"Do you need to restructure
your business in order to
maximise its potential?"
"4 convenient office
locations - you come to
us or we come to you."
"Save time and money by
having one firm for all your
legal and accounting needs."
"We can help you on
the path to achieving
your business goals."
"Giving our clients the
best integrated legal and
Summary of GST terms
Here is a summary of the key terms used in GST. In most cases, you will find a cross-reference to the main place on this page where the term is explained more fully.
Words preceded by an asterisk (*) are themselves defined.
Shorthand for Australian Business Number. This is a new business identifier which serves as a GST registration number and will be used for other purposes such as the *Pay As You Go system.
Shorthand for the Australian Competition and Consumer Commission. This body has the special responsibilities for monitoring GST-related price increases.
Shorthand for A New Tax System. This is the Government’s name for a package of tax measures, including GST, personal tax cuts and the *Pay As You Go system, that generally come into force on 1 July 2000.
Shorthand for “application for own use”, an expression borrowed from *sales tax law. Wine that is applied to the seller’s own use – for example by consumption or giving it away – may attract *wine equalization tax
Shorthand for the Australian Taxation Office. The GST system is administered by the Commissioner of Taxation through the ATO.
This shorthand method of completing the *BAS is available to businesses that have appropriate record-keeping and accounting systems. It enables the business to identify its GST and *input tax credits directly from the accounting records.
If you use the accruals basis, you work out your GST and *input tax credits for each *tax period on the basis of your entitlement to be paid and your obligation to pay. This may be compared with the *cash basis, which looks at the amounts actually received and paid out. Most businesses will operate on the accruals basis.
This includes any form of acquisition. It is not restricted to purchases.
For certain types of GST *adjustment that reduce GST or increase an *input tax credit, you cannot attribute the adjustment to a *tax period unless you hold an adjustment note at the time you lodge your *GST return for that period. Adjustment notes contain information similar to *tax invoices.
Adjustments to previously declared GST or *input tax credits may be needed if supplies are later cancelled, goods are returned, there is a part-refund, or a supply changes its GST status. These *adjustment events are taken into account in the later tax period, provided that an *adjustment note is held at the time of lodging the *GST return for that period. Other adjustments may be required if there is a bad debt, a change in the intended business use, businesses are started, transferred or wound down, and in various other situations.
Normally, if you make a supply through an agent, you are the one liable for the GST, not the agent. Similarly if you acquire something through an agent, you are the one entitled to claim the *input tax credit. However, if a non-resident acts through an agent resident in Australia, the agent is responsible for the GST consequences of those actions.
There are a number of reasons why you may need to work out your GST turnover:
If you are carrying on a business or *enterprise, you are required to be registered for GST if your GST turnover is $75,000 or more for businesses, or $150,000 or more for non-profit organisations.
- You must use one-month *tax periods if your GST turnover is $20 million or more.
- You can use the *cash basis of accounting for GST if your GST turnover does not exceed $2 million.
- You normally must make your GST return to the Tax Office electronically if your GST turnover is $20 million or more.
- You cannot elect to pay GST by *instalments if your GST turnover exceeds $2 million.
- You cannot elect to report and pay GST annually if your GST turnover exceeds the registration thresholds ($75,000 or more for businesses, or $150,000 or more for non-profit organisations). However, if your GST turnover is below the registration thresholds you can voluntarily register for GST and will be required to report annually.
- You cannot elect to make annual apportionments of input tax credits if your GST turnover exceeds $2 million.
GST turnover is worked out on the basis of your current *GST turnover and your projected *GST turnover. Tests based on turnover also apply for certain GST-related tax incentives (Chapter 24) and in determining eligibility of food retailers for simplified accounting methods.
This is necessary in various situations, for example where something has been acquired for a mixture of business and private purposes. The *input tax credit will need to be apportioned to reflect only the business purpose. This also applies where something is acquired and used in providing a mixture of *taxable and *input taxed supplies.
Special rules apply if you make a supply to an associate at a price below market value or as a gift. The effect is that the supply will be treated as if it had been for market value, unless the associate would have been entitled to a full *input tax credit. An associate includes a relative, business partner, *entities in trustee/ beneficiary relationships, and companies and their controllers.
This is the process of working out what GST and *input tax credits belong to each *tax period. The way that this is done will vary according to whether you have a *cash or *accruals basis of accounting.
Australia does not include any external Territories, but may include offshore oil rigs. The definition is relevant in various contexts, such as the import and export rules and the requirement that taxable supplies must be *connected with Australia.
Australian Business Number
Special rules allow you to register your business branches separately. This procedure is intended to avoid the administrative and accounting costs of having to amalgamate branch accounts every *tax period.
Business Activity Statement (BAS)
This is a two-page form which is used as the *return for GST and various other taxes, such as *wine equalisation tax, *luxury car tax, FBT instalments, income tax withholding and instalments, and deferred company tax instalments.
Business norms method
This is one of the *simplified accounting methods available to food retailers. It enables them to choose to use standard percentages, based on business norms, to estimate their *GST-free sales and purchases.
Cash accounting turnover threshold
This is the $1,000,000 threshold described under “Cash basis”.
If you use the cash basis of accounting, you work out your GST and *input tax credits for each *tax period on the basis of amounts actually received and paid out. You can use the cash basis if your *GST turnover does not exceed $1,000,000, or if you already account for income tax on a cash basis, or if you are a charity, or in certain other approved situations.
Commercial residential premises
These include hotels and caravan parks. The sale of these premises is subject to GST. Special rules apply where they are rented out on a long-term basis.
Connected with Australia
Supplies are not subject to GST unless they are connected with Australia. The degree of connection varies according to whether goods, real estate or services are involved.
This means anything of value that is provided in return for a supply of goods and services. It includes acts of forbearance. A supply will not be subject to GST unless there is consideration.
This is the type of acquisition on which you can claim a credit for the GST component (an *input tax credit). For you to have a creditable acquisition, you must be *registered, GST must have been payable, and you must have acquired it for a *creditable purpose.
This is the type of importation on which the importer can claim an *input tax credit for the GST component. For you to have a creditable importation, you must be *registered, GST must have been payable (normally by you) and you must have acquired it for a *creditable purpose.
To obtain *input tax credits, your acquisition or importation must have been carried out for a creditable purpose – this basically requires that it must be for business purposes that are not *input taxed.
If you are carrying on an enterprise, you can *register, charge GST on your supplies, and claim *input tax credits on your acquisitions. An enterprise includes all types of business activities, but does not include the activities of employees.
When the legislation refers to “you”, it is referring to entities generally. This means, for example, that entities carrying on an *enterprise may be *registered for GST. An entity includes an individual, a company, a partnership, any other unincorporated association, a trust and a superannuation fund.
Financial acquisitions threshold (FAT)
A maker of a *financial supply may claim *input tax credits on acquisitions related to making the supply if the financial acquisitions thresholds is not exceeded.
Financial supplies are *input taxed. This covers most services that are provided by banks and other financial institutions, including loans. They also cover certain services provided by brokers, life insurance companies, investment managers and superannuation funds. Providing advice is not a financial supply.
GAP or GAAP
Shorthand for “general anti-avoidance provision”, ie Div 165.
Special rules for calculating GST apply if you make gambling supplies. These include supplying tickets in lotteries or raffles, or accepting bets on races, games, sporting events or any other events.
The sale of a going concern is *GST-free, subject to various restrictions. A going concern means, in effect, a continuing *enterprise. This means that the sale of a business, or the sale of a tenanted commercial building, may be GST-free.
Certain closely-associated companies, non-profit bodies, trusts or partnerships can be treated as a single taxpayer for GST purposes. This means that purely internal transactions within the group do not have any GST consequences. One member of the group – the *representative member – is responsible for lodging returns.
Shorthand for goods and services tax.
The anti-avoidance provisions can only apply if the avoider gets a GST benefit from a *scheme. A GST benefit means any reduction in the net tax payable and also includes timing advantages.
Shorthand for *input tax credit.
Under the anti-avoidance rules, compensating adjustments may be made in favour of “losers” suffering a GST disadvantage from the relevant *scheme. A disadvantage is the mirror image of a *GST benefit.
GST exclusive market value
This means 10/11ths of the *GST inclusive market value.
GST exclusive value
This means 10/11ths of the *GST inclusive price. For luxury cars, it means 10/11ths of the GST inclusive price, excluding *luxury car tax. For importations, it means the value of the importation.
If a supply is GST-free, this means that no GST is payable on it. However, any GST that has been paid at earlier stages can be claimed as an *input tax credit. The main GST-free supplies are exports, sales of businesses, international travel, health, food, education, child care, certain farm subdivisions and certain activities of charities and religions.
GST inclusive market value
This means the market value without any reduction for GST or *luxury car tax.
Input tax credit
This is a credit for the GST payable on your business inputs. To claim the credit, you must be *registered and be carrying on an *enterprise. Input tax credits are offset against the GST you charge each *tax period.
Input taxed supply
If a *supply is input taxed, this means that no GST is payable on it, but the supplier cannot claim *input tax credits for business inputs associated with the supply. Input taxed supplies include financial services and residential rents.
Instalment turnover threshold
This is the $2 million threshold described under “Instalments”.
Quarterly taxpayers with *GST turnovers that do not exceed $2 million may elect to pay GST by instalments. Under this option, GST returns are lodged annually and instalments of estimated GST are paid quarterly, with an annual reconciliation being made.
Companies engaged in a mining joint venture can have it approved as a “GST joint venture”. This means that the operator of the joint venture is responsible for the GST liabilities and entitlements arising from the operator’s dealings on behalf of the venture participants. This provides an administrative shortcut on what are essentially internal transactions.
This is the term used in the GST Act to describe a person who suffers a GST disadvantage from an avoidance *scheme. Losers may be entitled to compensatory adjustments in their favour.
Luxury car tax (LCT)
This is a special tax designed to ensure that price reductions on luxury cars as a result of the abolition of sales tax are proportionate with the reductions on other cars.
Dealers and developers of real estate can use a margin scheme that allows them to calculate their GST liability as 1 / 11th of the difference between the tax inclusive sale price and the original purchase price. Special rules apply to real estate held at 1 July 2000.
This is the net total of the GST, *input tax credits and *adjustments that are attributable to a *tax period. If you have a net amount above zero, you must pay it to the Tax Office. If it is below zero, you may be entitled to a refund.
Non-profit bodies have the option of splitting their operations into separate independent units for GST purposes.
Opportunity to review
If you have a pre-8 July 1999 contract that spans the 1 July 2000 commencement date for GST, its exposure to GST after that date may depend on whether the contract contains an opportunity to review the price to take account of GST.
Pay As You Go (PAYG)
This is the new system for withholding tax which replaces PAYE, provisional tax, company tax instalments and various other withholding systems from 1 July 2000. People subject to PAYG withholding will generally not be subject to GST, except where they have entered into a voluntary agreement in an *input taxed industry.
This means gold, silver or platinum of prescribed levels of fineness. A supply of a precious metal is *GST-free where it is the first supply to a regular dealer. Apart from this, supplies of precious metals are input taxed.
This means the amount of *consideration for a supply, including GST. If the consideration does not consist of money, the price is the *GST inclusive market value. In non-tax Federal legislation, references to prices, fees, charges or similar terms include the net GST payable.
This is a period of three months, starting on 1 July, 1 October, 1 January and 1 April. Depending on your *GST turnover, you may account for GST on a quarterly basis or a monthly basis. Alternatively, certain small businesses can elect to account on an annual basis, but pay instalments on a quarterly basis.
This means the *entity to which a *supply is made. In the case of a sale, for example, it would be the purchaser.
Recipient created tax invoice (RCTI)
A *tax invoice is normally issued by the supplier. However, sometimes this will not be practicable, for example where the recipient determines the value of the goods or services, rather than the supplier. In these situations the tax invoice may be created by the recipient.
Reduced credit acquisition
This is the type of acquisition that may give rise to a *reduced input tax credit.
Reduced input tax credit (RITC)
Financial suppliers may be entitled to claim reduced (75%) *input tax credits on certain types of services they use in their business.
You will be entitled to a refund if the *input tax credits exceed the GST for a *tax period, after taking *adjustments into account (~8-110). Visiting tourists may also be entitled to refunds of the GST paid on purchases that they take home with them.
You can only be registered if you are an *entity that is carrying on an *enterprise. Whether you are required to register will depend on your GST turnover. Registration is relevant because: (1) GST is not payable on a supply unless the supplier is registered; (2) *input tax credits can only be claimed if you are registered; and (3) GST *returns must be lodged if you are registered.
Registration turnover threshold
See “GST turnover”.
This is the member of a GST *group that has been nominated to carry out the administrative GST tasks, such as lodging *returns, for the group as a whole.
In general, the sale of residential premises is *input taxed. However, the sale of new or commercial residential premises is subject to GST. Residential rent is not subject to GST but special rules apply to long term commercial residential accommodation.
If you are *registered, you must provide a GST return to the Tax Office within 21 days after the end of each *tax period. The return is incorporated into your *Business Activity Statement. The return may be lodged electronically (this is normally compulsory if your *GST turnover is $20 million or more).
Certain supplies of services or rights made outside *Australia may be caught by GST even though they are not made through an Australian business or *enterprise of the supplier. In these cases, GST is payable by the *recipient, not by the supplier. This “reverse charging” overcomes the fact that the supplier will often not be within the Australian GST system.
See under “Opportunity to review”.
Under ACCC guidelines, prices may be rounded up to meet established price points, but the net increase cannot exceed 10%. As a separate measure related to the phasing out of one and two cent coins, cash totals may be rounded off to the nearest multiple of five cents.
The wholesale sales tax (WST) was replaced by the GST with effect from 1 July 2000.
The anti-avoidance provisions can only operate if there is a *scheme with which a *GST benefit is associated. A scheme is widely defined to include arrangements, agreements, understandings, promises and undertakings. It does not matter whether these are express or implied, and they do not need to be legally enforceable. A scheme also covers any scheme, plan, proposal, action, course of action or course of conduct. These may be unilateral or not. The scheme does not have to be entered into or carried out in Australia.
These are goods that have been previously owned, but do not include certain *precious metals or animals. If you are not *registered, your supply of second-hand goods is not subject to GST. If you are registered, GST will apply. In certain cases, dealers will be able to claim *input tax credits on second-hand goods even though their supplier was not registered. Certain supplies of second-hand goods by charities and gift-deductible bodies are GST-free.
Simplified accounting methods (SAMs)
The Tax Office may authorise simplified ways of accounting for retailers who sell *GST-free food or make GST-free charitable supplies as part of their business.
This is one of the *simplified accounting methods available to food retailers. It enables them to use a representative period of trading to estimate their total *GST-free sales and purchases.
Stock purchases method
This is one of the *simplified accounting methods available to food retailers. It enables them to use their percentage of GST-free purchases to estimate their percentage of *GST-free sales.
This includes any type of supply. It is not restricted to sales.
GST is payable on taxable importations of goods as well as on *taxable supplies. However, the GST is payable by the importer, not the overseas supplier. This applies whether or not the importer is *registered. Importation generally takes place when the goods are entered for home consumption under customs law.
GST is potentially payable on taxable supplies. To be taxable, the supplier must be *registered and carrying on an *enterprise, the *supply must be for *consideration, it must be sufficiently *connected to Australia, and it must not be *GST-free or *input taxed.
This is a special type of invoice that contains specified items of information including the supplier’s Australian Business Number (*ABN). Generally, you must hold a tax invoice for a purchase or acquisition at the time you lodge your GST *return for the period in which the claim for an *input tax credit is made.
The GST system will be administered by the Australian Taxation Office.
Your GST liability (or entitlement to a refund) is worked out for each *tax period. This may be monthly or quarterly. Depending on your *GST turnover, it may be required to be monthly.
Tax period turnover threshold
If your *GST turnover is $20 million or more, you must use monthly *tax periods. If it is below that, you generally have the option of monthly or quarterly tax periods.
Tourist Refund Scheme (TRS)
This scheme enables international travellers and Australians travelling overseas to claim a refund of GST paid on certain goods bought in Australia.
Shorthand for value-added tax. Taxes such as GST are sometimes called VAT in other countries.
Shorthand for the wholesale sales tax which will be replaced by GST from 1 July 2000.
Wine equalisation tax (WET)
This is a special tax designed to prevent the price of wine and similar drinks from falling as a result of the replacement of sales tax by GST.
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.
© The Quinn Group Australia Pty Ltd ABN 86 078 526 860
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.