Unsure about GST?!...
A Quick Explanation!
GST stands for Goods and Services Tax and is a tax on consumption of goods and services.
For most businesses GST is a straight forward process. However, for some businesses GST can become a complicated matter. If you have your own business you will need to either inform yourself correctly, or seek reliable advice on GST requirements and how it will affect your business. If starting a new business, or currently running an existing business, and are unsure about the current GST system and legal requirements, please contact us. We have been approved by the ATO, and are qualified to advice you on GST legal requirements.
Note that GST it is a tax on consumption, which means that it should be a tax on the end user and is not meant to be a tax on businesses. If you are a business paying for goods and services you may be entitled to claim back that GST paid on expenses from the Australian Taxation Office. In addition you may have to charge GST on your sales and forward the GST collected to the Australian Taxation Office.
If a business is registered for GST, at the end of its reporting period, it will need to complete an activity statement (BAS), in which it will report the amounts of GST that has been collected through sales of their own, and the amounts of GST that has been paid through business purchases. The difference of GST will either be paid to, or refunded from the ATO. If you are running a business you can register for GST. However if your Business has an annual turnover of a certain amount you are required to register for GST. The current amount of annual turnover as of 2016 is $75,000 or more (for non-profit organisations the threshold is $150,000 or more) or if you are a taxi driver, regardless of your turnover. Once a business is registered for GST there are additional legal requirements it must uphold and abide to. This may include its Tax Invoices meeting an approved format, lodgement of extra reporting to the ATO, and the keeping of extra paperwork and records. A business should either inform itself correctly, or seek reliable advice.
If a business is registered for GST, does it need to charge GST on all goods and services supplied?
If a business is registered for GST, not all goods and services being sold are subject to GST. If a business is selling supplies that may be GST free, it should correctly inform itself if it should charge GST or not.
The following goods and services may be GST free:
- Most basic food
- Some education courses, course materials and related excursions or field trips
- Some medical, health and care services
- 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.
- Exports of goods and services
- GST Input Taxed Supplies (refer to the next section)
GST Input Taxed Supplies
These supplies are GST free but they are also input taxed. This means that if a business is dealing in these supplies, as well as not charging GST on sales, it is not allowed to claim back any GST paid on the items acquired to make these supplies. Refer to the next section for a diagram showing the difference between the treatment of GST taxable, GST-free and GST input taxed supplies.
Input taxed supplies may include the following:
- Financial supplies
- Residential rent
- Residential premises (depending on sale terms)
- Precious metals (after the first supply)
- School tuckshops and canteens
The following diagram shows the difference between the treatment of GST taxable, GST-free and GST input taxed supplies:
If starting a new business, or currently running an existing business, and are unsure about the current GST system and legal requirements, please contact us. We have been approved by the ATO, and are qualified to advice you on GST legal requirements.