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Residential Rental Payment Summary Invoice

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					Financial Management Practice Manual 732
Policy and Procedures

GOODS AND SERVICES TAX (GST)

Definition
Goods and Services Tax (GST) is a broad-based tax of 10% on the supply of most goods,
services and anything else consumed in Australia. GST is a tax on transactions and not on
entities. Unlike stamp duty an entity cannot be exempted from GST. GST is a tax on private
consumption; businesses that are registered for GST can recoup the GST that they are charged
on their purchases.


The commencement date was 1 July 2000.



Types of Supplies
The concept of “supply” underpins the GST legislation. GST is charged on every taxable supply.


The GST legislation defines three (3) types of supplies, together with the treatment of GST and
the ability to claim credits:


Type of Supply                      Charge GST                       Claim Input Tax Credit

Taxable Supplies                    Yes                              Yes

GST free Supplies                   No                               Yes

Input taxed Supplies                No                               No


Taxable Supplies – A taxable supply will include a charge for GST. A supplier makes a taxable
supply if they are registered for GST. A taxable supply is any supply:
    •   for consideration;
    •   in the course of an enterprise carrying on their business;
    •   connected with Australia.


A taxable supply does not include GST free or input taxed supplies. If the University generates a
taxable supply then GST will have to be levied on the amount charged (e.g. Sale of Equipment).


GST Free Supplies – This type of supply does not include GST (i.e. GST is not levied on the
amount charged). Typically, GST free supplies would include exports, health & medical care,
education & childcare, non-commercial activities of charitable institutions and most types of food.
The GST levied on expenditure incurred in generating revenue which is GST free, is able to be
recouped.


Input Taxed Supplies – This other type of supply also does not include GST. An example of an
input taxed supply is residential rental premises. The GST levied on expenditure incurred in
generating revenue which is input taxed, is not able to be recouped.


In general, the University generates two (2) types of supply; GST free supplies (e.g. Education)
and taxable supplies (e.g. Consultancy). This in turn means the GST charged on purchases that
relate to these supplies can be recouped. As most of the purchases the University incurs relates
to the delivery of either GST free supplies or taxable supplies any GST charged on these
purchases, can be claimed back as an input tax credit refund.



Input Tax Credit
An input tax credit is the GST that has been paid on any creditable acquisition. Input tax credits
are claimed by the University with the lodgement of its Business Activity Statement (BAS) each
month.


The University must retain a valid tax invoice in order for an input tax credit to be claimed.



Australian Business Number (ABN)
The Australian Business Number (ABN) was introduced with the GST legislation. It is the single
business identifier that allows all businesses to operate within the new legislation. All ABNs are
listed on the Australian Business Register: www.abr.business.gov.au


The above web site is available to verify a business’s registration details. Dealings with an
unregistered business require the withholding of 46.5% of the invoiced amount. It’s possible for
businesses to have an ABN and not be registered for GST. These businesses would not be able
to charge GST and would not be able to claim input tax credits.


The University’s ABN is 46 253 211 955.



GST Registration
Any entity with a turnover greater than $75,000 must register for GST. An entity registered for
GST must charge GST on taxable supplies and can claim input tax credits on purchases that
relate to either taxable or GST free supplies.


The University is registered for GST.
PAYG Withholding – 46.5% (No ABN)
The Government’s business tax reform package contained a number of measures in addition to
the introduction of GST. One of these is the requirement of every business enterprise to obtain
an ABN. For GST purposes the ABN acts as the GST registration number and is also required
on a supplier’s tax invoice in order to claim an input credit.


Under the Pay As You Go (PAYG) legislation, suppliers are required to quote their ABN on all
invoices and, if not quoted, the other business is required to withhold tax from their payment. Any
amounts withheld are remitted to the ATO and the supplier is presented with a payment
summary. The payment summary shows what tax has been remitted to the ATO on behalf of the
supplier. The supplier can then claim this tax, using the payment summary, when lodging their
income tax return.


The University must withhold 46.5% tax from any payments (other than employee salaries and
allowances) where the payee cannot provide an ABN. Exceptions to withholding are when:
    •   the payment does not exceed $75 (excluding GST);
    •   the payment is exempt income for the recipient;
    •   the recipient is an individual and has made a written, signed statement (Statement by
        Supplier) that the supply is private or domestic in nature, or relates to a hobby.


Any business that fails to withhold is exposed to possible tax penalties, which will include the tax
that should have been withheld. If a payment is to be made to a payee who cannot provide an
ABN then the payment MUST be made through accounts payable using a payment request form.
There is no mechanism to withhold 46.5% PAYG tax via the Corporate Credit Card or Petty Cash.


Following the supplier’s payment (53.5%), accounts payable will:
    •   forward the 46.5% withholding tax to the ATO; and
    •   forward a payment summary to the supplier.



Tax Invoices
A tax invoice is a special type of invoice that contains specific information needed for the
operation of the GST legislation. All businesses that are registered for GST must issue a tax
invoice when charging GST. The tax invoice details the type of acquisition and, if GST has been
charged, allows the purchaser to claim back the GST. Different requirements apply to tax
invoices for taxable supplies if the total value, including GST, is:
    •   greater then $1,000;
    •   between $1,000 and $82.50;
    •   less than $82.50.


Additional information is required if the invoice involves taxable supplies and GST-free and or
input-taxed supplies (mixed supplies). The table below sets out the different requirements:


Requirements             Non-Tax                   Invoice(less than        Tax Invoice Tax
                                                    $1,000)                   Invoice ($1,000 +)

“Tax Invoice” stated                                X                         X
prominently

Date of issue             X                         X                         X

Name of supplier          X                         X                         X

ABN of supplier                                     X                         X

Name of recipient         X                                                   X

Address or ABN of                                                             X
recipient

Brief description of                                X                         X
each thing supplied

For each description –                                                        X
the quantity of the
goods or the extent of
the services supplied

The GST inclusive         X                         X                         X
price of the taxable
supply

If GST is 1/11th of the                             X                         X
total price either:
(a) a statement like
“the total price
includes GST” or
b) the total amount of
GST

If GST payable is less                              X                         X
than 1/11th of total
price
a) the amount payable
(excluding GST) and
b) the total amount of
GST


Rounding - Where the total amount of GST payable for the tax invoice includes a fraction of a
cent, the amount should be rounded to the nearest cent, with fractions of half a cent being
rounded upwards.


Taxable Supplies less than $82.50 (including GST)
There is no requirement for a supplier to issue a tax invoice and the recipient does not have to
hold a tax invoice to claim an input tax credit if the value (excluding GST) of the taxable supply is
$75 or less. However, there should be some documentary evidence to support all input tax credit
claims.
Even though a tax invoice is not required for acquisitions that are $75 or less (excluding GST),
the GST can still be claimed back. For example, a cash register receipt for a $28 stationery
purchase is sufficient to claim the input tax credit. The University can still claim back 1/11th of
this as an input tax credit ($2.54). However the University still has to have evidence to support
the input tax credit claim for the transaction. The cash register receipt will satisfy this if it can
substantiate what was purchased, the supplier, the date and the consideration.


Mixed Supplies
A mixed supply is where only some of the items on a tax invoice include GST (e.g. field trip
receipt from a supermarket where some of the items have GST and some do not). A tax invoice
for a mixed supply must:
(a)     clearly identify each taxable supply;
(b)     show the total amount of GST payable; and
(c)     show the total amount payable.


Period/Progressive Supplies
Supplies of goods or services that are supplied for a period, or progressively over a period have
special rules. Examples are leases, hiring arrangements, pay by the month insurance cover, and
building & construction contracts. In these situations the contract is treated as a series of
separate contracts for each separate supply that is invoiced. For attributing the GST payable and
the input tax credit to a tax period, each progressive or period component of the supply is treated
as a separate supply.


While the separate components are treated as separate supplies it is not necessary to issue
separate tax invoices for each supply. The ATO have issued GST Ruling 2000/17, which states
that a single invoice can be issued to cover all the supplies. The invoice would have to identify
the price of each supply either in the document or with a schedule attached. Where these
requirements are met, the purchaser can recoup the GST over the life of the agreement.


Subscription, Conference Registration, Insurance Renewal, and Similar Notices
These types of notices are issued before it is know whether there will be a supply. Legally these
documents are called an “offer” and the supply does not take place until accepted by payment.


The ATO, in GST ruling GSTR 2000/17, have stated that if the document otherwise complies with
the requirements for a tax invoice (click here for the requirements of a tax invoice) then it can be
treated as a tax invoice. However the document must contain a statement such as “This
document will be a tax invoice for GST when you make payment”.



GST Procedures
The following GST procedures have been developed according to the type of activity and how
that activity is processed through the University’s finance system:


732.1 - Accounts Payable
732.2 - Petty Cash
732.3 – Corporate Credit Card
732.4 - Recipient Created Tax Invoices (RCTI) Agreements
732.5 - Accounts Receivable
732.6 - Business Activity Statement (BAS)



732.1 – Accounts Payable
All invoices for payment of goods and services, other than those processed via the corporate
credit card, are processed by Accounts Payable within Financial and Business Services Office.


Most acquisitions by the University will be subject to GST. The University will pay GST at the
time of acquisition and then, with a tax invoice, claim an input tax credit from the ATO.


At the time of processing the invoice, the relevant Rate Code (see below) is used to ensure the
correct GST treatment is applied.


GST Codes in Finance One
Listed below are the codes used in Finance One to deal with GST.


Rate Code                Description                Rate                    Comments

C                        Current Rate               10%                     revenue and
                                                                            expenditure where
                                                                            GST is in the final
                                                                            amount

E                        Exports                    0%                      goods or services that
                                                                            are exported from
                                                                            Australia

F                        GST Free                   0%                      revenue with no GST
                                                                            in the final amount

I                        Input Taxed                0%                      input taxed supplies

P                        Private                    0%                      private acquisitions

Z                        Zero Rate                  0%                      purchases with no
                                                                            GST in the final
                                                                            amount

N/A                      Not Applicable             0%                      transactions outside
                                                                            the scope of GST




Tax Invoices
Details regarding the requirements for tax invoices.
Please note, where a cost centre has failed to obtain a tax invoice which results in the University
not being able to claim the GST as a refund, then the cost centre will be charged the GST.


PAYG Withholding – 46.5% (No ABN)
Details regarding Pay as You Go withholding.



732.2 – Petty Cash
GST Requirements
The introduction of GST, and because it relates to each transaction, has placed extra
considerations on petty cash expenditure, namely:
    •   The requirement to obtain tax invoices to claim input tax credits; and
    •   PAYG withholding at 46.5% for No ABN.


Tax Invoices
Details regarding the requirements for tax invoices.
Please note, where a cost centre has failed to obtain a tax invoice which results in the University
not being able to claim the GST as a refund, then the cost centre will be charged the GST.



PAYG Withholding – 46.5% (No ABN)
Details regarding Pay as You Go withholding.
Please note that payments should not be made via petty cash where the payee cannot provide an
ABN and the purchase value is greater than $75 (excluding GST). There is no mechanism in the
petty cash system to withhold tax at 46.5%. These payments must be made through accounts
payable with a payment request.



732.3 – Corporate Credit Card
These procedures should be used in conjunction with:


Finance Committee Directive                        420 – Corporate Credit Cards

Finance Procedure                                  421 - Credit Cards - Procedure

Finance Procedure                                  422 - Credit Cards - Authorised Limits &
                                                   Restrictions of Use


The corporate credit card is a means of paying for goods and services in an efficient and
convenient manner. The corporate credit card does not alleviate the cardholder from any of the
normal GST or ABN considerations that presently exist for acquisitions made by the University.
Amount entered is GST Inclusive
The purchase request should be raised using the GST inclusive figure from the supplier’s quote.
In most instances 10% GST will be levied on goods or services that the University acquires. To
avoid any chance of a dispute with a supplier ensure the price quoted is GST inclusive.


Rate Code Pick List
Listed below are the codes used with the corporate credit card to deal with GST:


Rate Code                 Description               Rate                      Comments

GST 10%                   Current Rate              10%                       revenue and
                                                                              expenditure where
                                                                              GST is in the final
                                                                              amount

GST Free                  Zero Rate                 0%                        purchases with no
                                                                              GST in the final
                                                                              amount



Tax Invoices
Details regarding the requirements for tax invoices.
Corporate credit cardholders must ensure that tax invoices are received to substantiate each
transaction greater than $75 (excluding GST).



PAYG Withholding – 46.5% (No ABN)
Details regarding Pay as You Go withholding.
Please note that payments should not be made via the corporate credit card where the payee
cannot provide an ABN and the purchase is greater than $75 (excluding GST). There is no
mechanism to withhold tax at 46.5% with the corporate credit card. These payments must be
made through accounts payable with a payment request. To avoid this situation you should
ensure that you are dealing with a supplier who has an ABN.



732.4 - Recipient Created Tax Invoices (RCTIs)
An RCTI is a tax invoice that is issued by the recipient instead of the supplier.



ATO Ruling – GSTR 2000/10
The ATO determines the situations in which RCTIs can be issued and has authorised RCTIs for
some general situations and also for some specific industry transactions. The ATO have issued a
ruling (GSTR 2000/10), which relates to Recipient Created Tax Invoices.


This extract below from GSTR 2000/10 explains the rationale behind RCTIs:
Usually, the supplier of a taxable supply gives the recipient a tax invoice for the supply. However,
commercially, invoices are also currently created by recipients of supplies, particularly where:
    a) the value of the supply is established by the recipient rather than by the supplier; and
    b) (i) the goods involved are of a type that require qualitative analysis to be undertaken
       before their value can be ascertained (for example, cut sugar cane is analysed by the
       sugar mill);
        (ii) quantitative analysis is undertaken before the recipient can ascertain the value of
        the supply (for example, work-in-progress in the building and construction industry
        is analysed by quantity surveyors);
        (iii) the supplies are arranged and recorded using electronic purchasing systems
        operated by the recipients (to require a tax invoice to be issued by the supplier
        would detract from the effectiveness of these systems); or
        (iv) there are mutual efficiencies for the supplier and the recipient in conducting their
        business on the basis that the recipient notifies the supplier of the value of the
        supply.


The determination will enable many recipients to claim input tax credits without significantly
altering their current invoicing practices.



What information must an RCTI contain
A RCTI is basically a tax invoice that has been prepared by the recipient. Therefore a RCTI must
contain all the information required for a tax invoice. In addition, the words “recipient created tax
invoice”' and the ABN of the supplier and the recipient must also be prominently stated.


How to set up a RCTI agreement
The University has entered into RCTI agreements with a number of funding bodies. In these
situations the funding body is the recipient and has instigated the agreement. The RCTI allows
the funding body to make periodic payments (with RCTI attached) without having to wait for the
University to raise the tax invoice. If the entity you are dealing with has been given authority to
enter into RCTI agreements by the ATO then a RCTI agreement can be set up.


Normally the recipient would initiate the agreement. All agreements should be forwarded to the
Taxation Accountant, Financial and Business Services Office to ensure that they comply with the
requirements set out by the ATO.



732.5 – Accounts Receivable
Revenue for the University can only be raised using one of the four (4) methods:


    1. Appropriation. For GST purposes appropriation has been specifically excluded from the
       definition of consideration and therefore falls outside the scope of the legislation. For the
       University this means income like the operating grant, which has been provided under
       appropriation, will not include GST. This type of income will not be invoiced but will
       usually be receipted via a direct deposit.
    2. Request for Invoice. Invoices must NOT be raised by organisational units. The Request
       for Invoice form should be completed and forwarded to Financial and Business Services
       Office for processing. Income should not be received without an appropriate invoice.
       Examples of income that should be raised using a Request for Invoice form would
       include: research & consultancies, and the sale of goods and services.


The Request for Invoice form is on the web and the following steps should be used to complete
the form:


    a) Check if the supply is GST-free. If GST-free do not include GST in total price. You must
       however show justification why GST should not be charged.
    b) Determine the actual price of the supply (excluding GST). NB if recovering expenses
       incurred, the amount must be exclusive of GST (can not levy tax on tax). Insert as
       TOTAL AUD$.
    c) Calculate 10% of TOTAL & insert at GST $.
    d) Add GST to TOTAL and insert at “TOTAL incl GST”.
    e) The account number to be credited should be clearly indicated.
    f)   Have Request authorised by appropriate delegate and forward to Revenue Section,
         Financial and Business Services Office.


As the University accounts for GST on an accrual basis the GST is remitted to the ATO at the
time when the invoice is raised and not when the funds are received.


    3. Recipient Created Tax Invoices (RCTI).
       Details regarding RCTIs


    4. Sub-receipts/Cashier (Student Enquires). Generally this will include low value
       miscellaneous income where an invoice is not raised (e.g. sundry charges for students).
       This type of income is usually receipted at departments using sub-receipts or directly
       through the cashier (Student Enquires).


         Both the sub-receipt form and the receipt issued by the cashier comply with the
         requirements of a tax invoice.


         For receipting using sub-receipts the following instructions are to be used:


    a) Before sub-receipts are forwarded to the cashier for receipting the finance officer must
       indicate whether the receipts include GST or not. The cashier does not make this
       determination.
    b) Sub-receipts should be divided into taxable supplies and GST-free supplies. This will
       assist in the data entry of the transaction.
    c) The account number to be credited should be clearly indicated.
    d) For taxable supplies fill out the exclusive amount, the GST amount and ensure they add
       to the total received.
        Sub-receipts that have no indication regarding GST will not be receipted until the
        GST has been determined.



GST Codes in Finance One
Listed below are the codes used in Finance One to deal with GST.


Rate Code                Description              Rate                      Comments

C                        Current Rate             10%                       revenue and
                                                                            expenditure where
                                                                            GST is in the final
                                                                            amount

F                        GST Free                 0%                        revenue with no GST
                                                                            in the final amount



732.6 – Business Activity Statement (BAS)
The Taxation Accountant, Financial and Business Services Office, is responsible for lodging the
Business Activity Statement (BAS) to the Australian Taxation Office (ATO). The University
lodges the BAS monthly (determined by turnover). The University has had approval from the
ATO to lodge based on the University’s period reporting.


Each month the BAS information for the JCU Bookshop and JCU Halls of Residence are
consolidated with the BAS information for the University. The consolidation is required as the
JCU Bookshop and JCU Halls of Residence run separate general ledgers to the university.



Specimen Forms
Request for Invoice
Statement by Supplier



Related Glossary Terms
Taxation



Related Legislation
A New Tax System (Goods and Services Tax) Act 1999
A New Tax System (Australian Business Number) Act 1999
A New Tax System (Pay As You Go) Act 1999
For enquiries in relation to this Finance Procedure please contact Mark Phillips
Mark.Phillips@jcu.edu.au




Approval Details


Policy sponsor:             CFO and Director, Financial and Business Services

Approval authority:         Procedure – CFO and Director

Version no:                 02 - 1

Date for next review:       12/2008


Modification History


Version    Approval date             Implementation        Details
no.                                  date

02 - 1     08/2002                   08/2002

				
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