Topic 3: Principles & Features of GST

Question 1

What are a company’s obligations regarding GST?

Answer 1

When a business reaches gross income of $75,000 or more, it must register for GST. Every sale made from then on must impose 10% GST which must be disclosed clearly on any tax invoice. Adds GST Credit, which they can claim when they purchase inventory and GST Payable which records the 10% added to each sale. At the end of every month, the company must complete a Business Activity Statement (BAS) for the Australian Taxation Office (ATO). Failure to administer the GST will result in penalties depending upon the size of the business and frequency of offences.

Question 2

What is GST?

Answer 2

Goods and Services Tax: A flat tax of 10% that is added to the price of most goods and services in Australia.

Question 3

When does a business have to register for GST?

Answer 3

Only has to when annual turnover is more than $75,000. If total is less than this number then the owner can choose whether to register or not. If they do not register, they still pay GST on goods they purchase but do not charge GST to their customers.

Question 4

What is a Business Activity Statement (BAS)?

Answer 4

It is a form submitted to the Australian Taxation Office (ATO) by registered businesses to report their tax obligations.

Question 5

What are GST-free supplies?

Answer 5

They are goods or services that DO NOT attract the 10% GST but where GST credits CAN be claimed on the good or service. E.g. Fresh food, child care, health services, education, water

Question 6

What are Input Taxed supplies?

Answer 6

They are goods or services that DO NOT attract the 10% GST but where GST credits can NOT be claimed on the good or service. E.g. Rent, wages/salaries, bank loans

Question 7

What are Taxable supplies?

Answer 7

Refers to any good or service on which GST is charged. E.g. Processed food, clothing, cars