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A 10 Point Guide to GST

Here is a 10-point snapshot of how GST works.

1. Charging GST

Businesses are required to charge GST at the rate of 10% on goods and services that they supply to customers. The GST payable is included in the price paid by the recipient of the goods and services. The supplier must pass on this amount of GST to the Tax Office.

2. Getting credits for GST

If the recipient of goods or services is a registered entity (business), it will normally be able to claim a credit for the amount of GST it has paid, provided it holds a tax invoice. This credit – called an input tax credit – is offset against any GST which the business itself charges on goods and services it has supplied to its own customers.

3. Burden on end-consumer

The net effect is that registered entities receive an amount representing GST but do not keep it, and pay an amount representing GST but get a credit for it. This means that they act essentially as collecting agents for the tax. The ultimate burden of the tax falls on the private consumer of the goods and services, as this person gets no credit for the GST he or she pays.

4. Registration

Most businesses will have to register for GST, although there are some exceptions. If an entity is not registered, it normally cannot charge GST and cannot claim credits for the GST it pays.

5. Accounting basis and tax periods

Tax periods may be monthly, quarterly or, in some limited situations, annual. Monthly tax periods are compulsory in some situations, such as where turnover is $20 million or more. GST and credits are allocated to particular tax periods either on a cash basis (based on when amounts are received or paid out) or on an accruals basis (based on when invoices are sent or received). There are restrictions on who can use the cash basis.

6. Returns

Entities account to the Tax Office for the GST they charge and the credits they claim by making a GST return in their Business Activity Statement. A separate GST return is made for each tax period, which may be monthly or quarterly.

7. Tax or refund?

If the GST allocated to a tax period is more than the credits for that period, the business pays the balance to the Tax Office. If the credits exceed the GST, the business gets a refund. Adjustments may need to be made later if there is a change of circumstances.

8. GST exemptions

Some transactions are outside the scope of GST altogether because, for example, they are gifts, or made by unregistrable people, or have no connection with Australia. Others are “GST-free” which means that the supplier does not charge GST, but can claim credits for the GST on its own acquisitions. The main GST-free items are exports, health, food, education, international travel and certain charitable activities.

9. Input taxed supplies

A small range of items are “input taxed”. This means that the supplier does not charge GST and cannot claim credits for the GST on its own acquisitions. The main input taxed items are financial services and residential rent.

10. Special rules

Special rules apply to a wide range of items including imports, land development, insurance, motor vehicles, second-hand goods, charities and gambling.

Our dedicated team can assist you with all your accounting and GST related matters. Complete and submit the Express Enquiry form on the top right hand side of this page and we will contact you to discuss your enquiry or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment.

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The Quinn Group operates Quinn Consultants, Quinn Lawyers, Quinn Financial Planning and Quinn Financial Solutions. The Quinn Group provides related information in regard to legal, accounting and financial planning issues. Liability limited by a scheme approved under Professional Standards Legislation* *other than for the acts or omissions of financial services licensees.