Week 4 - Accounting for GST and PAYG Flashcards
What is the GST
o GST is a broad consumption tax and it applies to the majority of transactions in Australia.
What is an ACN
ACN
o Australian Company Number
What is an ABN
o Australian business number
o The ABN is a unique identification number quoted by businesses dealing with the ATO and other government agencies
o The ABN is the public registration number for the GST
How is GST achieved?
o ACHIEVE GST BY DIVIDING BY 11
Explain the relationship between ABN and GST
o An entity must have an ABN to register for GST, but it is not strictly mandatory for a business to have an ABN. (However the law is written to make it difficult if you choose not to get an ABN).
o But not all entities with an ABN need to register for GST
What makes a business entitled to an ABN
o Carrying on or starting an enterprise in Australia
OR
o A Corporations Act company
Explain those who CANNOT register for an ABN/GST
o An employee o Conducting a hobby o A self-funded retiree (in most cases) o An individual or partnership who is not conducting commercial activities with an expectation of profit. o *No ABN means no GST credits
Explain those who CAN (OPTIONAL) register for ABN/GST.
o You are entitled to an ABN
o The turnover is below the threshold
Explain those who MUST register for an ABN/GST
o Above the threshold of $75,000 (profit organisation)
o Above the threshold of $150,000 (not for profit organisation)
Explain GST Paid is it an asset or liability?
o GST Paid is an asset (you are better off in the future)
o GST Paid is a current asset
Explain GST collected, is it an asset or liability?
o GST collected is a liability
o GST collected is a current liability
Explain PAYG Withholding
o When you have to make a payment on behalf of someone else
o Employers much garnish PAYG from employee’s wages
What does PAYG mean for an employee?
o PAYG is used when they file a tax return.
o Will be seen on the “payslip” and the employee will also be issued at the end of a financial year a “PAYG Payment Summary Statement”
What are on-costs for an employer?
o On- costs are additional related costs of employing staff and are usually calculated on top of earnings. E.g super, ATO, Worksafe
What are awards and what do they set out?
o Awards set out minimum wages and conditions that an employee is entitled to.
o They do not apply when an employer has an enterprise agreement or other registered agreement
Is PAYG liability or an asset and is debited or credited.
o PAYG is a liability and is credited
Explain the Business Activity Statement (BAS)
o If a business is registered for GST, then they are also required to submit a BAS statement.
o BAS aides in reporting and paying; GST, PAYG withholding tax, PAYG instalments and other taxes.
Explain a G1 in relation to a BAS form
o G1: the sales and GST collected within that period, it is the gross amounts
Explain a G10 in relation to a BAS form
o G10: capital purchases/expenditure; these are long term assets which are non-inventory and non- expense.
Explain a G11 in relation to a BAS form
o G11: total of non-capital purchases; these are on-going expenses and inventory purchases.
Explain a W1 in relation to a BAS form
o W1: salaries and wages (gross wages); this also includes sales commission
Explain a W2 in relation to a BAS form
o W2: PAYG amount withheld
Explain how to fill out the “amount you owe ATO” section of the BAS form
o Amount you owe ATO:
1A: divide G1 by 11
4: total PAYG withheld
Add these figures together
Explain how to fill out the “amount ATO owes you” section of the BAS form
G10+G11/11
What are the items that do not count towards the BAS form
capital contributions, drawings, sales made from previous periods, COGS, paying interest on a loan
