GST
726943038 V3 23/7/2003

Foreword
GST – Brief Overview
 GST is a broad-based tax of 10% on the supply of most goods, services or anything else for consumption in Australia. GST is effective from 1st July
2000. GST replaces the Wholesales Sales Tax system, which applied taxes at varying rates to a range of products.
 Any entity carrying on a business can register for GST. Employees and those people involved in hobbies cannot register those activities for GST.
 GST is paid at each step in the supply chain and is included in the final price paid by the consumer. Those parties involved along the way are merely collecting GST and passing it to the Australian Tax Office.
 When any entity is registered for GST, the payment of GST by them is not an expense. There is a cash outgoing, but the GST can be claimed back from the
ATO when the entity lodges their Business Activity Statement.
 The PAYG (pay as you go) system has been introduced and relaces the PAYE,
Company instalment system, PPS and RPS systems from the 1st July 2000.
Provisional Tax has been abolished effective from 1 st July 2000. All individuals and entities with business or investment income will pay PAYG instalments.
PAYG instalments will be paid quarterly except where an election is made to pay annually.
 All entities should now register for an ABN. If an entity does not have an ABN, business payers are required to deduct 48.5% tax.
 All businesses with an ABN must produce a BAS (Business Activity
Statement), either monthly or quarterly. These are lodged with the ATO, and are due (with any tax payable) by the 28 th period.
of the month following the tax
 An entity that is not registered for GST cannot charge GST, but also cannot claim input tax credits.
 The new tax system uses the terms ‘supplies’ and ‘acquisitions’ to replace
‘sales’ and ‘purchases’.
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 Supplies include taxable supplies, GST-free supplies and input taxed supplies.
(See "Terms and Definitions’ below).
 Taxable supplies are subject to GST, while GST-free and input taxed supplies are not subject to GST.
 Acquisitions include creditable acquisitions, GST-free acquisitions and acquisitions for making input taxed supplies. (See "Terms and Definitions’ below).
 GST paid and GST received is offset against each other to produce a net amount for a tax period. The net amount is either paid to the ATO or received as a refund from the ATO.
 GST is payable if second hand goods are supplied by a registered entity.
Plenary
Oracle Training - Reading & Reporting
GST Training by DE&T Tax Compliance Unit
- Basic & Refresher
- Contract Managers
- Grant Managers
- PAYG
GST Tax Compliance Unit and Hotline
Tax Briefs & GST Update
ATO & DE&T Tax Resource Centre Websites
The Goods and Services Tax has been established in Australia for a number of years now and
DE&T staff have become familiar with its operation, particularly in relation to coding Accounts
Receivable and Accounts Payable into ARIBA/ORACLE using the DE&T Chart of Accounts (1 st revision August 2002).
DE&T was very vigorous in its implementation of GST, initially creating a GST Task Force for this purpose. This has since developed into the Tax Compliance Unit, Financial Services
Division.
The Tax Compliance Unit liaises with/trains/provides resource materials/undertakes research/ with other DE&T Divisions, regions, Agencies Units etc, with other Government Departments
(e.g. NRE, Health, Justice etc) including the Department of Treasury and Finance and of course the ATO itself.
In order to readily provide DE&T staff with the latest, plain English, information to staff, DE&T
TCU ma intain t5he “Tax Resource Centre” webpage, which provides advice, articles and contains links to GST and other taxation related articles on GST (and other taxation matters).
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 The supply of an education course is GST-free. These include pre-school and primary school courses, most accredited secondary and tertiary courses, TAFE courses, Masters and Doctoral courses, professional or trade courses (where they are an essential prerequisite to employment in a trade, profession or occupation).
However this exemption does not extend to DE&T agencies providing the course, it must be provided by a school
 Examples of courses that are not GST-free include private tuition, personal development, hobby and recreational courses, and short occupational courses to maintain skills eg spreadsheet training.
GST – Food
 Food for human consumption is GST-free, except where explicitly specified as being taxable.
 Food is taxable if it is consumed on the premises or surrounding grounds, or if it is hot food, or prepared food (eg hamburgers, sandwiches, platters), confectionery, savoury snacks, bakery products, ice-cream foods and biscuits.
 Beverages are GST-free if they are for human consumption and consist of milk, tea, coffee or malt extracts, fruit & vegetable juices (that include at least 90% fruit), ingredients for beverages for infants and invalids.
 Beverages are not GST-free if they are supplied hot, or supplied for consumption on the premises or of a kind specified in the regulations.
 Water in containers of less than 100 litres will not be GST-free.
GST – School Tuckshops and Canteens
School tuckshops and canteens run by non-profit bodies, such as a parents and citizens associations at a primary or secondary school, can choose to have the supply of food input taxed. However, certain conditions need to be met, including that the only supplies made by the tuckshop are of food. The choice cannot be revoked within twelve (12) months after the day on which the non-profit body made the choice.
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Index
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GENERAL CLAIM FORM ........................................................................................................53
Personal Expense Claim Form .......................................................................................................54
A
B
Sample Region ..............................................................................................................55
Sample Unit ...................................................................................................................56
15. Glossary ................................................................................................................................58
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1. Introduction
The Goods and Services Tax (GST) is a consumption tax levied on the supplier, but ultimately to be paid by the end user for all goods and services provided in Australia. It applies from 1 July
2000 and is set at 10%. Generally GST will not apply to consumption outside Australia.
Whilst DE&T Central Administrative Agencies, Units, Divisions and Regions are exempt from wholesale sales tax (WST) (which is abolished from 1 July 2000), they will be required to pay and charge GST on supplies “connected with” Australia (this includes supplies made in, or goods imported into, Australia).
Registered entities will pay tax on purchases but will be able to claim the tax back as an input tax credit. This cannot apply to supplies that are input taxed or are GST free (see explanations later). In the former case no tax is applicable to the supply but input tax credits cannot be claimed on acquisitions. Examples of input taxed supplies are financial supplies and lease of residential accommodation. (A reduced input tax credit will be allowed for certain financial acquisitions). In the latter case GST is not applied and, therefore cannot be claimed back.
GST is a tax on a supply or importation of anything, except where the supply is GST free or is input taxed. The entity which incurs the GST liability is the supplier, which needs to include GST in the price for the supply and remit the GST collected to the ATO. A business transaction will result in a charge by the supplier for GST and an equal GST credit claim by the purchaser
(known as an input tax credit).
The amount of GST on a taxable supply is 10% of the GST exclusive value, or 1/11 th of the total consideration for the supply.
GST will not apply to activities performed as an employee. Salary and wages and related costs will not be subject to GST.
To claim input tax credits a "tax invoice" in the ATO approved form is required and DE&T customers must be supplied with a "tax invoice" to allow them to claim input tax credits. Final consumers (effectively, entities which are not registered – see later) will not need a tax invoice, as they cannot claim input tax credits.
1.1 Oracle Solution to GST
DE&T is basing its GST solution on the “Whole of Government Approach to GST” developed by
Oracle in co-operation with the Department of Treasury and Finance and other Government
Departments.
Oracle provides a proprietary software solution to GST, and is tailored to DE&T configuration and requirements. GST Codes are the connectors for the GL Chart of Accounts to the BAS return components.
Chart of Account codes most likely to affect users are Revenue (70000 series) and Expenses
(80000 series).
Systems documentation has been modified to reflect GST requirements, including:
All claim and other forms.
Accounting Procedure Manuals.
Accounting Policies, including reviewing pricing structure.
All such documentation is available on EduLibrary for all Central Administrative staff for ready access.
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1.2 DE&T FSD to prepare Business Activity Statement
DE&T Central Administrative Divisions and its Agencies have been registered as one GST group with DE&T Financial Services Division a s the ‘representative member’, responsible for lodging one GST (BAS) return on behalf of all grouped members. The GST grouping provisions ignore intra-group transactions for GST purposes, thus members within the group do not have to charge GST and claim back input tax credits on internal transactions.
DE&T, as the representative member, is liable for all GST payable by the group and is entitled to all input tax credits on purchases made by the group. All GST group members are jointly and severally liable for GST payable by the GST group. All adjustments are the responsibility of the
DE&T as the representative member.
DE&T is be required to lodge a Business Activity Statement (BAS) return electronically with the
ATO, and any net liability paid, on an accrual basis within 21 days of the month following the end of the tax period (monthly). In the case of DE&T Central Administrative and its grouped
Agencies, this will be the end of the preceding month.
If a refund is due, the ATO must pay the refund within 14 days of lodgement of the return, though DE&T will offset any GST refund against PAYG withholdings from DE&T employees’ salaries).
DE&T is required to keep records of all GST transactions for at least 5 years.
1.3 Schools and the VCAA, VIT etc
Schools for the purposes of the BAS return are individual entities and are not grouped with
DE&T. Schools are however considered a government related entity for the purposes of providi ng school global budgets and other “appropriation” type funding. As such, DE&T considers the funding to schools which are government related entities to be “appropriations”, which will not be “grossed-up” to include GST. Note, funding to non-government schools is not considered an appropriation but rather a grant (see also RCTI Agreements) for GST purposes and will need to be grossed-up to include GST.
The Victorian Curriculum Assessment Authority (VCAA) and the Victorian Institute of Teaching
(VIT) are also currently not under the DE&T grouped entity for the preparation of the BAS, primarily because it operates its own accounting system. Similar to schools above, they are be considered a government related entity though for the purposes of any “appropriation” type funding provided by DE&T.
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GST Operating Procedures
2. Key GST Elements for DE&T Central Administrative Staff
2.1 Price Monitoring
2.2 Chart of Account Codes
2.3 Oracle GST Tax Codes
2.4 How to complete a General Claim Form for correct GST recording
2.5 Taxable Supplies
2.1 Price Monitoring
The Australian Competition and Consumer Commission (ACCC) will monitor prices to make sure they are adjusted properly and make sure price changes are consistent with the changes in tax rates. This has implications for both schools and suppliers.
DE&T Central Administrative Agencies Units, Divisions and Regions are advised to adhere to the ACCC guidelines which are available on the ACCC Website: www.accc.gov.au
when setting
GST-inclusive prices for goods and services. There are two options:

Prices can be quoted for the period to June 30, 2000 only and therefore, do not need to consider GST. For prices from July 1, 2000 the impact of the GST could be considered when a more informed position is clear to calculate its effect;
OR

if providing prices for the full calendar year in 2000:

An adjustment may be required to all prices of goods and services provided after
July 1, 2000 to allow for the impact of the removal of other taxes (like wholesale sales tax) associated with the introduction of the GST. This adjustment could result in a reduction in costs to schools and would have an impact on the prices charged by schools;
 a decision will need to be made on whether the “supply” being provided by the DE&T
Central Administrative Agency is a taxable supply requiring GST to be included in the price. For example, if the DE&T Central Administrative Agency is supplying musical instruments for hire to students, this will attract GST and must be included in the price charged. [This should also be done when using the first option…..]
In relation to suppliers, ensure that you deal with suppliers who have an ABN and are registered for GST (refer section 5.4 for more details).
2.2 Chart of Account Codes
Look in the attached link for the Oracle Chart of Accounts. http://arrakis.icon.edu.vic.gov.au:8000/fsb/
2.3 Oracle GST Tax Codes
Look in Edulibrary under All Public Folders/Documents for Central Administrative
Users/Financial and Business Services/Chart of Accounts
GST Tax Codes to be commonly used will be:
Tax code Description
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Revenue:
G01
G02
G03
G04
N06
Sales revenue, income and other supplies
Exports – GST Free [[XX DE&T to determine if code is relevant XX]]
GST-free sales revenue, income and other GST free supplies (other than exports)
Input taxed supplies [[XX DE&T to determine if code is relevant XX]]
Out of Scope
Expenditure:
G10 Acquisition of capital items i.e. Assets >$1,000
G11
G14o
Acquisition of Non Capital Supplies eg Operating Expenses
Acquisition of GST free, input taxed or from non-GST registered suppliers
G15
N06
Not deductible
Out of Scope
2.4 How to complete a General Claim Form for correct GST recording
There are 3 actions in Oracle to record GST payments
DIRECTIO N S O F THE MIN ISTER
N ame of Client
(USE BLOCK LETTERS)
A ddress to which it its desired that the cheque be forwarded
V endor N o. (8)
GENERAL CLAIM FORM
…………………………………………………………………………………………………………….
…………………………………………………………………………………………………………….
(SUBURB/ SITE)……………………………………………………………Post Code)……………….
Invoice N umber (12) P.O. N umber ( 6) Invoice Date (7)
DD-MO N -YY
-
Purchase Order - To remain..
(Please circle)
O PEN / CLO SED
Financial Year (4)
/
DESCRIPTIO N
EN TI TY ( 2 ) AU TH O RI TY ( 4 ) CO ST CEN TRE ( 4 ) ACCO UN T ( 5 ) GST CO DE tax inclusive
Y/ N
AM O U N T
TRACK AS AN ASSET
.
.
.
.
YES / N O
CH EQ U E WI TH DRAWAL YES / N O
PRO JECT ( 6 )
( IF YES PLEA SE A TTA CH A SSET FORM ) RCTI REQ U I RED
N AM E PH O N E
LO CATI O N ( 6 )
YES/ N O
1. GST Code Oracle will calculate and record the GST amount. GST will not impact on cost centre budgets
2. Tax Inclusive Y/N
3. RCTI required?
Will not use “per 3.5.2 (b)” any more as all invoices must now be supported by a tax invoice
[[XX Question for DE&T – more info – what does this mean? XX]]
Telephone, Gas and Electricity Bills now require claim form to be completed as they are Tax invoices and require accounts to be split
2.5 Taxable Supplies
GST will be payable on many of the goods and services the DE&T sells or supplies to others as it conducts its business. GST will also be included in the price of things acquired for each
Unit, Division or Region, even if it is on behalf of a school. [[ XX Comment for DE&T – do agency rules apply here? If DE&T buys something on behalf of schools which is truly on the account of the schools, then DE&T cannot claim the ITC, the school must claim the ITC. It would normally be acceptable for the claim for ITC to be based on where the expenditure is recorded. XX]]
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ORACLE Finance has been modified to individually allocate a GST code to each transaction and this will be covered in more detail in the receipting and payment procedures sections.
However, in order to fully understand the data entry recording aspects, a theoretical appreciation of the GST and how it will affect your day-to-day procedures is vital for internal and external compliance.
Firstly, it is necessary to identify when a supply to your DE&T Central Administrative Agency is subject to GST. This is termed a taxable supply.
The following example illustrates a taxable supply situation:
Example 1 DE&T purchases calculators or pays a cleaner for use in the regional office.
These are taxable supplies to DE&T. There will be GST included in the price which DE&T pays. DE&T will be entitled to claim back the GST as an input tax credit in its next BAS, as long as DE&T holds valid Tax Invoices.
Example 2 DE&T pays a grant to a non government school or organisation and DE&T imposes conditions on the receiver of the money as to the untended use of the money or obtains some other benefit. This is a taxable supply to DE&T. There will be GST included in the price which DE&T pays. DE&T would normally increase the amount of the grant to cover the GST. DE&T will be entitled to claim back the GST as an input tax credit in its next BAS, as long as DE&T holds valid a Tax Invoice from the grant receiver (refer to section 4.2 for more details of this example).
2.6 GST-free Supplies
Secondly, it is also important to determine when a supply is a GST-free supply.
Section 4, dealing with special provisions: education will explain this in more detail. Essentially, accredited educational courses provided by recognised education providers are generally GST-free (as per
Goods & Services Tax Bill 1998 Sec. 38-95). This means that GST is not payable on the education course, and the course provider will be entitled to claim input tax credits for GST included in the price of goods and services acquired to provide the course. It must be noted however that the GST-free treatment only applies to the actual course provider. In many cases across DE&T, the course provider is the school not DE&T itself. As a result payments between
DE&T and the schools are not GST free education as the payments do not relate to education services. Such payments relate to “ arranging ” education – which is not the same as GST-free education. However, the situation is confused by the fact that the payments may be GST-free for other reasons – that is, an appropriation. Each individual circumstance needs clear examination.
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Study the following example/flow chart:
Funding from
DTF to DE&T for education purposes
Not GST free education
But no GST as payment is an appropriation
Grant from
DE&T to school
Fees from parents
2.6 Input Tax Credits
Not GST free education
GST free education
Taxable
Non-Government
School
This document has extensively referred to input tax credits.
These are clearly defined in the legislation, and only available once certain criteria are met e g you must have an ABN and be registered for GST with the ATO to claim input tax credits. In addition, DE&T must hold a valid tax invoice at the time of lodging the BAS for all input tax credits that are claimed on the BAS.
This is a vital part of the GST systems and tax invoices must be obtained for all DE&T purchases.
Input tax credits enable businesses, including schools, to claim back the GST-inclusive component of the item acquired. In the case of the calculators above, the DE&T Central
Administrative Agency paid $3,300 including GST of $300. As a taxable supply, the GST is passed on to the end consumer and the ATO refunds the DE&T Central Administrative Agency
$300 at the appropriate time. In the second example concerning the zoo excursion, the DE&T
Central Administrative Agency has absorbed the GST component of the ticket price, as the excursion is deemed a GST-free supply, and will only charge students $6.00 each. The ATO will reimburse the DE&T Central Administrative Agency .60 cents for each ticket sold by allowing an input tax credit.
Input tax credits cannot be claimed in some circumstances. For instance, they are only available for creditable acquisitions that are for a creditable purpose and claimed by an organisation registered for GST e g the purchase may be all, or part, for private usage. In the example of the calculators above, the entire $300 could not be claimed if one of the calculators was purchased by a teacher for private use at home. In this case, a partial claim is calculated for the educational usage (Partial claims will be dealt with in Section……….) [XX- Question for
DE&T – could there be an expense reimbursement / FBT? XX]
2.7 Input Taxed Supplies
If a supply is input taxed , no GST is payable on the supply and there is no entitlement to an input tax credit for anything acquired or imported to make the input taxed supply. Input taxed supplies are often referred to as “exempt supplies” for this reason.
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There are 2 main areas of input taxed supplies those being financial supplies and the supply of residential accommodation. In addition, school tuck shops and canteens can elect to have their supplies of food input taxed. This election is available to individual schools. However DE&T has undertaken some modeling on such an election and considers that it is optimal not to make this election. Nonetheless some small schools may make this election to reduce administrative compliance costs. [[XX DE&T to review this paragraph to determine if it is appropriate or any policy decisions etc XX]].
Some examples of input taxed financial supplies are:

money e g creation, issue, transfer, assignment, receipt of, dealings such as: lending/borrowing money; creating/transferring a debt or an interest in a debt; advance/granting of credit;

accounts e g creation, keeping or closing a saving/cheque/deposit account bank account, superannuation funds etc; and

sale, lease or hire of residential premises.
For a comprehensive list, refer to “ A New Tax System (Goods & Services Tax) Regulations
1999 Part 3-1Div 40, Regulation 405.09”
It is anticipated that schools will be impacted only to a small extent in the area of input taxed financial supplies, with interest on bank accounts being the most common item. The de minimus rule will normally ensure that no action is required by schools or DE&T in relation to apportionment.
2.8 Importations
GST is payable on goods imported into Australia if they are imported for home consumption within the meaning of customs legislation. The importer is liable for the GST.
If a DE&T Central Administrative Agency is directly importing goods from overseas, it will pay
GST on taxable imports at the rate of 10% of their value. Value is the sum of:

The customs value of the goods;

The amount paid or payable to transport the goods to Australia and to insure the goods for that transport to the extent that this is not already included in the customs value; and

Any customs duty payable on the importation of the goods.
An input tax credit is available for GST on importations for goods under rules that are similar to input tax credits for other acquisitions.
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2.9 Adjustments
In the normal course of daily business, it will sometimes be necessary to adjust the GST amount that is owed or paid. Termed an “adjustment event”, specific instances are:

cancelling a supply or acquisition e g returns of goods

changing the price (consideration) e g discount

a supply becomes/ceases to become, a taxable supply

bad debts (not applicable for cash basis of accounting)
The adjustment that results is either an “increasing adjustment” (GST amount on a supply is increased or the input tax credit is decreased) or a “decreasing adjustment” (opposite effect).
This will be documented with an adjustment note (refer Sample Documents section).
Adjustments are generally required to be reported separately on the BAS. [XX – question for
DE&T – is a special tax code available for adjustments? XX]
2.10 Tax Periods
Any GST on supplies made, input tax credits on acquisitions and importations and adjustments are all attributable to a particular tax period. The nominated tax periods are monthly for DE&T and most schools etc, or quarterly. Organisations have 21 days following the end of their tax period to complete and lodge the Business Activity Statement to the ATO.
[XX – Add chapter re attribution rules for both supplies and acquisitions?]
As schools currently use a cash basis of accounting, they will account for the GST payable when the receive payment for a taxable supply and claim input tax credits when the y actually pay for acquisitions. This may cause a temporary cash flow effect until the ATO refunds any credit amounts due. The ATO is bound by the Taxation Act 1983 to pay interest on any refund due, after 14 days of BAS lodgement.
2.11 GST Documents and Records Storage
Although only the tax invoice, adjustment note and Business Activity Statement (BAS) are legally required under the GST legislation, other documents may be amended to facilitate the introduction of GST. Samples of documents are shown in Attachment 2 and include: Tax invoice, Purchase Order, Adjustment Note, Statement and Business Activity Statement. [XX
Question for DE&T - RCTI? refer to 2.4, RCTI may be taken out of 2.4?XX]
See DE&T Disposal Schedule and Archival Officer- Admin Services
[[XX Comment for DE&T Refer earlier – the archiving issues is important and should probably be included here. That is it is important that relevant staff know the tax documentation that is required to be kept. XX]]
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3. Dealing GST in your Agency, Division, Region, Unit
The following list identifies the main areas of responsibility which all DE&T units should consider and develop strategies, to ensure appropriate actions are in place in time for, and during, the tax reform introduction process.
3.1 Contracts currently in existence, or to be entered into, that go beyond July 1, 2000
Prior to July 1, 2000 DE&T Central Administrative Agencies, divisions, units etc should identify any contractual arrangements with suppliers and providers currently in place, or being considered. These range from cleaning contracts to contracts for building works, maintenance, classroom and canteen/bookshop supplies etc. If in doubt about the contractual status with a current supplier, the unit manager/accounts staff should contact the supplier and clarify any details.
The impact of GST on contracts entered into before July 8, 1999 and going beyond July 1, 2000 will vary depending on:

the date on which the contract is entered into

the date on which full payment was made

whether the contract is reviewable or non-reviewable

whether the customer is entitled to full input tax credits
Generally speaking, a reviewable contract spanning the transitional period (entered after July
8, 1999 when GST became law) will attract GST from July 1, 2000.
Refer to “Special Provisions: Education” (Section 7.12) below for specific procedural details regarding cleaning and other contracts.
3.2 Suppliers: Considerations when dealing with Suppliers
Registration - All non-government enterprises with an annual turnover of $50,000 ($100,000 for non-profit bodies) must register with the ATO. Below this threshold, registration is optional.
This enables registered suppliers to obtain a credit for input tax paid in the course of carrying out their enterprise.
Unregistered suppliers and individuals cannot charge GST on their supply, and consequently cannot claim input tax credit for any costs incurred for the supply.
Valid Tax Documentation – All registered contractors and suppliers need to provide valid financial documents to your school. Check that the supplier intends to:

Provide you with valid tax invoices, adjustment notes etc from July 1, 2000 showing certain minimum information (see Sample Documents section) in order to substantiate transactions for $50 or more (GST-exclusive). This is necessary in order for your DE&T Central
Administrative Agency to lodge a claim for input tax credits.

Differentiate between supplies less than $1,000 and those more than $1,000 by including minimum required information for each threshold (refer Sample Documents section).
Note 1: An invalid invoice should not be processed and the customer/recipient can request the provision of a valid tax invoice within 28 days of purchase.
Note 2: Credit card statements are NOT an acceptable alternative or substitute for a tax invoice. [[XX DE&T comment further discussion is required on this issue as the ruling does allow credit card statements in certain circumstances. XX]]
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3.3 Office Staff
In preparation for GST, office staff should undertake the following actions:
• Understand the GST status of each transaction processed, that is, taxable supplies, GSTfree supplies or input taxed supplies
• Know how to issue appropriate tax invoices for goods or services provided by the organisation, reconciling total taxable supplies, GST-free supplies or input taxed supplies with the total tax invoices issued.
• Know how to account for credit card transactions
• Understand how to process tax invoices received from creditors.
• Know how to deal with adjustment notes, credit notes, and refunds.
• Understand and follow the rules for reconciling all the accounts
• Understand the attribution rules which determine the tax period in which a transaction is accounted for GST purposes
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4. Receipts/Income
4.1 ABN: Australian Business Number
4.1.1 Use of DE&T ABN on Invoice, receipts and other stationary
4.1.2 Cost Centres to Register with Accounts Receivable for use of DE&T ABN
4.2 Grants & Appropriations
The GST treatment of Grants and Appropriations requires careful consideration and in many instances case-by-case examination.
The critical issue is whether a payment is a grant or an appropriation for GST purposes.
[[XX Comment for DE&T – do you want us to go into chapter and verse on the definition of grants and appropriations from the rulings?? XX]]
4.2.1 Grants
Where DE&T makes grants to non-government entities, the grant is likely to be subject to GST.
In this situation DE&T will include GST in the grant amount (by adding 10% to the actual grant or by “grossing up” the grant if it has already included GST). The provider receiving the grant must remit the GST included to the ATO and raise a tax invoice on DE&T. The DE&T Central
Administrative Agency then claims the GST back as an input tax credit.
This also applies to Fee for Service government contracts and tenders to both public and private sector entities.
N.B. Procedures to simplify this process and reduce the number of tax invoices are being considered. When these and proposed grant schedules are formalized, DE&T Central
Administrative Units, Divisions and Regions will be notified.
Appropriations as defined in the GST Act are not subject to GST - GSTR 2000/4
Grants are generally subject to GST
Appropriations are between government related entities
Grants are payments to parties external to government
Appropriations
Appropriations have the following features: the payment is made by a government related entity to another government related entity; and the authority to make the payment may be found in an Act or other instrument of a legislative character which appropriates moneys; and the payment is a non-commercial, funding transaction where no goods, services or presently existing property rights are provided directly to the paying agency in return for the payment.
DE&T Funding
All funding made by DE&T to other entities needs to be assessed for GST treatment on a case by case basis
The vast majority of payments that DE&T makes to schools, colleges, TAFE’s and other cost centres meet the criteria for appropriations and are therefore not subject to GST
However many funding arrangements made by DE&T do not meet the tests for appropriations, are grants in consideration for supply, and therefore attract GST
In instances where it is difficult to determine whether the funding is an appropriation or a grant, it may be appropriate to treat the funding as a grant that attracts GST
DE&T Position
19

DE&T funding to government schools, colleges and institutes, in general, will not be subject to the GST
DE&T funding to non-government entities and non-government schools will, in general attract the GST
Appropriations - Ruling GSTR 2000/4
Payment by a government related entity to another government related entity
Specifically covered by an appropriation under an Australian law includes budget papers etc global budgeting
Payment specifically deals with transactions between government related entities or is not part of a commercial transaction
Grants -
Ruling GSTR 2000/11 (Final Ruling released 12/5/2000)
Grant is usually consideration for a supply, grant is not usually the supply
Need to establish that a supply has occurred
Supply will be subject to GST where it meets 4 elements of taxable supply
Terms
- Supplier - Grant Receiver (Grantee)
- Recipient - Department (Grantor)
Grants - Ruling GSTR 2000/11
Consideration for a supply
Conditions attached
Enforceable - goes to the substance of what the grant is for
Incidental
Right to Repayment
Material benefit to the grantor
Gifts
Grants - Ruling GSTR 2000/11
In the course or furtherance of an enterprise
Supply connected with Australia
Grantee registered or required to be registered
4.2.2 Appropriations
4.3 GST Revenue Procedures
Improve GST knowledge and documentation requirements
Establish consistent practices across department
We can’t read your mind
We often have to interpret and analyse “unclear” notes
It is just as easy to get it right the first time
There is an administrative time cost in continuously correcting errors.
What is the impact of inadequate invoices or documentation?
Processing of receipts or invoices could be delayed by Shared Services
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Mischargings may occur
GST will be automatically deducted if the GST status cannot be determined.
DE&T could be subject ATO fines and penalties and expose DE&T to audit by ATO
Failing to meet Tax Compliance Framework guidelines which the Secretary signed off to
DTF
Revenue “Invoice” Cycle
Revenue “Receipts” Cycle
Business Rules - Revenue
Units must use a “Revenue Advice Slip” when sending cash, cheques or credit sales vouchers to Cash Management Unit
When advertising courses, PD, selling curriculum materials, CD’s etc you must use the
Subscriptions “Tax Invoice” proforma
When management and others use dept phones for private use you must complete the
Blue “private use telephone reimbursement” with the money remitted
Tax Invoice Creation form
Credit Note Creation form
Run your own revenue reports
Revenue Advice Slip
Business centres often use “memos” with insufficient data to inform Cash Management of cheques etc received for banking.
Units can now use a “Revenue Advice Slip” cover sheet for each type of revenue e.g. program Create separate Revenue Advice Slips for
Each individual company
But NOT for Victorian Government or Non Govt schools
– cheque details provide school name and drawer details are linked to school No on Oracle
Do require a tax invoice creation form if it is a common name e.g.
St.Mary’s, St.Josephs etc we will need to know suburb
GST Revenue Tax Codes
G01 - Taxable sales, income and other supplies
Sales of taxable supplies where 1/11th of gross price (GST payable) is liable to be remitted to ATO
Mirrors G11 in Accounts Payable (appears in BAS)
G03 - GST Free supplies
No GST is charged on supply of goods and services that are GST-free or where vendor is ABN only registered
Basic foods (unprepared), identified education supplies, childcare & health services etc
Mirrors G14 in Accounts Payable
(i.e. not GST inclusive) (But will still appear on BAS)
N03 - No GST Outside the Scope of GST
Mirrors N06 in Accounts Payable (Does not appear on BAS)
GST Revenue Tax Codes
G04 - Input Taxed supplies
Where a supply is input taxed, no GST is payable, however input tax credits cannot then claim back any GST included in acquisitions.
Financial supplies, residential rent & residential premises.
Mirrors G13 in Accounts Payable ( i.e. “input taxed”)
(Will appear on BAS)
Generating an invoice
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Oracle created “Tax Invoices”
Invoice creation form should be used in most instances (preferred).
Or
Where units “advertise” for sales, self produced invoices can be produced using the “tax invoice” proforma (attached) as part of promotion/publicity material
Split Charging Invoices
Need a separate line on the invoice creation form for each GST tax code treatment.
E.g. reimbursement of Cab Fares
Cost of cab fare - GST Inclusive G01
Liquidated damages/service fees G03
Invoicing
Combined invoices e.g. accommodation and fares
E.g. $8000 inc $620 GST to be reimbursed should be shown on separate lines as:
$6200 + GST (i.e. $620) G01
$1800 GST free G03
GST and You
Consider whether GST applies
Consider whether is it an “appropriation” (NO3) or a supply of professional services
(G01)
Defining GST status is dependent upon the “Appropriations Test”
 “Govt” to “Govt”

In an act or budget paper

Non Commercial
Exceptions
Contra Entries
There goods and services are provided for (or in part) for another good or service and each party still needs to account for GST on the BAS.
Property (this is a complex topic e.g. residential vs. commercial, etc)
Sponsorships - e.g. a real estate signboard advertising a fete on school grounds, naming rights or advertising boards at sponsors’ request)
Manual invoices are “swapped” by the parties (and journal entries are raised to effect
BAS accounts) external to Oracle.
Credit Notes
Similar to Tax Invoice, requires Business unit to advise Cash management to cancel invoices for whatever reason
This reverses entries to
Oracle/GL working account management reports
BAS return
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4.3 Catering and functions
4.4 Commissions
Use of RCTIs to collect commissions and royalties
Various types of commissions are earned by DE&T Central Administrative Units, Divisions and
Regions, including:

For lease of property (Optus tower)

For administering a payroll deduction.

For hire of or provision of a facility (cafeteria, bookstore etc.)
In most cases, commissions are either invoiced to the relevant client or receipted in an approved area.
Where commission is deducted from a payroll amount (i.e. health insurance, loan repayments, deposit to savings account etc.) the commission should be “grossed up” to include GST. The deductions included in the schedule to the entity requesting them may substitute as a tax invoice so that the tax included in the commission can be claimed back as an input tax credit.
This will be confirmed at a later stage.
4.14 Curriculum Materials/Licensing Agreements
Where materials are sold to students or are subject to a licensing fee, the fee is GST free if the materials relate to the standard curriculum framework or to recognised accredited courses/programs (education courses).
Where sales are from the department to a school or similar body the sale of the curriculum materials is subject to tax. I.e. DE&T are not providing education services to a student; we are simply selling books or resource materials to schools.
These fees are mainly invoiced to clients and the staff member completing the invoice request must identify whether the fee is GST free or is recognized by the finance system when the invoice is produced.
Curriculum materials for sale by DE&T units and Divisions, including CD
’s, Reading
Recovery materials, publications etc Similar to PD, simply just because schools supplies a GST free education course, this does not mean that all the supplies made to the school are GST-free.
4.5 Exports
Any goods sold or services delivered overseas are classified as exports and are GST free.
Existing coding on invoices, direct credit advices or letters of credit will identify these transactions as export transactions and little change to existing procedures is anticipated.
The introduction of tax invoices, though not required for export transactions, is a change that needs to be noted by the relevant staff members.
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4.6 Hire of Facilities/Equipment
Hire transactions always attract GST and the current coding indicates this to the finance system.
There is, therefore, no change to the current procedure.
4.7 Industry/Commercial Training/Services
Generally, training sold to industrial and commercial organizations attracts GST. However, where training packages are devised, they may include subjects/components which are GST free. In this situation, the areas calculating the cost/price of the package must now comply with the GST legislation as well as that imposed by competitive tendering and the price guidelines laid down by the Australian Consumer Competition Commission.
This manual assumes that any pricing procedures in existence at the DE&T Central
Administrative Agency have been reviewed and modified to permit the inclusion of GST in the pricing mechanism after allowing for any components of the cost build-up that are GST free.
The staff member completing the invoice request must enter the relevant amounts in the designated areas to permit the issue of the tax invoice to the client. These figures should be obtainable from the price build-up documentation. Line by line details are required where the price build-up includes mixed supplies.
4.8 Invoice Processing
Where an invoice is raised to register enrolments or charge materials fees, the invoice format will change to reflect the GST legi slation. It will be called a “Tax Invoice” (Attachment 2) and will include specific information required by the legislation. However, the system will produce the invoice and apply tax where necessary by reference to the course/subject code entered on the request for invoice documentation. Where alternative software is used a similar process should apply.
The software modifications made to accommodate the implementation of GST require very little additional work by the staff member undertaking the processing of transactions.
Where administration charges are deducted from refunds, GST should be included if the course to which the refund relates was originally subject to GST. Conversely, administration charges for refunds for courses, which were GST free, are also GST free. A refund will require the issue of an adjustment note (see Section NNN).
4.9 Other Government Entities
“Sales” to other Government Entities, other than internal transfers within agencies within the grouped entity, will however be taxable.

Where the materials included are a mixture of GST free and taxable supplies, a breakdown will be needed so that the system can apply the GST to the relevant amount.
4.10 Other DET Central Agency Retail Outlets
See Lamerc, LOTE, Regions, SOFNet, Joining the Chorus etc
Staff in those areas needs to identify sales as taxable or GST free. GST free status applies mainly where fresh food is sold as fresh food is generally GST free. A procedure is required whereby staff members input a code to distinguish those items which are GST free.
Where these areas use a system different from the main finance system, they must comply with the legislation regarding receipts (or invoices) and also provide information to the Accounts
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Receivable section which can be appropriately entered to permit GST status to be identified in the main finance system.
4.11 Overseas Students
It should be noted that this section relates to students from overseas studying in Australia and should not be confused with “exports” where the delivery of services takes place outside
Australia. Therefore as discussed in section 2.1, enrolments are driven by the course/subject code, and whilst overseas student enrolments may be achieved using the standard enrolment process, (enrolment forms or invoices) letters of offer are also used.
Enrolment by this means entails a preliminary payment when the letter of offer is issued followed by a final payment on enrolment. These are, therefore, similar to installment payments where tax status is determined for each installment and paid to the ATO in the normal way
(unless the course is GST free).
If the enrolment is not confirmed, a refund and adjustment situation arises (see Section 4.13).
Tuition fees charges to overseas students for study in Australian Secondary colleges for educational services are GST Free and this component of the fee charged by the
“International Studies Unit” of DE&T are “passed on” to schools.
Health Insurance (GST Act) GST Free
Commission on Health Insurance G01
DE&T acts as an agent and receives commission for students health insurance using an
RCTI with the Health Insurance Agency
4.12 Professional development, conferences, seminars or courses run by Units
Schools often complain about the quality of tax invoices from the department and clarity of the GST Tax status.
Units should use “Tax Invoice” ordering and payment proforma as part of any fliers or publicity
4.12 Recipient Created Tax Invoices
RCTI Agreements
4.12 Rental Properties
GST will not normally apply on the sale of existing residential property at 1 July
2000. Property held as at the 1st July 2000 by businesses registered for GST should be valued so that only the increase in value from the 1st July 2000 will be subject to
GST.
Sales of new residential property will be subject to GST.
 Residential rents will be input taxed but landlords will not charge GST to their tenants.
 GST is payable on the sale or rental of commercial residential premises, including hotels, motels, inns, hostels, boarding houses, and caravan parks.
 Rental of commercial premises will only be subject to GST where the sum of all rental received by the landlord exceeds $50,000
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4.13 Reimbursements for employees private use of a DE&T Resource
Where an employee is required to reimburse DE&T for the private use of a DE&T resource e.g.
E Tags, Mobile phones, DE&T Business Telephones etc. this is not a creditable acquisition and
DE&T will need to identify the GST element of the reimbursement for remittance to the ATO.
DE&T will have already paid the supplier e.g. Telstra and claimed the full amount of the GST input tax on the basis that the payment was for a creditable acquisition
Personal Telephone Reimbursements
Managers (and others) who use a DE&T funded telephone should reimburse the department for the bills $ value of any personal calls.
Unit staff should ensure calculations include GST
Staff contributions are consideration for a taxable supply and GST will be applicable.
All reimbursement of private phone calls is to be made on “mobile telephone form”
4.15 Secondments
GST is charged on salaries and on costs at the full GST level of 10%
4.15 Student Accommodation, including Hostels
Where students are charged fees for living in an DE&T controlled hostel or other form of accommodation, no GST if chargeable as the transaction is “input taxed”. This means that fees charged do not attract GST but no input tax credits can be claimed for GST included in any purchases of goods or services that relate to the supply (student accommodation).
If the main finance system accounts for these fees the relevant coding (tax input taxed supplies) determines their GST status. Where these areas use a system different from the main finance system, they must comply with the legislation regarding receipts or invoices and also provide information to the Accounts Receivable section which can be appropriately entered to permit
GST status to be identified in the main finance system.
Tertiary Students are
4.16 Study Tours
4.17 Refunds – Treatment for GST
4.18 Working Accounts
See Acquisitions
4.19 Impact of GST on Fringe Benefits Tax
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5. Acquisitions/Purchases
Need to discuss
5.1 Budget Impact
GST “flows through” business generally does not represent a cost and is not a cost to
Divisions/Units. GST is borne by private individuals, unregistered businesses, and entities making input taxed supplies
5.2 How is GST Charged to Oracle
Will GST affect my budget when the transaction is posted to Oracle? Only the tax exclusive amount will be recorded against your budget/actual expenditure line. That is, the GST component is split charged automatically by Oracle to the GST liability control account.
5.3 Tax exclusive process required to be quoted
As mentioned in the introduction, GST is a tax on a supply or importation of anything, except where the supply is GST free or is input taxed. The entity required to pay the tax is the supplier, which needs to include GST in the price for the supply. A business transaction will result in a charge by the supplier for GST and an equal GST credit claim by the purchaser.
The amount of GST on a taxable supply is 10% of the tax exclusive price, or 1/11 th of the total consideration for the supply.
Registered entities will pay tax on purchases but will be able to claim the tax back as an input tax credit. This cannot apply to supplies that are input taxed or are GST free. In the former case no tax is applicable to the supply but input tax credits cannot be claimed on acquisitions.
Examples of input taxed supplies are financial supplies and lease of residential accommodation
(a reduced input tax credit will be allowed for certain supplies).
To claim input tax credits a “tax invoice” in the approved form will be required.
5.4 Supplier Registration
An entity must register for GST if it is carrying on an enterprise and has an annual turnover of
$50,000 or more. If annual turnover is below $50,000 an entity may choose to register.
An entity will need to have an Australian Business Number (ABN) to register for GST purposes and applications for an ABN and GST registration can be made on the same form.
If an entity does not register for GST it is not mandatory for it to have an ABN. However, where an entity does not quote an ABN the recipient must withhold tax at the marginal rate from payment (currently 48.5%). The ABN is a new identifier to be used for dealing with the ATO. It will not replace tax file numbers but will eventually replace Australian Company Numbers
(ACN’s). Entities must quote their ABN to qualify to claim input tax credits. Some systems may require that ABNs be updated to Supplier Files/Databases to provide an edit check. This can be achieved on a progressive basis as invoices are processed or before 1 July 2000 if ABNs are known.
Note that these rules do not apply to Government entities, which have considerable flexibility in registration choice.
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The vast majority of purchases made by DE&T Central Administrative Units, Divisions and
Regions will attract GST.
The recognised procedures for processing purchases follow the steps shown below:
5.5 Purchase Requisitions
Prepare requisition
Raise purchase order
Receive goods received advice
Receive supplier invoice
Make payment
Suppliers should be requested to quote price lists or prices quoted by suppliers on the basis of
GST exclusive to facilitate uniform comparison of quotes (some may give GST separately).
The Purchase Order, when produced by Oracle will include automatically GST where the tax code selected for the account code charged is of a GST nature.
5.5.1 GST Bulletin GSTB 1999/1 Guidelines for 'tax invoices' issued by suppliers before
1 July 2000
Date of issue: 2 September 1999
This bulletin is a public ruling for the purposes of section 37 of the Taxation Administration Act
1953.
It is about the application of the GST law.
About this bulletin
This bulletin outlines guidelines that inform suppliers of the minimum information they should include in a document issued before 1 July 2000 for a taxable supply made after that date, so that recipients will not need a tax invoice to claim an input tax credit.
Background
For GST purposes, a recipient of a taxable supply will generally need a tax invoice to claim an input tax credit for a creditable acquisition with a value of more than $50. Generally, as a supplier you must issue a tax invoice for a taxable supply within 28 days of a request by the recipient.
The GST law requires a tax invoice to show:

the Australian Business Number (ABN) of the issuer of the document

the price of the taxable supply, and

other information as specified in the regulations.
The regulations in draft form are available on the ATO's Website at taxreform.ato.gov.au.
Alternatively, you may phone the business Tax Reform Infoline on 13 24 78.
However, you will not be able to issue documents that satisfy these requirements until you have an ABN and the regulations in final form are made. This means that if you issue a document before 1 July 2000 for a taxable supply made after that date, you may have to, after 1 July 2000, issue an additional document that meets the tax invoice requirements.
To reduce this additional work and expense, the Commissioner of Taxation will exercise a discretion* to allow a recipient of a taxable supply to claim an input tax credit without holding a
28

tax invoice if the document that issued before 1 July 2000 contains the minimum information requirements set out below.
This information shows that a taxable supply was made and allows the recipient to easily determine the amount of the input tax credit.
Guidelines
Your recipients will not need a tax invoice if:
1. a document has been issued before 1 July 2000 for a taxable supply after that date, and
2. the document contains the following information:

your name or trading name

your address

the date of issue

the price of the taxable supply

either
(i) a statement that the price of the taxable supply includes the amount of GST to be payable, or
(ii) the amount of GST to be payable.
Public ruling to issue
A public ruling will be issued giving more information about the exercise of the Commissioner's discretion in the circumstances described in these guidelines
*Section 29-10(3) of A New Tax System (Goods and Services Tax) Act 1999
5.5 Supplier Invoice/Tax Invoice
One of the most important documents in the new tax system is the valid tax invoice (Attachment
2). Where a valid tax invoice is not received, the relevant staff member must curtail any further processing and activate a procedure whereby the supplier is requested to provide a valid tax invoice within 28 days. No further action is taken until the supplier responds as requested.
You should already have taken steps to alert suppliers of the need to submit a valid tax invoice and orders should include a note that states that no invoice will be paid unless it is a valid tax invoice. These steps should minimize receipt of invalid tax invoices.
In some cases, invoices received before 1 July 2000 may not comply with the ATO’s interim tax invoice requirements (see Attachment 4). If valid invoices are not obtained, input tax credits cannot be claimed. Therefore, in common with invalid tax invoices received after 1 July 2000, any supplier who has not submitted a valid interim tax invoice prior to 1 July 2000 should be requested to do so within 28 days.
5.6 Invoices for Taxable Supplies
Tax invoices for taxable purchases can take one of two formats:
(a) The invoice can be for one or more lines with the tax inclusive price shown against each line and in total, or in total only inclusive of GST.
(b) The invoice can be for one or more lines with tax shown separate from the base price.
Most invoices for taxable supplies will fall into category (a). For these it is not anticipated that any additional work will be required of relevant staff members. Invoices in category (b) may require additional keystrokes.
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Where imports are concerned, the legislation provides that amounts of GST on taxable importations are to be paid by the importer to the Commonwealth in the same way as customs duty is currently paid. However, a deferral scheme (see Section 10.11) has been proposed that will allow for deferral of payments of GST on taxable importations to coincide with payments of net amounts of GST.
If purchases have been made that include a private element or that are non-deductible for income tax purposes (see Section 10.5), they should be identified by the relevant staff member and the appropriate identification included.
5.6.1 Requirements of an invoice and a tax invoice
A new ruling has been issued on Tax Invoices (GSTR 2000/16). The extract below summarises highlights. The ruling can be obtained in full on the ATO web site. For a detailed explanation of what constitutes a valid tax invoice, refer to GST Ruling GSTR 2000/17.
This ruling applies if GST is accounted for on a basis other than cash i.e. accrual and explains the difference between an invoice and a tax invoice.
Invoice defined
An invoice is defined in section 195-
1 of the GST Act to mean “a document notifying an obligation to make a payment”. For the purpose of this definition:
A document may be in the form of paper, a computer system, tapes or computer disks and may be in an electronic form.
Notifying an obligation to make a payment is the essential characteristic of a document which is an invoice. This characteristic exists where the document informs the parties that there is a presently existing obligation to make a payment and the amount of that payment.
The existence of an obligation to pay will depend on the terms of the contract which govern the supply. In some circumstances, an obligation to pay may arise at a point in time preceding the time of supply; however, this will depend on the intention of the parties. A supplier who has completed all that is required under the contract to demand payment of some or the entire contract price may issue a document notifying the recipient of an obligation to pay that part of the supply consideration. A document of this nature is an invoice for the purposes of the GST
Act.
A document will be an invoice if it notifies a presently existing obligation.
It is not sufficient that the obligation exists and that the document merely evidences the existence of liability. The document must also inform the recipient of the obligation to make a payment and the amount of that payment.
A contract creates a contractual obligation to make a payment. If the obligation created is a presently existing one, a copy of the executed contract, which is returned to the recipient of the supply, will be a document which notifies that obligation if it specifies the amount due by the recipient to the supplier. The copy of the contract will be an invoice. However, many contracts do not create an immediate obligation to pay. This will depend on the terms of the contract and the intention of the parties.
The amount notified by an invoice must be a sum certain. It is not enough that an amount might become payable in the future upon the happening of some contingency.
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5.6.3 When is an invoice issued?
An invoice is issued when the supplier sends a document, which notifies the recipient of the obligation to pay. The actual date when the invoice issues may not be the preparation date.
The actual date is the date when the invoice is electronically transmitted, posted, couriered, hand delivered or similar. This date determines the tax period to which the GST payable and input tax credits are attributed.
For GST purposes, it is desirable that an invoice contains sufficient information to identify or ascertain:

Date of issue

The supplier

The recipient

The amount payable
The recipient is entitled to rely on the date of issue stated on the invoice in the absence of any evidence to the contrary.
It is accepted that documents used in commercial practice that are not referred to as an
“invoice” may satisfy the definition of invoice under the GST Act.
5.6.4 Examples of “invoice” for GST purposes

Delivery docket containing date of issue, date of delivery, name of supplier, name of recipient and the amount payable

Monthly statement containing date of issue, name of the supplier, name of recipient, and the amount payable

Progress claim when certification is made by a third party. The certificate is an invoice.
5.6.5 What is the difference between an invoice and a tax invoice?
An invoice notifies a recipient of an obligation to pay. The effect is to attribute the GST payable and input tax credits to the correct tax period. A tax invoice will enable a claim for input tax credits. A tax invoice is not required when the GST exclusive value of the taxable supply is $50 or less.
Requirements of an invoice and a tax invoice
Attributes Invoice
(GST)
Tax invoice stated prominently
Date of issue X*
X Name of supplier
ABN of supplier
Name of recipient
Address or ABN of recipient
Brief description of each item
X*
Tax Invoice less than $1,000
X
X
X
X
X
X
Tax Invoice over $1,000
X
X
X
X
X
X
X
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Supplied
For each description – the quantity of the goods or the extent of the service supplied
The GST inclusive price of the taxable supply
If GST payable = 1/11 of the total price, either: a statement like “the total price includes GST”, or
X
X the total amount of GST
If GST payable is less than 1/11 of total price: the amount payable (excluding GST) and the total amount of GST
*Recommended for attribution purposes
5.7 Invoices where a Mixture of Supplies appear
X
X
X
X
X
X
In this case the lines on the invoice may have some which are taxable and others which are
GST free and/or input taxed. The regulations state that, in this situation, each line must show the total amount of GST payable and the total amount payable.
In this situation the relevant staff member identifies the lines, which are not taxable, and inputs a code to signify that they are GST free and/or input taxed.
The finance system will determine the process to adopt when keying the lines on the invoice.
If purchases have been made that include a private element or that are non-deductible for income tax purposes, the relevant staff member should identify them and the appropriate identification included.
5.8 Invoices for Input Taxed Supplies
In this case there can be one or more lines on the invoice which are not subject to GST.
Where purchases of goods and/or services are made which relate to input taxed supplies no input tax credits can be claimed. The staff member controlling these supplies must clearly mark on the tax invoice the fact that the purchase relates to an input taxed supply. For instance, where student accommodation is concerned and purchases of furniture or for services such as electricity or cleaning are made for the student accommodation, then when the staff member approves the invoice, notation identifying the purchase as an input taxed supply must be made on the invoice.
When the invoice is processed, the staff member concerned will enter the relevant code.
5.10 Invalid Tax Invoices
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Where an invoice has been rendered by an entity which has not registered for GST but which holds an ABN, there is no requirement for a valid tax invoice and no tax is included in the amount(s) of the invoice. The approving staff member should indicate clearly on the invoice that the entity is not registered but has an ABN. When the invoice is processed, the relevant staff member will enter the GST status code.
Where an invoice has an invalid ABN (wrong number of characters), processing should be curtailed and the invoice returned to the supplier for correction. If an entity has not registered for
GST and also does not have an ABN, there is no requirement for a tax invoice and no tax is included in the invoice amount(s). However, in this situation, withholding tax will be applied to any payment made. The approving staff member should indicate clearly on the invoice that the entity is not registered and does not have an ABN.
When the invoice is processed, the relevant staff member will enter the GST status code.
5.11 GST Codes and mismatches with GL Chart of Account Codes
Where an invoice has been rendered by an entity which has not registered for GST but which holds an ABN, there is no requirement for a valid tax invoice and no tax is included in the amount(s) of the invoice. The approving staff member should indicate clearly on the invoice that the entity is not registered but has an ABN. When the invoice is processed, the GST status code will be entered by the relevant staff member.
5.12 Purchases less than $1000 (including GST)
An invoice does not always exist for all acquisitions. No invoice is required where the invoice value is less than $50 (excluding GST).
In these cases there is a high probability that tax invoices will not be available to or will not be obtained by the employee. Normal procedure requires that documentary evidence is produced to support reimbursement of petty cash purchases or other expenses and to validate purchases made by credit card.
This should be appropriate for GST purposes where purchases are for less than $50. No tax invoice is required to claim input tax credits in this case. Where there is more than one item on the document(s) the staff member making the purchase must ensure that each item is shown with relevant details. With this information the staff member processing the payment can determine the tax status of each item.
If only a total is shown on the document when there is more than one item the inclusion or exclusion of tax should be noted on the document as part of the receipting process (assuming all items are of the same tax type). Where this does not occur the supplier should be contacted for details.
The procedural considerations discussed above for transactions less than $50 will also apply to those that fall between $50 and $1,000. However in this case there is no obligation to comply with the requirement to provide a “full” tax invoice. Where the total amount payable is less than
$1,000, an “abbreviated” tax invoice may be used.
This provision is designed to accommodate smaller business transactions. For example, retail sales documents generally do not have details of the recipient or the quantity or volume of goods supplies. For these types of transaction a cash receipt may be used as the tax invoice
(providing it satisfies the requirements to include the date of supply, the words “tax invoice”, the name of the supplier and a brief description of the thing supplied).
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Where purchases fall into this category the relevant staff member codes the document concerned to reflect its tax status (taxable, GST free or input taxed) or includes appropriate notation to indicate tax status.
When the invoice is processed, the GST status code will be entered by the relevant staff member.
5.12 “GST Only” Tax Invoices
See Adjustments
6.1 A-Z of Acquisitions/Purchases

6.1.1 Corporate (Visa) Card
Card Holders have copies of the new guidelines:
Card is used for official purposes only.
 Cardholders have a financial delegation from the Minister.
 Transactions are authorised by an authorising officer appointed by the Secretary.

 Authorising Officer now has to sign Journal Entries the delegated officer.
This replaces signing the Cardholder Activity Report.
Transactions recorded on Oracle using manual journal entries
 GST codes must be recorded
 GST Ruling, new documentation standards
Supporting documentation must be attached to the Journal Entry
 Amex Statement
 Tax invoice
 Sales Dockets
6.1.1 Impact for Subcontractors
 All subcontractors should at least register for an ABN, and for GST if annual income may exceed $50,000.
 Subcontractors without an ABN will have 48.5% tax withheld on payments, by other businesses paying them.
 Subcontractors will participate in the PAYG system.
6.1.2 Discounts needs work
2 ways to treat, offset against purchase or separate charge code as charge as an adjustment on the BAS
6.1.3 GST Free Supplies
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The lines on these invoices are GST free.
Where purchases of GST free supplies are made the staff member approving the tax invoice must indicate clearly that the supply is a tax-free supply. In some cases, such as water and sewerage, the system may automatically recognize the supply as GST free by reference to the cost code. However this will not always be the case and invoices for GST free food, education courses purchased, as part of professional development and some medical services should be clearly marked as GST free. When the invoice is processed, the relevant staff member will enter the GST status code.
6.1.4 Imports
GST is payable on most goods imported into Australia.
GST is normally payable to the Australian Customs Service (Customs) at the time imported goods are entered for home consumption —that is, when Customs releases them for use in Australia. The GST is 10 per cent of the value of a taxable importation.
The value of a taxable importation is the sum of:


 the customs value of the goods any customs duty payable the amount paid or payable to transport the goods to the port or airport of final destination in Australia
 the insurance cost for that transport, and
 any wine equalisation tax payable.
Deferred GST Scheme
The Deferred GST Scheme allows GST to be deferred until the first Business Activity
Statement is submitted after the goods are entered for home consumption.
Importers are eligible to defer GST if they:
 have an Australian Business Number (ABN) and are registered for GST; and
 lodge their Business Activity Statement monthly, via the internet-based e-commerce system operated by the Australian Taxation Office (ATO); and
 pay their Business Activity Statement liabilities electronically; and
 deal with Customs electronically; and
 have a satisfactory compliance record with the ATO, including, as a general rule, not having debt or returns outstanding; and
 have approval in writing from the ATO to defer payment of GST on imported goods.
If the importer has been given approval to defer GST, Customs releases the goods after payment of any customs duty or other charges. Customs records the deferred GST liability of each shipment as it is cleared.
At the end of each month, Customs advises the ATO of the total deferred GST liability for each importer who deferred GST.
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The Business Activity Statement that the ATO issues to those importers includes the deferred GST liability. The amount of deferred GST liability is included in the calculation of the Business Activity Statement net amount for the month.
Importers can apply to participate in the Deferred GST Scheme by electronically completing and submitting an online form. It is available on the ATO assist web site located at www.ato.gov.au.
Freight Forwarders
Freight forwarder will generally provide a tax invoice (or Australian Customs document) for payment of GST upon delivery of the goods.
Freight forwarder will usually not provide the goods until the GST has been paid.
Goods imported directly where no GST has been charged
Where goods are imported directly and do not pass though Australian Customs or a freight forwarder and consequently no GST has been charged.
DEET recommends that the total invoice amount be grossed up by 10%, but that the invoice payee for the 10% amount should be Australian Customs Office.
Like any other taxable supply of goods, the invoice should be grossed up and coded as
GST inclusive at the time of payment and included in the BAS.
What type of documentation do you require?
6.1.5 Income Tax Exempt Entities
Victorian Government schools (as Public Educational Institutions) are exempt from income tax by operation of the Australian Income Tax Assessment Act (ITAA) (item 1.4 of section 50-5
ITAA97), with no certificate of tax exempt status required.
Some grant and new bank account applications require that schools supply some form of a "tax exemption certificate" with applications. In these cases schools should identify themselves as an exempt body (Australian public school) under item 1.4 of section 50-5 ITAA97. If this is insufficient, suppliers may accept a copy of the school's ABN registration.
It is not possible for Victorian Government Schools to provide either a "certificate of incorporation" or a "certificate of tax deductible status", as a school is neither a corporation nor a gift-deductible entity. Most entities seeking to claim exempt status are required to be endorsed by the Commissioner as an income tax-exempt charity (sec 50-52 of the ITAA97).
To obtain this endorsement, entities must satisfy the other conditions required for exemption.
The ATO's Charity Pack publication provides useful guidance on the endorsement arrangements (Item 1.5B). Since schools do not fall into any of these categories, they are tax exempt without requiring the endorsement of the Commissioner.
Also discuss use of declarations
6.1.6 Insurance
See Admin Services. GST will not apply to the settlement of an insurable event occurring before 1 July 2000. Where an insurance claim is made prior to 1 July 2000, GST will not apply to the supply in relation to the claim. For insurable events occurring on or after 1 July 2000, GST is likely to apply.
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Division 78 has undergone substantial amendments from its original form. This includes the removal of the requirement for the insured to notify the Commissioner that they are going to claim input tax credits on their insurance policies.
The supply of insurance by an insurer registered for GST is generally subject to GST. Private health insurance is GST-free, life insurance is input taxed and some insurance will be GST-free under section 38-190. Division 78 is divided into six Subdivisions canvassing insurers, insured entities, third parties, insured entities that are not registered, statutory compensation schemes and miscellaneous matters.
The GST on the supply of an insurance policy, or the supply of membership or participation in a statutory scheme, will be calculated as if an amount equivalent to stamp duty were excluded from the price of the supply, for example, if the total premium for a policy was $185, including stamp duty of $20, GST would be 1/11 of $165, which is $15 (New sections 78-5 and 78-95).
The price for other purposes of the GST Act, such as the tax invoicing provisions, will remain stamp duty inclusive.
6.1.7 Non-deductible Expenses
Some expenses are not deductible under the Income Tax Assessment Act 1997 – this is usually because there is a private element. Input tax credits are not allowed for acquisitions or importations that are included in the categories listed in section 69-5.
Some examples of where an acquisition will not qualify as a creditable acquisition include:
 entertainment;
 relative’s travel;
 recreational clubs and leisure facilities or boats; and

Non-compulsory uniform expenses.
The relevant staff member needs to note the details of non-deductible expenses and insert the appropriate code.
6.1.8 Petty Cash
Each entry made for Petty cash will have the same GST treatment as any other payment, including the requirement for a tax invoice if greater than $50. Where transaction under $50 may not require a tax invoice, DE&T will still require sufficient substantiating documentation in order for the input tax credits to be recovered from the ATO.
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6.1.9 Progressive or Periodic Supplies/Payment Schedules
Where supplies are made on a periodic or progressive basis, for example, commercial leases, each progressive or periodic component of the supply is treated as a separate supply. However, separate tax invoices are not required to be issued for each component of the supply. A single document can be a tax invoice for all components of the supply if it satisfies the requirements of a tax invoice and it shows the price of each component of the supply.
If the price is not the same for every component of the taxable supply, a schedule may be attached to the agreement that shows the price for each component. The agreement and the schedule together satisfy the requirements for a tax invoice.
In some situations, the price of each component of the supply is not known, for example, monthly lease payments adjusted by the Consumer Price Index. In these circumstances separate tax invoices must be held that show the new prices after the adjustment for the
Consumer Price Index.
6.1.10 Recipient Created Tax Invoices (RCTI)
The supplier of a taxable supply must issue a tax invoice, unless it is a recipient created tax invoice. A recipient created tax invoice is an invoice that belongs to a class of tax invoices that the Commissioner has determined in writing may be issued by the recipient of a taxable supply.
The Commissioner proposes to determine three classes of tax invoices that may be issued by the recipient of a taxable supply. These include:

Tax invoices for taxable supplies made to registered government entities.

Tax invoices for taxable supplies made to registered recipients that:

Have a turnover (including input taxed supplies) of at least $20 million annually; or

Are members of a group of companies in which one or more other members of that group have such a turnover?
There may be some situations where the recipient created tax invoices can be used to replace a supplier invoice and the concept may have some significance should any grants be deemed to be taxable.
6.1.11 Refunds of Unspent Grant Moneys
Money provided by ANTA
6.1.12 Residential Rent transactions
Department of Education has 295 residential properties, of which 57 are leased to sundry tenants (non employee) at the moment and 29 are vacant.
In order to restrict revenue and expenditure transactions for input tax credits associated with acquisitions used in making supplies of residential rental accommodation DE&T uses selected
Oracle chart of account “codes” as part of its GST BAS collection procedures.
Residential premises (such as a house) are not commercial residential premises. All rentals of residential premises are input taxed. GST is not payable on the rent and no input tax credits are available for things acquired to make the supplies.
These residential properties are currently managed by the Properties Unit (Facilities
Branch, OSE). Properties Unit charges revenue and payables on the following basis
Revenue:
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Rent on residential properties Oracle Code 75805 G03
No change to account no
Expenditure:
Maintenance (electricity, repairs etc) Oracle Code Old 86458 G13
Rates and water
New 86115 G13
Oracle Code Old 86461 G14
New 86117 G14
No other revenue or expenditure is deliberately restricted to being charged to these accounts and one officer (Stuart Jarrett) in Properties units currently looks after these residential properties as one part of his duties (other duties include disposal of DE&T properties (schools, camps, plantations).
DE&T do not currently apportion capital or operating costs for this Properties Officer due to the immaterial nature of the duties.
6.1.13 Royalties and Copyright
GST and Statutory Licenses : ATO advice that GST is not payable by licensees for copying under the statutory educational and government licenses administered by
CAL (Copyright Agency Limited).
(See CAL updates 22 March 2001)
Licenses:
Royalties:
Money provided by ANTA
6.1.14 Secondments
Secondments of DE&T staff to other government departments or agencies do incur GST.
6.1.15 Security Deposits
Generally, security deposits are refunded when the entity meets necessary obligations. To avoid the payment of GST followed by an adjustment on the refund on such deposits, special provisions will apply.
The payment of a security deposit is not treated as consideration for a supply (and hence not subject to GST), unless the deposit is forfeited or applied against the consideration for the supply.
If the deposit is forfeited or is applied towards the consideration for the supply, GST is paid on the amount of the deposit. The GST is attributed to the tax period in which the deposit is forfeited or is applied towards the consideration.
6.1.16 Taxes and Division 81 Fees and Charges
GST applies to payments of taxes, fees and charges, except those taxes, fees and charges that are excluded from the GST by a determination of the Treasurer ( see Division 81 ).
The Treasurer's Determination under Division 81 of the A New Tax System (Goods and
Services Tax) Act 1999 lists Government taxes, fees and charges that are not regarded as provision for consideration, and therefore not subject to GST. The underlying principle of the
Determination is that compulsory taxes and other regulatory fees and charges levied by
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Government should not be subject to GST. The Determination also excludes taxes, fees or charges that constitute payment for a service. Fines and penalties are not subject to GST and therefore do not require listing on the Determination. Also, where a fee or regulatory charge is
GST-free because it satisfies one of the provisions in Division 38 (e.g. subdivision 38-B Health, subdivision 38-C Education, subdivision 38-G Non-commercial activities of charitable institutions, etc) it is also excluded from the Determination.
For a tax, fee or charge to be listed in the Commonwealth Treasurer's Determination under
Division 81 and not be subject to GST, it must meet certain principles as specified in the Inter-
Governmental Agreement between the States/Territories with the Commonwealth Government and as defined in the A New Tax System (Goods and Services Tax) Act 1999 Division 81.
Generally, the payment of an Australian tax, fee or charge (other than the GST), or the discharging of a liability to make such a payment, is treated as the provision of consideration for a supply. However, the Treasurer has made a Determination under Division 81 of the GST Act detailing specific taxes, fees and charges that are not the provision of consideration.
Those taxes, fees and charges that are exempt include certain Commonwealth taxes, fees and charges (Part 1) and certain Victorian taxes, fees and charges (Part 3). Some examples are provided below. However, it is recommended that you refer to the Determination for a comprehensive listing of the taxes, fees and charges to which GST does not apply.
Some examples of exempt Commonwealth taxes, fees and charges are:
Australian Taxation Office Income tax, Fringe Benefits Tax, Medicare Levy,
Luxury Car Tax, Wine Equalization Tax
Victorian Government Payroll Tax, Stamp Duty etc
Australian Securities and Investments Commission - Annual returns and accounts fees, incorporation and registration of companies’ fees
Victorian Institute of Teaching “Registration of teacher’s” fee
Office of Training and Further Education Registration of private providers, endorsement, replacement certificate of registration and endorsement, vocational training course accreditation
6.1.16 Travel and Personal Expenses Reimbursement
Discuss under $10 certification requirement
No documentation can’t claim input tax credits, if using own credit card need a complete tax invoice, not a “EFTPOS stub”
6.1.17 Vouchers, eg library vouchers
A supply of a voucher which has a stated monetary value is not a taxable supply. Instead, GST will be payable at the time the voucher is redeemed for goods or services.
Vouchers entitle the holder to goods or services from a particular provider up to the value stated
(e.g. a gift voucher). A phone card would fall under this provision as it entitles the holder to make telephone calls up to a certain value. This could involve one call or a number of calls.
No changes to existing procedures are anticipated.
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The above does not apply to vouchers which while they may state a price or value are for a specified good or service, such as a bus ticket, a movie ticket, or an airline ticket. These types of supplies are subject to the normal rules and subject to GST at the time of supply of the ticket etc.
6.1.18 VPS Rail Ticket Commuters Club for Victorian Public Service (VPS) members
VPS Staff apply for and DE&T purchases a yearly ticket on their behalf (there are many of these each month) from an advance provided by DTF. The ticket is then provided to the employee, who repays the price of the ticket (including GST) to DE&T each fortnight as a salary deduction (in post tax dollars).
DE&T claims the cost of the GST on the transaction on our BAS as an employer’s expense in providing a benefit to our employees.
DE&T does not currently charge an administrative fee although other government departments do charge 3%.
At this time DE&T has not forwarded the GST component of the employees’ contribution to the ticket to the ATO as revenue or GST output tax.
Should
1. DE&T not claim the GST credit as it is a private expense of the employee and use GST BAS code G15 to make payment to OneLink for the purchase of the tickets.
2.
DE&T adjust the BAS to remit the previous amounts “claimed in error” and change the coding for future transactions to BAS code G15.
3. DE&T pass on the ITC credits to employees who had rail ticket club yearly tickets as a fringe benefit. DE&T do calculate the impact of FBT as a loan fringe benefit but all tickets are below the$100 minor and infrequent benefit limit at the current interest rate – so they are subject to FBT but the action of the employee repaying the loan reduced the amount on a compound interest basis to less than $100 pa.
4. If DET charge 3% administration charge make this inclusive of GST.
Staff Rail Ticket Club Query
DE&T operate a rail ticket club for Victorian Public Service members
Staff applies and DE&T purchases on their behalf a yearly ticket (there are many of these each month) from an advance provided by DTF. The ticket is then provided to the employee, who repays the price of the ticket (including GST) to DE&T each fortnight as a salary deduction (in post tax dollars).
DE&T claims the cost of the GST on the transaction on our BAS as an employer’s expense in providing a benefit to our employees.
DE&T does not currently charge an administrative fee although other government departments do charge 3%.
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At this time DE&T has not forwarded the GST component of the employees’ contribution to the ticket to the ATO as revenue or GST output tax.
Should
5. DE&T not be claim the GST credit as it is a private expense of the employee and use GST BAS code G15 to make payment to OneLink for the purchase of the tickets.
6. DE&T adjust the BAS to remit the previous amounts “claimed in error” and change the coding for future transactions to BAS code G15.
7. DE&T pass on the ITC credits to employees who had rail ticket club yearly tickets as a fringe benefit. DE&T do calculate the impact of FBT as a loan fringe benefit but all tickets are below the$100 minor and infrequent benefit limit at the current interest rate – so they are subject to FBT but the action of the employee repaying the loan reduced the amount on a compound interest basis to less than $100 pa.
6.1.19 Working Accounts
Where revenue and related expenditure is generated in a working account, this is usually an indication that the sake is if a commercial nature and is G01
Where most sales fail the GST test
Are you “selling” schools a “publication” or a service etc?
If so there is GST on it (G01)
Need to discuss operating/Working a/c’s and general operation of GST – especially re non charging of GST to chart of a/c’s
6.2 Allocating Revenue & Expense Charge Codes & GST Codes
6.2.1 Chart of Account Codes/GST Tax Codes
6.3. New Forms, Procedures and Policies Required
6.3. 1 All claim and other forms.
Accounting Procedure Manuals.
6. Adjustments
Whether DE&T Central Administrative Units, Divisions and Regions make or receive taxable supplies, subsequent events may mean that too much or too little GST was paid, or that too much or too little input tax credit was claimed in a previous tax period. In these situations, it may be necessary to make adjustments to the BAS.
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Adjustments can be either increasing or decreasing. An increasing adjustment increases the net amount for the tax period, while a decreasing adjustment decreases the net amount for the tax period.
If a supply is made and an increasing or decreasing adjustment arises from an adjustment event, an adjustment note must be issued. However no adjustment note is required if the GST exclusive value of the taxable supply is $50 or less.
The following list indicates when adjustments arise:
6.1 Changes to sales (supplies made) a Increasing adjustment

Price has increased.

Sale treated as GST free becomes taxable. b Decreasing adjustment

Sale is cancelled.

Price is reduced.

Sale treated as taxable becomes GST free.
Changes to Purchases c Increasing adjustment

Purchase cancelled.

Price has reduced.

Purchase treated as a creditable acquisition stops being creditable. d Decreasing adjustment

Price has increased.

Purchase treated as not creditable becomes creditable.
6.2 Bad Debts e Decreasing adjustment

Debts previously incurred now written off or greater than 12 months old. f Increasing adjustment

Previously written off bad debt, now recovered.

Amount included previously as a creditable acquisition, which has now been written off as a bad debt by your supplier or is greater than 12 months old.
2. Changes in Extent of Creditable Purpose
The extent of creditable purpose is defined as the extent to which an acquisition is used in your business other than for the purpose of making input taxed supplies, or for private or
43

domestic purposes. Changes are made to ensure that the correct amount of input tax credits is claimed.
Occurrences of this adjustment are rare and details to deal with them are given in
Attachment 3.
3. Adjustments may be needed for:

Company amalgamations.

Supplies used to make financial supplies.

Supplies of going concerns.

Cessation of registration.
These situations are likely to be rare and when they occur reference should be made to
Attachment (to be included).
In many cases, adjustments after the implementation of GST will be as the result of events that occur in the current environment e.g. price fluctuations, cancellations of invoices and treatment of bad debts. Similar information is required after GST, such as the date of the original tax invoice, the price on that invoice, the new price and the difference between the two (see
Attachment 2).
Appropriate staff members need to recognize these existing events and indicate on the relevant document (either by words or in code) the type of adjustment being made.
Additional events that need to be recognized after the advent of GST relate to transactions which were previously taxable but stop being taxable and vice versa.
Identification action taken by the appropriate staff member results in the officer processing the documents triggering the preparation of an Adjustment Note.
Adjustment Notes are not required when the transaction is GST free i.e. there is no GST impact.
In this case, the credit/debit note procedure remains unchanged subject to the staff member identifying the transaction with the relevant wording/code.
Adjustment Notes are not required for bad debts’ transactions. The system will produce adjustment notes from the information provided by the appropriate staff member. They may include the word credit or debit (eg. Credit adjustment note, debit adjustment note etc).
Changes in extent of creditable purpose
The extent of creditable purpose is defined as the extent to which an acquisition is used in your business other than for the purpose of making input taxed supplies, or for private or domestic purposes. Changes are made to ensure that the correct amount input tax credits are claimed.
These adjustments are made in an “adjustment period” the first of which starts at least 12 months after the end of the tax period in which you included the consideration for the purchase.
8. Internal Transfers
On many occasions, transactions between agencies, divisions and units and other areas of
DE&T take place, which are deemed to be outside the scope of GST. Interdepartmental
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transactions of this nature should be clearly marked (or may be identified in the system by the cost coding).
Transfers of the kind referred to commonly occur in:

Photocopying

Computer/IT support

Hire of facilities

Catering and functions
Expand this section to include who is part of the GST group of DE&T – i.e. which agencies…
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Procedures for Transitional Issues
9. Transitional Issues
9.1 Contracts
As a general principle, GST will apply to any supplies made on or after the implementation date of 1 July 2000. This means that an entity may have to charge and account for GST even if it has received all or part of the consideration or issued an invoice before the commencement of the
GST on 1 July 2000. The transitional rules are aimed at providing mechanisms to deal with contracts entered into prior to 1 July 2000 to ensure there is no avoidance of GST liability.
Input tax credits in respect of creditable acquisitions are attributable to the tax period in which any consideration is provided or an invoice is issued, whichever is earlier.
Contracts and agreements with suppliers should be reviewed in order to ensure that suppliers pass on all cost savings from the New Tax System changes.
GST – Contracts spanning 1 st July 2000
 Any supplies made on or after 1 st after 8 th
July 2000 under a contract entered into
July 1999 (date of Royal Assent) will be subject to GST. However, transitional arrangements are still relevant for contracts entered into before
8 th July 1999.
 The Act differentiates between reviewable and non-reviewable contracts.
 In essence for contracts entered into prior to 2 nd December 1998: - Supplies under non-reviewable contracts are GST-free to 1 relevant consideration was paid before 2 nd st July 2005. Where all
December 1998, all supplies are
GST-free. Supplies under reviewable contracts are GST-free to the earlier of the first review or 1 st July 2005. If all the consideration was paid before 2
December 1998, supplies are GST-free until the first review opportunity.
nd
 For reviewable contracts entered into between 2 nd December 1998 and 8 th
July 1999, the GST treatment depends on whether or not the recipient of the supply is entitled to a full input tax credit. Supplies where full input tax credits are available will be GST-free to the earlier of the first review or 1st July 2005
(if all the consideration was paid before 2 nd December 1998, supplies are
GST-free until the first review opportunity). Supplies where full input tax credits are not available will be subject to GST from 1 st July 2000.
 For non-reviewable contracts entered into between 2 nd December 1998 and
8 th July 1999, supplies where full input tax credits are available will be subject to GST from 1 st July 2005 and supplies where full input tax credits are not available will be subject to GST from 1 st July 2000.
9.2 Wording to Explain the Position with Contracts
All new and renewable contracts dated after Royal Assent (8/7/99) will be subject to GST after
30/6/00.
Contracts dated between 2/12/98 and 8/7/99 is GST free until 1/7/05 where the recipient is entitled to a full input tax credit. Where the recipient is not entitled to a full input tax credit supplies under the contract will be subject to GST after 30/6/00. If a contract review opportunity arises before 1/7/00 GST is payable on any supplies after 30/6/00. If it arises after 1/7/00 GST is payable from the review date (or 1/7/05 if that is earlier).
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Non-reviewable contracts dated before 2/12/98 are GST free until the end of the contract if full payment has been made or until 1/7/05 in other cases. The latter also applies to reviewable contracts except that GST becomes payable from review date if before 1/7/05 or from 1/7/00 if the review date occurs before 1/7/00.
9.3 Construction Agreements
As GST will apply to all supplies after 30 June 2000, provisions have been made for the situation where a construction contract is made before 1 July 2000 but the construction is not completed by this date. The provisions will apply to all constructions, major reconstruction, manufacture or extensions of buildings, and civil engineering work.
Basically, the builder will have to value at 30 June 2000 the partly completed work and materials permanently in or affixed on the site. GST will then be payable on the contract price less this pre
1 July 2000 value (the remaining value). However, the valuation could be at a later date if the contract is reviewable and the review opportunity occurs after 1 July 2000, but before 1 July
2005. In which case, the valuation may be performed on the date of review.
It is not necessary to get a formal valuation by a valuer o r quantity surveyor if the entity’s records accurately reflect the value of the work and materials permanently in or affixed to the site.
9.4 Pre 1 July 2000 Acquisitions
See 4.3.
9.5 GST Only Invoices
These will require adjustment to entries previously posted. Accounting Services Unit request that invoices of this nature be submitted in a batch on their own with the $ value left blank.
Accounting Services Unit will raise the appropriate journal entries to ensure the GST is accounted for in DE&Ts BAS return.
Please note: There will be no effect upon the unit’s budget line arising from this journal entry as
GST is posted to a liability account.
9.7 Sale of Freehold Interests
If a registered entity makes a taxable supply of a freehold interest in land, strata unit or longterm lease the supply is subject to GST. GST will generally be calculated on the full value of the supply and input tax credits can be claimed if the property is acquired by a registered entity.
Division 75 alters the general rules by allowing the entity to choose to calculate the GST applicable to the transaction in a concessional manner by using a margin scheme. The margin scheme applies to interests held on 1 July 2000 and supplies of interests after that date.
GST is 1/11 th of the margin for the supply. The margin is the selling price (including GST) less the original purchase price. The cost of any improvement to the land made after 1 July 2000 is not included in the original purchase price.
If the original purchase price is more than the sale price there is no positive margin.
The method is to ensure that GST is payable on the value added by the enterprise, for example, the value added by a property developer who supplies new houses.
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If an entity is registered or required to be registered for GST on 1 July 2000 and holds a freehold interest in land, strata unit or long-term lease at that date the value as at 1 July 2000 must be used to work out the margin on the supply – not the original purchase price.
Where a purchaser acquires property from an entity that calculated the GST liability under the general rules (Section 9-70) and later re-sells the property, the GST liability can only be calculated using the general rules. The vendor cannot choose to calculate GST for the supply using the margin scheme.
Where an entity acquires real property from a supplier who has calculated GST on a margin scheme, input tax credits are not available (Subsection 75-20(1)). However, the purchasing entity may choose to apply the margin scheme when making a subsequent taxable supply of the property.
It is probable that transactions included under this heading will be resolved manually.
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9.11 Deferring GST Payments on Imported Goods
From 1 July 2000, GST will be payable on most goods imported into Australia.
GST will normally be payable to the Australian Customs Service (Customs) at the time imported goods are entered for home consumption – that is, when Customs releases them for use in
Australia.
On 31 March 2000, the Assistant Treasurer announced details of a scheme under which approved entities will be able to defer payment of GST on imported goods. Known as the
Deferred GST Scheme, it allows GST to be deferred until the first Business Activity Statement is submitted after the goods are entered for home consumption.
Importers will be eligible to defer GST if they:
 have an Australian Business Number (ABN) and are registered for GST; and
 lodge their Business Activity Statement monthly, via the internet-based e-commerce system operated by the Australian Taxation Office (ATO); and
 pay their Business Activity Statement liabilities electronically; and
 deal with Customs electronically; and
 have a satisfactory compliance record with the ATO, including, as a general rule, not having debt or returns outstanding; and
 have approval in writing from the ATO to defer payment of GST on imported goods.
After 1 July 2000, importers will quote their ABN to Customs when they enter goods for home consumption.
If the importer has been given approval to defer GST, Customs will release the goods after payment of any customs duty or other charges. Customs will record the deferred GST liability of each shipment as it is cleared.
At the end of each month, Customs will advise the ATO of the total deferred GST liability for each importer who deferred GST.
The Business Activity Statement that the ATO issues to those importers will include the deferred
GST liability. The amount of deferred GST liability will be included in the calculation of the
Business Activity Statement net amount for the month.
Importers can apply to participate in the Deferred GST Scheme by electronically completing and submitting an online form. It is available on the ATO assist web site located at www.ato.gov.au
.
49

10. Business Activity Statement (BAS)
10.1 Business Activity Statement (BAS)
From 1 July 2000 DE&T will for the first time, together with most other Victorian public sector entities, report most of our financial transactions to the ATO. The Business Activity Statement
Grouping
Offset PAYG
Non ABN Withholding
Voluntary Withholding
FBT
Lodgement cycle and date
50

Pay as You Go (PAYG)
12. PAYG
12.1 PAYG – Salaries and Wages
12.2 Variations to Pay
12.2.1 Deductions
12.2.2 S221D Provisional Tax Variations
12.3 PAYG - Non ABN Withholding
12.4.1 PAYG Voluntary Withholding Labour Hire Agreements
12.4.2 PAYG Withholding – 48.5% No ABN
Where no ABN is supplied, or
Supplier is not registered for ABN,
Where a valid “Tax Invoice” is not supplied.
Accounts Payable Process
Issue: Oracle does not have the ability to “automatically reduce” the 48.5% No ABN
Withholding from a payment by selecting the W04 code
If DE&T were to split charge 48.5% to W04 PAYG withholding on an invoice the outcome is still that DE&T would pay the creditor (with no ABN supplied) the total invoice amount (i.e. would be 100%, not 51.5%)
E.g. XYZ creditor
G14 N
W04 N
$515.00
$485.00
Solution:
(1)
However this entry will still mean the creditor will be paid $1,000 (and the ATO will also have $485 reported on the BAS)
Two separate claim forms will need to be completed, separating or split charging the creditor and tax components onto two separate claim forms, splitting the original invoice total between
 “Creditor” element (51.5%) and
51

 “ATO” tax Element (48.5)
(2)
(3)
(4) (a)
(4) (b)
Insert “into the description box” of Creditor Claim Form the phrase –
“ Invoice total is less PAYG NO ABN withholding 48.5%”
I.e. Claim Form 1 XYZ Creditor
Claim Form 2 ATO
G14 N
W04 N
$515
$485
All PAYG No ABN withholding “creditor cheques” should be “cheque withdrawal” in the claim form. DE&T will use the cheque remittance advice (produced when making the payment use this as a remittance advice) to satisfy ATO PAYG annual reporting requirements.
A manual “.doc” PAYG summary template will also need to be prepared to send to the creditor at the same time (attach to balance of invoice payment) so the creditor can claim the amount back on their income tax return by attaching a
“certified” copy of the ATO remittance advice with the creditor remittance advice to verify the PAYG withholding action.
(5) AP Shared services Division should maintain a database (e.g. manually record all such payments on excel) of all such payments for tracking and reconciliation purposes. AP should also nominate an “accountable” officer to undertake this task
12.5 Casual/Agency Employed Staff
12.5.1 Casual Staff
12.5.2 Agency Employed Staff
12.6 Payment Summaries (formerly titled Group Certificates)
52

DIRECTIONS OF THE MINISTER
Name of Client
(USE BLOCK LETTERS)
Address to which it its desired that the cheque be forwarded
GENERAL CLAIM FORM
………………………………………………………………………………………………………
…….
………………………………………………………………………………………………………
…….
(SUBURB/SITE)……………………………………………………………Post
Code)……………….
Vendor No. (8)
DESCRIPTION
GST CODE tax inclusive Y/N
Invoice Date (7)
DD-MON-YY
- -
AMOUNT
.
Invoice Number (12) P.O. Number (6) Purchase Order
- To remain.. (Please circle)
OPEN / CLOSED
AUTHORITY (4) PROJECT (6)
TRACK AS AN ASSET
CHEQUE WITHDRAWAL
DD
Date of Supply or period of Service
MON YY
YES / NO
YES / NO
.
.
.
( IF YES PLEASE ATTACH ASSET FORM ) RCTI REQUIRED
NAME
PARTICULARS OF PAYMENT
PHONE
Rate
Financial Year (4)
/
AMOUNT
$
LOCATION (6)
YES/NO c
AUTHORISING OFFICER/APPROVAL FOR PAYMENT
Signature ....…….....…......………...........................................................
Designation .
…...….…….........….............................................................
I certify that this account is true and correct in respect of the requirements of the irections of The Minister under the Financial Management Act 1994
Certifying Officer
...………...........................................................
……../……../……..
Dollars
I certify that in accordance with the Directions of The Minister, under the Financial Management Act 1994, this account has been checked and found to be correct.
I certify that the goods / services have been received.
Cents
$ under the Financial Management Act 1994.
Signature of Officer .………......................................................
……../……../……..
53

Personal Expense Claim Form
Batch Header
Multi Charging Sheet
RCTI
Tax Adjustment
Tax Invoice
PAYG Withholding (Compulsory Non ABN) Payment Summary (Tax Statement)
54

A Sample Region
The extent of creditable purpose is defined as the extent to which an acquisition is used in your business other than for the purpose of making input taxed supplies, or for private or domestic purposes. Changes are made to ensure that the correct amount input tax credit is claimed.
Accommodation
Air Fares - Domestic
G11
G11
Air Fares - International
Carpet
Catering
Closed School/Other Ceremonies
Computers
Computer parts/repairs
Conference Registration
Diaries/ Business cards
Courier costs
Electricity/Gas
Medical Consultation
Photocopying
Stationery
Subscriptions
Tables
Telephone
Vehicle Lease
Water Rates
G14
G10
G11
G11
G10
G11
G11
G11
G11
G11
G14
G11
G11
G11
G10
G11
G11
G14
55

B Sample Unit
The extent of creditable purpose is defined as the extent to which an acquisition is used in your business other than for the purpose of making input taxed supplies, or for private or domestic purposes. Changes are made to ensure that the correct amount input tax credits is claimed.
Public Servant Salaries
Casual Employee on HRMS
Agency Employed Staff
Consultancy/Contractors
Closed School/Other Ceremonies
Computers
Computer consumables
Conferences & Courses
Appropriations
Grants
Catering/Entertainment
Freight & Couriers
Electricity/Gas
Photocopying
Office Requisites
Books & Subscriptions
Audio Visual Equipment
Telephone - Rent & Calls
Vehicle Lease
Goods & Services within portfolio
W01
W01
G11
G11
G11
G10
G11
G11
G10
G11
G11
Intgrp%
Unit not affected
Unit not affected
PAYG?
G11
NoCom0% No Consideration
G11
G11
Where fail approp test
FBT?
G11
G11
G11
G11
Internal Transfer
56

8.
57

15. Glossary
ABN Australian Business Number, consisting of eleven (11) digits and will eventually replace the ACN or ARBN.
ABR Australian Business Register – check for contractors, suppliers and other organisations ABN No., GST and other registrations, has links to ASIC
ACCC
Acquire
Acquisition
Adjustment
Adjustment Note
Adjustment Period
Australian Competition and Consumer Commission
Includes buying goods and services for the enterprise and other
transactions as explained in the definition of acquisition
A broad term including: things bought (goods and services), obtaining advice/information, lease/ hire/ rental contractual arrangements connection with your enterprise
in
Any change made to the BAS to increase or decrease the net GST amount payable or refundable for a tax period
Document generally issued by suppliers which detail changes made to a supply and used to substantiate additional input tax credit claims
The tax period in which adjustment/s for acquisitions or importations are made
Annual Turnover
ATO
The value of the goods and services supplied through the DE&T
Central Agencies for a 12 month period, excluding the amount of GST and any input taxed supplies
Creditable purpose
Australian Taxation Office
Attributing Attribution rules determine to which tax periods
GST is payable and input tax credits belong. This will differ, depending on whether GST is accounted for an accrual or cash basis.
Australian Business
Business Activity Statement The official ATO form used for accounting for Statement (BAS) GST and other taxes (Fringe Benefits Tax, Pay-As-You-Go PAYG etc)
A monthly or quarterly statement submitted to the ATO, which details the calculations that arrive at the GST liability or credit.
Consideration Any thing of value (in money or kind) in return for a supply
Creditable acquisition
A unique identifier for dealings with the ATO Number (ABN) and for future dealings with other departments and agencies
Any instance where a thing is acquired for a creditable purpose; the taxable supply of a thing; provision of consideration for the supply; by a registered entity
A thing acquired for carrying on the enterprise but not to the extent that it relates to making input taxed supplies or being of a private or domestic nature
DE&T Department of Education & Training
58

Enterprise
Entity
Any activity performed: as a business; as a trade adventure or concern; on a regular or continuous basis in the form of a lease, license or grant of an interest in property; certain activities of gift-deductible funds, authorities or institutions; certain activities of governments and government corporations
An individual (e g sole trader), partnership, body Central Administrative,
Central Administrative sole, body politics, any other unincorporated association or body of persons, trusts, superannuation funds
Fringe Benefits Tax.
Goods and services tax.
FBT
GST
Grossed Up
GST Free Supply
GST Group
Input Tax Credit
Input Taxed Supplies
Margin
Margin Scheme
Net amount payable or refundable
PAYG
Price
Real Property
PAYG Withholding
Registration
A supply with no GST charged on the supply but with an entitlement to input tax credits for anything acquired to provide the supply
Entities operating as a group where transactions between entities are not treated as taxable supplies
The GST included in the price of goods and services acquired by a
GST registered business from its suppliers that can be claimed back from the ATO
Supplies of goods and services that do not have GST included in the price and which do not qualify for input tax credits the amount by which the costs of a supply exceed the costs of the acquisition of a freehold interest, stratum unit or long term lease.
The GST payable on a taxable supply of a freehold interest, strata unit or long-term lease may be calculated under the margin scheme.
An item appearing on the BAS by working out the total
GST payable and offsetting the total input tax credits applicable for the tax period.
Pay As You Go, replaces PAYE, PPS and RPS systems.
Subcontractors or suppliers without an ABN will have
48.5% tax withheld on payments made by DE&T.
The price of a taxable supply includes GST.
Any interest in or right over land, a personal right to call for or be granted any interest or right over land, or a license to occupy land, or other contractual right exercisable over or in relation to land. Land includes buildings and other improvements to the land.
All business entities of any kind, including government departments, sole traders, and bodies corporate, trusts, superannuation funds, deductible gift recipients, charities and commercial property
59

landlords who pay provisional tax should all register for an ABN, and ALSO should register for GST if annual turnover may exceed
$50,000. Charities and non-profit organizations with annual turnover exceeding $100,000, MUST register for an ABN and GST.
Registration turnover The level of annual income at or above which you are required threshold to register for GST.
Residential Premises land or building occupied or intended to be occupied as a residence, including a floating home.
Requite
RFBA
Supplies
Tax Fraction
Tax Invoice
Tax Period
Reportable Fringe Benefits Amount
Includes the goods and services sold by an enterprise; provision of advice/information; leasing/ hire/ rental agreements etc
The GST component of the price of goods and services, being 1/11
the GST inclusive price
An invoice with certain “prescribed” information contained in it. th
Required to substantiate a GST input tax credit claim from the ATO
of
Length of time or period to be reported for accounting for GST on a BAS depending on annual turnover.
(Quarterly: 31 March, 30 June, 30 September and 31 December; or
Monthly: the last day of each calendar month)
Taxable Importations
Tax Invoice
Tax Period
GST payable on goods imported into Australia unless the goods qualify for certain customs duty concessions or would have been GSTfree/ input taxed if they had been supplies
Document generally issued by the supplier. It shows the price of a supply and indicates whether it includes GST and may show the amount of the GST. It must also show the name and address of both the supplier and the purchaser and the supplier’s ABN. You must have a Tax Invoice before making a claim for the input tax credit applicable.
The length of time for accounting for GST on your BAS. It may be quarterly of monthly. Quarterly tax periods end on 31
March, 30 th June, 30 th September and 31 st December.
st
Supplies of goods and services that have GST included in the price Taxable Supplies
60

61

ABN No.’s
ABN Pending
Adjustments
Agencies use of ABN
Appropriations
Approval to use
DE&T/PETE/ACFE ABN No
Business Activity Statement
Chart of Accounts
Commissions
Contracts
Central Administrative Card
Deductions
FBT Gross Up
Forms
General Claim Form
Grants
GST Only Invoices
GST Tax Codes
Hospitality Approval Form
Journal Entries
McMillan Shakespeare
Multi Charging Sheets
Non ABN Withholding
Notebook Computer Scheme
(Teachers)
Oracle
Overseas Students Medibank
Private
Overseas Students Tuition
Fees
PAYG Withholding
Permission to use ABN
Personal Expense Claim
Forms
Personal Expense Travel Rates
Personal Travel –
Documentation under $10
Public Sector Commuter Club
Purchase Orders
Purchase Requisitions
Raising invoices, receipts/ purchase orders
Recipient Created Tax
Invoices (RCTI)
Reportable Fringe Benefits
Salary Packaging
Secondment of staff to work on overseas education projects
-
Subsidised Employee Rent
62

Supporting Documentation for processing claims
Uploading
Vendors
Voluntary Withholding
Batch Headers
Invoices for GST Free
Telephone, Electricity, Gas
Water rates
63

A
Acquisitions ............. 4, 10, 15, 18, 23, 29, 30
Adjustment Note .................................. 41, 57
Adjustment Notes .................... 16, 18, 21, 29
Adjustments ......................................... 16, 27
Advance Accounts ..................................... 15
Agents ........................................................ 28
Australian Business Number 4, 10, 11, 14, 33, 48,
INDEX
Photocopying .........................................8, 21
Progressive Supplies ................................. 20
Purchase Orders ........................................ 11
Purchases ....... 4, 5, 10, 11, 13, 14, 15, 17, 27
Purchases less than $1000 ...................15, 56
R
Records Storage ...................................21, 22
B
56
Bad Debts ............................................ 17, 18
Business Activity Statement 4, 12, 21, 28, 33, 45
Registration .................. 10, 11, 18, 33, 47, 50
Reimbursements ..................................15, 56
Requisitions .............................................. 11
S
C
Catering ..................................................... 21
Commissions ............................................... 9
Computelec ................................................ 29
Sale of Freehold Interests ......................... 30
Sales of Curriculum Materials .................... 8
Second-hand Goods .......................25, 29, 30
Security Deposits ...................................... 31
Construction Agreements .......................... 24
Contracts .................................................... 23
Course Materials .......................................... 6
Credit Card .......................................... 15, 56
D
Donations……………………………………A
Sponsorships ............................................. 19 non-monetary ........................................ 19
Stock on Hand .......................................... 25
Student Accommodation .......................... 14
T
Tax Invoices .................. 8, 12, 15, 20, 21, 29
GST free supplies .................................. 14 interim ..............................................12, 48 Deferment of GST Payments............... 13, 33
E
Exports......................................................... 8
F invalid ..............................................12, 14 issued before 1 July ............................... 48 mixed supplies .................................12, 13 recipient created .................................... 16 Fees ............................................ 7, 20, 32, 50
Food ................................................. 9, 14, 35
Franking Machines .................................... 31
G taxable purchases .................................. 13
Tax Periods 4, 16, 19, 21, 23, 25, 27, 28, 30, 31, 47
Taxes ......................................................... 32
Trust Accounts .......................................... 29 Goods Received Note ................................ 12
Grants .................................................... 7, 16
Grouping .................................................... 27
GST Free Supplies ..................................... 14
H
Hire of Equipment ........................... 8, 25, 29
V
Vending Machines ...................................... 9
Vouchers ........................................31, 32, 47
Hire of Facilities .................................... 8, 21
I
Input Tax Credits 4, 5, 10, 12, 15, 18, 19, 23, 25,
27, 28, 29, 30, 32, 47, 51, 52, 53, 54
Input Taxed Supplies4, 10, 13, 16, 18, 27, 47
Insurance ................. 9, 26, 32, 51, 52, 53, 54
Internal Transfers ................................ 21, 27
J
Joint Ventures ............................................ 28
M
Motor Vehicles .................................... 25, 55
N
Non-deductible Expenses .................... 13, 30
Non-profit Entities ..................................... 10
P
Payments by Head Office .......................... 16
Periodic Supplies ....................................... 20
Petty Cash ............................................ 15, 56
64

65

Recovery of FBT Liability Accounting Charges
Employees contribution relating to their share of FBT liabilities for salary packaging (eg EO’s,
Principals, VPS officers), are regularly paid (weekly, fortnightly) into
“80401 Employee Fringe Benefits Tax” account
These contributions are for the fbt tax components of employees who enter car novated leases and other salary packaging schemes (other than FBT exempt salary packaged items such as superannuation, notebooks etc))
Please note, the employee contributions relating to the actual payment of the item salary packaged eg car lease payments are paid into an independent account from 80401for payment to
McMillan Shakespeare.
Deductions are made from employee’s salaries via HRMS and salary deduction entries are undertaken in HRMS by MMS directly with a cheque for the total amount forwards to MMS each fortnight.
FRINGE BENEFITS TAX
80401 Employee Fringe Benefits Tax
Fringe
N06 80400 Benefits 2100
Tax
Employee FBT associated with salary packaging.
FRINGE BENEFITS TAX
80401 Employee Fringe Benefits Tax N06
8040
0
Fringe
Benefit 2100 s Tax
Employee FBT associated with salary packaging.
80402 FBT Expense N06
8040
0
Fringe
Benefit s Tax
2100
On costs associated with salary expense- refer to budget bulletin for latest budget rate.
80403 Employees Input Tax Credit Ref
8040
0
The account is used in connection with the payment to Macmillan Shakespeare who are the administrators of
Fringe
Benefit the teachers and principles
2100 salary sacrifice scheme. MMS s Tax pay invoices for expenses related to the salary sacrifice and we pay MMS the money sacrificed from the salaries to offset the payments.
66

GST – Tax Invoices
 Registered suppliers must issue a Tax Invoice to enable you to claim an input tax credit.
 You will not be entitled to an input tax credit for an unregistered supplier’s services.
 Tax Invoices are not required if the GST-exclusive value is $50 or less.
 Tax invoices for taxable supplies under $1,000 must include seven (7) things: 1) ABN, 2) the GST inclusive price of the taxable supply, 3) the words “Tax Invoice” stated prominently, 4) the date of issue of the tax invoice, 5) the name of the supplier, 6) a brief description of each of the items supplied, 7) when GST payable is exactly 1/11 of the total price, either a statement that says “total price includes GST”, or the GST amount.
 Tax Invoices for taxable supplies of $1,000 or more must include: 1)
ABN, 2) the GST inclusive price of the taxable supply, 3) the words “Tax
Invoice” stated prominently, 4) the date of issue of the tax invoice, 5) the name of the supplier, 6) a brief description of each of the items supplied,
7) when GST payable is exactly 1/11th of the total price, either a statement that says “total price includes GST”, or the GST amount, 8) the address or the ABN of the recipient, 9) the name of the recipient., 10) the quantity of the goods or the extent of services supplied.
 If the tax invoice is for a taxable supply and either a GST-free or input taxed supply, the tax invoice must also show three (3) things: 1) each taxable supply, 2) the amount of GST payable in relation to those supplies, 3) the total amount payable for the supply.
 An adjustment note may be required to make an adjustment to the amount of GST owed or refunded. This could be required for example if part of a supply is cancelled. An adjustment note must include: 1) The words 'Adjustment Note' in a prominent place, 2) The name and ABN of the supplier, 3) the name of the recipient, 4) the address or ABN of the recipient, 5) the issue date of the adjustment note, 6) the issue date of the original tax invoice for the taxable supply, or if there were any previous adjustment notes, the issue date of the last adjustment note, 7) the price of the taxable supply in the tax invoice or previous adjustment note, the correct price, and the difference between these amounts, and
8) a brief explanation of the reason for the adjustment.
67

GST
Table of
Contents.......................................................................................................................................... 6
1. What is the GST and how does it work?
................................................................................................11
1.1 Basic features of the GST .......................................................................................................12
1.2 How the GST works..................................................................................................................12
1.2.1 Who charges GST? Who must collect GST? ................................................................12
1.2.2 Who has to pay GST and who does not?.....................................................................13
1.2.3 Can I pass the cost of GST on to my clients? .............................................................13
1.2.4 Do I charge GST on everything I supply? .....................................................................13
1.3 Classifying your transactions...................................................................................................13
1.3.1 Taxable supplies....................................................................................................................14
1.3.2 GST-free supplies
..................................................................................................................15
1.3.3 Input taxed supplies..............................................................................................................16
1.4 Some key concepts in the GST law..............................................................................................18
1.4.1 Entities (Section 184-1) ........................................................................................................18
1.4.2 Enterprise (Section 9-20)
......................................................................................................18
1.4.3 Taxable supplies (Subdivision 9-A) ......................................................................................20
1.4.4 Supply for consideration........................................................................................................20
1.4.5 What is meant by ‘in the course ’ or ‘furtherance of’ an enterprise?..................................21
1.4.6 Connected with Australia
......................................................................................................22
1.4.7 Required to be registered......................................................................................................22
1.4.8 GST-free or input taxed supplies are not a taxable supply...................................................22
Let’s consider some examples of transactions/supplies and their GST treatment
................................24
1.5 Major types of supplies and acquisitions by aged care providers..........................................24
1.5.1 Residential care............................................................................................................24
1.5.2 Community care............................................................................................................24
1.5.3 Flexible care..................................................................................................................25
1.5.4 Short-term/long-term accommodation (hostels/retirement units)..............................25
1.5.5 Acquisitions ..................................................................................................................25
1.5.6 An example ...................................................................................................................27
1.5.7 Exercise - Aged care .....................................................................................................27
1.6 Major types of supplies and acquisitions by hospitals...........................................................29
1.6.1 An example ...................................................................................................................29
1.6.2 Exercise – hospital treatment ......................................................................................30
1.7 Non-commercial activities of charities ....................................................................................30
1.7.1 What is nominal consideration?............................................................................................30
1.7.2 What about the sale of donated goods? ..............................................................................31
1.7.3 What if a business donates goods to a charity? ..................................................................31
1.8 Raffles and bingo conducted by charitable institutions..........................................................32
2. How to decide whether to register.........................................................................................................33
68

Contents…
.........................................................................................................................................33
2.1
Rules............................................................................................................................................33
2.1.1 What being registered means ......................................................................................34
2.1.2 Understanding annual turnover is the key ...................................................................35
2.2 Registration considerations.....................................................................................................36
2.2.1 How will registration effect the cost of my purchases? ..............................................37
2.2.2 Why is my customer base important in my decision to register? ...............................37
2.2.3 Compliance costs and registration ..............................................................................37
2.2.4 Why will a fluctuating turnover be a factor in my decision to register?.......................37
2.3 Cancelling your registration.....................................................................................................38
2.4 ABN registration......................................................................................................................38
2.5 Penalties for failing to register ................................................................................................38
2.6 Branch registration ..................................................................................................................38
2.6.1 Can an entity only register some of its branches?......................................................39
2.7 Forming a GST group...............................................................................................................39
2.7.1 Forming a GST group ....................................................................................................39
2.7.2 Can non-profit bodies form a GST group?....................................................................39
2.7.3 What does it mean to be a part of a GST group?........................................................40
2.8 Non-profit sub-entities..............................................................................................................40
2.9 How to register........................................................................................................................41
3. Charging GST on sales............................................................................................................................42
3.1 What does this mean for a hospital?......................................................................................42
3.1.1 You can be sure that… ................................................................................................42
3.1.2 You will be uncertain about… ......................................................................................43
3.1.3 Non-hospital treatment supplies..................................................................................43
3.1.4 Uncertainty in a self-assessment system....................................................................43
3.2 What does this mean for an aged care provider?...................................................................43
3.2.1 You can be sure that… ................................................................................................44
3.2.2 You will be uncertain about… ......................................................................................44
3.2.3 Non-residential care supplies.......................................................................................44
3.3 Tax invoices.............................................................................................................................45
3.3.1 Sample tax invoice – transaction over $1,000 (before GST) ......................................47
4. Claiming GST credits...............................................................................................................................49
4.1 Record.....................................................................................................................................49
4.2 Substantiate ............................................................................................................................49
4.3 Claim .......................................................................................................................................50
4.3.1 How to complete your Business Activity Statement (BAS) ..........................................50
4.3.2 What does the BAS look like?......................................................................................50
4.3.3 GST Net Amount...........................................................................................................51
4.3.4 Content of the BAS GST calculation sheet ..................................................................51
4.4 Creditable acquisitions.................................................................................................................52
4.4.1 Input tax credits.....................................................................................................................52
4.4.2 What is a creditable acquisition?..........................................................................................52
4.4.3 What is an acquisition?.........................................................................................................52
4.4.4 Can an entity always claim the full amount of input tax credit? ..........................................53
4.4.5 When is an acquisition only partly for a creditable purpose? ..............................................53
4.4.6 If an entity only pays for part of the acquisition how does it work out the amount it can claim as an input tax credit?...........................................................................................................53
4.4.7 What happens if an entity changes its planned use for an acquisition?.............................54
4.4.8 Partial input tax credit for acquisitions relating to financial supplies (Division 70) ............55
4.4.9 Can an entity claim an input tax credit for capital expenditure?..........................................55
4.4.10 Are there any other special credits that can be claimed? .................................................55
4.4.11 Restrictions on claiming input tax credits ..........................................................................55
4.4.12 Non-deductible expenses (Division 69)..............................................................................55
69

5 Adjustments (Division 19, 21 and
129)..................................................................................................57
5.1 Adjustment notes......................................................................................................................57
7
5.2 Adjustment events (Division 19)
..............................................................................................57
5.3 Can adjustments occur either increasing or decreasing the net amount? .............................59
5.4 Bad debts (not applicable if the entity accounts on a cash basis) (Division 21) ...................59
5.5 Change in the extent of creditable purpose (Division 129).....................................................60
5.6 What is an adjustment period? How does an entity measure a change in use of goods or services purchased, over the adjustment period?.........................................................................60
6. Self-assessment system.........................................................................................................................61
6.1 Introduction..............................................................................................................................61
6.2 Your obligations ......................................................................................................................61
6.3 The risks .................................................................................................................................63
6.3.1 Not identifying transactions that constitute taxable supplies to customers or clients
63
6.3.2 Misclassifying a taxable supply as a GST-free supply.................................................63
6.3.3 Charging GST and not paying it to the ATO..................................................................63
6.3.4 Not including GST in prices ..........................................................................................63
6.3.5 Not collecting tax invoices............................................................................................64
6.3.6 Not identifying GST input tax credits and not claiming refunds ..................................64
6.3.7 Claiming a GST input tax credit in respect of costs of making input taxed supplies
64
6.3.8 Spending GST owing to the ATO...................................................................................64
6.4 Compliance..............................................................................................................................64
6.4.1 The general anti-avoidance rule (Division 165)....................................................................64
6.4.2 Application of
GAAP...............................................................................................................65
6.4.3 Consequences from GAAP application (Subdivision 165-
B).................................................66
6.4.5 Rights of
Review....................................................................................................................66
6.4.6 Other penalties under the GST law.......................................................................................66
7. Cash flow implications.....................................................................................................................68
7.1 Cash flow ................................................................................................................................68
7.1.1 Cash accounting...........................................................................................................69
7.1.2 Accrual accounting .......................................................................................................69
7.1.3 Purchases – debtor and creditor control......................................................................70
7.1.4 Purchasing equipment..................................................................................................70
7.1.5 Timing for lodgement....................................................................................................71
7.2 Pricing......................................................................................................................................72
7.3 Transitional issues...................................................................................................................73
7.3.1 Contracts entered into on or after the date of assent ................................................74
7.3.2 Contracts entered into before the date of assent.......................................................74
8. Implications for business systems..................................................................................................76
8.1 What changes?........................................................................................................................76
9. Case study........................................................................................................................................78
9.1 Background..............................................................................................................................78
9.2 Questions and exercises .........................................................................................................79
9.2.1 Registration ..................................................................................................................79
9.2.2 Classifying supplies (transactions) ..............................................................................80
9.2.3 Lodging a Business Activity Statement........................................................................80
9.2.4 Cash or non-cash?........................................................................................................80
9.2.5 Completing a Business Activity Statement..................................................................80
10. The Pay As You Go system
(PAYG).................................................................................................81
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8
10.1 Timing of tax payments under PAYG....................................................................................81
10.2 The Business Activity Statement (BAS) ...............................................................................81
10.2.1 What are you remitting? ..............................................................................................82
11. Endorsement as a deductible gift recipient and/or income tax exempt charity..........................83
Contents…......................................................................................................................................8
3
11.1 Endorsement as income tax exempt ...................................................................................83
11.2 Endorsement as a deductible gift recipient.........................................................................83
12.
Checklist..........................................................................................................................................8
5
12.1 Make an action plan ............................................................................................................85
12.2 ABN registration – determine whether ABN registration is required...................................86
12.3 GST registration – determine whether GST registration is required. Investigate whether voluntary registration is desirable......................................................................................................87
12.4 Transitional issues – contracts spanning the introduction of the GST...............................88
12.5 Grouping – if you have two or more closely related enterprises, determine whether you can use the grouping provisions.........................................................................................................89
12.6 Sub-entity registration – if you have identifiable, small independent units who maintain their own accounting records consider whether you can elect to treat the entities as separate sub-entities for GST purposes............................................................................................................89
12.7 Citing your ABN – ensure this number appears where it must...........................................90
12.8 Charging GST – determine which, if any supplies, made by your business are taxable. ...90
12.9 Claiming GST credits – be sure to claim all the GST credits (on business acquisitions) to which you are entitled.........................................................................................................................91
12.10 Endorsement as deductible gift recipient – determine whether you need to be endorsed 91
12.11 Endorsement as an income tax exempt charity – determine whether you need to be endorsed 92
12.12 Post the introduction of GST – things you have to look at after 1 July 2000.................92
12.13 GST compliant systems – determine what changes need to be made in your business systems (management as well as accounting) to make them GST compliant..................................93
13. Where to go for more information or help in implementing the GST (and other tax reform measures)......................................................................................................................................95
13.1 I need to know how the New Tax System applies specifically to my industry ....................95
13.2 I need to know what business records to keep for The New Tax System ..........................95
13.3 The way I pay tax throughout the year is changing. I need to know what that means for me 95
13.4 I need help in meeting the costs of gearing up for The New Tax System ..........................96
13.5 I need an answer to a specific question about The New Tax System that I have not been able to find an answer to in the other material..................................................................................96
13.6 What I need is advice on the business skills I need to run my business effectively under
The New Tax
System..........................................................................................................................96
13.7 There are reporting requirements for the fringe benefits I provide to my employees. I need to know what that means for me...............................................................................................97
13.8 Pricing safeguards have been introduced with GST. I need to know what they mean for me. 97
14 Commonly asked questions
.............................................................................................................98
14.1 Maintenance contracts .......................................................................................................98
14.2 Operational charges............................................................................................................98
14.3 Input taxed supplies ...........................................................................................................98
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14.4 Staff board ..........................................................................................................................99
9
14.5 Category 8 residents...........................................................................................................99
14.6 Extra service facilities .........................................................................................................99
14.7 Community services............................................................................................................99
14.8 Government grants............................................................................................................100
14.9 Privately purchased care...................................................................................................100
14.10 Retirement villages.........................................................................................................101
14.11 Sale of buildings.............................................................................................................101
14.12 Self care units ................................................................................................................101
14.13 Delivery of meals to aged care facility residents...........................................................102
15. Planning for and implementing the GST
........................................................................................103
15.1 ‘Best practice’ approach to GST-readiness.......................................................................103
15.1.1 Planning for the GST..................................................................................................103
15.1.2 Implementation issues..............................................................................................104
10
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GST impacts on many aspects of the Catholic aged care and hospital sector. For example GST will impact on:
 documentation received and produced
 your organisation's information and reporting systems
 internal control procedures required
 pricing of goods and services
 tenders for the supply of some goods and services
 grants
 promotion of services
 specific new clauses required when entering into contractual arrangements
 fundraising
Incorrect handling of GST related matters could cause financial loss to your organisation. Your staff also need to be informed on how GST affects their organisation, and trained in aspects that affect their work.
The basic rule is:
The GST is a tax on transactions (i.e. on the supplies that you make; on your acquisitions).
To survive you need to be able to identify the GST consequences of all transactions into and out of your business. This is essential because you will need to:
 recover GST
 pay, track and claim
 record and lodge
Remember:

To identify the types of supplies into and out of your business.

To account for GST on those transactions where it applies and include the GST in the price of taxable supplies that you make.

To claim all your GST credit entitlements.

To record and lodge.
11
1.1 Basic features of the GST.
1.2 How the GST works.
1.3 Classifying your transactions.
1.4 1.4 Some key concepts in the GST law
1.5 Major types of supplies and acquisitions by aged care providers.
1.6 Major types of supplies and acquisitions by hospitals.
1.7 Non-commercial activities of charities.
1.8 Raffles and bingo conducted by charitable institutions.
The GST is:
 a tax on the supply of most goods, services or anything else supplied;
 designed to be ultimately paid by the consumer rather than by business;
 collected by business;
 a multi-stage tax collected at each stage of the commercial chain;
 effectively added to the value added at each stage of the commercial chain; and
 has a credit offset mechanism.
When you supply goods, services or anything else you must account for GST on those supplies.
However, you do not need to account for GST where:
 the supply is GST-free or input taxed; or
 you (the supplier) are not registered or required to be registered.
If you acquire goods or services you cannot avoid paying GST, unless those goods or services are
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GST-free or input taxed supplies. Typically, the GST will be included in the price you pay.
However, if you do pay GST you may be eligible to claim back some or all of the GST you have incurred through an input tax credit.
12
If you are registered, you must account for the 10% GST on the taxable supplies you make.
However, the ATO is not ultimately concerned with who actually bears the GST. The ATO simply requires that you remit 1/11 th of any consideration received for goods or services you supply.
Therefore, if you fail to incorporate the GST into your prices, you will effectively be paying all the
GST yourself.
The ultimate price you charge for your goods or services will depend upon a range of factors that will vary according to the nature of your business, all of which must be considered in developing a pricing schedule that can be substantiated under ACCC scrutiny.
No. If you are registered you must only charge GST on goods or services which are taxable supplies, as explained in below.
Whether your business is a charity, aged care provider, hospital, small or medium enterprise it is affected by the GST. It is important to realise that no business is GST-free, only certain transactions may be classified as such. Every business has transactions and because the GST is a tax on transactions you must track and record these so that you can determine the correct GST treatment.
For GST purposes there are four different types of transactions (or supplies) that can occur – each of which result in a different GST treatment. These are:

Taxable supplies: a supply (for example a sale or barter transaction) where a registered supplier is required to include GST in the price. The supplier will be entitled to claim input tax credits equalling the amount of GST paid on the acquisitions made for the purpose of running their business (enterprise).

GST-free supplies: a supply that does not attract GST and therefore no GST is included in the price of the supply. However, a registered supplier may still claim input tax credits for inputs acquired for the purpose of making GST-free supplies. GST-free supplies include charitable activities, non-commercial activities of charities, basic food, exports, some health services and some medical supplies.

Input taxed supplies: no GST is charged on the supply of these things and no input tax credits can be claimed for acquisitions made in relation to the making of input taxed supplies. For example, financial supplies in general, residential premises and residential rents will be input taxed. This means that suppliers may build into their price the effect of the GST included in the price of acquisitions.
13

Out of scope supplies: these are supplies that do not fall within the scope of the GST legislation and are therefore not subject to GST. For example, supplies by non-registered persons – no GST is charged on supplies made nor are input tax credits available for GST paid on relevant purchases/inputs or supplies made for no consideration.
In running your business, it will be very important for you to classify each transaction (ie each supply) that you make in order to determine which of the four types of supplies it falls into.
Whether you charge GST on the supply and whether you are entitled to an input tax credit for the acquisitions made for the purpose of making the supply will depend on how that supply is categorised.
Diagram 1 demonstrates how the GST should work and how registered entities will be able to recover any GST included in the price paid for goods and services used in the enterprise. This example shows only two tiers of suppliers, ie. if it is assumed a business is the retailer in the example, it shows a supplier, and their supplier. In reality, it is likely that there will be a string of other suppliers backing them up as most supply chains will go back many more levels. The principle shown will, however, remain the same no matter how many links there are in the supply chain.
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Diagram 1
14
An explanation of Diagram 1 : As a brief explanation of the above diagram, consider the position of the retailer. Their selling price is $660 which includes $60 GST charged on to the customer. The retailer paid $220 for acquisitions, including $20 GST. As discussed above, the retailer is entitled to claim an input tax credit for the $20 and remits only the net amount of $40 to the ATO.
Note that the retailer has added $400 in value to the product (being its net of GST price of
$600 less $200 it paid the Tier 1 supplier). The amount of GST it remits to the ATO is $40, being
10% on the $400 value added. This is why a GST is often referred to in other countries as a value added tax (‘VAT’).
The total payment to the ATO over the supply chain is $60, which is equal to the GST included in the price paid by the consumer at the last point in the chain. The ATO has collected the $60 in three stages, $5 from the Tier 2 Supplier, $15 from the Tier 1 supplier and
$40 from the Retailer. There is no duplication of the amount on which the tax is to be charged, because each supplier was entitled to a credit for the GST it had paid on the things acquired to make the sale.
Using the same format as for Diagram 1 above, this is how the treatment of GST-free supplies will work:
Diagram 2
An explanation of Diagram 2 : The example shows that GST is not payable by the exporter of the exports which are GST-free. However, the exporter can claim input tax credits of $20 for the GST included in the price of the things acquired from the Tier 1 supplier. GST is payable by the Tier 1
($20) and the Tier 2 ($5) suppliers. The Tier 1 supplier is entitled to input tax credits of $5 for the
GST included in the price of the things acquired from the Tier 2 supplier. Overall, there is no GST included in the price of the exports to the consumer.
15
Using the same format as for the previous Diagrams, Diagram 3 shows how input taxed supplies will work:
Diagram 3
An explanation of Diagram 3 : In this example, the bank (which supplies input taxed financial supplies), does not charge the consumer any GST. However, unlike taxable supplies (10%) and
GSTfree supplies (0%), the bank cannot claim an input tax credit for the $20 GST paid on their inputs, and as a result, the GST is a cost to them. The price paid by the consumer is $620 compared to
$600 even though no GST has been charged to them. This is calculated on the basis that if the bank wishes to have a $400 value added to its cost base, it will need to add that $400 to the
$220 (including GST) that it has paid for goods and services. This is in contrast to the previous examples where the $400 is added to the cost base of $200 as the $20 was able to be claimed.
16
An entity may be registered for GST if it is carrying on an enterprise. Entity is defined in the legislation in Section 184-1. An entity is defined to mean:
 an individual;
 a body corporate;
 a corporation sole;
 a body politic;
 a partnership;
 any other unincorporated association or body of persons;
 a trust; and
 a superannuation fund.
For a trust or superannuation fund the trustee is taken to be the entity. An entity can carry on more than one enterprise.
Enterprise has been defined very broadly. Enterprise includes a business but also includes other
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activities.
An enterprise is an activity or series of activities, conducted:
 in the form of a business; or
 in the form of an adventure or concern in the nature of trade; or
 on a regular or continuous basis in the form of a lease, licence or other grant of an interest in property; or
 by charitable institutions; or
 by religious institutions; or
 by gift deductible funds, authorities or institutions; or
 by the Commonwealth, a State or a Territory or a Commonwealth, State or Territory corporation are also included.
Several of these have been included in the definition of enterprise so that these entities can be registered for GST and claim input tax credits. An enterprise does not include activities done :
 as an employee or other pay-asyou earn (‘PAYE’) taxpayer; or
 as a private recreational pursuit or hobby; or
 an activity or series of activities undertaken by an individual in a position as a local government member; or
 by individuals (or partnerships of individuals) where there is no reasonable expectation of profit or gain.
There is an exception to the rule that the activities of an employee or PAYE earner do not constitute the carrying on of an enterprise. For example, a partner in an accounting firm accepts the directorship of a client company as part of the accounting firm’s normal services. Although the work of the director is done as an employee, the supply of services by the accounting firm is an activity within the meaning of an enterprise and the payment for the services is subject to GST.
17
An entity making an isolated commercial transaction with a profit making intention, where any profits would be assessable for income tax purposes, is an example of an activity in the form of an adventure or concern in the nature of trade.
GST is payable on taxable supplies and taxable importations. Subdivision 9-A defines a taxable supply and sets out the criteria that determine when a supply is a taxable supply. An entity only makes a taxable supply if all of the following criteria are satisfied. An entity makes a taxable supply if:
 it makes a supply for consideration;
 makes the supply in the course or furtherance of an enterprise that the entity is carrying on;
 the supply is connected with Australia; and
 the entity is registered or required to be registered.
The supply is not a taxable supply to the extent the supply is GST-free or input taxed. An entity may make a supply for consideration and the supply may be connected with Australia. However, if the supply is not made in the course of carrying on an enterprise or the entity is not registered (or required to be registered), the supply will not be a taxable supply. The payment of money for a supply is not itself a supply. The concept of a taxable supply, itself, hinges on a number of other important definitions. Each requirement is discussed in turn below, except for registration which is discussed in Section 2.
GST only applies to taxable supplies and taxable importations. It does not apply to all supplies.
The definition of supply for GST purposes is very broad, being “any form of supply whatsoever”.
Specifically included are:
 supplies of goods or services;
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 the provision of advice or information;
 the grant, assignment or surrender of real property;
 a creation, grant, transfer, assignment or surrender of any right;
 a financial supply; and
 an entry into, or release from, an obligation to do anything, to refrain from an act or to tolerate an act or situation.
Examples of these include:
 provision of advice or information includes income tax advice provided by a tax agent;
 a grant of a right includes an agreement for the exclusive use of a trade name; and
 an entry into an obligation to refrain from an act includes, where a vendor of a business agrees not to trade in the same type of business within 100 km of the business sold.
18
As noted above a taxable supply must be for consideration. Consideration covers more than just monetary payment for something. It also covers inducements to do something or to refrain from doing something, payments by way of barter and even payments by someone other than the recipient of the supply. Forgiving a debt in exchange for a supply would be consideration for the supply.
For example, Forest Products makes a supply to Wood Turner. Wood Turner has a debt owing to Forest Products in respect of that supply. Tree Tops owes money to Wood Turner. Tree
Tops agrees to pay Forest Products the consideration due for the supply that Forest Products made to Wood Turner in satisfaction of the debt it has to Wood Turner. Another example of a supply for consideration is where John contracts with an electrician registered for GST purposes to carry out some repairs to his home. Joe, John’s father decides to pay for the work as a gift for John. Even though John did not pay for the work done, the supply was made for consideration.
Yes. Any payment made as a gift to a non-profit body is not regarded as consideration for a supply.
In addition, appropriations from one government agency to another are not regarded as being consideration. Under Division 81 the payment of certain taxes and charges (to be determined in writing by the Commonwealth Treasurer) will not be the provision of consideration.
This is not defined in the legislation but is considered broad enough to cover any supplies made in connection with an enterprise. Private supplies are not included. For example, if Joe, an electrician is operating a business from his family home, and decides to sell that home, this is not a supply in the course of his enterprise. It is a private sale. If Joe up all his left over electrical cable and sells it for its copper content, this is a supply in the course of his enterprise.
This will be established where you are dealing with:
Goods which are:
 delivered in Australia;
 made available in Australia;
 removed from Australia;
 imported into Australia; or
 installed, or assembled in Australia .
Real property (including buildings) which are:
 in Australia.
A supply of things other than goods or real property if:
 the thing is done in Australia; or
 supplied through an enterprise the supplier carries on in Australia .
19
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An enterprise is carried on in Australia if it is carried on through a permanent establishment.
Australia is defined to exclude any external territory but includes installations such as oil rigs.
An accountant who practices in Australia provides a client in Australia with financial advice, the provision of that advice constitutes the making of a supply connected with Australia. If that advice were provided to an overseas company in respect of a takeover of an Australian company that too would be a supply connected with Australia. In the latter case, this is because the advice is being provided through an enterprise being conducted in Australia.
To make a taxable supply an entity must either be registered or required to be registered.
A supply that is GST-free or input taxed is not a taxable supply (Division 38 and 40, respectively).
Section 9-80 provides that where a supply is partly taxable and partly GST-free or input taxed, the value of that part of the supply that is a taxable supply, is the proportion of the value of the actual supply that the taxable supply represents. For example, if a supply valued at $30,000 is 80% taxable and 20% GST-free or input taxed, the value of the supply which is taxable is $24,000
(80% of $30,000).
20
In the GST environment it will be particularly important that all transactions in your business are easily and accurately:

Identified and measured by your source documents; and

Tracked and recorded into a paper or electronic system.
Care should be taken with the following material as it represents a simplified presentation of typical transactions. If there are special circumstances relating to a transaction, or specialised transactions not covered, you should seek professional advice regarding its GST treatment.
Most aged care services will be GST-free. Where you supply aged care services you will need to know what care related goods and services are GST-free. You will also need to determine whether your organisation is an approved aged care facility.
Residential care provided by an approved provider is GST-free if the services are covered by
Schedule 1 to the Quality of Care Principles made under the Aged Care Act 1996. Residential care includes personal and/or nursing care provided in a residential facility for people who are aged.
Typically your residential aged care facility will also provide residents with a number of goods and services including accommodation assistance, meals, cleaning services, equipment and furniture.
The supply of these goods and services will also be GST-free.
However, supplies of goods and services not covered by Schedule 1 of the Quality of Care
Principles will generally be taxable supplies (and therefore subject to GST). For example additional supplies such as hairdressing services will be taxable supplies and you will have to account for
GST on those supplies.
The provision of services similar to those provided in a nursing home to aged people in their homes will generally be GST-free if:

A community care subsidy is payable to you under the Aged Care Act 1996. Privately funded community care services are GST-free if they are specified in Schedule 1 to the Quality of Care
Principles under that Act. Such services include assistance with bathing, eating and personal hygiene; or
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21

You receive funding under the Home and Community Care Act 1985 in connection with the supply. This includes such things as prepared food (eg meals on wheels), home maintenance, personal care assistance and respite care.
A supply of flexible care is GST-free if a flexible care subsidy is payable for the supply under the
Aged Care Act 1997 and the Home and Community Care Act 1985 .
Some aged care providers will also supply short-term and/or long-term accommodation to clients.
GST will apply to the supply of short-term accommodation (periods of less than 28 days) in commercial residential premises. Commercial residential premises are defined in the legislation to mean residential premises, such as hotels, motels and hostels or similar.
The GST payable on the supply of long-term accommodation in commercial premises will depend on how long your clients stay, what is included in the charges for the accommodation and whether you provide predominantly long-term (greater than 27 days) accommodation. If you supply commercial residential accommodation to an individual for more than 27 days, the value of the supply for calculating GST is 50% of the price that would be charged if it were treated as a standard taxable supply. If your premises are predominantly (ie, at least 70% of clients stay 28 days or more) for long term accommodation, this concessional treatment applies from the start of the stay.
Otherwise, it is calculated from the 28 th day. However, where you supply long-term commercial accommodation you may choose whether to treat the supply of that accommodation as being input taxed or to apply the concessional treatment. But, you must treat all your supplies of long-term commercial accommodation in the same way. Once you choose to treat your supplies in a particular way you cannot change your choice for twelve months.
Many of the inputs to your business will have GST included in the price. For example, typically
GST will be included in the cost of inputs such as furnishings, office equipment, prepared foods, accounting, legal and IT services, drugs and medicinal preparations and equipment. Generally speaking, you will be allowed input tax credits for any GST included in the price of goods, services or anything else acquired for use in carrying on your aged care facility or hospital.
22
Residential care and the concessional GST treatment of long-term accommodation
The Mount Mary Retirement and Aged Care Facility owns 50 independent living units (ILU). It also runs a residential aged care facility, with 30 places.
Residents who are considered ‘long-term’ (they stay 28 days or more) currently occupy forty of the ILU.
Because more than 70% of Mount Mary’s ILU clients stay 28 days or more, it can choose to pay
GST on 50% of the price for the resident’s entire stay (that is 28 days or more) or Mount Mary’s can treat the supply as being input taxed. If Mount Mary’s chooses to treat the supply as taxable, it will include
GST in the unit price for residents who stay (continuously) for 28 days or more, on 50% of the price of their stay. Mount Mary’s will be entitled to claim input tax credits for all the goods and services purchased to make the supply. If Mount Mary chooses to treat the supply of long-term commercial accommodation then it will not pay GST on the supply. However, it will not be able to claim input tax credits on goods and services purchased to make those supplies.
Provided the care supplied in the residential care facility satisfies the requirements of Schedule 1 to
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the Quality of Care Principles and Mount Mary’s is an approved provider, the provision of personal and/or nursing care for residents is GST-free. This will include the supply of residential accommodation.
Note the different GST treatment accorded to different types of transactions (or supplies) – the supply of long-term commercial accommodation versus the supply of residential care.
Are the following supplies GST-free? If the answer is not clear what further information is needed?
Assume that, where the same names are used, the facts are consistent for the individual/entity.

Residential care provided by Mount Mary Retirement and Aged Care Facility to Mrs Brown. The types of services provided to Mrs Brown include all meals and accommodation, medicinal preparations, a weekly hairdressing appointment, a television in her room and a weekly excursion to the local theatre.

Mount Mary also provides community care services to Mr Bloggs in his home. Such services include assistance with bathing, eating and personal hygiene. Prepared food is supplied to Mr
Bloggs by the local footy club at a heavily subsidised price.
23
For GST purposes there is no distinction between treatment provided in a public hospital and treatment provided in a private hospital. For the purposes of the GST legislation the supply of
‘hospital treatment’ is GST-free. Hospital treatment, means accommodation and nursing care, whether provided for the purpose of permitting the provision of professional attention or, in the case of a nursing-home type patient, as an end in itself, and includes the:
 provision at, or on behalf of, a hospital of relevant health services to a patient of the hospital; and
 provision at a hospital of a facility for a patient of the hospital.
Accordingly, most of the supplies made by a typical hospital will be GST-free. These would include
(but is not limited to) accommodation, nursing care, medical services (which are services supplied by or on behalf of a medical practitioner or approved pathology practitioner, which is generally accepted in the medical profession as being necessary for the appropriate treatment of the patient). Any goods (bandages, medicines or meals for example) or services provided to a patient during the course of providing GST-free hospital treatment will also be GST-free.
Please note that, at the time of writing, certain issues had been put to the GST Consultative
Forum on Health for clarification by the Australian Taxation Office (ATO). The Forum provides the ATO with the opportunity to deal with industry spec ific issues and to outline the ATO’s position on a number of issues of concern to the sector. For example, of particular interest to those in the health sector supplying ‘medical services’ is what is meant by the term ‘appropriate treatment’ (as it appears in the definition of medical services). The ATO is currently considering this and other health-related questions.
Mount Mary Private Hospital is a facility providing 150 beds. As part of its operations, the Hospital also rents out space to the local doctor, who works separately to the hospital. The Hospital outsources the supply of catering.
Generally speaking, the supply of hospital treatment is GST-free. Any goods supplied to a patient in the course of providing GST-free hospital treatment are also GST-free. Accordingly, the Hospital will not pay
GST on the supply of accommodation and nursing care provided to a patient. Nor will it pay GST on the supply of meals to a patient (because the provision of meals is integral to providing hospital treatment).
Even though the food will be used in the course of supplying hospital treatment, GST is included in the price by the outside supplier. However, the Hospital will be entitled to input tax credits for any
GST
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included in the price of the catering (and other business inputs).
Classify the following transactions.
24

Pathology services supplied by a pathologist outside the hospital system.

The supply of prescription drugs by the wholesaler to a hospital pharmacy.

The supply of prescription drugs to a patient as part of their hospital treatment.
 The provision of private amenities such as a telephone and television in a patient’s room.

A grant from the Federal Government for the provision of hospital services through a clinic
(located off the hospital’s grounds).
Non--commercial supplies made by charitable institutions, trustees of charitable funds and giftdeductible entities are GST-free. The ATO maintains a register of gift deductible funds. Commercial activities of these charitable entities will be taxable to ensure charities do not have a competitive advantage over other organisations.
Non-commercial supplies are supplies made by the charitable entity for nominal consideration and supplies of donated second-hand goods.
This will depend on what the supply is for – accommodation or other? Nominal consideration in relation to the supply of accommodation means the consideration for a supply is less than 75% of the tax inclusive market value of the supply, or, the consideration is less than 75% of the cost o the supplier to provide the accommodation. Where the supply is not a supply of accommodation, the less than 50% rule applies.
For example, a charitable or religious institution hires out a hall for $500. The market value for a comparable hall is $1100. As the hire is at less than 75 per cent of the market value the supply is
GST-free.
The sale of donated goods by charitable institutions, trustees of charitable funds and gift deductible entities will be GST-free. If the goods are dealt with in such a way that they lose their original character, the supply will be taxable. For example, if donated clothing is cut up and sold as rags, it has been transformed from its original character and will be subject to GST.
Exercise: Where donated second hand goods are received by a charity and sold without changing their character, the sale will be GST-free. What approach should a charity employ in distinguishing between ‘new’ and ‘second hand’ goods received as donations in collection bins?
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Answer: Where donated goods are received by a charity in collection bins, the Commissioner will accept that all goods received in this manner are second hand, unless the charity has information to the contrary. For example, if a clothing manufacturer has advised the charity that it will be depositing 500 new shirts in their charity bin, and these shirts are identifiable because of their labelling, packaging etc., they would not be considered second hand goods. Where, however, an isolated shirt appears in a collection bin with labels attached and in its original packaging, this will still be considered second hand. [Charities Consultative Committee – Issues & Questions Volume
2].
Generally, if goods are purchased by a registered business for donation, an input tax credit will not be available as the goods were not purchased for a creditable purpose. Section 11-15 provides that if you acquire a thing in carrying on your enterprise you acquire it for a creditable purpose.
There may be instances where it could be argued that the purchase of a good for donation was for a creditable purpose. For example X smash repair shop purchases a painting to donate to a charity.
The painting contains a plaque stating that the painting was donated by X smash repair shop. In
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this case, it could be argued that the purchase was for a creditable purpose, that of advertising the smash repair business.
If the business donates goods that had previously been acquired for use in the business there is no requirement to make an adjustment to any previously claimed input tax credits for a change of creditable purpose (section 129-45).
For example, Beryl is a baker. She donates bread that is unsold at the end of the days trading to a charity. If she had used the bread for private purposes she would have an adjustment to her entitlement to input tax credits for a change in creditable purpose. Section 129-45 means that
Beryl does not have to make any adjustment. Beryl will remain entitled to the input tax credits for her acquisitions used in making the bread.
Supplies of raffles and bingo by charitable institutions, trustees of charitable funds or gift deductible entities (excluding lotteries), that do not contravene a State or Territory law will be
GSTfree.
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The rule is:
As a non-profit you must register for the GST where your annual turnover is $100,000 or more.
You may choose to register if your annual turnover is less than $100,000.
In deciding whether to register or not consider the following points:

You can only claim input tax credits if you are registered.

Who are your customers and clients? Some businesses may only deal with other registered businesses (so that they can claim input tax credits for the goods and services they buy from you. They may be private individuals.

Are your clients motivated by price?

Is it worth investing in new systems or can your current system handle the record keeping requirements for information that you need to give to the ATO.

What do you need to do to register? You will need an Australian Business Number (ABN).

How do you account for GST?

What tax periods do you choose?
2.1 Rules
2.2 Registration considerations
2.3 Cancelling your registration
2.4 ABN registration
2.5 Penalties for failing to register
2.6 Branch registration
2.7 Forming a GST group
2.8 Non-profit sub-entities
2.9 How to register
The relevant rules about registering for GST purposes are as follows:
You have to register if:

You are carrying on an enterprise; and
27

Your annual turnover is more than $100,000 as a non-profit body (or $50,000 for other organisations).
You can choose to register if:

You are carrying on an enterprise; and

Your annual turnover is less than $1000,000 as a non-profit body (or $50,000 for other organisations)
For GST purposes, aged care providers and hospitals will almost certainly be “carrying on an enterprise”. Enterprise involves planning, organising and managing. Enterprise involves both formal and informal structures. Enterprise involves people doing things, making things happen and
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providing things. Enterprise involves everything from the activities undertaken by Australia’s largest companies, to the facilities provided by a local community group. It is important to realise that enterprises that are required to register for the GST may not be businesses or organisations in the way those terms are normally understood – religious structures are a classic example.
The issue of whether to register or not is central when considering the impact of the GST. For those of you who have a choice the following discussion will help you make a choice. If you expect to meet the registration requirement on 1 July 2000 you will need to apply for registration by 31 May
2000.
Electing to register for GST purposes means that your organisation will have a number of fundamental consequences, both in terms of the treatment of your sales (output supplies) and purchases/acquisitions (input supplies), and its compliance obligations with the ATO.
Sale and purchase transactions
Sales: If you are registered for GST and you make a taxable supply you will be required to include
GST in the price of the goods or services supplied. Where you are making GST-free or input taxed supplies you are not required to include GST in the price of the goods and services provided. If you are not registered for GST purposes, you will not be required to include GST in the price of the goods and services you sell.
Purchases: If you are registered for GST, you will be entitled to claim input tax credits from the
ATO for any GST that is included in the price of the purchases you make for the purposes of carrying on your business (except where you make input taxed supplies). If you are not registered for the
GST, you will not be able to claim input tax credits for the GST included in the price of purchases you make.
GST Compliance
If you are registered for GST you will be required to lodge regular GST returns with the ATO.
These are known as Business Activity Statements or BAS.
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You can choose to lodge these either quarterly or monthly if your turnover is less than $20 million.
If your turnover is greater than $20 million, or if you have a financial period that does not end on
30
June, then you will be required to lodge your BAS monthly.
Stop Press! Non-profit bodies will be allowed to choose either a quarterly or monthly return period, regardless of the date you end your accounts.
You will use the GST section of the BAS to report GST payable on taxable supplies you have made and claim GST included in the price of acquisitions you have made. Given the complex nature of a
BAS, these forms are discussed in greater detail later.
Any GST payable (net of amount of GST collected less input tax credits) will be lodged with the
ATO at the same time as you lodge your BAS.
Note: entities that are not registered for the GST are not required to complete and lodge a BAS.
However, they will, in all likelihood, be required to lodge an Instalment Activity Statement or IAS.
Annual turnover is very important as it drives whether you need to:
 register for GST
 use quarterly or monthly tax periods
 lodge your return electronically or manually
 adopt the cash or accruals method of accounting
How do I work out my annual turnover?
To work out your annual turnover, you need to calculate the following:
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 your current annual turnover (the value of all supplies you make or are likely to make during the current month plus the value of supplies you made during the preceding 11 months); and
 your projected annual turnover (the value of all supplies you made during the current month plus all the supplies you are likely to make for the next 11 months).
Annual turnover includes all consideration (all moneys received) for the supplies from your business. These are the services or goods you supply to others (your patients or aged care residents for example). Obvious examples include fee income, charges for the provision of a service and grants. Not so obvious are receipts in respect of rent on premises you own. When determining your annual turnover do not include the following:
 input taxed supplies (eg a loan received)
 supplies for no consideration
 proceeds from the sale of business assets
 any GST included in the price of supplies made by you (ie you use the GST exclusive amount)
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Best practice – organisations with an annual turnover (whether current or projected) close to the registration threshold should continually monitor the last 12 months turnover and the projected turnover for the next 12 months. If either of these figures is over $100,000, then the organisation will be required to register. If your annual turnover is over the limit, then your decision is easy – you must register.
There are many considerations that need to be looked at in deciding whether to register or not. If you decide to register, then keep in mind that you must remain registered for at least 12 months.
Key issues to take into consideration in deciding whether to register or not include:

Increasing costs on purchases into your business because you cannot claim an input tax credit if you aren’t registered.

The main types of customers/contributors you deal with.

Compliance costs of lodging regular BAS compared with estimated GST credits

Fluctuating turnover around the turnover threshold.
If you do not register for GST purposes then you will not be entitled to claim an input tax credit from the ATO for the GST included in the price of purchases/acquisitions that you make. This will mean that the cost of these purchases will be greater than if you were able to claim the input tax credit.
Ultimately, this may effect the profitability of your enterprise and/or the price you have to charge your clients in order to cover your costs.
This point is particularly important where you will be making large capital purchases.
If you are not registered and therefore unable to claim input tax credits for your purchases, you may find that you have to increase prices to recover the higher costs of running your organisation.
Sponsorships and most grants will attract GST. That is, if you are registered, you will need to charge GST on the amount of the sponsorship or grant received. The person providing you with the sponsorship/grant may have a preference to deal only with registered organisations (because they can claim an input tax credit for the amount of GST you charge on the sponsorship/grant).
Best practice – talk to those who provide sponsorship/grants to determine if they have a preference to deal only with registered organisations.
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If you choose to register for GST purposes, you will incur additional internal costs in undertaking the following:

Identifying and classifying the types of supplies you make. Determining which of your supplies are taxable and including an amount for GST in the price.

Issuing tax invoices to customers for supplies.
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
Compiling and lodging quarterly or monthly BAS.
For those entities with a turnover that fluctuates around the turnover threshold, the need to constantly monitor this will impose an additional duty and cost upon your organisation. In these cases, if you believe the monitoring task to be onerous, you may choose to register to avoid this ongoing task,
If you are under the annual turnover threshold, and you have chosen to register, you can cancel it should you decide that you no longer want to remain registered. However, you can only do this if you have been registered for at least 12 months.
If you choose to register, or are required to register for GST, then you will receive an Australian
Business Number (ABN). It is important to remember that you can register for an ABN without the need to register for GST. If you are registered for GST then you will be required to show your
ABN on all your tax invoices.
An important reason why you should consider registering for an ABN, even if you do not want to register for GST purposes, is because of the new Pay As You Go (PAYG) system. One element of this system is that any payment made to a person or entity who does not have an ABN, except for employees, will have 47.5% of that payment withheld by the payer and remitted to the ATO.
The law imposes penalties for those who do not register when they should. If the ATO believes you should be registered for GST purposes then it will register you and notify you in writing. The ATO may also backdate your resignation where it believes you should have applied earlier. Effectively this means that you must account for GST on all your supplies (where applicable) from that date.
Your would also be able to claim input tax credits on your purchases from that date.
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An entity is able to register a branch separately for GST purposes providing: the branch has an independent accounting system; the branch can be separately identified by the nature of its activities or its location; the Commissioner of Taxation is satisfied that the registered entity is or intends to carry on an enterprise through the branch; and the registered entity is not a member of a GST group.
Yes. An entity may choose to register one, some or all of its branches separately for GST.
Whether an entity chooses to take advantage of the ability to register individual branches will depend on a number of issues, including how management responsibilities and performance are monitored.
Note that a consequence of separately registering branches is that each is treated as operating as a distinct entity. Transfers from one branch to another or a transfer to the parent company will be subject to GST where the supplies are taxable supplies.
Technically entities cannot ‘register’ as a group or joint venture. However, they can apply to the
ATO to be treated as a group. The ability to form a GST group is aimed at reducing unnecessary administration costs. Companies within a group often supply things to other members of the group.
This would result in the group basically charging itself GST and then claiming input tax credits on the same internal transactions. The GST grouping provisions ignore these intra-group transactions for GST purposes.
Entities (eg. companies, partnerships, and trusts) are able to form a GST group if certain requirements are met. In the case of companies considering the possibility of grouping, the legislation requires that each company must:
 be registered for GST;
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 be a member of the same 90% owned group as all other members of the GST group;
 have the same tax period and account for GST on the same basis (ie. cash or other than cash basis); and
 not be a member of another GST group.
Non-profit bodies are also able to form a GST group and while required to meet the conditions above, do not have to comply with the 90% ownership test. However, all members of the proposed
GST group must be non-profit bodies and all must belong to the same non-profit association.
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Once the Commissioner approves a GST group, the group is effectively treated as one entity for
GST purposes. One entity, the ‘representative member’ becomes responsible for lodging the GST return on behalf of all members. The representative member is responsible for all the GST payable and is entitled to all input tax credits that the members of the GST group have that relate to supplies and acquisitions made outside the GST group. The representative member must be an
Australian resident.
Any transactions between members of a GST group are not treated as being taxable supplies or creditable acquisitions. These transactions are excluded from the GST system as a result of the
GST group.
Some kinds of non-profit entities may choose to have some (or all) of their separately identifiable branches or units treated as separate entities for GST purposes. For these provisions to apply, the non-profit entity must be registered and must be (typically) a charitable institution or a non-profit body that is exempt from income tax under the relevant provisions of the Income Tax Assessment
Act 1997 (ITAA 97).
For example, units could include a branch, fete, fundraiser or fundraising dinner. It means, that where the subentity’s turnover is below $100,000, the sub-entity can choose whether to register for GST or not. Where the sub-entity has a turnover of $100,000 or more, it will have to register separately for GST and will have the same rights and obligations as other GST registered entities.
The liability for all GST obligations of the sub-entity will be imposed on the persons responsible for the management of the sub-entity.
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Best practice - You may wish to consider this option as the flexibility it may allow you to substantially reduce your compliance costs . The benefit of separate registration for sub-entities is that the subentities may fall below the non-profit sub-entity registration threshold and thus be exempted from registration.
To register for the GST you will need to complete an application. The Tax Office has produced a
Guide to Registering for the New Tax System – you will find an application form in the guide along with instructions on how to complete the form. The same application form is used to register for an
ABN.
Some of the questions on the form will require you to perform some calculations and make decisions about how you plan to comply with the GST. These include:
9 What is your estimated annual turnover?
10 How will you account for GST? Cash or non-cash (accruals)?
11 Do you provide goods and services to business? If yes, what percentage of your sales is to business?
You can complete this form manually, via the Internet or give it to your tax agent to lodge electronically for you.
Best practice - If your business has not received these papers, contact the ATO immediately.
Applications must be lodged by 31 May 2000. Best practice would see you do this well in advance of the cut off date.
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34

If your business is registered for the GST, be aware of the few circumstances where GST can apply to a service rendered or good provided by a hospital or aged care facility and make sure where
GST applies, it is charged.

Charge the GST on any non-treatment, non-medical, non-health or nonresidential/ flexible/community care services you supply.

Issue tax invoices when required, and plan for any consequential changes in stationery and computerised/manual systems.

If the GST status of the supply (be it a good or service) is unclear, seek advice
A s already noted, the GST legislation carries the notion of a “taxable supply”; defined as the supply of a good or a service that is subject to the GST. Enterprises that are registered for the GST are required to charge the GST on any taxable supply. Enterprises that are not required to register for the GST and which do not register voluntarily are not permitted to charge GST (but can pass on cost increases due to GST on their purchases).
Virtually all the services rendered by an aged care facility or hospital, and most of the goods you supply, will not be taxable supplies but are GST-free.
Hospital treatment is GST-free except for a small range of treatments where Medicare benefits are not payable. This is linked what is a supply of ‘professional services’ specifically not GST-free.
Hospital treatment includes accommodation and nursing care, in addition to medical and other health care services. For GST purposes there is no distinction between treatment provided in a public hospital and treatment provided in a private hospital. If, in the course of providing GST-free hospital treatment, you supply goods to a patient (for example, meals or bandages) those goods are also GST-free.
It is clear now, because it is explicitly stated in the GST legislation, that hospitals will need to add
GST to the price of hospital treatment services where those services are rendered:
 for cosmetic reasons and do not attract a Medicare benefit;
A lot! Unfortunately, there are a number of situations that are not so clear cut. Consider, for example, the following scenarios:
35

How does a hospital identify taxable and GST-free supplies such as specific clinical furniture and equipment when it is included as one hospital fee? Do such things as televisions included as part of the hospital suite furniture have to be identified and GST charged?

Is GST to be charged on sales of (prostheses type) goods billed directly to (surgical) patients on the instruction of the hospital/attending surgeon?
Both of these questions, together with a number of other health related GST issues, are being considered by the ATO as part of its role in a consultative forum with the health industry. At the time of writing, the ATO had not finalised its position in respect of the above outlined issues.
Best practice – keep abreast of outcomes of the GST Consultative Forum on Health and the
Charities
Consultative Committee. Be aware that the ATO is releasing draft rulings in relation to a number of GST related issues.
There may be occasions where a hospital renders services that are not hospital treatment. An example of this might be where a hospital owns premises part of which is rented out to a florist.
Here, GST will apply to the commercial rental.
The GST is a self-assessment system. In the event of an audit, you have a burden of proof to show that it has complied with the law. If a hospital supplies a service or good where the GST status is
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unclear, it must make a judgment about the risks it carries if GST is not charged. If GST is not charged and in an audit, the ATO seeks to collect GST on that service, the hospital may be liable to pay 1/11 th of any fee to the ATO without recourse to the patient.
The supply of residential care is GST-free. Residential care includes personal and/or nursing care provided in a residential facility for people who are aged. Typically, a residential facility provides residents with a number of goods and services including accommodation assistance, meals, cleaning services toiletries, consumables and furniture.
As an approved provider, where you supply residential care which is covered by the Quality of
Care
Principles made under the Aged Care Act 1997 the supply is GST-free. Accordingly, meals provided by a nursing home as part of its residential care will be GST-free. However, the supply of additional services for your residents (such as hairdressing or television hire) will attract a GST liability – you will need to ensure that you include an amount for GST in the price you charge for non-residential care services/goods.
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The Charities Consultative Committee (CCC) has provided some guidance on a number of issues in relation to certain supplies made by aged care providers. For example, accommodation supplied by an aged care provider will generally be regarded as GSTfree. A principle ‘test’ will be whether the residential care provided is supplied in the course of providing residential care.
Where the accommodation provided is not residential care and it is supplied in residential premises
– for example, independent living units – it will be an input taxed supply. However, if the accommodation is provided by a charity for less than 75% of the market value or the cost of supply the supply would be GST-free.
Any number of supplies (transactions) that are commonplace within your organisational structure.
For example you might bundle the supply of taxable (telephone service) and GST-free (residential care) supplies into the one fee. Will the taxable supply take on the character of the GST-free supply merely because it is bundled? Invariably, aged care providers (and hospitals) will make a number of mixed supplies for which only one fee is charged. Be aware of the GST implications. If in doubt seek advice.
There may be occasions where an aged care provider renders services that are not residential care.
An example of this might be where a hospital owns premises part of which is rented out to a florist.
Here, GST will apply to the commercial rental.
Best practice – keep abreast of outcomes of the GST Consultative Forum on Health and the
Charities
Consultative Committee. Be aware that the ATO is releasing draft rulings in relation to a number of GST related issues.
Nothing in the GST legislation requires you to issue a tax invoice if the services covered by the invoice are GST-free. However, you need to make a business decision whether to make all invoices comply with the form of a tax invoice or whether to have a separate form of invoice for use when a tax invoice must be issued. If GST must be charged on a supply made and if the value of the
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service or good supplied is more than $50 you will be required to issue a tax invoice.
The ATO has released Regulations and issued draft rulings specifying certain additional information that must be contained in a tax invoice or a recipient created tax invoice. The following information demonstrates what is required by the GST legislation to be included on a tax invoice.
37
GST-inclusive amount of supply $1,000 or more
GSY-inclusive amount of supply between $50 and $1,000
Recipient created invoice
1. ABN of supplier X X X
2. The date of issue of the tax invoice X X X
3. The words ‘tax invoice’ stated prominently
X X
4. Name or trading name of supplier X X X
5. Name of recipient X X
6. Address or ABN of recipient X X
6. Brief description of each thing supplied
X X X
7. Quantity or volume of thing supplied X X
9. The words ‘recipient created tax invoice’ prominently stated
X
10. The words ‘’The GST shown is payable by the supplier’
X
Type of supply Additional information
GST payable on the supply is exactly 1/11 th of the total price
 The statement: “the total price includes GST for the supply”; or

The amount, excluding GST for the supply and the amount of GST.
GST payable on the supply is less than 1/11 th of the total price

The amount, excluding GST for the supply; and

The amount of the GST.
A GST-free, input taxed or pre-1 July 2000 supply

Each taxable supply must be clearly identified; and

For each supply:

The amount payable, excluding GST

The amount of GST payable

The total amount payable for the supply.
3.3.1 A recipient created invoice
A ‘recipient created tax invoice’ is one issued by the recipient of a taxable supply in certain circumstances, including a situation where it would not be practicable for the supplier to issue a tax invoice. The ATO has released Draft Goods and Services Tax Ruling – Goods and Services Tax: recipient created tax invoices (GSTR 1999/D5) on the subject of ‘recipient tax invoices’.
A supplier need not issue a tax invoice if the GST exclusive value of the goods or services supplied does not exceed $50.
38
Best practice – Tax invoices will form the basis of the audit trail for tracking the availability of input tax credits. Make sure you hold a valid tax invoice before you claim an input tax credit in relation to any supply.
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Even though you may make predominantly GST-free supplies, good business practice would suggest you issue complying tax invoices .
ABC Accounting Services
ABN: 123 456 789
Date: 1 August 2000
To: Mount Mary Aged Care
123 Community Street
Anywhere
Qty Description Amount Total
Fees 2 months to 31 July $1000 $1000
GST $100 $100
Supplier name
Supplier
ABN
Must state
It is aTax
Invoice
Issue date
Recipient name and address
Quantity or volume
Amount excluding GST
GST amount
including GST
Description of supply
States that the total includes GST
Amount payable including GST
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
Accurately record the GST paid on all supplies into your business.

Be able to substantiate your claims – you must hold a tax invoice before you can claim an input tax credit. Keep the evidence – records must be kept for five years.

Claim back all the GST to which you are entitled.
4.1 Record
4.2 Substantiate
4.3 Claim
4.4 Creditable acquisitions
The introduction of the GST will require that you examine all your expenses so that you can classify them into acquisitions with GST included in the price, and acquisitions without GST. Identification and isolation of any GST paid by you on your purchases will help you when it comes time to complete your GST return.
You have a financial incentive to keep good records of GST paid:
Missing out on claiming credits for GST paid on the purchase of business inputs will be increasing your costs (compared to your competitors).
Any GST credit entitlement, which is not claimed, is a windfall gain to the Government.
There is a risk of penalties if you cannot substantiate GST credits claimed.
If you have a GST-compliant accounting system (be that manual or computerised), that system should enable all GST paid on business purchases (acquisitions) to be tracked.
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Best practice – speak with your accounting software provider or your accountant to ensure that you have the systems in place to cope with the requirements under the GST system.
The required documentary evidence is:
 a tax invoice for any amount of $50 or more; or
 a sales docket for amounts under $50.
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For anything costing $50 or more, GST credits can only be claimed when you hold a valid tax invoice
– no invoice; no claim (even if you have paid out money). Also, GST credits can only be claimed for business expenses not personal or private expenses. A GST credit is not be available for the
GST paid on some other business expenses which are not deductible for income tax purposes, such as entertainment expenses.
Most business purchases will explicitly include GST in the price. Remember, GST will not be charged where the service itself is GST-free or if the supplier is explicitly or effectively inputtaxed, that is, the supplier is:
 providing services that are identified in the GST legislation as input-taxed (eg, bank fees and charges); or
 unregistered and not entitled to charge GST.
Keep these records for five years.
Best practice - Insist on receiving a tax invoice for all purchases of $50 or more. If a tax invoice is not forthcoming, do not pay the GST portion of the price.
Where you are registered for the GST Business Activity Statements (BAS) will be required to be lodged either monthly or quarterly.
While the BAS is designed to include more than just GST, the information provided here relates to
GST only. You should seek assistance from other sources or your advisers if you need help with any of the other taxes mentioned on the BAS.
At the time of producing this guide, the ATO had not finalised the format for the BAS. However, a draft BAS has been circulated by the ATO and is reproduced at the end of this section. Any references in this section to the BAS are references to the draft BAS, unless otherwise stated.
The BAS is a double-sided, single page document. The first page sets out a summary of your taxes owing (left hand side) and tax refunds/credits owed to you (right hand side) and shows the net amount owed by or refundable to you. The reverse side of the BAS is a calculation sheet to allow you to calculate your GST amounts, and to summarise taxes withheld and income tax instalments.
The figures calculated here and transferred to the front of the BAS help calculate your total tax liability. It is here that everything offsets against each other to calculate your net amount.
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Your ‘GST Net Amount’ refers to your GST payable on your taxable supplies less the input tax credits for the GST you have paid on your acquisitions. If the amount is positive, this is the amount of GST you owe the ATO. If the amount is negative, then this is the amount of GST the ATO owes you.
Other taxes included on the BAS are taken into consideration in working out the ‘Net Amount of your Obligations’ that you owe to or are owed by the ATO. This offsets your GST Net Amount with
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income tax instalments, FBT instalments and any withholding amounts. Any amount payable must be lodged with your BAS. Amounts refundable will be paid into the bank account you have nominated on your ABN registration form.
The calculation sheet asks questions in relation to:

Total taxable supplies

GST-free supplies

Capital acquisitions

Private use acquisitions

Adjustments
As you can imagine, to get these figures from your records, you need to have a good record keeping system. While this calculation sheet may be ‘unnecessary’ for some of you (because your system can calculate your net obligations in respect of taxation (GST and others), it is compulsory to complete every box. The BAS will be rejected if they are not completed.
Please note, as part of the seminar program sponsored by the GST Start UP Assistance Office we will complete an exercise designed to work through completing a BAS.
Need more help:

HELPLINE: Treasury Tax Reform Helpline 13 63 20 (PAYG and FBT issues)

HELPLINE: Business Tax Reform Infoline 13 24 78 (BAS & instructions)
 ‘Business Activity Statement – Instructions’, ATO draft covering information on how to calculate tax obligations and how to complete the BAS (current as at 22 February 2000).
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An input tax credit is an amount allowed to offset the GST included in the price of an acquisition if it was acquired for use in an enterprise. Registered suppliers are entitled to input tax credits which arise on creditable acquisitions. The amount of the input tax credit is equal to the amount of the
GST included in the price paid for the acquisition. However, the amount of input tax credit is reduced if the acquisition is only partly for a creditable purpose.
An entity makes a creditable acquisition if all the following conditions are met:
 the acquisition is solely or partly for a creditable purpose (ie. not for a private or domestic purpose, or relating to making input taxed supplies);
 the supply of the thing to be acquired was a taxable supply to the entity;
 the entity provides or is liable to provide the consideration; and
 the entity is registered or required to be registered.
An acquisition has been defined very broadly in Section 11-10. The definition is intended to cover a very broad range of transactions. It will cover the usual purchase of goods and services, but also extends to the receipt of advice or information; accepting the grant, assignment or surrender of any right; receiving financial supplies; acquiring the right to require someone to do anything, refrain from doing something or tolerate something. However, money that an entity receives as payment for a supply made by the entity is not an acquisition.
No. If the acquisition is only partly for a creditable purpose, or an entity provided only part of the consideration, the input tax credits are apportioned (see below).
An acquisition will be for a creditable purpose to the extent that it is acquired in carrying on the entity’s enterprise. A thing is not acquired for a creditable purpose to the extent that:
 the acquisition of the thing relates to making input taxed supplies; or
 the thing acquired is acquired for a private or domestic purpose.
Under these circumstances the acquisition is only partly for a creditable purpose.
For example: Kramer buys a fax machine for $2200 (including $200 GST). He plans to use the
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machine 20% for private purposes relating to his volunteer activities in the local football club and
80% in his enterprise. Kramer can claim an input tax credit of 80% of the GST paid in the price of the machine, that is, 80% of $200, which is $160.
Where an acquisition is only partly creditable because it relates to making financial supplies, the acquisition may still be taken to be fully creditable in certain circumstances. Subsection 11-30(2) provides for an acquisition to be fully creditable if the value of the financial supplies that an entity makes in a year concluding at the end of the current month, or that an entity is likely to make in the year beginning at the start of the current month, is less than or equal to the lessor of:

$50,000; or
 5% of what the entity’s turnover would be if it included input taxed supplies.
43
Therefore, if an entity’s supply of financial supplies is small in value it will not be denied a full input tax credit for acquisitions made in carrying on its enterprise.
If an entity provides or is liable to provide only part of the consideration for an acquisition then it will need to apportion the amount of input tax credit it can claim. The entity is only entitled to the part of the input tax credit that relates to the consideration paid or liable to be paid by it.
For example: Cheryl runs a cosmetic consulting business. She often travels to make presentations and it is common for the travel costs to be split equally between her and the client. As Cheryl only pays for half of the travel costs, she is only entitled to claim half of the input tax credit for the cost of her travel. The client may be able to claim half of the input tax credit for the half of the costs they pay for.
The entity will be required to make an adjustment to its previously claimed input tax credit where its actual use differs from that originally planned (Division 129).
44
Generally, input tax credits are not available for acquisitions that relate to making financial supplies. However, certain acquisitions will entitle the entity to a partial input tax credit. The amount of the credit and the special situations that give rise to a partial credit have yet to be provided for in regulations.
Yes. An entity may be eligible to claim an input tax credit for the GST included in the price of capital items acquired for use in the enterprise. The test for determining whether an acquisition has been made for the purpose of an enterprise is wider than the test for income tax deductibility.
An entity may be able to claim additional credits relating to:
 pre-establishment costs (Section 60-5): a company may be able to claim an input tax credit for the GST on acquisitions made by another entity, before the company comes into existence, for example, in setting up the company;
 special credit for Wholesale Sales Tax (‘WST’) paid on trading stock on hand at 1 July 2000.
There will be some situations where an entity will have paid GST in the price of a supply for use in carrying on its enterprise, but for which an input tax credit will be denied. These are:
 acquisitions of freehold interest subject to the margin scheme (Division 75);
 certain non-deductible expenditure for income tax purposes (Division 69 - see below);
 the portion of the credit on a motor vehicle which exceeds the car deprecation limit (Section 69-
10); and
 the input tax credit for new motor vehicles purchased after 1 July 2000 is being phased in over two years.
Some expenses are not deductible under the Income Tax Assessment Act 1997 – this is usually
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because there is a private element. Input tax credits are not allowed for acquisitions or importations that are included in the categories listed in section 69-5. Some examples of where an acquisition will not qualify as a creditable acquisition include:
 entertainment;
 relative’s travel;
 recreational clubs and leisure facilities or boats; and
 non-compulsory uniform expenses.
45
Situations will occur where adjustments will need to be made to the amount of GST paid or input tax credits claimed in the previous tax period. For instance, where either too much or too little
GST has been paid, or items purchased are returned to a supplier.
There are basically three circumstances that will give rise to the entity being required to make an adjustment:
 adjustment events (Division 19);
 bad debts (Division 21); and
 a change in the extent of the creditable purpose (Division 129).
A supplier should give the recipient of a supply an adjustment note where there is an adjustment event relating to a taxable supply. The adjustment note must:
 be issued by the supplier of the taxable supply (unless the recipient created the tax invoice);
 contain the ABN of the entity issuing the tax invoice;
 contain any information required by the Commissioner; and
 be in the approved form.
An adjustment note must be issued by the supplier of the taxable goods or services within 28 days of either a recipient’s request, or of becoming aware of the adjustment.
Where an entity uses the cash basis to account for GST then adjustments to the net amount of the entity involving a change in consideration are made in the tax period when the change in consideration is paid or received.
Where an entity uses the non-cash basis to account for GST then adjustments t o the entity’s net amount takes place in the tax period when the entity becomes aware of the need to make the adjustment.
Section 19-10 provides that adjustment events arise where:
 all or part of a supply or acquisition is cancelled (eg. goods are returned due to poor quality);
 the consideration for a supply or acquisition is altered (eg. a volume discount is given due to a certain threshold being exceeded);
 a supply becomes, or stops being taxable; or
 an acquisition becomes, or stops being creditable.
Where any of the above events occur, an adjustment must be made to the net amount attributable to the entity for the tax period. The adjustment must be made, as the occurrence of one or more of the above events means that the amount of GST payable or input tax credits attributed to a previous tax period in relation to the transaction, is no longer correct.
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Yes. There can be both increasing and decreasing adjustment events in relation to both supplies and acquisitions. Section 17-10 provides for two types of adjustments to the net amount:
 increasing adjustments, which add to the net amount; and
 decreasing adjustments, which reduce the net amount.
Increasing adjustments will occur where the GST amount in a previous tax period has been understated. Section 19-50 provides that the adjustment will be the difference between the corrected GST amount (what the GST amount should have been in a previous tax period) and the previously attributed GST amount (the actual GST amount calculated in a previous tax period).
In contrast, a decreasing adjustment will occur where the GST amount in a previous tax period has
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been overstated. Section 19-55 provides that the adjustment will be the difference between the amount of GST that was previously attributed in a previous tax period, and the amount of GST which should have been paid (the corrected GST amount).
In relation to creditable acquisitions, where the correct GST input tax credit amount is greater than the previously calculated amount, a decreasing adjustment equal to the difference will arise.
Creditable acquisitions, where the correct GST input tax credit amount is less than the previously calculated amount, will give rise to an increasing adjustment equal to the difference.
Where the entity does not account for GST on a cash basis, an adjustment may be required where the entity writes off a debt as bad or recovers amounts previously written off. As a supplier, the entity will have a decreasing adjustment where:
 the entity made a taxable supply;
 the whole or part of the consideration for the supply was not received; and
 the entity writes off as bad the whole or part of the debt, or the debt has been owing for 12 months or more.
GST adjustments may also apply in relation to the entity making the creditable acquisition where no payment is made for the supply. Division 21 also provides for adjustments to input tax credits claimed by the recipient where:
 the entity makes a creditable acquisition;
 the whole or part of the consideration is due but the entity is yet to provide the consideration; and
 the supplier of the goods or services provided writes off the whole or part of the debt as bad, or the whole or part of the debt has been due for 12 months or more.
Where the actual use of an acquisition by the entity differs from the original intended use which was the basis the entity used to claim an input tax credit, the entity will need to make an adjustment for the change in use. These adjustments are calculated at the end of an adjustment period. The number of adjustment periods will vary depending on the value of the goods or services acquired. Please refer to the chart on the following page, which assists in determining the number of adjustment periods.
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An adjustment period starts at least 12 months after the end of the tax period which the input tax credit for the acquisition is attributed and ends on 30 June in any year or the end of whichever tax period ends closer to 30 June. For example, if the acquisition is made in March 2001, the first adjustment period will end on 30 June 2002. The adjustment period that applies to a particular acquisition will depend on whether or not it relates to making financial supplies. The following diagram provides a guide to making adjustments to the input tax credits previously claimed by the entity.
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
Understand the obligations of a business under a self-assessment system.

Implement good business systems to minimise the risk of being penalised for errors.
 Don’t leave it to the last minute.
The GST is a self-assessment system. Each business entity must assess its liability and return that liability on a regular basis to the ATO. Under a self-assessment system, a business will be sending less paperwork to the ATO, but the paperwork still has to be done. The self-assessment system is backed up by the ATO’s audit system. There are penalties for errors, although these are less serious for honest mistakes than for deliberate attempts to avoid and evade tax obligations.
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The tax reform legislation imposes many obligations on business enterprises. The most important of these are:

The need to ascertain whether or not you are required to be registered for the GST, based on your current or projected annual turnover;

The need to have a working knowledge of how the GST applies to your business. In particular, to know when GST must be charged on the goods and services you supply and when there is an entitlement to claim credits for GST paid on your business purchases. The liability to pay GST to the ATO is based on your own assessment of the net amount payable (or refundable).

The need to be aware of and to comply with the reporting and payment requirements including lodging GST returns and making GST payments.

The need to retain appropriate documentation so that, in case of an audit, self- assessments can be substantiated.

If there is more than one business entity, the need to make these assessments for each entity.
The GST legislation has some very strong provisions to deter avoidance schemes, such as schemes to reduce or delay a GST liability or to bring forward a refund of GST. The “general antiavoidance provision” in the legislation gives the Commissioner the power to invalidate any scheme, which seeks to take advantage of the GST law in a way that was not intended.
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Best practice – it will take a significant period of time to make the necessary changes to your business systems and procedures. Mistakes can occur in any business. The best protection is to have good administration and accounting systems.
Basically the motto should always be – remember GST. Some of the risks not doing so include:
Normally day to day business supplies of goods and services will be either taxable supplies,
GSTfree supplies or input taxed supplies. However, organisations from time to time enter into 'unusual' or 'non-standard' contracts or arrangements. More often than not these will carry GST implications.
Organisations need to be alert to this and be able to identify them and the GST implication at the first opportunity. Failure to do so may result in GST default, and loss to the organisation.
An organisation may not charge GST on a GST-free supply. Because there is likely to be a mix of taxable and GST-free supplies there is a danger that taxable supplies are incorrectly treated as
GSTfree.
Organisations need to commit time to identify whether or not each type of supply they make is a taxable supply or a GST-free supply. Do not hesitate to seek advice from a professional adviser or the ATO to resolve uncertainties.
When an organisation is registered for GST 1/11th of the price received is GST (unless GST-free supplies or input taxed supplies are made). This GST needs to be paid to the ATO by the due date.
It is very important that at all times an organisation remains aware of its exposure to GST liabilities, to make sure it records the GST owed to the ATO, and to ensure it is subsequently paid by the due date.
When an organisation is registered, GST is always payable on the sales of taxable goods and services. It will always have to pay the GST out of the amount it receives from its customers, regardless of whether or not it has included GST in the price.
If an organisation does not add GST to the price of taxable supplies, the organisation ends up paying the GST.
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Every organisation must make sure that when it prepares its BAS and calculates its input tax credit claims, that it holds valid tax invoices to support the total input tax credit to be claimed.
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Incorrectly claiming input tax credits can expose an organisation to penalties.
Failure to identify GST input tax credit entitlements or to claim them back from the ATO at the first opportunity will cost the organisation money.
You are not entitled to make refund claims for the GST content of acquisitions which relate to supplies which are input taxed. To make a claim to which you are not entitled can attract penalties.
When an organisation is registered for GST, it is in effect acting as a collection agent for the ATO.
It is entitled to claim back the GST it pays on its expenses (as input tax credits), but the balance is due to the ATO. The organisation effectively holds that money on behalf of the Government. In many respects it is similar to PAYE deducted from its employees, it is not the organisation's money!
These provisions have attracted considerable attention since their introduction, primarily because of their ‘general’ nature. Rather than adopting specific anti-avoidance measure which would need to be amended to deal with new schemes as they arose - the government took a sweeping approach by adopting a general antiavoidance provisions (‘GAAP’). This approach was aimed at deterring any scheme that would result in a benefit by taking advantage of the GST law (other than in circumstances provided for under the law) for the avoider (the entity getting the benefit of the scheme).
This approach is similar to the approach taken in Part IVA of the Income Tax Assessment Act
1936.
The GAAP can be divided into two parts:
 criteria for its application; and
 provisions dealing with the consequences from its application.
The GAAP only applies to schemes entered into after 2 December 1998 (when the draft GST legislation was introduced into the Parliament).
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For the GAAP to apply, three criteria must be satisfied:
 there must be a scheme;
 an entity must obtain a GST benefit from the scheme (called an ‘avoider’ in the legislation): this includes reducing the GST payable, increasing a refund, receiving a refund earlier, or delaying a payment; and
 it is reasonable to conclude that:
 it was an entity’s sole or dominant purpose (first test); or
 the principle effect of the scheme was to obtain a GST benefit (second test).
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The two tests are quite different. The purpose test (first test) applies to the entity entering into the scheme without the outcome of obtaining the benefit. The principal benefit test (second test) relates to the entity actually obtaining the benefit. Concerns were raised on the introduction of the draft legislation into Parliament that the GAAP would capture transactions which were of a legitimate commercial nature with an incidental effect of also providing a GST benefit. In response, the Government introduced amendments to clarify the fact that the GAAP would only apply where the schemes giving rise to a GST benefit were artificial and contrived.
As an example, the choice of monthly tax periods over three monthly tax periods (because this enables refunds of GST to be collected earlier) would not necessarily be caught by this provision as the purpose or main purpose of the scheme may not be the reduction of a GS T liability .
The consequences for GST avoidance under the Act are located in Section 165-40. This provision
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allows the Commissioner to negate the GST benefit derived by the avoider through the scheme.
The
Commissioner can also reverse the advantage that decisions relating to timing may have had for the avoider.
Penalties apply where action is taken under the GAAP. The amount of penalty is double (two times) the sum of:
 all the increases a declaration makes to the avoider’s net amounts; and
 all the increases a declaration makes to the GST payable by the avoider on taxable importation.
Decisions made under GAAP are reviewable and subject to the rights of objection under the
Taxation Administration Act 1953 . In addition, there are rights of appeal to the Australian
Administrative Tribunal or Federal Court, and ultimately to the High Court. These review and appeal provisions should provide an approp riate check on ensuring that the Commissioner’s application of the GAAP is appropriate and reasonable .
The penalties for non-compliance with the GST law as authorised by the Taxation Administration
Act
1953 are also imposed for:
 late payment of GST (Section 40);
 failing to pay in the appropriate manner, for example a taxpayer with a turnover of greater than
$20 million not lodging by electronic lodgment (Section 41);
 failing to apply for registration or cancellation of registration when required (Section 42);
 failing to provide GST returns or other information to the Commissioner (Section 43);
 failing to issue tax invoices or adjustment notes (Section 44); and
 faking false statements in relation to the operation of the GST (Section 46).
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
The GST will be cash flow negative for most aged care and hospital enterprises.

Plan now to determine whether your cash flow will be adversely effected from the changed timing of income tax payments.

Take care to ensure that all GST credit entitlements are claimed.

Consider the option of lodging Business Activity Statements monthly to bring forward the receipt of net GST credits.

If the business is accounting for GST on an accruals basis, be aware of the extra complexity in the cash flow equation and look carefully at the trade credit terms offered by yourself and your suppliers
7.1 Cash flow
7.2 Pricing
7.3 Transitional issues
Most businesses selling taxable supplies will enjoy a positive cash flow effect from the GST.
Putting aside for the moment the greater complexity of trade credit, the GST most businesses collect on their sales will exceed the GST paid on business purchases. A surplus of funds will build up through each tax period and will be paid to the ATO after the end of the tax period.
As health care providers you will collect little or no GST from your patients/residents/clients but will still be paying GST on most of your business purchases. You would expect to accumulate a GST refund over the course of each tax period (be that monthly or quarterly). You may be in a position to offset this against other funds held aside for tax obligations, such as tax withheld from wages and income tax instalments.
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There are many factors that you need to consider to ensure that you do not suffer from cash flow problems because of your obligations under the GST system. We will look at the main ones, being:

Cash versus accrual accounting

Purchases – debtor and creditor control;

Purchasing equipment

Timing of lodgement of BAS
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For cash flow purposes you might find that, even though you currently maintain your accounting records under the accrual method, you will be better off, in respect of the GST, to maintain them under the cash method. Or, vice versa. The only way you can decide which option is better for you is to understand how it will affect your cash flow.
Cash accounting is simply accounting for all your transactions when money actually changes hands.
Whenever you pay for something, the transaction is recorded in the accounts. Whenever you receive money (for the provision of a supply) the transaction is recorded in the accounts. With the GST, the timing of the recording of the transactions will not change. Whatever period you pay the invoice in is the tax period in which the transaction is entered. Whenever you enter a transaction that has GST implications that is when the GST liability or availability of input tax credits arises.
When accounting for GST on the cash basis, if you only partially pay for a business purchase then you can only claim a part of the input tax credit, that is 1/11 th of what you have actually paid.
Remember that you still need to hold a valid tax invoice before you can make an input tax credit claim. Equally, when you only receive partial payment on a supply you make, then you will only be liable for 1/11 th of what you actually receive.
Best practice – The best plan for your cash flow is to try and pay any expenses out at the end of the tax period. This means you will have been able to hold onto your money for as long as possible in the month and that when you lodge your return, you will receive the input tax credit back shortly afterwards.
If you operate using an accrual accounting system, you account for revenue and expenses when they are incurred. This means that if you buy items on credit, it is when you actually make the credit transaction that you have incurred the expense. Therefore, as soon as you receive the invoice, you put the transaction through your accounts.
For GST purposes, when you receive an invoice, being a tax invoice, you can claim your input tax credits. So even though you haven’t actually paid anything out, you can claim your input tax credit.
While this sounds very attractive, you should also consider the revenue side because once you issue an invoice to a customer, and it doesn’t have to be a tax invoice, then you are liable to pay
1/11 th of the price on the invoice to the ATO.
Debtor control and timing of invoices – It is critical that you have a good system of maintaining your debtors. As you will have to pay the GST to the ATO for transactions in the previous tax period, you will want to make sure that the cash from these transactions comes in. It is important to chase anyone who owes you money. Again, if you do any invoices on account, make sure you send the statements at the beginning of the month, so it gives you as much time as possible to collect the money. If you have a debtor that is consistently late, you should refuse them credit. You must update your credit policy regularly, and make sure it is followed. Otherwise it is your organisation that will be out of pocket.
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Creditors – are the reverse of debtors. If you owe people money, you want to hold off as long as possible with paying them, in the hope that you can claim back your input tax credit before you actually pay your creditors. You need to be careful that you d on’t actually breach their credit policies or they may refuse you credit. You need to find a happy medium that does not damage your relationship with your suppliers. Use your knowledge on pricing issues and the ACCC guidelines in your negotiations with your suppliers to make sure they are giving you the best deal they can.
The general rule of thumb is that the net price (net of GST) of many business purchases may fall after the introduction of the GST. Goods, which are now subject to a high rate of wholesale sales tax, may tend to fall more than other goods. The highest rates of wholesale sales tax tend to apply to luxury consumer goods that are not normally purchased by businesses. However, the prices of goods now subject to the general rate of wholesale sales tax of 22%, including many items used by businesses, are expected to fall.
As a general rule, specialised medical equipment tends not to be subject to wholesale sales tax
(through the exemption system) and is more likely to be imported (which means there will be less run-on effect from cost reductions within Australia). Expect little change in the cost of that specialised equipment compared with the generic items of business equipment now commonly subject to the general rate of wholesale sales tax of 22%.
Because of supply and demand effects, there is no clear cut answer to the question – buy now and take ‘advantage’ of my exemption from sales tax or wait until after the introduction of the GST? In making an assessment, it is important to know whether the item in question is subject to wholesale sales tax and at what rate.
There are two steps a health care business can take to minimise the likely negative cash flow impact of the GST:

The first is to make sure that all GST paid on business purchases is accurately recorded so that all GST credit entitlements are obtained; and

The second is to consider lodging business activity statements monthly instead of quarterly. For important cash flow reasons, be able to prepare your BAS as early as possible after the tax period has ended to establish whether you are in a refund or payable position. Obviously, if you are in a payable position, you will not want to lodge your return and pay the ATO until the 21 st of the month, the last possible day. Conversely, if you are in a refund position, you will want to lodge your return straight away so that you get your money back from the ATO as soon as possible (that is, within 14 days).
Monthly lodgment means more administrative effort, so there is a judgment to be made about the cost of that compared with the benefit of receiving the GST tax credits earlier. Larger enterprises
(turnover of $1 million or more) will typically account for the GST on an accruals basis. For them, the cash flow equation is more complex. Such businesses may encounter circumstances where:
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
GST included on invoices issued must be paid to the ATO before the client has paid (leaving the business out of pocket);

If there is a bad debt, the GST already paid must be subsequently claimed back; and

If your suppliers impose short trade credit terms, GST on business purchases may be paid, on average, well before a credit can be obtained.
For health care enterprises that account for the GST on an accruals basis, the focus falls almost entirely on the third of the issues listed above. Because GST would not normally apply to the services rendered by health care providers, the first two issues will arise only in rare circumstances.
Where the suppliers themselves have an obligation to account for the GST on an accruals basis, they may be trying to tighten trade credit terms while their clients are trying to lengthen them.
If in doubt, consult your tax accountant.
When pricing your goods and services there are a few factors that you need to look at. All
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businesses need to be aware of the guidelines issued by the Australian Competition and
Consumer
Commission (ACCC) for the pricing of goods and services under the GST.
The guidelines are available on the Internet at www.accc.gov.au. Key features are:
12 prices should be reduced immediately costs are reduced to pass on the full effect of the tax reductions; any increase in price based on the GST should include a full offset for other indirect tax reductions;
 no markup should be applied to the GST component of price;
 prices should reflect only actual, not anticipated, tax increases;
 businesses should not take the opportunity to increase the difference between cost and prices in dollar terms (the dollar margin rule); however
 businesses that experience increases in compliance costs associated with the GST are entitled to recover those higher costs through their prices.
In summary, all businesses are expected to pass on any cost reductions but are entitled to recover any cost increases, including compliance costs, as a result of the GST. When determining your prices in a GST regime, you need to take into account all additional expenses you can expect to incur as a result of the introduction of the GST. In particular, your increased compliance costs.
This can be in the form of monitoring annual turnover, completing a BAS every month (or quarter), changing your accounting systems (if applicable), more staff, training staff, new stationery and invoices and the list goes on. If you find your expenses are increasing be careful not to change any price b y more than 10% as you may breach the ACCC’s guidelines.
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Health care enterprises can expect, as a general rule, that they will not have to increase any prices because of the GST, firstly because most services will be GST-free and secondly because of the favourable cost-side impact of the GST. The GST will lower the net cost (that is, net of GST) of some business purchases. Health care is highly labour-intensive (among the major industry groups, only education is more labour-intensive). GST does not apply to wages, and the GST does not alter the cost of wages. Cost reductions can be expected among some of the goods and the services purchased from other businesses, primarily because of the removal of wholesale sales tax.
An important transitional issue relates to contracts that span the GST implementation date of 1
July
2000.
This is a relatively complex area of the law. The following seeks to give a broad overview of the topic to help health care enterprises identify potential problem areas or uncertainties. Businesses with complex contracts to supply services should seek expert assistance from their tax accountant or other professional adviser.
Rule of thumb:

If you have any long-term contracts to supply services, make sure that when invoicing for those services GST is charged when it applies, which may not necessarily be from 1 July 2000.

If the services were supplied before 1 July 2000, no GST will apply.

If the services are supplied after 1 July 2000, GST may apply from that date or from a later date up to 1 July 2005.

If in doubt, seek expert advice.
The GST legislation establishes a general principle that the GST regime applies to supplies made on or after 1 July 2000. However, there are transitional rules that vary the general rule for certain types of arrangements. The focus in this section is long term contracts.
Many businesses have long term contractual relationships:
13 Some with suppliers in regard to their business purchases (eg, a lease of business premises, or a financial or operating lease of a car or equipment); and

Some with clients in regard to the services they supply (eg, a contract to provide diagnostic imaging or pathology services to a hospital).
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In preparing for the GST, all contractual arrangements need to be reviewed to ascertain the liability to charge (or pay) GST. Businesses need to pay particular attention to contracts when they are the supplier. The onus is always on the supplier to charge GST where it applies. If the supplier does not charge GST when required, GST is still payable to the ATO, but without recourse to the customer.
The point of sale is the supplier’s only opportunity to recover GST from customers. For example, a commercial property landlord who failed to charge GST for the appropriate rental period or at the appropriate rate would be at risk for non-compliance, not the tenant.
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Whether (and when) GST can become payable under a long term contract will depend on whether:
 the contract was entered into before or after the date of Royal Assent to the GST legislation; and
 the contract itself allows an opportunity for review.
Where:

A long-term contract is entered into on or after the date of Royal Assent (8 July 1999), but before the 1 July 2000 start date for the GST. The GST must be charged on that part of the payment under the contract that relates to the period starting 1 July 2000.
For hospitals and aged care providers, with outputs being mostly GST-free, the issues are primarily when GST will start to apply to contracts for business purchases such as the rental or construction of premises or to contracts for the provision of cleaning services in your facility. For example, if you entered into a new lease of business premises after the date of Royal Assent, the GST will kick in for any payment relating to the rental period starting 1 July 2000 (even if that payment is made before 1 July 2000). If the refurbishment of your facility spans 1 July 2000 and the building contract was signed after the date of Royal Assent, the builder will have to separately value the work done prior to 1 July 2000. The GST will apply only to the value of work done on or after that date. If your supplier has not taken into account GST in setting price and the contract has been signed, you may enforce the contract price. Your supplier will be out of pocket not you (given it is the supplier’s responsibility to pay GST to the ATO).
Where:

A long-term contract is entered into before the date of Royal Assent (8 July 1999). There is no opportunity to review or renegotiate the price paid under the contract, but there may be a formula-based price adjustment, such as CPI-based indexation.
The GST will apply to that contract from 1 July 2005 if the contract extends beyond that date. It will not apply to that contract before that date. If the contract ends before that date and a new contract entered into, GST will apply to the new contract.

A long-term contract is entered into before the date of Royal Assent (8 July 1999). There is provision in the contract for the price paid to be reviewed with reference to market prices.
The GST will apply to that contract from the date of effect of a new price following the first marketbased review that occurs after 1 July 2000.
In some circumstances only contracts entered into before 2 December 1998 will gain the above
GST treatment
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Best practice –. If uncertain, seek advice from your tax accountant or other professional adviser.
Many long-term contracts allow for regular re-negotiation of prices. For example, leases of business premises commonly allow for, say, annual reviews of the rent payable using a “current market
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rental” reference point. All such contracts are regarded as reviewable and, as noted above, the
GST will apply from first review date after 1 July 2000.
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
Prepare your business now for the GST by identifying the changes that will be required in business systems —especially accounting systems—and embarking on an orderly program of change.

Ensure the accounting system enables quick and accurate identification of those expenses for which there is entitlement to a GST credit.

Use the checklist as an active tool to ensure the necessary steps are taken in a timely manner.
The GST (and related taxation reforms) will trigger changes in business systems. The comprehensive checklist included in this manual will help you to identify any such changes that may be required and to manage these changes. The checklist is useful for identifying both the things you need to do and the things you may not need to do. It seeks to provide practical help as you prepare for the GST. If you are uncertain about how to manage the transition to the GST please seek the advice of your accountant.
8.1 What changes?
The changes in business systems that will be required include humdrum issues such as overprinting letterhead and stationery with the ABN (or having new letterhead printed) and changing the layout of invoices so that the words “TAX INVOICE” are prominent on the form and the other data requirements are met. Should you have any business clients, client databases may need to be changed to include records of their ABNs. This will not be an issue, however, for individual patients/nursing home residents. As mentioned earlier, you do not have to issue a tax invoice if the service you are rendering is GST-free.
Perhaps the most important area of change will be in the areas of record keeping and reporting.
These underpin your ability to:
 comply with the self-assessment of GST liability; and
 keep the costs of complying with the GST as low as possible without engaging the risk of mistakes which could attract ATO penalties.
If you use computer accounting software, take steps now to ensure that the software is GST compliant or that a GST-compliant upgrade will be available very soon. You may wish to consider whether your current system:

Includes the capacity to charge GST where it applies, that is, is it flexible enough to cope with a mixture of taxable and GST-free supplies?

Helps you decide whether or not GST applies?
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
Allows you to generate a complying tax invoice?

Keeps track of GST paid on business purchases, and conveniently and reliably calculates all
GST paid to facilitate the claiming of GST credits?

Can cope with any adjustments to either the GST payable or the input tax credits that are claimable?

Accounts for GST in all summary statements and reports (ie, does it show GST collected and not yet paid as a current liability, does it show GST paid on business purchases and not yet refunded by the ATO as a receivable)?
Best practice – try to avoid the administrative nightmare of maintaining two different types of accounting systems – one for your general accounting requirements and one for the GST.
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Consider the following example in relation to the Mount Mary Nursing Home. Work your way through the accompanying exercises and questions.
The average monthly accounts (prepared on a cash basis) show the following:
Income:
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
Government grants $110,000 (including GST)

Resident fees $20,000

Interest income $1,000

Sales – bookshop & coffee shop $3,850

Rental income $13,000
Expenses:

Electricity $3,300

Repairs and maintenance $11,000

Administration $550

Salary and wages $66,000

Bank fees $220

Cleaning services $2,200

Depreciation $5,200

Accounting and legal $550

Catering (food) $4,000

Rates $1,100
Other information:
Resident fees are billed monthly in advance. By month end, the average money owing from residents who have not paid their monthly fees is $5,000.
Purchases made, but not yet paid for total $5,500.
They have considered all of the contracts that they are party to and note the following:
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
The contract to provide the cleaning at the home is for a period of four years. The contract commenced on 1 November 1998. The contract provides that the contract fee will rise each year by a set amount.

The contract for the supply of catering services to the Nursing Home commenced in February this year. There is no mention of how the GST might be applied to supplies made under the agreement. The fee for the provision of the catering services is set for the next 12 months, when both parties will sit down and review the services supplied and the contract price.
The Nursing Home will have a policy of only dealing with registered suppliers.
Assume that the cleaning contractor does not provide the Nursing Home with a valid tax invoice.
In any event, the Nursing Home dutifully pays the amount each time when billed (as per the agreement).
The Nursing Home has a very successful combined bookshop and coffee shop on the premises.
All net monies raised through this enterprise are used to help run the nursing home facility.
Volunteers run the enterprise. The accounts are maintained separately to the Nursing Home. The Nursing
Home ‘charges’ the shop a commercial rate of rent for the space.
The Nursing Home has a residential rental property, which it leases out at current market value.
The amount for rates includes rates on this property (of $150).
Assume that Mount Mary Nursing Home is a charitable institution for the purposes of the GST legislation.

Does Mount Mary Nursing Home and Retirement Villas need to register for the GST? Why or why not? What matters need to be considered when deciding whether to register or not?

What are the benefits of registration? What are some of the disadvantages of registration?
 Are there any special ‘registration options’ available to charitable organisations.

Identify and classify the types of supplies made by (out of) Mount Mary Nursing Home. Use the attached schedule to identify whether the supplies you make are taxable, GST-free or input taxed.
Calculate the amount of GST to be remitted to the ATO using the attached calculation sheet..
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
Identify and classify the types of supplies made into Mount Mary Nursing Home. Use the attached creditable acquisitions schedule to identify on which purchases you are able to claim input tax credits.
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Calculate the amount of input tax credits the Nursing Home is entitled to using the attached calculation sheet.

Should the Nursing Home lodge its BAS monthly or quarterly? Would it make a difference if the
Nursing Home received only $1,100 in Government grants and an extra $100,000 in resident fees? Discuss the cash flow implications in relation to monthly or quarterly lodgement.

Should the Nursing Home calculate GST on a cash or non-cash (accrual) basis? What factors should the Nursing Home take into consideration?

Calculate:
 the GST payable; and
 the amount of input tax credits using the draft calculation sheet on the draft BAS and the schedules used to identify supplies in and out of the Nursing Home. Transfer these amounts to the appropriate places on the front of the BAS.
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
Typically, you will report all your tax obligations, including GST, in your BAS.
The Pay As You Go (PAYG) system is a comprehensive new payment and reporting system, which comes into effect from 1 July 2000 and will replace eleven existing systems, namely:
 nine exis ting withholding tax systems, perhaps the best known of which are “Pay As You Earn”
(PAYE), the prescribed payments system (PPS) and the reportable payments system (RPS) with a more pervasive withholding tax environment; and
 provisional tax, and company and superannuation fund income tax instalments.
The timing of fringe benefits tax instalments will also be aligned with other quarterly business tax payment dates.
You need to be aware of the timing of tax payments under the PAYG system for your own business.
In general terms:

Most income tax and FBT obligations will be payable quarterly. Some smaller businesses
(those not registered for the GST and with income tax payable of less than $8,000) will still be allowed to pay income tax on an annual basis if they choose to do so;
14 Small and medium businesses will pay GST (or get their net GST refunds) quarterly. Large businesses (turnover in excess of $20 million p.a.) will pay GST monthly; and

The income tax withheld from the wages of employees will be paid to the ATO quarterly if the amount withheld from wages in the previous year was under $25,000, monthly if $25,000 to under $1 million and weekly if $1 million or above.
Where you are registered for the GST, the paperwork associated with the PAYG system is called the
Business Activity Statement (BAS). This will cover PAYE tax, income tax for individuals, companies and superannuation funds, fringe benefits tax and GST. The ATO has issued a draft of the
Instructions for BAS (shown below).
You will need to lodge a BAS each time you have an obligation to pay tax. If you are paying tax and lodging quarterly, statements must be lodged and any tax obligations paid by the 21 st day of the month following each quarter. For the financial year 2000-2001, the following timetable is relevant to those lodging quarterly:
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Table: PAYG timetable for the financial year 2000-2001
Trading period Known as Date for lodgement of BAS and paying tax obligations
1/07/2000 to 30/09/2000 September quarter 2000 21 October 2000
1/10/2000 to 31/12/2000 December quarter 2000 21 January 2000
1/01/2000 to 31/03/2000 March quarter 2001 21 April 2001
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1/04/2001 to 30/06/2001 June quarter 2001 21 July 2001
The amount of tax remitted to the ATO will be the overall net amount for all the different types of taxes mentioned (where applicable). Hospitals and aged care facilities employing staff would typically be making a payment comprising:

Amounts withheld from payments (comprising, in most cases, tax withheld from wages paid to employees, equivalent to the previous PAYE system) partly offset by

A net refund of GST.
This assumes that your organisation is exempt from paying income tax and/or fringe benefits tax.
Where this is not the case you will need to consider these taxes as well when completing your
BAS.
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
Charities need to be endorsed as income tax exempt charities.

Charities need to be exempt as deductible gift recipients.
11.1 Endorsement as income tax exempt
11.2 Endorsement as deductible gift recipient
From 1 July 2000, a new system of endorsement of charities for income tax exemption will commence. This means that specific endorsement of income tax exempt charities will be required from that date.
Endorsement is the new approval process for charities that are seeking income tax exemption.
Australian organisations are entitled to endorsement if they are regarded as charities and satisfy certain specific conditions.
From 1 July 2000, endorsement is compulsory for a charity to become or continue to be income tax exempt. Accordingly, if you currently have income tax exempt status you will need to be endorsed from 1 July 2000.
A charity seeking endorsement as income tax exempt must first obtain an ABN. Applications for endorsement will be sent out to organisations that indicate on their ABN application that they are a charitable institution or a trustee of a charitable fund.
From 1 July 2000, a new endorsement process will operate for organisations seeking or wishing to maintain deductible gift recipient status (DGR). Specific endorsement of DGR will be required from that date (ie. it is compulsory).
Organisations are entitled to endorsement for DGR if they qualify under one or more of the categories set out in the gift provisions of ITAA 96. An organisation seeking endorsement must first obtain an ABN. Applications for endorsement will be sent out to organisations that indicate on their
ABN application that they are (or consider themselves to be) a DGR. Where your current DGR status has been confirmed by the ATO, the endorsement process is streamlined by quoting your current
900/DGR number on your application for endorsement. If you do not know your 900/DGR number, write to the ATO asking for the number. Where you do not have confirmed DGR status, you should request confirmation now to enable streamlined processing of your application.
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The following checklist aims to help you to prepare for the GST. It is useful for identifying:

The things that must be done.

The things that may be done.

The things that do not need to be done because they do not apply to your business; and
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
Matters on which you may need to seek expert assistance from your tax accountant or other professional adviser.
Use the checklist to create an action plan for your business/enterprise. The action plan should cover:
 what needs to be done to prepare for the GST;
 who will do it (and who will help them); and
 when it should or must be done.
The checklist is divided into the following parts:
12.2 ABN registration
12.3 GST registration
12.4 Transitional issues in the lead up to 1 July 2000 (contracts,)
12.5 Grouping
12.6 Sub-entity registration
12.7 Citing ABN
12.8 Charging GST
12.9 Claiming GST credits
12.10 Endorsement as deductible gift recipient
12.11 Endorsement as income tax exempt charity
12.12 Things you have to look at after 1 July 2000
12.13 GST compliant systems
Because aspects of the GST tax law are still evolving, this checklist should be reviewed from time to time in the coming months and updated as necessary.
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Issue Action required Relevant dates Who is responsible
Completed
Yes/No
You are a company. An ABN is required. Get registration forms from the
ATO.
Take required action now.
Although the deadline for applying for an ABN is
31/05/2000, it is not recommended that you leave it to the last minute
You are engaged in an
‘enterprise’, which includes activities done in the form of a business or activities done on by a charitable institution.
As above Take required action now.
Although the deadline for applying for an ABN is
31/05/2000, it is not recommended that you leave it to the last minute
You require endorsement as an income tax exempt charity.
As above Take required action now.
Although the deadline for applying for an ABN is
31/05/2000, it is not
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recommended that you leave it to the last minute
You require endorsement as a deductible gift recipient.
As above Take required action now.
Although the deadline for applying for an ABN is
31/05/2000, it is not recommended that you leave it to the last minute
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Issue Action Relevant dates Who is responsible
Completed
Yes/No
Your business turnover
(current or projected) is
$100,000 p.a. or more
You must register for the
GST. Do this at the same time you register for an ABN.
As for ABN registration.
Your business turnover
(current or projected) is less than $100,000 p.a
You may choose to register for the GST.
Remember, you must be registered to be able to claim back input tax credits.
As for ABN registration.
You are not sure about the implications of registering for GST on your business.
Get assistance from your tax adviser.
Sort this out now.
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Issue Action Relevant dates Who is responsible
Completed
Yes/No
Long term contracts spanning the introduction of the GST
Review contracts to determine your position in relation to any responsibilities under the GST. Where applicable, determine who is responsible for
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paying the GST (eg can your supplier charge you or will he have to bear the burden)
Now.
Entering into contracts that will commence after the introduction of the GST.
Be prepared to renegotiate pricing where costs are likely to fall (or rise). Ensure optimum position for your business.
Now.
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Issue Action Relevant dates Who is responsible
Completed
Yes/No
You have an
‘organisational’ structure of closely related entities.
Perhaps you need to consider the grouping provisions. This might simplify many intra-entity transactions as these are ignored for GST purposes.
However, it requires a central point of administration so that GST input tax credits and GST liabilities can be consolidated for all members of a GST group.
Consider whether to apply to the ATO to be treated as a GST group.
Failure to recognise the most appropriate structure for GST purposes may have significant cashflow implications.
Seek advice from your tax adviser.
Review group structure to achieve the most efficient group structure. Start doing that now – group registration deadline is 31 May
2000.
You can apply for group registration at the same time you register for GST.
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Issue Action Relevant dates Who is responsible
Completed
Yes/No
You have small, independent units that are identifiable by the nature of their activities and which keep separate accounting records. For example, a
‘fundraising’ sub-entity.
Scope to take advantage of registration threshold.
Consider whether to elect to treat any subentities as separate for
GST purposes.
Seek advice from your tax adviser.
Elect to treat any subentities as separate for
GST purposes.
Now.
At the same time you register for GST.
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Issue Action Relevant dates Who is responsible
Completed
Yes/No
Appearance of your ABN is required on any tax invoice you issue. Should be contained on all stationery
(remember, its an
‘identifier’).
Overprint/stamp existing stationery (letterhead, invoices etc) with your
ABN. In the alternative, order new stationery.
Take action as soon as practicable after you have received notification of your
ABN.
Issue Action Relevant dates Who is responsible
Completed
Yes/No
Although your supplies will be, typically, GST-free you need to determine whether you make any taxable supplies.
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Review the transactions/supplies you make. Be able to identify any special (ie taxable or input taxed supplies).
Start now. Have a thorough review completed before 30
June 2000.
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Issue Action Relevant dates Who is responsible
Completed
Yes/No
You need to be able to reliably identify where/when you have paid GST on purchases for your business. Remember, you must hold a valid tax invoice before you can claim an input tax credit.
Put systems in place to ensure that the payment of GST is accurately recorded and can be tracked on all business purchases.
Start now. It is recommended that you have GST compliant accounting system in place well before the introduction of the GST on 1 July 2000.
Issue Action Relevant dates Who is responsible
Completed
Yes/No
From 1 July 2000, as a charity you will need specific endorsement of your deductible gift recipient status (DGR).
When applying for your
ABN indicate that you are or consider yourself entitled to be a DGR.
The ATO will then send out an application for endorsement.
As for ABN registration.
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Issue Action Relevant dates Who is responsible
111

Completed
Yes/No
From 1 July 2000, as a charity you will need specific endorsement of income tax exempt status.
When applying for your
ABN indicate that you are a charitable institution. The ATO will then send out an application for endorsement.
As for ABN registration.
Issue Action Relevant dates Who is responsible
Completed
Yes/No
New income tax schedules. Implement new income tax schedules for employees.
First pay after 1 July
2000.
Regular monitoring of GSTrelated decisions.
Important where you have based decisions on thresholds (eg to register or not to register). Needs to be reviewed constantly to ensure that the situation has not changed.
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Issue Action Relevant dates Who is responsible
Completed
Yes/No
Whether you will account for the GST on a cash or accruals basis. Will that require changes to the way your accounts are compiled?
If unsure, talk to your accountant and/or to the supplier of your accounting software.
Now.
You need to record any GST charged. You also need to be able to identify any mixed supplies (GST-free and taxable)
Ensure that, firstly you have an accounting system in place and
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secondly that your system (manual or computerised) is GST compliant (ie, it can cope!)
Begin preparation / planning / implementation now.
You need to be able to generate a tax invoice.
As above As above
You need to accurately record any payments of
GST on business inputs.
As above As above
You need to be able to generate tax period turnover figures for PAYG calculations
As above As above
It would be beneficial if any summary statements account for the GST (paid & charged).
As above As above
You need to know when you will be lodging a BAS
(monthly/quarterly)
As above As above
You need to be able to quickly and easily generate figures needed for the quarterly or monthly BAS.
As above As above
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
Information available from the GST Start-Up Assistance Office website at www.gststartup.gov.au or the GST Assist Help Line on 13 30 88.

Guide to GST explains how GST works and how to account for GST. You will receive a copy when you register. Also available at www.taxreform.ato.gov.au

More than 30 industry booklets with industry-specific examples explaining how The New Tax
System and GST work. For a copy call 13 24 78 or go to www.taxreform.ato.gov.au

Satellite seminars and videos about how to register (available February), record keeping
(available March) and how to complete the BAS (available May). Look for advertising and promotional material about these events.

More than 50 fact sheets on a range of topics. Available by calling 13 24 78, A Fax From Tax on 13 28 60, or www.taxreform.ato.gov.au

How to keep your business records now and in the future
Step-by-step instructions sent to all registered businesses with an annual turnover less than $1 million using cash accounting. An interactive CD-ROM version (available mid-March) will also be sent to qualifying registered businesses. The booklet version is available from www.taxreform.ato.gov.au

Wallchart showing how to record typical supplies and acquisitions for some businesses/occupations. For a copy, call 13 24 78 or go to www.taxreform.ato.gov.au
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
Pay As You Go – An introduction for Business gives an overview of how PAYG replaces company and super fund instalments and provisional tax for businesses. For a copy, call 13 24 78 or go to www.taxreform.ato.gov.au . A comprehensive guide to PAYG will be available in March 2000.
78

Business Activity Statement Instructions show how all tax payments (GST, PAYG and FBT) are consolidated and generally paid quarterly. You’ll receive a copy when you register. From
February you can practice filling in an activity statement at www.taxreform.ato.gov.au

Fact sheets on aspects of the PAYG system. Available by calling 13 24 78, A Fax From Tax on
13 28 60, or www.taxreform.ato.gov.au

Redeemable certificates to the value of $200 for GST-related goods and services. For information call the GST Assist Help Line on 13 30 88.

Tax deductions for such costs as obtaining advice and training staff. For information call 13 24
78.

Immediate tax write-off for computers and software for The New Tax System purchased between
1 July 1999 and 30 June 2000. For information call 13 24 78.

Free record keeping software from mid March. Qualifying businesses will receive a CD-ROM copy after registering.

Call 13 24 78, or use the search facility at www.taxreform.ato.gov.au

Contact the ATO by faxing 1300 139 031, emailing replyin5@ato.gov.au or writing to PO Box
9935 in your capital city. You can expect an answer within a week (a little longer if by mail).

Information available from the GST Start-Up Assistance Office website at www.gststartup.gov.au or the GST Assist Help Line on 13 30 88.

GST Business Skills – an Action Guide explains how to get ready for GST. Available from 13 30
88 and at www.gststartup.gov.au

GST Business Skills Manual – a survival kit for Aged Care Providers and Hospitals explains what aged care providers and private hospitals should be doing in relation to getting ready for the GST and other tax reform measures. Available at www.cha.org.au .
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
Your guide to changes to Fringe Benefits Tax reporting arrangements . For a copy or any questions about FBT contact the FBT enquiry service on 13 33 28 or go to www.taxreform.ato.gov.au

ACCC Pricing Hotline on 1300 302 502 has information on price exploitation and pricing.
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Q. We outsource many of our maintenance and catering activities. Will the suppliers charge us
GST?
A. Yes, if they are registered for GST, in which case you can claim an input tax credit if the service is necessary for you to carry on your business (the supply of residential care or hospital treatment
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for example). If your suppliers are not registered you will not pay GST but in all probability their price will be inflated to cover the GST they have had to pay and cannot claim back on their own inputs.
In addition, if a supplier is not registered and does not, therefore, give you an ABN then you will be obliged to withhold tax at 47.5% from any payments you make to it.
Q. What is the GST status on operational charges to residents?
A. Nursing home and hostel residents will not pay the GST on their daily fees. Why? Because the supply of ‘residential care’ is GST-free (provided the services supplied are covered by Schedule 1 to the Quality of Care Principles made under the Aged Care Act 1997 ). However, residents will normally pay GST on fees or charges in relation to ‘additional services’ such as hairdressing and television hire. Why? Because such supplies are taxable supplies.
Q. If we decide not to charge our residents GST on taxable supplies of goods and services (such as television hire), do we escape paying GST?
A. No. If you are registered, you must account for the 10% GST on the taxable supplies you make.
However, the ATO is not ultimately concerned with who actually bears the GST. The ATO simply requires that you remit 1/11 th of any consideration received for goods or services you supply.
Therefore, where you choose not to incorporate the GST into your prices, you will effectively be paying all the GST yourself.
Q. Is there any GST payable on accommodation bonds/charges?
A. Residents of nursing homes and hostels will not pay GST on their accommodation bonds or charges. They are input taxed supplies.
Q. We provide full board and lodging for staff in our residences. What GST is payable?
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A. This is a complex area. Basically, the accommodation for staff will be an input taxed supply as it is classified as residential rent. You will not have to account for GST on the supply of the accommodation, however nor will you be able to claim any input tax credits in respect of any of the expenses incurred in the cost of providing that accommodation. These include the building of the premises, maintenance, power, and insurance, all of which will need to be apportioned if the residential area is part of a building otherwise used to provide taxable or GST-free supplies. The supply of meals to staff will be subject to the particular GST rules for the supply of food – some supplies of food are GST-free others are taxable.
Q. Is there any problem related to category 8 residents and residents who are paying the full subsidy due to the income testing arrangements?
A. Aged care services funded under the Aged Care Act 1997 will be GST-free, including services for residents not receiving subsidies (for example, RCS 8 residents and residents whose fees cover their care costs). No GST will be payable on services covered under Schedule 1 of the Quality of
Care Principles, including meals, accommodation, care and other daily living needs.
Q. What are the implications for residents of Extra Care facilities where the Extra Service fees include amounts for goods and/or services outside the Quality of Care Principles?
A. Residents of Extra Service facilities will not pay GST on their extra service fees, except for amounts that are for additional services, such as hairdressing and personal television hire).
Q. Will services provided to the community under the CACP’s, HACC or the like be subject to the
GST?
A. Community Aged Care Packages and services funded under the Home and Community Care
Act will be GST-free, as will accommodation support and community care services funded by other
Government programs.
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Q. Will community care services not funded by Government, which provide support to older people – such as assistance with transport, housework, shopping, meals preparation, counselling and advocacy be considered charitable institutions for the purpose of the GST?
82
A. The term ‘charitable’ has the same meaning for GST as it has for income tax. It is likely that an organisation providing community care would satisfy the charitable purpose of ‘relieving poverty, sickness and the needs arising from old age’. Where an organisation is unsure of its status as a charity it should obtain a ruling from the ATO. Privately funded community care services are
GSTfree if they are provided to one or more aged persons and they are of a type specified by item 2.1 of Part 2 of Schedule 1 to the Quality of Care Principles made under the Aged care Act 1996.
Such care services are daily living activities assistance and include assistance with bathing, eating, personal hygiene and respite care.
Q. Is GST payable on the grants received from the Government?
A. It will depend on the nature of the grant – if it is for a specific purpose it will be subject to GST.
That is, where, among other things, the grant is paid in exchange for the grantee’s entry into an obligation to the grantor to do something there is a taxable supply (by the grantee). The obligation may be to use the granted money to provide particular services to the community in exchange for the grant, for example the provision of aged care or hospital facilities. The ATO has issued a draft ruling (GSTR 1999/D13) on this area. Also, the Federal Government has indicated that it will gross up the grants to certain organisations (charitable/non-profit for example). Grossing up a grant means increasing the amount of a grant in order to cover the GST liability of the grantee who is making a taxable supply. Where a grant is grossed up by the amount of the GST on the grant, your organisation should receive the same net amount, as if no GST applied.
Q. Will privately purchased care be GST-free?
A. Privately purchased nursing and personal care services will be GST-free. (Reference Schedule
1 to the Quality of Care Principles under the Aged Care Act 1997 ). Other privately provided HACCtype services, such as delivered meals, home help and gardening, are not GST-free unless provided as part of a GST-free personal care package.
Q. Will the charges for care levied on residents in retirement villages be subject to GST?
A. Retirement village residents who receive nursing and personal care will receive the same treatment as nursing home and hostel residents. Such supplies will be, generally, GST-free. They will not pay GST on their fees and accommodation charges.
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Q. Will the sale of buildings owned by charities and organisations that use them for noncommercial
GST-free activities be subject to GST? Is the sale of a gifted real property GST-free, regardless of changes made to that property or usage of that property?
A. The sale of buildings, regardless of their prior use, is generally a taxable supply. However, there are some exceptions to this principal:

If the premises are, or are intended to be used for residential accommodation, the sale will be input taxed, unless the sale constitutes the sale of new residential premises. An example of a new residential sale would be a church that has been turned into a residence and is sold for the first time as a residence. In this instance, the sale would be taxable. However, if the church had acquired a property as a residential property, any subsequent sale (provided it was still used for residential purposes) would be input taxed.

Sales of gifted property will not be GST-free. Such sales will be treated in the manner described above.
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Q. Self care units are aged care facilities that have residents some of whom receive funding and others that do not. The numbers of funded to unfunded positions varies constantly. Does this mean that residents who are funded will receive GST-free supplies and those that are not funded will have to pay the GST?
A. The supply of residential care will be GST-free under section 38-25 of the A New Tax System
(Goods and Services Tax) Act 1999 (the GST Act) if those services:


Are covered by Schedule 1 of the Quality of Care Principles;
Are provided through a residential care service within the meaning of the Aged Care Act 1997 ; and

The supplier is an approved provider within the meaning of the Aged Care Act 1996.
Provided the care qualifies under the section the supply is GST-free irrespective of whether they are funded or unfunded positions.
[This situation serves to illustrate that the GST treatment to be applied to any particular transaction is not dependent on who the recipient or supplier is, it is dependent on the type of transaction involved]
Q. There are a number of different ways in which residents of Aged Care facilities can receive their meals including:

Attending the meals area in the facility;

Meals provided to those same residents by services funded under the HACC program; or
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
Meals that are purchased for re-heating and delivered to private health care clients.
What will be the GST treatment in each case?
A. In each of these examples, if the meals are provided as part of residential care as determined in section 38-25 of the GST Act or community care as determined under section 38-30 of the GST
Act, they are GST-free. If they are not GST-free under those provisions and the supplies are for consideration that is equal to or greater than 50% of the GST inclusive market value (or 75% of the cost of supply) and the facility is a charitable institution registered for the GST, then the supplies would be GST-free.
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The aim of this section is to identify a number of critical GST implementation issues for the aged care and hospital sectors. Hopefully, you will be well on the way to planning for the GST – in which case you can use this chapter to review the measures you have taken so far. If your preparations are not particularly advanced, then please use the information provided below as a guide to help you start planning for and implementing the GST.
The size and complexity of your business will determine the type of implementation processes necessary to ensure GST-readiness. Even the smallest business among you will have fairly complex transactions. An understanding of each transaction and how that transaction flows through the business is necessary prior to identifying all of the GST impacts for your business.
For some of you the following may seem more complicated than your needs. In which case use it as a guide or only apply those areas most appropriate for your business. There are, unfortunately, no hard and fast rules here - except be ready.
Steps you might want to consider include:
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GST steering committee
Establish a multi-disciplinary GST steering committee. Representatives of each division and IT, legal, finance, tax, sales, marketing and purchasing people should be considered for inclusion on the committee. Do not underestimate the value of involving representatives from all areas of your business as the GST has repercussions across your business (not just the finance people).
GST program plan
Develop a GST program plan to review the GST requirements of the your business and design the most appropriate course of action. Budgeting for the costs of GST implementation and allocating resources to the program are critical.
GST strategic overview
Conduct a strategic overview of the transactions that flow through every area of your business, including the administrative functions. This high level review should determine which supplies will be taxable, input taxed and GST-free. It should also address other GST impacts on your business, such as IT and business process impacts, commercial impacts, and communication impacts.
Detailed business process review
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Undertake a detailed review of the processes within your business and map the treatment of transactions through your business. GST is a tax on transactions: to properly collect the tax and ensure the business complies with the GST rules, the money flows and transaction flows should be mapped throughout your business. GST impacts should be identified and assessed .
Implementation
A detailed implementation plan must be developed, prioritising the actions that must be taken.
These actions are likely to include IT systems remediation, adaptation of business processes and compliance manuals, renegotiation of commercial contracts, adjustments to prices, and education and awareness training for staff.
[ Read the following discussion in conjunction with the checklist found in section 12 ]
The types of implementation issues you may be facing will depend, largely, on the nature and size of your business. For example, a small, single entity nursing home will have different considerations to that of a large hospital. The following seeks to identify a number of generic implementation issues, which may arise for aged care providers and hospitals.
Registration: grouping/sub-entities

Under the law, related entities may seek to be treated as a group (provided certain requirements are met). The effect of forming a group is that a representative of the group is responsible for the GST rights and obligations of the entire group. Intra-group transactions can be ignored for GST purposes, which will reduce the administrative burden. Any decision to group will have flow through effects for the processes of your business, for example accounting system requirements across the group.

The GST legislation also allows some kinds of non-profit entities to choose to have some (or all) of their separately identifiable branches (units) treated as separate entities for GST purposes (provided certain conditions are met). These measures provide scope to take advantage of the registration threshold. Consider in relation to fundraising activities for example.
Review organisational structure to achieve the most tax effective structure. Be mindful of the registration deadline - 31 May 2000.
Contracts spanning 1 July 2000
Certain contracts spanning the introduction of the GST are subject to special transitional provisions.
Where, under ordinary circumstances, supplies under such contacts would be subject to GST, they may be GST-free. Their GST status is dependent on:

The date the contract was entered into;

Whether there would be an entitlement to an claim full input tax credits; and
 Whether the contracts contain a ‘review opportunity’.
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Potentially, the GST status of such contracts could have a negative cashflow/financial impact for your business, especially where you have assumed that because the contract was entered into
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before the introduction of the GST it would not impact.
Policies in relation to external contractors who are registered
Generally speaking, registered contractors will charge GST on their supplies to you.
The introduction of the GST presents both risks and opportunities for your business. Those of you who are well organised for its implementation will be best placed to minimise the risks and maximise the opportunities.
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