GST & FBT for
Accounts Payable
Anne Harvey – Group Tax Manager, Corporate Finance
Eric McCallum – Group Tax Accountant, Corporate Finance
24 August 2012
Objectives
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When does GST apply
What are the GST Codes
What is FBT
What does Taxable Value mean
Types of benefits which attract FBT
When is FBT charged
Vendors
Thesis Examiners
When does GST apply
When is it applicable
• Taxable supply
 for consideration
 in course of furtherance of
carrying on enterprise
 connected with Australia
 registered or required to be
registered
 not GST free or input taxed
• Taxable sales
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price includes GST
pay GST on sales
claim GST on purchases
1/11th of Total invoice/sale price
When is it not applicable
• GST free sales
 Basic food - meat, milk, bread,
fruit and vegetables
 Most education, child care,
health
 Some exports
• Input Taxed sales
 Residential property
 Financial transactions
 Cannot claim GST credit
How Does GST work
Supplie
r
Raises
Tax
Invoice
Purchase
r
Receives
Tax
Invoice
Issue Tax
invoice
$1100
•Taxable
Sale $1000
•GST on
sale $100
Receives Tax
Invoice $1100
•Purchases
$1000
•GST
charged
$100
Total Sales
on BAS $1100
•Sales
$1000
• Remit GST
1/11th to
ATO $100
Total
Acquisitions
on BAS $1100
•Acquisitio
n $1000
•Claim ITC
for GST
$100
Cash Received
$1100
•Net
revenue
$1000
•GST paid
to ATO
$100
Cash Payment
$1100
•Net
Expense
$1000
•GST
claimed
from ATO
$100
Vend
or
Sponso
UNSWr
GST Codes: Acquisitions – AP/ Expenses/Credit Card
1.
2.
Taxable – AC/AO
GST Free – FRAC/FRAO
1.
Most goods and services
2.
3.
Imports – IMAC/IMAO
3.
4.
Input Taxed – ACIT/AOIT
5.
Non deductible – NIAC/NIAO
5.
6.
7.
Out of scope – EXCL
Advances - EXAD
6.
7.
Basic food; consumed/used
overseas i.e. international airfare,
accommodation
Customs clearance e.g.
Equipment; overseas
subscriptions
Financial supplies, residential
accommodation
Cannot claim GST, no Tax
Invoice, student entertainment
Taxes, wages, donations
Travel Allowance, Advance
4.
“C” in AC, FRAC, etc refers to Capital. “O” in AO, FRAO,
etc refers to Other.
University of New South Wales
ABN 57 195 873 179
GST Codes Used In NS Financials
GST CODE
SHORT
DESCRIPTION
LONG DESCRIPTION
Capital
>=$5,000
ACQUISITIONS
Purchase Orders, Credit Card Reconciliation, AP Vouchers & Journals.
The purchase of taxable goods or services where GST is charged and it can be claimed (i.e. as an Input Tax
Credit – ITC). This applies to the majority of purchases.
The purchase of taxable goods or services which are input taxed supplies but the GST charged (i.e. an ITC)
cannot be claimed. E.g. financial supplies (financial services), and certain supplies relating to residential
accommodation.
GL 3505
GST In Price,
Claimable
GST In Price, &
Input Taxed
Supply
GST In Price,
GST Not
Claimable
Other
<=$5,000
GL 3505
AC
AO
ACIT
AOIT
NIAC
NIAO
FRAC
FRAO
NABC
NABN
The overseas purchase of goods and services imported into Australia, where, had they been purchased in
Australia instead, would have been subject to GST. E.g. machinery, equipment, computers, software etc.
IMAC
IMAO
The overseas purchase of goods and services brought into Australia, where, had they been purchased in
Australia instead, would have been GST-Free anyway. E.g. Pharmaceutical and medicinal drugs. Also for
goods imported into Australia that don’t require customs declaration.
IMFC
IMFO
Not reported on the ATO Business Activity Statement (BAS). E.g. transactions between members of same
GST group, payments of taxes (e.g. PAYG, payroll tax, employer payments such as wages, super, donations)
EXCL
EXCL
EXAD
EXAD
EXCL
EXCL
AC01
AO01
The purchase of taxable goods or services which are specific non-deductible items but the GST charged
cannot be claimed. E.g. fines and penalties. Also used for transactions where the original tax cannot be
obtained. Note: For meal entertainment expenses, where FBT is not payable.
GST Free
Purchase
The purchase of goods or services with no GST in the price. These are referred to as GST Free purchases.
E.g. GST-free basic food; water; sewerage and drainage; also used for purchases made which are consumed
or used overseas e.g. accommodation; international air fares, taxi fares etc. If imported into Australia use
the Import codes below.
No ABN or
Used where the Supplier you are buying from does not have an ABN number, and hasn’t provided a
Declaration declaration form (Statement by Supplier). UNSW are required to withhold 46.5% of the payment as
withholding tax. Supplier to be notified.
Importation Of
Taxable
Goods And
Services
Importation of
GST-Free
Goods &
Services
Out Of Scope
Payments
Interim Advances
Journals SSJ or
ONL
Kensington
College
This code is used for initial transactions in relation to Travel Allowances and Cash Advances. Other items
where no GST is charged.
GST adjustment journals maybe raised by the Client Service Accountants or Financial Control. Please refer
to the journals procedure.
Input tax purchases where 44% can be claimed as an "Input Tax Credit".
Supply and Consideration
Supply (goods)
UNSW
Lab Equip Coy
Consideration
($)
Payment
Goods used
in
business,
can claim
GST
charged
AC, AO, FRAC,
FRAO
ATO
UNSW
Pay Taxes – Funds Payment
only
UNSW
Out of
Scope
EXCL
No supply for
consideration
Employee
Travel Advance – Funds Payment
only
Cash
advance
EXAD
Claiming ITC for GST charged
• Tax Invoice showing GST or GST inclusive price
• Can rely on other supporting documentation issued by supplier if
minor defects in Tax Invoice
• Purchase $82.50 or less (including GST) with Tax invoice, Receipt,
invoice, docket
• Sale < $1,000 – Tax Invoice, name & ABN of supplier, date,
description, if each item is taxable sale, $ GST or Total price includes
GST.
• Sale $1,000+ also show buyer’s name or ABN
Common GST Mistakes
• Mixed Supplies – need to enter Taxable items and GST free items on
separate lines with GST code (Telstra bills, Cabcharge, Hotels,
Qantas, basic food)
• Assume GST applies to total – check for GST free
• Use GST code from PO - check if agrees to Tax Invoice
• Relying on default GST codes in EMS
• Tax calculated in system not agree to GST on Tax invoice – may
need to split lines
• Deposits – claiming GST on deposit. Adjust on final Tax invoice
• Credits from prior month. Check GST charged on Invoice.
Risk to UNSW if GST Not correct
 No entitlement to ITC if GST not charged, or no Tax Invoice held (except for low
value items, i.e. < $82.50)
 No entitlement to ITC if goods or services not used for creditable purpose
(used in business)
 No entitlement to ITC if expense non deductible for Income Tax under Income
Tax rules
• Private or domestic in nature – if pay FBT(AO). No FBT (NIAO)
• Entertainment
• If pay FBT (staff & associates), can claim ITC (AO)
• If don’t pay FBT (students, clients, guests) cannot claim ITC (NIAO)
 Audit risk – inadequate processes and controls
 Penalties and Fines
 Reputational risk
 BAS amendments
Mixed Supply – GST free and Taxable Supply
Mixed Supply
How to create two voucher lines from one line
Entry fields are green, all other fields are derived from the entry fields
Input
Total GST is not 10% of the total invoice value
Enter the total value of the tax invoice (inc GST)
(Total cash payment inc GST)
167.14
Calculated GST value by NS Financials
Enter the total GST on the suppliers tax invoice
15.19
(Total GST on the tax invoice)
14.49
Value of the tax invoice (excluding GST)
152.65
GST Code
Total to enter as AO including GST
AO
Total to enter as FRAO
FRAO
This should equal the total value of the invoice (inc GST)
Base Amount
GST
Gross Amount
144.90
14.49
159.39
7.75
0.00
7.75
152.65
14.49
167.14
Comments:
If the non-taxable supplies on the invoice relate to residential rent, financial supplies, or long term student accommodation please use the code AOIT instead of FRAO
GST Calculated
Processed
3.07
93.10
9.31
$105.48
GST(VAT) calculated not agree to GST entered
VAT entered
≠ VAT
calculated
As FRAO used VAT
on Invoice of $8.46
shows as Non
Recoverable. GST
does not go the
GST account in GL
Cabcharge Mixed Supply
Mixed Supply
How to create two voucher lines from one line
Entry fields are green, all other fields are derived from the entry fields
Input
Total GST is not 10% of the total invoice value
Enter the total value of the tax invoice (inc GST)
(Total cash payment inc GST)
105.48
Calculated GST value by NS Financials
Enter the total GST on the suppliers tax invoice
9.59
(Total GST on the tax invoice)
8.46
Value of the tax invoice (excluding GST)
97.02
GST Code
Total to enter as AO including GST
AO
Cabcharge service fee no GST
Liquidated damages no GST
This should equal the total value of the invoice (inc GST)
Base Amount
GST
Gross Amount
84.62
8.46
93.10
FRAO
9.31
0.00
9.31
FRAO
3.07
0.00
3.07
97.00
8.46
105.48
Comments:
If the non-taxable supplies on the invoice relate to residential rent, financial supplies, or long term student accommodation please use the code AOIT instead of FRAO
Fringe Benefits Tax - Facts
FBT year 1 April to 31 March
Tax Rate 46.5% - Calculated on Grossed Up Taxable Value
FBT paid by employer – UNSW
Includes benefits under a salary sacrifice arrangement
Reportable Fringe Benefit included on Payment Summary in June, if > $2000
FBT is tax on benefits (right, privilege, service or facility)
 provided to employees & associates (relative, partner/ spouse, child)
 by an employer, associate of employer or under an arrangement with a
third party
 in respect of employment – reward for service
“Employee” includes current, former and future employees
No FBT for students, clients, volunteers or independent contractors
 If pay Salary  PAYG deduction  Employee pays tax
 If provide fringe benefit  no PAYG deduction  Employer pays tax
FBT Calculated on Taxable Value
What is Taxable Value
Determined by the rules applying to each category of fringe benefit
Generally the cost of the benefit
Some benefits concessional tax, e.g. Motor Vehicles
Some reductions and exemptions provided in legislation
GST Impact
• Taxable Value based on GST inclusive amount
• FBT payable depends on whether entitlement to ITC credit
• Can claim Input Tax Credit for GST paid
Important correct GST codes are used and GST amount is correct.
When Does FBT apply
FBT
applies
No FBT
applies
• Employee receives benefit/privilege due to
employment
• Private or domestic in nature
• Not related to work/ not for business purpose
• No concessions, reductions or exemptions in
legislation
• For student client, guest
• For Business purpose/ incurred in earning income
• Exemption, concessions or reduction in legislation
• Entitled to income tax deduction if incurred expense
themselves
• Pay personally from after tax dollars
• Deceased employee
• Capital nature for legally enforceable contract or
Personal injury
FBT Applicable Accounts in
General Ledger
GL Account
Description
6457
6459
6501
6613
6619
6623
6624
6626
6630
Entertainment
Entertainment – Recreational
Uniforms FBT Payable
Staff Exp Membership Fees
Staff Gifts & Awards $300+
Staff Exp –Recognition Awards
Staff Exp - Education
Staff Exp – Childcare
Staff Expenses FBT
FBT Accrual A/c
6662
6687
6663
6664
6687
6692
6682
6687
If expenses charged to the GL account, FBT will be accrued at month end
Examples of Benefits Incurring FBT
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Salary packaged Motor Vehicles or UNSW provided – personal use.
Medical Insurance - inpatriates
Permanent Residency – application, police & medical checks, lawyers fees
(Exempt if to enter Australia on relocation)
Gifts, awards and prizes - $300 or more
Travel for family – SSP, accompany employee on business (exclude relocation)
VC Child care support
Furniture purchase in lieu of relocation transport/ relocation allowance
Kensington College accommodation and meals – provided to tutors/employees
Reimburse deferred HECS/HELP fees
Write off Advance - Debt waiver
Outstanding Advance not acquitted within 6 months  Loan – calculate interest
Home phone/ internet – private %
Dual purpose travel – business and private
Entertainment – tax exempt body
Exemptions, Concessions or reductions in legislation
Exemptions – No FBT
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work related item - provided for work purpose. Limit one item per type pa – e.g. laptop,
mobile phone, electronic diary, tool of trade, protective clothing
minor benefit < $300 and infrequent / irregular (consider associated benefits)
relocation – Required to change usual place of residence for employment. Flights
including family, relocation consultant, etc. HR administer
Airport lounge, professional subscriptions, child care/gym on premises, car parking
LSL awards
Concessions – Lower TV
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e.g. Cars, Car Parking benefits
holiday transport for overseas employment – 50% concession. Limit of one trip per
FBT year.
Temporary accommodation on relocation. HR administer
Reductions – TV reduced
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otherwise deductible with declaration reduced by % of business use, e.g. home
internet use
full time education of children of Overseas employees. Less than 25 years. At school,
college, university or by tutor.
Entertainment v Sustenance
• Social – FBT
• Complete working day
in comfort –
Sustenance
• CPD seminar sustenance
• Overtime –
Sustenance
• Employee travelling –
Sustenance
• After work - FBT
Why
What
When
Where
• How elaborate
• Sit down meal – FBT
• With alcohol - FBT
• Finger food –
sustenance
• Coffee sustenance
• On premises – less
likely entertainment
• Off premises – more
likely entertainment
Entertainment – FBT
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Social function, farewell
Party, Christmas party
Restaurant meals
Business lunch & drinks
Celebrations, Dinners
Spouse meal of employee travelling on
business
Non travelling employee (when dines
with travelling employee)
Morning, afternoon tea, light lunches –
associates
Leisure or amusement activities
Sporting activities, golf days
Gym membership, sporting club
memberships
Holiday
Theatre/movie ticket
Cruises
 Account 6457
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Sustenance – no FBT
(6611)tea for
Morning and afternoon
employees
Birthday cake – morning tea for
employees
Light lunches, sandwiches, finger food,
salad, juice, etc for employees
Light breakfast at training seminar –
incidental to seminar
Finger food and light refreshments
(with moderate alcohol) immediately
after training or CPD seminar –
incidental to seminar
Meal at seminar that goes for over 4
hours
Meal (with alcohol) while travelling on
business - employee
Tea / coffee – employee
Overtime meal in office
 Account 6611
GST - claiming ITC and interaction with FBT
Entertainment
(includes GST)
FBT liability?
Yes FBT
Employees,
Associates
AO – can claim
ITC for GST,
as pay FBT
FRAO – no
GST charged,
overseas
No FBT
Students,
Clients, Guests
NIAO – cannot
claim ITC for
GST
Travelling on business
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ATO view of travelling on business is away for short periods - up to 21 days at a time
Stay in hotel, motel, serviced apartment
Unaccompanied by family
ATO set Travel Allowance rates – based on Salary band and destination
Travel Allowance rates based on 1 July to 30 June year
•
Travel Allowance for Payroll Tax (State based tax) to be split between Taxable and Non taxable
 Tax Exempt (Domestic 7014, International 7114)
 Taxable component (Domestic 7013, International 7113)
 For 2012/2013 year tax exempt portion is
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Accommodation $189.00 per day
Food and Drink $98.40 per day
Incidentals $17.85 per day
Any excess above these rates to 7013/7113
Travel Benefits
Business Purpose
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Predominantly business undertaken
Considered Incidental to business – extra
day to acclimatise
Weekends during business period, e.g. 2
week business trip
Day to prepare/ wrap up
Make Flight connections
Due to flight availability/ delays
1 day Stopover en route – no extra cost
Day between business meeting
Dual Purpose
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Travel to conference then holiday
Holiday at same or different location
Book Annual Leave days in myUNSW
Family accompanies
Private portion 40% or more of total days
Travel Allowance only for business days
Frequency of trips
No restrictions on private travel

Flight cost split 50/50 between business
(7103) and private (6630) FBT on 50%
private
If employee pays 50% of airfare directly to
Travel Agent  No benefit  No FBT
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ABN
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Australian Business Number – www.abr.gov.au
 Shows type of entity – company, sole trader, partnership, etc
 If registered for GST – charge GST on invoices
Must withhold 46.5% of total payment for supply unless
 Invoice with ABN quoted
 ABN of agent quoted where supply made through agent
 Exception to withholding applies
 Supplier not entitled to ABN
• Exceptions – no Withholding
 Payment $75 or less, excluding GST
 Not entitled to ABN - not carrying on enterprise or business in Australia
 Statement by Supplier provided – ATO declaration of reason ABN not
quoted
Contractors and VN1 Form
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All new Vendors to complete VN1 form – process and system to manage
VN1 form has questions in relation to the services provided and ABN status
To assess if employee or contractor
Assess for PAYG withholding, Superannuation and Payroll Tax
Vendor Classification assists in identifying for upfront Payroll Tax
exemption, ongoing Payroll tax assessment or SGC.
If “Refer HR” – needs to be referred to HRC for setting up in HR system.
Cannot be paid through AP.
Standard UNSW Contact
 Sole Trader Contractor Agreement
 Other Entity Contractor Agreement (Company, Partnership, Trust)
Service Provider – Payment for
Service
Individual
–
No ABN
Sole
Trader-ABN
Company,
Partnership
s & other
structures
Process
via H.R
Process
via H.R
Process
Via A.P
PAYG,
Super,
Payroll
Tax
Super,
Payroll
Tax
Payroll
Tax
Note: Some Sole Traders may be assessed(VN1 result) to be paid via A.P, if no Superannuation or PAYG obligations
Thesis Examiners
Pay in AP

Payment to Non Individuals/ Non residents
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Payment to another University
Payment to Organisation/ Company
Overseas Individual
 non resident of Australia
 No Australian bank account
 Cannot be paid in HR
 Statement by Supplier required
Pay in HR
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

Payment to individuals in Australia
Subject to PAYG deduction
TFN Declaration
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Existing employees
Individuals – in Australia
Sole Trader entity with/without ABN
Questions
Further Information
Finance website:
http://www.fin.unsw.edu.au/PoliciesProcedures/AccountingManual/FBT.html
Contact: Anne Harvey - Ext 51635. Email: a.harvey@unsw.edu.au
Eric McCallum – Ext 52825, Lucy Lowe – Ext 51204