In Australia, Goods and Service Tax (GST) is utilised as a broad based form of taxation that sees an additional 10% added to all product and service transactions. Simple enough, one might think. In reality, the exceptions that apply to Goods and Services Tax, and the way businesses claim credits, are often a cause for consternation.
Our helpful list of facts helps to blow away the confusion and myths surrounding the tax and presents the most common factors in easy-to-understand form:
Goods and Services Tax is applied to all financial transactions, not just those that are paid by the end consumers. Retailers, for example, will have to pay the tax when they purchase products from suppliers. Any tax paid can be reclaimed at a later stage as GST credits.
The 10% Goods and Services Tax charged isn't kept by the businesses themselves. This money is passed on to the Australian Tax Office so in effect, it could be argued that businesses are acting as collection agents on behalf of the Government.
Because businesses can claim back the tax that they pay, Goods and Services Tax is essentially levelled at end users and consumers who have no right to claim back any monies paid for products and services in Australia.
Business Activity Statements (BAS) are used to account for all GST transactions. These are submitted to the Australian Tax Office on a quarterly or annual basis. Businesses that turn over more than $200,000 in a financial year pay annually. Any business with a turnover below this threshold submits a BAS every three months.
GST credits are claimed on the amount of tax paid during each period. If the Goods and Service Tax received is higher than the amount of credit to be claimed, the outstanding balance is paid to the Government. If the credits are higher than the GST paid, the Australian Tax Office issues a refund.
There are a sizeable number of exempt products and services. Some food items, health care, exported goods, educational costs and qualifying charity items are not subject to Goods and Services Tax. In some cases, charges are input taxed and this is usually applied to residential property rental and financial services. Special exemptions are applied to second-hand products, imported goods, land development and gambling.
All business documentation relating to the tax must be held on file for five years, the same amount of time that Australian businesses have to hold tax return information.
Our helpful list of facts helps to blow away the confusion and myths surrounding the tax and presents the most common factors in easy-to-understand form:
Goods and Services Tax is applied to all financial transactions, not just those that are paid by the end consumers. Retailers, for example, will have to pay the tax when they purchase products from suppliers. Any tax paid can be reclaimed at a later stage as GST credits.
The 10% Goods and Services Tax charged isn't kept by the businesses themselves. This money is passed on to the Australian Tax Office so in effect, it could be argued that businesses are acting as collection agents on behalf of the Government.
Because businesses can claim back the tax that they pay, Goods and Services Tax is essentially levelled at end users and consumers who have no right to claim back any monies paid for products and services in Australia.
Business Activity Statements (BAS) are used to account for all GST transactions. These are submitted to the Australian Tax Office on a quarterly or annual basis. Businesses that turn over more than $200,000 in a financial year pay annually. Any business with a turnover below this threshold submits a BAS every three months.
GST credits are claimed on the amount of tax paid during each period. If the Goods and Service Tax received is higher than the amount of credit to be claimed, the outstanding balance is paid to the Government. If the credits are higher than the GST paid, the Australian Tax Office issues a refund.
There are a sizeable number of exempt products and services. Some food items, health care, exported goods, educational costs and qualifying charity items are not subject to Goods and Services Tax. In some cases, charges are input taxed and this is usually applied to residential property rental and financial services. Special exemptions are applied to second-hand products, imported goods, land development and gambling.
All business documentation relating to the tax must be held on file for five years, the same amount of time that Australian businesses have to hold tax return information.
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