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Guide for small business

NAT 301409.2010

For more informationvisit www.ato.gov.au

GST for small business

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COMMONWEALTH OF AUSTRALIA 2010

This work is copyright. Apart from any use as permitted under the Copyright Act 1968,no part may be reproduced by any process without prior written permission from theCommonwealth. Requests and inquiries concerning reproduction and rights shouldbe addressed to the Commonwealth Copyright Administration, AttorneyGeneralsDepartment, 35 National Circuit, Barton ACT 2600 or posted athttp://www.ag.gov.au/cca

PUBLISHED BY

Australian Taxation OfficeCanberraSeptember 2010

JS 17268

OUR COMMITMENT TO YOUWe are committed to providing you with accurate, consistentand clear information to help you understand your rights andentitlements and meet your obligations.

If you follow our information in this publication and it turns outto be incorrect, or it is misleading and you make a mistake asa result, we must still apply the law correctly. If that means youowe us money, we must ask you to pay it but we will not chargeyou a penalty. Also, if you acted reasonably and in good faith

we will not charge you interest.If you make an honest mistake in trying to follow our informationin this publication and you owe us money as a result, we willnot charge you a penalty. However, we will ask you to pay themoney, and we may also charge you interest.

If correcting the mistake means we owe you money, we will payit to you. We will also pay you any interest you are entitled to.

If you feel that this publication does not fully cover yourcircumstances, or you are unsure how it applies to you,you can seek further assistance from us.

We regularly revise our publications to take account of anychanges to the law, so make sure that you have the latest

information. If you are unsure, you can check for a more recentversion on our website at www.ato.gov.au or contact us.

This publication was current at September 2010.

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GST FOR SMALL BUSINESS 1

CONTENTS

ABOUT GST FOR SMALL BUSINESS 3

CHECKLIST FOR BUSINESS 3

GETTING STARTED 4

What is GST? 4

How does the GST system work? 4

01REGISTER FOR GST 6

Who must register? 6

Working out your GST turnover 6

How to register 7

What does being registered for GST mean? 7

GST groups 7

02THE TYPES OF SALES YOU MAKE 8

Taxable sales 8

GSTfree sales 9

The sale of a business as a going concern 10

Input taxed sales 10

03ISSUING AND OBTAINING TAX INVOICES 12

Issuing tax invoices 12

Requirements of a tax invoice 12

When you need a tax invoice 14

04CLAIMING GST CREDITS 15

When you can claim GST credits 15

When you cannot claim GST credits 15

Special rules for claiming GST credits 17

05 ADJUSTMENTS

What an adjustment is 18

When you must make an adjustment 18

Adjustment notes for increases in price 18

06 ACCOUNTING FOR GST 19

Accounting for GST on a cash basis 19

Accounting for GST on a noncash basis 19

Records you must keep 20

Simplified accounting methods for food retailers 20

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CONTENTS

2 GST FOR SMALL BUSINESS

07REPORTING AND PAYING GST 21

How to report GST amounts and claim GST credits 21

Options for reporting and paying GST 21

When to report and pay GST 22

How to pay GST amounts 23

DEFINITIONS 24

INDEX 27

MORE INFORMATION inside back cover

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This guide explains what you must do to meet your GSTobligations if you carry on a business and you do any ofthe following:

n have a GST turnover of $75,000 or more ($150,000or more for nonprofit organisations)

n have a GST turnover of less than $75,000 (less than$150,000 for nonprofit organisations) but choose toregister for GST

n provide taxi travel.

TERMS WE USE

When we say:

nyou, we mean you as a business, for example, a soletrader, a partnership, a trustee of a trust or asuperannuation fund, or a company

nbusiness, we mean the GST term enterprise

nannual turnover, we mean your aggregated turnover,that is the amount you use to work out your eligibility forsome small business concessions. It includes the turnoverof businesses you are connected with

nGST turnover, we mean the turnover figure you use to

work out if you need to be registered for GST (see page 6).It doesnt include the turnover of businesses you areconnected with

nsales, we mean the GST term supplies

npurchases, we mean the GST term acquisitions

npayment (made or received), we mean the GST termconsideration

n GST credit, we mean the GST term input tax credit

nproperty, we mean the GST term real property.

Some technical terms used in this guide may be new to you.They are explained in the list of Definitions (see page 24).

Throughout this guide you will find important notes (look forthe symbol) which will help you with key information.

You will also find more information boxes (look for thesymbol) which will show any further steps you may need totake or supplementary information you may need to refer to.

Does your business have a GST turnover of $75,000 ormore ($150,000 or more if it is a nonprofit organisation)or do you provide taxi travel?

If so, you must:

register for GST

work out whether your sales are taxable, GSTfreeor input taxed

include GST in the price of your taxable salesissue tax invoices for your taxable sales

obtain tax invoices for your business purchases thathave GST included in their price

work out whether you have any adjustments

account for GST on a cash or noncash basis, and

report your sales and purchases by lodging activitystatements (even if the amount to be reported is zero)and pay GST to us.

You can also claim GST credits for GST included in theprice of most business purchases.

CHECKLIST FOR BUSINESSABOUT GST FORSMALL BUSINESS

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HOW DOES THE GST SYSTEM WORK?Generally, registered businesses:

n include GST in the price of sales to their customers

n claim credits for the GST included in the price of theirbusiness purchases.

So, while GST is paid at each step in the supply chain,businesses do not actually bear the economic cost of the tax.The cost of GST is borne by the final consumer, who cannotclaim GST credits.

WHAT IS GST?Goods and services tax (GST) is a broadbased tax of 10%on most goods, services and other items sold or consumedin Australia.

GETTING STARTED

EXAMPLE: Collecting and paying GST on the sale of goods

A timber merchant sells timber to a furniture manufacturer for $110 (including $10 GST). The manufacturer uses the timber tomake a table, which he sells to a furniture retailer for $220 (including $20 GST). The retailer then sells the table to a consumerfor $330 (including $30 GST).

Raw materials Net GST to pay

A The timber merchant needs to make$100 on the sale of the timber. So hesells the timber to a manufacturer for$110, keeps $100 and pays $10 GSTto us.

A Timber merchantsells timber for $110,including $10 GST

GST on sale $10

Assume no GST credit $0

Net GST to pay $10 Timber merchantpays $10 GST to us

Production Net GST to pay

B The furniture manufacturer can claima credit for the $10 GST included in theprice he paid to the timber merchant.The manufacturer offsets that $10against the $20 collected on the saleof the table to the retailer, and pays$10 GST to us.

B Furnituremanufacturer sellstable for $220,including $20 GST

GST on sale $20

Less GST credit $10

Net GST to pay $10 Manufacturer pays$10 GST to us

Distribution Net GST to pay

C The furniture retailer can claim acredit for the $20 GST included inthe price he paid to the furnituremanufacturer. The retailer offsets that$20 against the $30 GST collected onthe sale of the table to the consumer,and pays $10 GST to us.

C Retailer sells tablefor $330, including$30 GST

GST on sale $30

Less GST credit $20

Net GST to pay $10 Retailer pays$10 GST to us

Retail GST to pay

The consumer who buys the table

bears the $30 GST included in theprice, as consumers cannot register forGST and cannot claim GST credits.

Consumer pays $330 (including $30 GST)

to the retailer

$30 total GSTpaid to us

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GETTING STARTED

EXAMPLE: Offsetting GST credits

You are registered for GST and charge three customers a total of $20,790 (including $1,890 GST) for services provided in theMarch quarter (January, February and March).

For the same quarter, you can claim a GST credit of $500 for the GST included in the $5,500 you paid for business purchases(including paper, electricity, postage and phone services).

Rather than paying $1,890 GST to us, you offset the $500 GST credit (that is, the GST included in the prices you paid for yourbusiness expenses in the quarter) against the $1,890 GST you must pay on your sales for the quarter. You then pay a net

amount of $1,390 to us.

Sales Sale price GST to be paid

A and B Both ZPB Pty Ltd and PXFPty Ltd are registered for GST andcan claim a credit of $50 and $1,800respectively for the GST included inthe price they pay for your services.

A Printing servicesto ZPB Pty Ltd

$550 (including $50 GST) $50

B Printing servicesto PXF Pty Ltd

$19,800 (including $1,800 GST) $1,800

C As consumers, Mr and Mrs Smithcannot claim a GST credit for the GSTincluded in the $440 they pay you.

C Photocopyingservices to Mr andMrs Smith

$440 (including $40 GST) $40

GST on sales $1,890

Purchases Purchase price GST credit

Paper, electricity,postage, phone

$5,500 (including $500 GST) $500

Net GST you pay to us $1,390

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01

WORKING OUT YOUR GST TURNOVERYour GST turnover is your gross business income (not yourprofit), excluding any:

n GST you included in sales to your customers

n sales that are not for payment and are not taxable(for example, some sales to associates)

n sales not connected with a business you carry on

n input taxed sales you make

n sales not connected with Australia.

If you are not registered for GST, you must check each monthto see whether you have reached the GST turnover threshold.If you reach the threshold, you must register for GST within21 days.

You reach the GST turnover threshold if either:

n your turnover for the current month and the previous11 months is $75,000 ($150,000 for nonprofits) or more current GST turnover, or

n your turnover for the current month and the next 11 monthsis likely to be $75,000 ($150,000 for nonprofits) or more projected GST turnover.

However, if your current GST turnover reaches or exceeds

the GST turnover threshold, but we are satisfied that yourprojected turnover will be below the threshold, you do nothave to register for GST.

In working out your projected GST turnover, do not includeamounts you received for the sale of a business asset(such as the sale of a capital asset) or for any sale you made,or are likely to make, solely as a consequence of ceasingor substantially and permanently reducing the size ofyour business.

If you are a member of a GST group, your turnover includes theturnover of other group members (except supplies made fromone member of the group to another member of the group).

If you do not register for GST and you are required todo so, you may have to pay GST on the sales you havemade since the date you became required to register even if you did not include GST in the price of those sales.Not only will you be out of pocket for the amount of GST,but you may have to pay penalties and interest.

WHO MUST REGISTER?If you carry on a business, you must register for GST if yourGST turnover is at or above the GST turnover threshold, that is,it is $75,000 or more ($150,000 or more for nonprofitorganisations).

You must also register for GST if you provide taxi travel as partof your business, regardless of your GST turnover. Taxi travelmeans transporting passengers by taxi or limousine for fares.

For more information about your GST obligations if youprovide taxi travel, refer to:

nHow to complete your activity statement for taxi drivers(NAT 11368)

nActivity statement payment card and the taxi industry(NAT 10748)

nRecord keeping for taxi drivers (NAT 14099).

If you carry on a business but have a GST turnover of lessthan $75,000 (or $150,000 for nonprofit organisations),you can choose to register for GST. Generally you mustthen stay registered for at least 12 months.

You register only once for GST, even if you operatemore than one business. For example, the company ABCPty Ltd operates two businesses: ABC Building HardwareSupplies and ABC Plumbers. ABC Pty Ltd registers oncefor GST. This registration covers the companys twobusinesses.

REGISTER FOR GST

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01 REGISTER FOR GST

HOW TO REGISTERYou must complete an application to register for GST. You canuse the same application to register for an Australian businessnumber (ABN) if you do not already have one. You need an ABNto be part of the GST system. Your ABN will also be your GSTregistration number.

You can register by:

n visiting www.business.gov.au

n phoning 13 28 66 to obtain the appropriate form

Application to register for an ABN individuals (sole trader)(NAT 2938)

ABN registration for companies, partnerships, trust andother organisations (NAT 2939)

n asking your tax agent.

After you register, we will notify you in writing of your registrationdetails, including the date your registration is effective from andyour ABN. You will receive your ABN immediately if you registeronline as long as you are able to provide all the information weask for and have proof of your identity.

WHAT DOES BEING REGISTERED FOR GST MEAN?

If you are registered or required to be registered for GST, youinclude GST in the price of most goods and services you sell.See pages 8 and 12 for when you do and do not have toinclude GST.

You must complete an activity statement every monthor quarter, or an annual GST return, to:

n report and pay the GST on your sales

n claim credits for any GST included in the price of yourbusiness purchases (provided you have a tax invoice andyou are entitled to claim a GST credit).

The reporting period you use is called a tax period. See Whento report and pay GST on page 22 for the type of tax periodthat applies to you.

If you are not registered or required to be registered for GST,you do not include GST in the price of your sales and youcannot claim credits for any GST included in the price of yourpurchases, even if they are for your business. But if you canclaim the business expense as an income tax deduction, youcan claim the entire expense, including GST, on your incometax return.

GST GROUPSTwo or more related businesses may form a GST group,provided they satisfy certain membership requirements.

GST groups are treated as a single entity. Generally,transactions between group members are ignored for GSTpurposes. As a result, you do not have to pay GST and youcannot claim GST credits on these transactions.

One business, known as the representative member,manages the groups GST affairs. The representative member

is responsible for the GST payable and can claim the GSTcredits on transactions undertaken by group members(except transactions between group members).

The representative member is the only group member whomust complete the GST part of an activity statement. In doingthis, the representative member will effectively be accountingfor the groups total GST liabi lity.

For more information about GST groups:

n phone us on 13 28 66

n refer to GST groups (NAT 3089).

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TAXABLE SALESYou must pay GST on taxable sales you make. You canclaim GST credits for purchases you used to make thesetaxable sales.

You make a taxable sale if you are registered or required tobe registered for GST, and:n you make the sale for paymentn you make the sale in the course of operating your businessn the sale is connected with Australia.

A sale is not a taxable sale if it is a GSTfree sale or aninput taxed sale.

Some sales may be partly taxable and partly GSTfree or inputtaxed. This is where a taxable sale can be separated intoidentifiable parts and one or more of those parts are GSTfreeor input taxed. These sales are also called mixed supplies.

If you are registered or required to be registered for GST, salesof business assets such as office equipment and motor vehiclesare usually taxable sales. GST also applies to business assetsyou trade in or otherwise dispose of by transferring ownership.

For more information about GST and disposing ofbusiness assets, refer to GST and the disposal of capitalassets (NAT 7682).

Sales for paymentFor a sale to be taxable, it must be made for payment. Thisis usually monetary, but can be some other form of payment,such as:

n goods or services provided instead of money, as in bartertransactions

n payment in the form of refraining from doing something.

EXAMPLE: Nonmonetary payment

A plumber who is registered for GST installs an electriciansnew spa.

The electrician is also registered for GST and wires theplumbers new shed as payment for installing the spa.

Although no money changes hands, the:

n plumber must pay GST on the value of the spa installationthey provided

n electrician must pay GST on the value of the electricalwiring service for the shed.

For more information about paying GST wherepayment is in a form other than money, refer toGSTR 2001/6 Goods and services tax: nonmonetaryconsideration.

Sales in the course of operating your businessThis usually means that you provide the goods or servicesas part of conducting your business. It includes all sales ofbusiness assets, including items such as motor vehicles andoffice plant and equipment. It also includes things done inthe course of setting up or winding down your business.

EXAMPLE

If your business provides electrical services and sells someelectrical cable left over from a job for its copper content,the sale is part of your business activities. By contrast, ifyou decide to sell a private vehicle that is not used in thebusiness, the sale is private.

Sales connected with AustraliaA sale of goods is connected with Australia if the goods areany of the following:

n delivered or made available in Australia to the purchaser

n removed from Australia

n brought to Australia, provided the seller either importsthe goods into Australia or installs or assembles thegoods in Australia.

A sale of property is connected with Australia if the propertyis in Australia. For GST purposes, property includes:

n land

n land and buildings

n interest in land

n rights over land

n a licence to occupy land.

A sale of something other than goods or property is connectedwith Australia if any of the following apply:

n the thing is done in Australia

n the seller makes the sale through a business they carry onin Australia

n the sale is of a right to purchase something that would beconnected with Australia.

This section describes the three types of sales you can makefor GST purposes:n taxable salesn GSTfree salesn input taxed sales.

THE TYPES OF SALES YOU MAKE02

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02 THE TYPES OF SALES YOU MAKE

For more information about sales connected withAustralia, refer to GSTR 2000/31 Goods and servicestax: supplies connected with Australia.

GSTFREE SALESYou do not include GST in the price of things you sell that areGSTfree, but you can still claim credits for the GST includedin the price of taxable purchases you use to make theseGSTfree sales.

Things that are GSTfree include:

n most basic food

n some education courses, course materials andrelated excursions or field trips

n some medical, health and care services

n some medical aids and appliances

n some medicines

n some exports

n some childcare

n some religious services and charitable activities

n

supplying accommodation and meals to residentsof retirement villages by certain operators

n cars for use by people with a disability, as long ascertain requirements are met

n water, sewerage and drainage

n supplies of going concerns

n international transport and related matters

n precious metals

n supplies through inward dutyfree shops

n grants of land by government

n farmland

n international mail.

EXAMPLE: GSTfree sales

A farmer grows potatoes and sells them at the producemarkets. The potatoes are basic food so the farmer doesnot include GST in their price. The farmer can claim GSTcredits for the GST included in the price of purchasesrelating to potato growing, for example, fertiliser, fueland freight.

For more information about what sales are GSTfreein the areas of:

n food, refer to

The GST food guide (NAT 3338), which contains analphabetical list showing whether general food anddrink products are taxable or GSTfree

GSTD 2002/2: Goods and services tax: what suppliesof fruit and vegetable juices are GSTfree?

n

health, refer to GST and medical services (NAT 4649)

GST and other health services (NAT 4650)

GST and medical aids and appliances (NAT 4651)

GST and acupuncture, naturopathy and herbalmedicine services (NAT 8090)

Application for medical assessment to obtain a car orcar parts GSTfree (NAT 3417)

n education, refer to

GST for preschools (NAT 12579)

GSTR 2000/27 Goods and services tax: adult andcommunity education courses; meaning of likely toadd to employment related skills

GSTR 2000/30 Goods and services tax: supplies thatare GSTfree for preschool, primary and secondaryeducation courses

GSTR 2001/1 Goods and services tax: supplies thatare GSTfree for tertiary education courses

GSTR 2002/1 Goods and services tax: supplies thatare GSTfree as special education courses

GSTR 2003/1 Goods and services tax: supplies thatare GSTfree as professional or trade courses

GSTD 2000/11 Goods and services tax: is the supplyof commercial pilot training GSTfree as an educationcourse under section 3885 of the A New Tax System(Goods and Services Tax) Act 1999 (the GST Act)?

GSTD 2000/7 Goods and services tax: is the supplyof the services of apprentices or trainees by a GroupTraining Company to host employers under a GroupTraining Scheme a taxable supply in terms of section95 of theA New Tax System (Goods and Services Tax)Act 1999 (the GST Act)?

n the noncommercial activities of charities, refer to

GST and fundraising dinners or similar functions(NAT 7327)

Endorsement process to access charity taxconcessions (NAT 3192)

Fundraising (NAT 13095)

Tax basics for nonprofit organisations (NAT 7966) Volunteers and tax(NAT 4612).

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In special cases, you may be able to claim a GST credit fora purchase that you use to make a financial supply if one ofthe following applies:

n you do not exceed the financial acquisition threshold(see page 24)

n your purchase relates to an amount you borrowed andused to make a noninput taxed sale

n your purchase qualifies as a reduced credit acquisition you will be entitled to a reduced credit (see page 25).

EXAMPLE

Bills Department Store sells a fridge to Louise for $1,100(including $100 GST). Bills Department Store sells the fridgeto Louise on credit and charges interest on the credit.

As providing credit is a financial supply, Bills DepartmentStore does not include GST on the amount of interest itcharges Louise.

In total, Louise pays Bills $1,165, made up of:

n the purchase price of $1,100

n interest of $65.

Bills Department Store must pay $100 to us, as this wasthe amount of GST included in the price of the goods.

Bills Department Store can only claim GST credits forpurchases it used to provide the credit, if either of thefollowing apply:

n the stores turnover does not exceed the financialacquisitions threshold

n the purchases that related to providing the creditare reduced credit acquisitions (in which case BillsDepartment Store will be entitled to a reduced inputtax credit of 75% of the GST payable on the supplyof the acquisition).

For more information about GST and making financialsupplies, refer to:

nFinancial services questions and answers, availableon our website www.ato.gov.au

nGSTR 2006/3 Goods and services tax: determiningthe extent of creditable purpose for providers offinancial supplies

nGSTR 2002/2 Goods and services tax: GST treatmentof financial supplies and related supplies and acquisitions(an addendum exists for this ruling)

n

GSTR 2003/9 Goods and services tax: financialacquisition threshold

nGSTR 2004/1 Goods and services tax: reducedcredit acquisitions.

THE SALE OF A BUSINESS AS A GOING CONCERNThe sale of a business as a going concern is GSTfree if:

n everything for the business continued operation is suppliedto the buyer

n the seller carries on the business until the day it is sold

n the buyer is registered or required to be registered for GST

n the sale is for payment

n before the sale, the buyer and seller agree in writing that thesale is of a going concern.

EXAMPLE: Selling a business

You are registered for GST and you sell your florist business.The sale includes the shop, delivery vehicle, stock,equipment and all the other things necessary to continueoperating the business. You continue to operate thebusiness until the buyer takes over. The buyer is registeredfor GST and you and the buyer have agreed in writing thatthe sale is of a going concern. This is a GSTfree sale.

For more information about the sale of a goingconcern, refer to:

nSale of a business as a going concern checklist(NAT 10147)

nGSTR 2002/5 Goods and services tax: when isa supply of a going concern GSTfree?

INPUT TAXED SALESYou do not include GST in the price of input taxed sales youmake and you cannot claim GST credits for purchases thatyou use to make input taxed sales.

The two most common input taxed sales for smallbusinesses are:

n financial supplies

n renting or selling certain supplies of residential premises.

Financial suppliesYou generally make a financial supply when you do any ofthe following:

n lend or borrow money

n grant credit to a customer

n buy or sell shares or other securities

n create, transfer, assign or receive an interest in, or a rightunder, a superannuation fund

n provide or receive credit under a hire purchase agreementif the credit is provided for a separate charge that isdisclosed to the purchaser.

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Residential premisesIf you rent out a residential premises for residentialaccommodation (that is, not a commercial residential premises),you do not include GST in the price of the rent. You cannotclaim credits for the GST included in any costs relating to therental, such as agents commission or repairs and maintenanceon the premises.

In contrast, supplying commercial premises is taxable. If you areregistered or required to be registered for GST and rent out a

factory or shop, you must include GST in the rent you charge.If you carry on your business from rented commercial premises,GST is included in your rent and you can generally claim acredit for that GST because it is a business expense.

For more information about GST and property, see:

nGST and property(NAT 72957)

nGST and the margin scheme (NAT 15145)

nGSTR 2000/20 Goods and services tax: commercialresidential premises

nGSTR 2003/3 Goods and services tax: when is a saleof real property a sale of new residential premises

nGSTR 2000/21 Goods and services tax: the marginscheme for supplies of real property held prior to1 July 2000

nGSTR 2006/7 Goods and services tax: how the marginscheme applies to a supply of real property made on orafter 1 December 2005 that was acquired or held before1 July 2000

nGSTR 2006/8 Goods and services tax: the marginscheme for supplies of real property acquired on or after1 July 2000

nGSTR 2009/4 Goods and services tax: new residentialpremises and adjustments for changes in extent ofcreditable purpose.

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ISSUING TAX INVOICESIf you make taxable sales, your GSTregistered customersand clients will need tax invoices from you to claim their GSTcredits for purchases of more than $82.50 (including GST). If acustomer or client asks you for a tax invoice, you must provideone within 28 days of the day they ask you for it. You must beregistered for GST to issue a tax invoice.

REQUIREMENTS OF A TAX INVOICETax invoices you issue or receive must include certaininformation. The information differs depending on the price ofthe sale. Tax invoices for sales of $1,000 or more require moreinformation than tax invoices for sales of less than $1,000.

Sales of less than $1,000Tax invoices for taxable sales that total less than $1,000must include enough information to enable the followingto be clearly ascertained:

1 that the document is intended as a tax invoice

2 the sellers identity

3 the sellers Australian business number (ABN)

4 the date the tax invoice was issued

5 a brief description of the items sold, including the quantity

(if applicable) and the price of what is sold6 the GST amount (if any) payable in relation to the sale this can be shown separately or, if the GST to be paidis exactly oneeleventh of the total price, as a statementsuch as Total price includes GST

7 the extent that each sale to which the document relatesis a taxable sale.

EXAMPLE

Windows to Fit Pty Ltd sells window frames to a customerfor $825 (including GST). Windows to Fit Pty Ltd issuedthe following tax invoice:

Tax invoiceWindows to Fit Pty Ltd 15 Burshag Road

ABN: 32 123 456 789 Festler NSW 2755

Date: 1 August 2010

To: Building Company254 Burshag RoadFestler NSW 2755

Description of supply Total

Window frames $825

TOTAL PRICE INCLUDING GST $825

1

23

4

5

6

This sample tax invoice satisfies requirement 7from the list above that is, to show the extent thateach sale is a taxable sale. The sale is clearly identifiedas being fully taxable.

This section explains:

n issuing tax invoices for your taxable sales

n

tax invoice requirementsn when you need a tax invoice for your purchases.

ISSUING AND OBTAININGTAX INVOICES03

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03 ISSUING AND OBTAINING TAX INVOICES

Sales of $1,000 or moreTax invoices for taxable sales that total $1,000 or moremust include enough information to enable the followingto be clearly ascertained:

1 that the document is intended as a tax invoice

2 the sellers identity

3 the sellers ABN

4 the date the tax invoice was issued

5 the buyers identity or ABN

6 a brief description of the items sold, including the quantity(if applicable) and the price of what is sold

7 the GST amount (if any) payable in relation to the sale this can be shown separately, or, if the GST to be paid isexactly oneeleventh of the total price, a statement suchas The total price includes GST

8 the extent that each sale to which the document relatesis a taxable sale.

EXAMPLE

Windows to Fit Pty Ltd sells window frames to a buildingcompany for $8,250 (including GST). Windows to Fit Pty Ltd

issued the following tax invoice to the building company:


ABN: 32 123 456 789 Festler NSW 2755

Date: 1 August 2010


Qty Description of supply Unit price Total

50 Window frames $165 $8,250

TOTAL $8,250

The total price includes GST

1

23

4

7a

5

6b 6a 6c


Windows to Fit Pty Ltd also sells the building companydeadlocks for $440 (including GST). Windows to Fit Pty Ltdissues the following tax invoice to the building company:


ABN: 32 123 456 789 Festler NSW 2755

Date: 1 August 2010


Qty Description of supply Unit price GST Total

50 Window frames $150 $15 $8,250

10 Deadlocks $40 $4 $440

TOTAL AMOUNT PAYABLE $8,690

The total price includes GST

1

23

4

7b

5

6b 6a

6c


For more information about tax invoices, refer to:

nValid tax invoices and GST credits (NAT 12358)

nGSTR 2000/17 Goods and services tax: tax invoicesn GSTR 2000/34 Goods and services tax: what is an

invoice for the purposes of theA New Tax System(Goods and Services Tax) Act 1999 (GST Act).

Special rules apply to tax invoices for transactionscarried out through agents. For more information referto GSTR 2000/37 Goods and services tax: agencyrelationships and the application of the law.

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03 ISSUING AND OBTAINING TAX INVOICES

Taxable and nontaxable sales (mixed supplies)If the tax invoice is for a taxable sale and either a GSTfreeor input taxed sale, you must be able to clearly ascertainthe following information from the tax invoice:

n each taxable sale

n the amount of GST to be paid (for the taxable sales)

n the amount to be paid for the total sale.

For more information about tax invoices and mixedsupplies, refer to GSTR 2001/8 Goods and services tax:apportioning the consideration for a supply that includestaxable and nontaxable parts.

Tax invoices that are missing informationIf you receive a document from a seller that is missing certaininformation, you may still be able to treat that document as atax invoice if the missing information can be obtained fromother documents issued by the seller.

Voluntary standards for tax invoices

Voluntary standards for tax invoices have been developedin consultation with small business to address concernsabout the lack of consistency in invoice formats.

For more information about voluntary standards fortax invoices, refer to:

nHow to set out tax invoices and invoices (NAT 11675)

nRequest for review of tax invoice decision (NAT 12381).

WHEN YOU NEED A TAX INVOICEYou must have a tax invoice to claim a GST credit for purchasesthat cost more than $82.50 (including GST).

If you do not have a tax invoice, you must wait until you receiveone from your supplier before you claim the GST credit, evenif this is in a later reporting period. In most cases, suppliersissue tax invoices. However, in special cases, recipients of asale issue tax invoices. These are known as recipient createdtax invoices.

For more information about recipient created taxinvoices, refer to:

nRecipientcreated tax invoices, available on our websitewww.ato.gov.au

nGSTR 2000/10 Goods and services tax: recipientcreated tax invoices.

To claim a GST credit for purchases that cost $82.50 or less(including GST), you must have one of the following:

n a tax invoice

n a cash register docket

n a receiptn an invoice.

Not a valid tax invoice?If your supplier gives you a document that does not meet therequirements of a tax invoice, you must not assume it is for ataxable sale. We recommend you contact the seller to confirmthat it is a taxable sale and obtain a correct tax invoice.

If you are unable to obtain a valid tax invoice, contact us forfurther advice on 13 28 66.

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WHEN YOU CAN CLAIM GST CREDITSYou can claim GST credits for the GST included in a purchaseyou make if you are registered for GST, and:

n you intend to use your purchase solely or partly in carryingon your business

n the price includes GST

n you provide, or are liable to provide payment for the itemyou purchased

n you have a tax invoice from your supplier.

You can work out the amount of GST that has been includedin the price of a purchase using the following formula:

The GST inclusive price of the good or service 1/11= the GST included in the price of the purchase.

For more information about claiming GST credits,refer to:

nGST credits for business (NAT 3019)

nCommon errors when claiming GST credits (NAT 73097).

WHEN YOU CANNOT CLAIM GST CREDITSYou cannot claim a GST credit for purchases made to makeinput taxed supplies.

There are other purchases you cannot claim a GST credit for,even though GST is included in the price. These include:

n land purchases under the margin scheme

n some purchases that you cannot claim as an income taxdeduction, for example entertainment expenses.

You cannot claim a GST credit for a part of a purchase thatyou intend to use for either of the following:

n to make input taxed sales

n for private purposes, unless you have made an annualprivate apportionment election.

Purchases that relate to making input taxed salesYou cannot claim a GST credit for any portion of a purchaseyou use to make input taxed sales.

There are some exceptions to this rule. For more informationsee page 10.

EXAMPLE

Linda is registered for GST. She purchases an item for

$11,000 (including $1,000 GST).

Linda holds a valid tax invoice for the purchase.

Linda intends to use the item purchased partly to maketaxable sales (40%) and partly to make input taxedsales (60%).

Linda is only entitled to claim a GST credit for the portionof the item she uses to make taxable sales, that is $400(40% $1,000).

Purchases that relate to private useIf you purchase goods or services that you use for bothbusiness and private use, you can claim a GST credit for thepart of the purchase relating to your intended business use.

If you later find that your actual use of the goods or servicesyou purchased differs from your intended business use,you may need to adjust the amount of GST credits youhave claimed.

For more information about adjustments, see page 18.

Special rules apply if you have made an annual privateapportionment election (see below).

EXAMPLE: Separating business and private use

You buy a computer for $3,300 (including $300 GST). Youintend to use the computer 60% of the time for businessand 40% of the time for private purposes. You can onlyclaim a GST credit for the part of your purchase that relatesto your intended business use. This means you can claim$180 (60% of $300) as a GST credit.

If you later find that your actual computer use differs fromyour intended use, you may have to make an adjustment.

This section explains:n when you can claim GST creditsn when you cannot claim GST creditsn GST credits and income tax deductionsn special rules for claiming GST credits.

04CLAIMING GST CREDITS

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04 CLAIMING GST CREDITS

Annual private apportionmentBy making an annual private apportionment election you arechoosing to account for the private portion of your businesspurchases once a year rather than each time you lodge anactivity statement. This means you can generally claim a GSTcredit for the total amount of GST included in the price of yourbusinessrelated purchases.

You can make an annual private apportionment election ifboth of the following apply:

n

your small business annual turnover is $2 million or lessor your enterprises GST turnover is $2 million or less

n you have not elected to pay GST by instalments or reportGST annually.

You must reassess your eligibility to use annual privateapportionment on 31 July each year.

Annual private apportionment applies to all purchases that aremade partly for business and partly for private purposes, unless:

n the business portion of the purchase relates solely to makinginput taxed sales supplies

n any part of the purchase is a reduced credit acquisition(see page 25).

You must make an adjustment in a later activity statement toaccount for the portion of the purchase relating to private use.You can make the adjustment in any activity statement up tothe one that covers the due date for lodging your income taxreturn. This means you can apportion for private use for bothGST and income tax purposes at the same time.

For more information about:

n annual private apportionment, refer to GST and annualprivate apportionment (NAT 12877)

n accessing GST and other small business concessionsand working out your annual turnover, refer to Guide toconcessions for small business (NAT 71874)

n how to work out your GST turnover for GST purposes,see Working out your GST turnover on page 6.

Motor vehiclesIn most cases you can claim a GST credit for the purchase ofa car that is used for your business. However, if you purchase acar and the price exceeds the car limit, generally the maximumamount of GST credit you can claim is oneeleventh of that limit.

For more information about the car limit, GST andmotor vehicles, refer to:

nLuxury car tax(NAT 3394)

nGST and motor vehicles (NAT 4629)

nHire purchase, leasing and GST(NAT 3491)

nGST and LCT on cars you buy for people withdisabilities (NAT 4325)

nGST and the sale of reconditioned parts (NAT 13259)

nGST and motor vehicle tradeins for charities(NAT 12353).

GST credits and income tax deductionsIf you can claim an income tax deduction for a businesspurchase, you claim the amount of the purchase less any

GST credit you are entitled to claim. If you cannot claima GST credit for the purchase, you can claim the full costof the purchase, including GST, as a deduction on yourincome return.

EXAMPLE: GST credits and income tax deductions

Alice, a GSTregistered computer repairer, buys somestationery for her business. She pays $22 (including$2 GST). Alice can claim a GST credit of $2 on heractivity statement and $20 as an income tax deductionon her income tax return.

If Alice was not registered or required to be registered forGST, she could not claim a credit for the $2 GST, but shecould claim the full $22 as an income tax deduction on herincome tax return.

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04 CLAIMING GST CREDITS

For capital items, such as some machinery, you may beentitled to an income tax deduction for the items decline invalue (depreciation). When working out decline in value youmust use the cost of the item, less any GST credits youhave claimed.

EXAMPLE: Calculating decline in value

John is registered for GST and buys a new photocopier for

his business. The seller is registered for GST and chargesJohn $1,155 (including $105 GST). If John has a tax invoicefor the purchase, he can claim a GST credit of $105 on hisactivity statement. John works out the decline in value usinga cost of $1,050 (that is, $1,155 $105 GST).

SPECIAL RULES FOR CLAIMING GST CREDITS

Preestablishment costsA special GST rule allows you to claim GST credits for theGST included in the price of some purchases you makebefore your company came into existence. The rule coverscosts such as setup fees, business registration, trading

stock and business premises.

For this rule to apply, the:

n purchase must be for the purpose either of bringing thecompany into existence or carrying on the business afterthe company comes into existence

n company must come into existence and be registeredno more than six months after the purchase

n purchaser must become a member, officer or employeeof the company

n company must have fully reimbursed the purchaser forthe cost of the purchase

n purchase must not be used to make input taxed sales

or for private purposesn company must not be entitled to a GST credit for the

purchase, if it later purchases the thing from the purchaser

n purchaser must not be able to claim a GST credit forthe purchase.

Secondhand goodsUnder a special GST rule, provided you meet certain conditions,you can generally claim a GST credit for any secondhandgoods you buy from an unregistered business for the purposesof sale or exchange (even though GST is not included in theprice of the goods).

Other special rulesThere are other special rules for claiming GST credits. Theyrelate to:

n periodic or progressive supplies, such as lease paymentsor service contracts

n purchases made with corporate credit cards

n purchases of land under standard land contracts

n supplies of gas and electricity by public utility providers, and

n layby purchases.

For more information about these special rules, refer to:

nGSTR 2000/35 Goods and services tax: Division 156 supplies and acquisitions made on a progressive orperiodic basis

nGSTR 2000/26 Goods and services tax: corporatecard statements entitlement to an input tax creditwithout a tax invoice

nGSTR 2000/28 Goods and services tax: attributingGST payable or an input tax credit arising from a saleof land under a standard land contract

nGSTR 2000/12 Goods and services tax: attributingGST payable and input tax credits for supplies andacquisitions under layby sale agreements

nGSTR 2000/32 Goods and services tax: attributingGST payable on supplies of gas and electricity madeby public utility providers.

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WHAT AN ADJUSTMENT ISFrom time to time, you may need to change your net GSTliability for a reporting period. These changes are calledadjustments.

There are two types of adjustments:

n increasing adjustments, which increase your net GST liability

n decreasing adjustments, which decrease your net GST liability.

WHEN YOU MUST MAKE AN ADJUSTMENT

You will need to make an adjustment if:n an event occurs that changes the price of a sale or purchase

(for example, you provide a rebate to a customer)

n a taxable sale you make, or a purchase for which youcan claim a GST credit, is cancelled

n you write off or recover a bad debt

n your actual use of a purchase for private purposes orto make input taxed sales differs from your intendeduse (this only applies if the GSTexclusive value of thepurchase is more than $1,000)

n you make or receive a third party payment.

There are other circumstances where you may need to

make an adjustment.

ADJUSTMENT NOTES FOR CHANGES IN PRICEOR THIRD PARTY PAYMENTSYou must issue an adjustment note to the purchaser if youmake a taxable sale and the price of the sale subsequentlychanges, unless the amount of the adjustment is $75 or less.

EXAMPLE

An adjustment event that discounts the payment for the

original sale of the goods or services by $660 results ina decreasing adjustment (GST liability) of $60. As thisis below the $75 threshold there is no need to issue anadjustment note. It is not required for attribution purposeseither.

Additionally, you must issue a third party adjustment noteif you make a third party payment, unless the amount ofthe third party payment adjustment is $75 or less.

You must issue the adjustment note or third partyadjustment note no more than 28 days after the earlierof the following:

n you receive a request from the purchaser to provide theadjustment note or a request from the payee to providea third party adjustment note

n the time you became aware of the adjustment.

As a purchaser, you must have an adjustment notebefore you can make an adjustment for an increase inthe price of a purchase you made. As a payer, you musthave a third party adjustment note before you make anadjustment for a third party payment.

For more information about adjustment notes, refer to:nGSTR 2000/1 Goods and services tax: adjustment notes

nGSTR 2000/19 Goods and services tax: makingadjustments under Division 19 for adjustment events.

This section explains:

n adjustments

n

how and when to make adjustmentsn adjustment notes.

ADJUSTMENTS05

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ACCOUNTING FOR GST ON A CASH BASIS

SalesIf you account for GST on a cash basis, you account for theGST payable on the sales you make in the same reportingperiod you receive payment for them. If you receive only partpayment for a sale in a reporting period, you only accountfor the GST that relates to that part of the sale in thatreporting period.

PurchasesYou claim GST credits for your business purchases in thereporting period you pay for them, provided you have a taxinvoice. If you pay only part of the cost of a business purchasein a reporting period and have a tax invoice, you claim only theGST credit for that part of the cost in that reporting period.

You can account on a cash basis if any of the following apply:

n your small business annual turnover is less than $2 million

n your enterprises GST turnover is $2 million or less

n you account for income tax on a cash basis

n you carry on a kind of enterprise we have agreed can accountfor GST on a cash basis regardless of your GST turnover, or

n you are an endorsed charitable institution, trustee ofan endorsed charitable fund, gift deductible entity orgovernment school, regardless of your GST turnover.

If you do not fit into any of these categories you canask to be allowed to account for GST on a cash basis.For more information about what to include in your request:

n refer to

Cash or accruals basis: supporting documentrequirements for private rulings available on ourwebsite at www.ato.gov.au

Paragraph 31 ofGSTR 2000/13 Goods and

services tax: accounting on a cash basis outlineswhat information to include in your request

n contact us on 13 28 66.

EXAMPLE: Accounting for GST on a cash basis

Joes Books is a GSTregistered book wholesale outlet.Joes Books sells books to Bills Bookshop and issuesa tax invoice on 17 December. Bills Bookshop pays theinvoice on 14 January.

If Joes Books reports GST:

n monthly, it would account for the GST in the month theGST is collected, that is, on its January activity statement(due 21 February)

n quarterly, it would account for the GST in the quarterthe GST is collected, that is, on its March quarter activitystatement (due 28 April).

If Bills Bookshop reports GST:

n monthly, it would claim the GST paid as a GST creditfor the month it paid for the books, that is, on itsJanuary activity statement (due 21 February)

n quarterly, it would claim the GST paid as a GST creditfor the quarter it paid for the books, that is, on itsMarch quarter activity statement (due 28 April).


n cash accounting, refer to Cash and noncash accounting(NAT 3136)

n accessing GST, other small business concessions,and working out your annual turnover, refer to Guideto concessions for small business (NAT 7184)

n how to work out your GST turnover for GST purposes,see Working out your GST turnover on page 6

n endorsement of charities, refer to Endorsement processto access charity tax concessions (NAT 3192).

ACCOUNTING FOR GST ON A NONCASH BASIS

SalesIf you account for GST on a noncash basis, you accountfor the full amount of GST payable on a sale you make inthe first of either:

n the reporting period you issue an invoice, or

n the reporting period you receive any part of the payment.

This section explains:n accounting for GST on a cash basisn accounting for GST on a noncash basisn records you need to keepn the simplified accounting methods available to food retailers.

06ACCOUNTING FOR GST

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06 ACCOUNTING FOR GST

PurchasesYou claim a GST credit for a business purchase in the reportingperiod your supplier issues an invoice or you make any partof the payment for the purchase, whichever happens first.However, you must hold a tax invoice for a purchase in orderto claim a GST credit for the purchase.

EXAMPLE: Accounting for GST on a noncash basis

Mr A Frame, a GSTregistered builder, builds some shelvesfor Ms B Newsworthy, a newsagent, and issued a taxinvoice for the work on 15 January. The newsagent paidthe invoice on 14 February.

If Mr Frame reports GST:

n monthly, he would account for the GST on his Januaryactivity statement (due 21 February), the month heissued the invoice

n quarterly, he would account for the GST on his Marchquarter activity statement (due 28 April), the quarterhe issued the invoice.

If Ms Newsworthy reports GST:

n

monthly, she would claim a GST credit on her Januaryactivity statement (due 21 February), the month shereceives the invoice for the shelves

n quarterly, she would claim a GST credit on her Marchquarter activity statement (due 28 April), the quartershe receives the invoice for the shelves.

You do not have to use the same method for GSTaccounting and financial accounting, but you may find thatusing a single accounting method (and therefore, a singleset of accounting records) reduces your compliance costs.

For more information about accounting for GST, refer to:

nCash and noncash accounting (NAT 3136)

n Choose a method to complete your activity statementin GST how to complete your activity statement(NAT 7392)

nGSTR 2000/29 Goods and services tax: attributingGST payable, input tax credits and adjustments andparticular attribution rules made under section 2925.

RECORDS YOU MUST KEEPIf you use a manual recordkeeping system, you can accountfor GST by adding a GST amount column to your cash receiptsand cash payments books.

If you prefer to keep your records electronically you may alsowish to obtain a commercial recordkeeping software package.

For more information about record keeping:

n refer to Record keeping for small business (NAT 3029)

n arrange for a tax officer to visit your work or hometo explain any aspects of GST and how you cankeep effective records by visiting www.ato.gov.au/assistancevisit or by phoning us on 13 28 66

n attend a free seminar or workshop on Record keepingor Tax basics by visiting www.ato.gov.au/seminars

SIMPLIFIED ACCOUNTING METHODS FORFOOD RETAILERSSome small food retailers, such as bakeries, milk bars andconvenience stores, make both GSTfree and taxable sales.

If these businesses do not have adequate pointofsaleequipment, they may find it difficult to account for differenttypes of sales separately. Simplified accounting methodsare available to make this easier.

For more information about simplified accountingmethods, refer to:

nSimplified GST accounting methods for food retailers(NAT 3185)

nSimpler GST accounting for the food and grocery industry(NAT 7162)

nBusiness norms percentages No 1 hot bread shops(NAT 3186)

nBusiness norms percentages No 2 convenience storesthat convert food(NAT 3187)

nBusiness norms percentages No 3 convenience storesthat do not convert food(NAT 3188)

nBusiness norms percentages No 4 fresh fish retailers(NAT 3267)

nBusiness norms percentages No 5 rural conveniencestores (NAT 3268)

nBusiness norms percentages No 6 pharmacies(NAT 3269)

nBusiness norms percentages No 7 cake shops(NAT 3270)

n

Business norms percentages No 8 health food shops(NAT 3271)

nBusiness norms percentages No 9 continentaldelicatessens (NAT 3272).

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HOW TO REPORT GST AMOUNTS AND CLAIMGST CREDITSYou report GST amounts to us and claim GST credits bylodging an activity statement or an annual GST return.

You can complete and lodge your activity statementselectronically.

For more information and to register for this service

visit our website at www.ato.gov.au/onlineservices

If you have no GST amounts to report or claim for a particularreporting period you must still report this, along with any othertax obligations, and lodge your activity statement by the duedate, appropriately signed and dated. If all your tax obligationsfor a particular reporting period are nil, you can lodge yournil activity statement on our automated phone system byphoning 13 72 26 and selecting nil activity statement fromthe lodgment menu.

OPTIONS FOR REPORTING AND PAYING GSTDepending on your GST turnover and other eligibility

requirements, you will be able to work out, report andpay GST either:

n monthly

n quarterly

n annually.

Reporting and paying monthlyIf you have a GST turnover of $20 million or more, youmust report and pay GST monthly, and lodge your activitystatement electronically.

We also require some other businesses to report monthly we notify the businesses that must do this.

All other businesses may report GST monthly if they wish.

Reporting and paying quarterlyIf your GST turnover is less than $20 million and we havenot told you that you must report monthly, you can reportand pay GST quarterly.

If you report and pay quarterly, you have three reporting options:

Option 1 work out, report and pay GST quarterly you may do this electronically

Option 2 work out, report and pay GST quarterly andprovide further information annually in an

annual GST information reportOption 3 pay a GST instalment amount quarterly and

report annually in an annual GST return.

You can only choose option 3 if you meet some eligibilityrequirements and one of the following applies your:

n small businessannual turnoveris less than $2 million

n enterprises GST turnoveris $2 million or less.

Under option 3, each quarter (or twice yearly in specialcases), you must pay a GST instalment amount we workout (or you vary).

We send you an annual GST return to report your total GSTliability for the financial year. If the total of the instalments you

have paid is more than your total GST liability, we refund thedifference to you. If your GST liability is more than the total ofyour instalments, you pay the difference to us.

If we work out that you are eligible for option 3, your activitystatement will have your instalment amount printed on it.

07REPORTING AND PAYING GST

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07 REPORTING AND PAYING GST

Reporting and paying annuallyIf you are voluntarily registered for GST and you have notmade an election to pay GST by instalments, you can chooseto report and pay or claim a refund of GST annually.

You are considered to be voluntarily registered for GST if yourGST turnover is less than $75,000 ($150,000 for nonprofitorganisations) and you have chosen to be registered for GST.Some entities, such as taxi drivers, must be registeredregardless of their GST turnover. As these entities are not

voluntarily registered, they cannot choose to report and payGST annually.

When choosing whether to report monthly, quarterlyor annually, think about your cash flow and the complianceimplications. For example, if you make mainly GSTfreesales, you may be entitled to GST refunds and may preferto choose monthly tax periods. However, if you choose toreport monthly, you generally have to do so for at leastone year and you may be subject to penalties if you donot comply with your monthly reporting requirements.

For more information about reporting and paying GST,refer to:

nReporting and paying GST monthly(NAT 4150)

nQuarterly GST options (NAT 4149)

nReport your GST once a year(NAT 12906)

nGoods and services tax how to complete your activitystatement (NAT 7392)

nCommon errors when accounting for GST(NAT 73096)

nCommon GST errors when completing your activitystatement (NAT 13614).

For more information about how to complete the GST

section of your activity statement and completing anannual GST return, phone us on 13 28 66.

WHEN TO REPORT AND PAY GST

MonthlyIf you report and pay monthly, the due date for lodging youractivity statement and paying any amount you owe on thatstatement is 21 days after the end of each month.

QuarterlyIf you report and pay quarterly the due dates for lodging youractivity statement and paying any amount you owe on that

statement (including quarterly instalment amounts) are:

Quarter Due date

September(July, August, September)

28 October

December(October, November, December)

28 February

March(January, February, March)

28 April

June

(April, May, June)

28 July

If you are using option 3 (see page 21) and you receivean instalment notice, you may not have to lodge that notice.However, you must pay the instalment amount specified onthe notice by the due date.

If you report quarterly using options 2 or 3 (see page 21),the due date for lodging your annual information report orannual GST return is:

n the date your income tax return is due, or

n 28 February following the end of the financial year coveredby that return or information report, if you are not requiredto lodge an income tax return.

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07 REPORTING AND PAYING GST

AnnuallyIf you report annually, the due date for lodging your annualGST return and paying any amount owing on that return is:

n the date your income tax return is due, or

n 28 February following the end of the financial year coveredby that return or information report, if you are not requiredto lodge an income tax return.

You must lodge the original activity statement we sentyou, not a copy or a version generated from a commercialsoftware package. If you use a commercial recordkeepingpackage, transfer the information from it to your originalstatement. We recommend you keep a copy of your originalactivity statement for your records.

Using a tax agentIf you use a tax agent to prepare your activity statements, youragent will advise you when the statements must be lodged.Contact your agent to work out when they need your informationto lodge your forms on time. You are responsible for makingsure the necessary information is with your agent in time.

HOW TO PAY GST AMOUNTSYou can pay GST amounts, along with other amounts youmust pay us:

n electronically via direct credit, BPAY or direct debit

n by mailing a cheque or money order to us, or

n by taking your original preprinted payment advice to anypost office and paying by

cheque or EFTPOS (from a savings or cheque accountonly, not a credit card account)

cash (up to $3,000).You pay only the net amount of GST to us, that is, the GST youowe less GST credits plus or minus any adjustments you have.

For information about paying GST by:

n direct credit, BPAY, post office payments or mail

phone 1800 815 886

email [email protected]

n direct debit

phone 1800 802 308

email [email protected]

Registered to BPAY Pty Ltd

ABN 69 079 137 518

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AcquisitionSee Purchase.

Activity statementYou use an activity statement to report your business taxentitlements and obligations, including GST, pay as you goinstalments, pay as you go withholding and fringe benefittax instalments.

Annual GST return

If you report GST annually, you use an annual GST return toreport actual amounts for GST, wine equalisation tax (WET)and luxury car tax (LCT). If you use option 3 (see page 21),you also use your annual GST return to account for thedifference between the total of your instalment amountsand your actual GST liability.

Annual turnover (aggregated turnover)Annual or aggregated turnover is your businesss yearlyturnover plus the yearly turnover of any businesses youare connected or affiliated with.

Annual turnover is used to work out whether you can:

n elect to account on a cash basis

n

make an annual private apportionment electionn elect to pay GST by instalments.

Australian business numberYour Australian business number (ABN) is your identifierfor dealings with us and other government departmentsand agencies.

Business (enterprise)An enterprise includes a business. It also includes othercommercial activities but does not include:

n private recreational pursuits and hobbies

n activities carried on as an employee, labour hire worker,director or office holder

n activities carried on by individuals (other than trusteesof charitable funds) or partnerships (in which all or mostof the partners are individuals) without a reasonableexpectation of profit.

It includes the activities of entities such as charities,deductiblegift recipients, religious and governmentorganisations, and some nonprofit organisations.

Business assetA business asset is a thing you use for purposes of yourbusiness, for example, manufacturing equipment, a deliveryvan or an office computer. Intangible items, such as goodwill,may also be business assets. You generally incur a GST liability

when you sell a business asset.

ConsiderationSee Payment.

EnterpriseSee Business.

Financial acquisitions thresholdIf you make financial sales without exceeding the financialacquisitions threshold for example, you make both financialand other sales and your financial sales are only a small part

of your total sales you can claim GST credits for purchasesthat relate to making those financial sales (providing you havea tax invoice).

For information refer to GSTR 2003/9 Goods andservices tax: financial acquisitions threshold.

Financial sales (supplies)Financial sales (supplies) are input taxed. Providedcertain requirements are met, examples of financialsales (supplies) include:

n the lending or borrowing of money

n the buying or selling of shares or other securitiesn the creation, transfer, assignment or receipt of an

interest in, or a right under, a superannuation fund

n the provision or receipt of credit under a hire purchaseagreement if the credit is provided for a separate chargethat is disclosed to the purchaser.

GSTfree salesSome goods or services are not subject to GST and are soldwithout GST in their price. These sales are referred to asGSTfree sales.

Examples of products or services that are sold GSTfree are:basic food, exports, sewerage and water, sales of businesses(as going concerns), the noncommercial activities of charities,and most education and health services.

If you sell GSTfree goods or services you are entitled to creditsfor the GST included in the price of your inputs (the goods orservices you used to make the goods or services you sold).

See also Input taxed sales and Taxable sales.

GST creditsYou can claim a credit for GST in the price of the goods orservices you buy for use in your business, unless you usethe purchase to make input taxed sales.

If you use the purchase partly for private purposes, you will

not be able to claim a credit for the full amount of GST, onlyfor the amount that relates to your business use.

See also Input taxed sales, Taxable sales and Tax invoice.

DEFINITIONS

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DEFINITIONS

GST turnover thresholdGST turnover thresholds are used to work out whether you:

n must register for GST

n must report GST monthly

n can report and pay GST annually

n can choose to account on a cash basis

n can make an annual private apportionment election

n must lodge GST returns and pay GST electronically

n can choose to pay GST by instalments.

InputsGoods or services you use in your business to make thegoods or services you sell.

Inputtax creditsSee GST credits.

Input taxed salesSome goods or services are sold without GST in their price,even though GST was included in the price of the inputsused to make or supply them. These sales are referred toas input taxed sales.

If you make an input taxed sale you are not entitled to creditsfor the GST in the price of your inputs (the goods or servicesyou used to make the goods or services you sold).

Two of the most common types of input taxed sales are:

n financial sales (supplies)

n supplies of residential premises by way of rent or sale.

In special cases, you can claim a GST credit for a purchasethat relates to making financial supplies.

Margin schemeYou can choose to use the margin scheme when you make ataxable sale of property. GST to be paid is oneeleventh of themargin for the sale and not the normal oneeleventh of the sale

price. However, you cannot use the margin scheme if your saleof the property is ineligible for the margin scheme, for example,you purchase the property through a taxable sale where theGST was worked out without applying the margin scheme.

You cannot claim a GST credit for a purchase made underthe margin scheme even though you may have paid GSTon the margin.

Payment (consideration)Payment for GST purposes is anything you receive forproviding goods, services or any other sale. It is usuallymoney, but can be in some other form, such as goods orservices, for example, barter transactions. Payment may

also be made by way of refraining from doing something.

Property (real property)Property includes:

n an interest or right over land

n a personal right to call for or be granted any interest inor right over land

n a licence to occupy land or any other contractual rightexercisable over or in relation to land.

Purchase (acquisition)For GST, a purchase or acquisition includes the acquisition of

goods or services such as trading stock, leases, consumablesand importations.

Real propertySee Property.

Reduced credit acquisitionsReduced credit acquisitions are purchases (acquisitions)of some types of things that relate to making input taxedfinancial supplies. You can claim a reduced GST credit onreduced credit acquisitions.

Sale of a business as a going concernA business is sold as a going concern if:

n all of the things required for the continued operation ofthe enterprise are supplied to the buyer

n the supplier carries on the enterprise until it is sold.

Sales (supplies)For GST purposes, a sale or supply includes:

n a sale of goods or services

n a lease of premises

n hire of equipment

n providing advice

n exporting goods.

A sale will be:

n taxablen input taxed

n GSTfree.

SuppliesSee Sales.

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Taxable salesThe sale of goods or services that are subject to GST (that is,things that must have GST included in their price) are referredto as taxable sales.

You make a taxable sale if you are registered or required tobe registered for GST and:

n you make the sale for payment

n you make the sale in the course or furtherance of abusiness (enterprise) you carry on, and

n the sale is connected with Australia.If you make a taxable sale you must include GST in your priceand you are entitled to claim credits for the GST in the priceof your inputs (the goods or services you used to make thegoods or services you sold).

See also GSTfree sales, Input taxed sales.

Tax invoiceA tax invoice is a document generally issued by the seller.It shows the price of a sale, indicating whether it includesGST and may show the amount of GST. You must have atax invoice before you can claim a GST credit on your activitystatement for purchases of more than $82.50 (including GST).

Tax periodFor GST purposes a tax period may be a month, a quarteror a year, and refers to how frequently you lodge your activitystatement (see When to report and pay GST on page 22).

DEFINITIONS

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INDEX

Aaccommodation and meals, retirement

villages, 9accounting, 1920

cash basis, 3, 19financial, 20noncash basis, 3, 1920simplified methods for food retailers, 20

acquisitionssee purchases;see also assets, business

activity statements, 3, 7, 15, 16, 19, 20, 21,

22, 23definition, 24due dates for lodgement, 22, 23

adjustment notes for price increases, 18adjustments, 3, 18agents commission, 11agents, transactions carried out through, 13annual GST payments, 22, 23, 23annual GST return, 7, 21, 22, 23

definition, 24annual private apportionment, 1516annual turnover

definition, 24see also turnover, business; turnover,

GST assets, business, 6, 8

definition, 24disposal, 8

Australian business numbers (ABNs)definition, 24registering for, 6tax invoices and, 12, 13, 26

Bbad debts, 18bakeries, 20barter transactions, 8, 25books, 19builders, 20buildings, 8

see also land; premises

businessceasing, 6, 8checklist, 3enterprise, definition, 24GST groups, 6, 7preestablishment costs, 17reducing the size of, 6sale of, as a going concern, 10

definition, 25

Ccancellations, 18capital assets, 6, 8, 17cars for disabled people, 9cash basis, 3, 19cash flow, 22charitable activities, 9charities, 9, 19checklist, business, 3

childcare, 9commercial premises, 11compliance costs, 20, 22computers, 15

repairers, 17consumables, 25consumers, 4, 5contact details, Tax Office,inside back coverconvenience stores, 20credit acquisition, reduced, 10, 25credit cards, corporate, 17

credit to customers, 10credits, GST

see GST credits

Ddecline in value, 17definitions, 246

GST, 4depreciation

see decline in valuedisability, people with, 9disposal of assets, 8distribution, 4due dates, 22, 23dutyfree shops, supplies through, 9

Eeducation courses, 9electrical services, 8electricians, 8electricity, 5, 17electronic record keeping, 20, 23entertainment expenses, 16eRecord, 20examples

accounting for GST on a cash basis, 19accounting for GST on a noncash

basis, 20business sales, 8calculating decline in value, 17collecting and paying GST on the sale

of goods, 4financial supplies, 10GST credits and income tax

deductions, 17GSTfree sales, 9input taxed sales, 15nonmonetary payment, 8offsetting GST credits, 5private and business sales, 8private and business use, 15selling a business, 10tax invoices, 12, 13

examples, 9expenses, business, 5, 7, 11, 16exports, 9

Ffactories, 11farmers, 9farmland, 9fertiliser, 9financial accounting, 20financial acquisitions threshold, 10

definition, 24financial supplies, 10, 25

definition, 24food, 9

retailers, 20freight, 9fuel, 9furniture manufacturer, 4furniture retailer, 4

Ggas, 17gift deductible entities, 19going concerns, 9, 10gross business income, 6GST credits, 3, 4, 7, 8, 10, 14, 19, 26

cash basis accounting, 19claiming, 1517, 19, 20, 21definition, 24

examples, 5, 15and income tax deductions, 1617motor vehicles, 16noncash basis accounting, 1920offsetting, 5preestablishment costs, 17purchases relating to input taxed

sales, 15purchases relating to private use, 15secondhand goods, 17special rules for claiming, 17when you cannot claim, 16, 25

GSTfree sales, 3, 6, 8, 9definition, 24

GST groups, 6, 7

representative member, 7GST liability, netchanging, 18

GST turnoversee turnover, GST

Hhealth services, 9hire purchase, 10, 24

Iimports, 8, 25income, gross business, 6income tax, 16, 19, 22, 23

accounting on a cash basis, 19deductions, 7

deductions and GST credits, 1617information, further,inside back cover

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INDEX

input tax creditsdefinition, 25

input taxed sales, 3, 6, 8, 1011, 15, 16, 17definition, 25

input taxed supplies, 15, 16inputs, 26

definition, 25instalments, payment of GST by, 15international mail, 9international transport, 9invoices, tax, 3, 12

Lland, 8

farm, 9grants by government, 9purchases under the margin scheme, 16purchase under standard land

contracts, 17layby purchases, 17lease payments, 17leases, 25loans, 10

Mmachinery, 17mail, international, 9

manufacturers, 4margin scheme, 16

definition, 25medical aids and appliances, 9medical services, 9medicines, 9milk bars, 20mixed supplies, 8, 14monthly GST payments, 21, 22motor vehicles, 8

luxury car tax threshold, 16see also car for disabled people;

taxi travel

Nnoncash basis, 3, 1920noncommercial activities of charities, 9nonmonetary payment, 8, 25nonprofit organisations, 24

threshold for GST, 3, 6

Ooffice equipment, 8offsetting GST credits, 5online registration, 6options for reporting and paying GST, 212

Ppaper, 5payment

definition, 25types of, 8

payment of GST, 3, 4, 7, 212annually, 15, 22, 23how to make, 23monthly, 21, 22quarterly, 21, 22

penaltiescompliance with monthly reporting

requirements, 22nonregistration for GST, 6

periodic supplies, 17phone, 5

photocopying, 5, 17plumbers, 8postage, 5potatoes, 9precious metals, 9preestablishment costs, business, 17premises, 11

see also buildings; landprice increases, 18printing services, 5private sales, 8private use, 8, 1516, 17, 18

annual private apportionment, 1516production, 4profit, 6

property, 8definition, 25see also buildings; land; premises

publications, Tax Office, 6, 7, 8, 9, 10, 11,13, 14, 16, 17, 18, 19, 20, 21, 22,insideback cover

purchases, 3, 4, 5, 7, 8, 9, 10, 12, 15, 16,18, 19, 25

definition, 25less than $82.50, 14made with corporate credit cards, 17more than $82.50, 12, 14, 26motor vehicles, 16preestablishment, 17related to making input taxed sales,

15, 16related to private use, 1516when to claim GST credits, 15, 19

Qquarterly GST payments, 21, 22

Rraw materials, 4rebates, 18receipts, 14, 20, 24recordkeeping system, 20, 23records, 20, 23reduced credit acquisition, 10, 25

registration for GST, 67application to register, 6choice of, 3, 22GST threshold, 6more than one business, 6obligations, 7online, 6penalties for nonregistration, 6proof of identity, 6voluntary, 3, 22

religious services, 9

rent, 11repairs and maintenance, premises, 11reporting and paying GST, 212

annually, 15, 22, 23monthly, 21options, 21quarterly, 21, 22

reporting period, 7later, 14

residential premises, renting or selling, 10, 11retailers, 4, 10

food, 9, 20retirement villages, supplies of accommodation

and meals to, 9

Ssales

business, 8business assets, 6, 10connected with Australia, 8definition, 25example of GST collection and

payment, 4example of offsetting GST credits, 5for payment, 8going concerns, 10GSTfree, 3, 8, 9input taxed, 3, 6, 8, 1011, 15, 16not connected with Australia, 6private, 8

simplified accounting methods, 20taxable, 3, 8types of, 811

schools, government, 19secondhand goods, 17service contracts, 17service provision, 5shares or other securities, 10shops, 11

see also retailerssoftware, recordkeeping, 20, 23stationery, 5, 17superannuation funds, 10supplies

financial, 10

see also salessuppliers, 14, 15, 19, 25

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For more information about GST for small business:

n visit www.ato.gov.au download publications, rulings andother general tax information

n visit www.business.gov.au this is an interactive servicethat can be used to register for an ABN and GST, or toapply for a tax file number

n phone 13 28 66 for information including GST rulings,ABN, pay as you go (PAYG) instalments, deductions fromemployees wages, business deductions, preparation ofactivity statements, account information for activity statementlodgment and payment, wine equalisation tax, luxury car tax,fringe benefits tax and information for nonprofit organisations.


n superannuation, phone 13 10 20

n personal tax, phone 13 28 61

n seminars for small business, which include sessions on GST,PAYG, activity statements and record keeping

visit our website at www.ato.gov.au

phone 1300 661 104

n seminars for your business group experienced tax officerscan deliver a variety of informative, personalised and practicaltax presentations and workshops to groups of 10 or more

phone 1300 30 282 email [email protected]

n visit www.ato.gov.au/smallbusinesssupport forinformation about small business

n you can subscribe to a monthly newsletter designedto provide information specifically for small business to subscribe, email us at [email protected]

n visits to businesses personalised, specialist visits fromone of our field officers, phone 13 28 66 orvisit ourwebsite at www.ato.gov.au/assistancevisit

If you do not speak English well and need help from us,phone the Translating and Interpreting Service on 13 14 50.

If you are deaf, or have a hearing or speech impairment,phone us through the National Relay Service (NRS) onthe numbers listed below:

n TTY users, phone 13 36 77 and ask for the ATO numberyou need

n Speak and Listen (speechtospeech relay) users, phone1300 555 727 and ask for the ATO number you need

n internet relay users, connect to the NRS onwww.relayservice.com.au and ask for the ATO numberyou need.

MORE INFORMATION

Ttax agents, 6, 23tax invoices, 3, 1214, 17

definition, 26examples, 12, 13issuing, 12mixed supplies and, 14recipientcreated, 14requirements of, 12sales less than $1,000, 12sales of more than $1,000, 13

validity of, 14voluntary standards, 14when required, 14

Tax Office, contact details,inside back covertax periods, 7

definition, 26taxable sales, 3, 8, 12, 18

definition, 8, 256and nontaxable sales, 14

taxi travel, 3GST registration, 6, 22

telephone, 5timber merchant, 4trading stock, 25transfer of ownership of assets, 8

transportsee cars for disabled people; international

transport; taxi travel; motor vehiclesturnover, business

threshold for accounting on a cashbasis, 19

threshold for annual privateapportionment election, 15

threshold for quarterly GST payment, 21turnover, GST

definition, 6projected, 6threshold, definition, 25threshold for accounting on a cash

basis, 19threshold for annual private

apportionment election, 15threshold for GST registration, 6threshold for monthly reporting and

payment, 21threshold for nonprofit

organisations, 3, 22threshold for quarterly reporting and

payment, 21threshold for voluntary registration, 22working out, 6

Wwater, sewerage and drainage, 9website addresses,inside back coverwholesalers, 19window frames, 12, 13

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Bus 20724 Nat 3014

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