25 million.
             Does Company A need to register for GST?
             Can Company A submit monthly or quarterly BAS?

    Company A receives a grant for $1.1 million from a State
     Department
             Does Company A have a GST liability or input tax credit
              entitlement in relation to this grant?
             What is the amount of GST liability/input tax credit entitlement?


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Case Studies

    Company A must register for GST

    Company A must submit monthly returns – annual
     turnover is greater than $20 million

    Where the grant represented consideration for a taxable
     supply made by Company A, it will have a GST liability of
     $100,000
             i.e. 1/11th of $1.1 million




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Case Studies

    XYZ Pty Ltd acquires goods from Arco Manufacturers for
     $220,000 in June 2002. However, the paperwork is
     delayed and XYZ Pty Ltd only receives a tax invoice in
     August 2002.
             Is XYZ Pty Ltd able to claim an input tax credit in its BAS for June
              2002?
             If not, when is XYZ able to claim an input tax credit?




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Case Studies

    XYZ has incorrectly claimed the $20,000 input tax credit in
     its June BAS
             Will XYZ be liable for any penalties?
             Can these penalties all be remitted?
             How can the mistake be corrected by XYZ – on a subsequent BAS
              when the tax invoice is actually received (ie. August 2002 BAS), or
              does the June 2002 BAS need to be re-submitted?
                      Hint: XYZ’s annual turnover is $50 million




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Case Studies

    Answer:
             XYZ could be liable for shortfall penalties because it claimed too
              much input tax credits
             General Interest Charge may also be imposed
             Shortfall penalty may be remitted, but General Interest Charge is
              likely to still apply
             XYZ will have to re-submit its June BAS - $20,000 is greater than
              the correction limit of $10,000
             Note: ‘Correcting GST Mistakes’ Fact Sheet could be used,
              General Interest Charge would not apply


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
Conclusion

    Relatively straightforward ‘basic’ concepts but special
     rules complicate GST compliance

    Need to be aware of all taxable supplies made so correct
     amounts of GST are remitted to ATO – beware contra
     supplies!

    Use ‘Correcting GST Mistakes’ Fact Sheet to avoid
     penalties and General Interest Charge




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  SER Tax/Law




Questions??




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)

				
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