Week 6 - GST Flashcards
1
Q
What are the 3 types of supply for GST purposes?
A
- Taxable supplies
- GST-free supplies
- Input-taxed supplies
2
Q
What does ITZ stand for?
A
Indirect tax zone
3
Q
What does the ITZ include?
A
Includes Australia, but excludes external territories.
Not included are:
- Ashmore and Cartier Islands
- Antarctic Territory
- Christmas Island
- Cocos Keeling Islands
- Coral Sea Islands
- Heard and McDonald Islands
- Norfolk Island.
4
Q
What is the definition of price for GST purposes?
A
The dollar amount of the supply including GST
Use 1/11th for the GST
5
Q
When is an entity required to register for GST?
A
It carries on an enterprise
The GST turnover meets / exceeds the registration turnover threshold ($150K for not-for-profits, $75K all others).
6
Q
What is the definition of GST turnover?
A
Total value (excluding GST) of table supply, GST-free supply or taxable importation.
Does not include input-taxed supplies, supplies for no consideration, or supplies not connected with the business.
7
Q
What period is covered by projected GST turnover?
A
Current month and next 11 months
8
Q
What period is covered by current GST turnover?
A
Current month and previous 11 months
9
Q
True or false:
Input-tax supplies are included in determining current / projected turnover for GST purposes
A
False
10
Q
True or false:
GST registration is compulsory for all -ride-share services (e.g. Uber), regardless of the turnover.
A
True.
As long as not an employee driver, then must register for GST
11
Q
True or false:
Transfer of capital assets is not included in projected GST turnover
A
True
12
Q
What section deals with cancellation of GST registration?
A
Subdivision 25-B of the GST Act
(A new Tax System GST Act 1999)
13
Q
An entity closes / sells their business, or restructures their business.
How long do they have to cancel their GST registration?
A
21 days.
14
Q
Under what circumstances can a taxpayer choose to cancel their GST registration?
A
When their GST turnover is below the threshold, unless:
- taxpayer is a taxi driver (including ride-sourcing / chauffer services)
- taxpayer represents an incapacitated entity that is required to be registered for GST (e.g. in liquidation)
- taxpayer is an Australian resident acting as agent for a non-resident that is registered for GST
15
Q
What is also cancelled when a taxpayer cancels their GST registration?
A
ATO will also cancel a range of other tax registrations:
- fuel tax credit
- luxury car tax
- wine equalisation tax
Cancellation does not affect PAYG (both instalments and withholding) and FBT.
16
Q
How long does a supplier have to issue a tax invoice?
A
28 days
17
Q
True or false:
Tax invoices do not need to be provided if the value is $75 ex GST ($82.50 incl GST) or less.
A
True.
Purchaser can still claim an input tax credit without a valid tax invoice.
18
Q
If an invoice is more than $1000 (including GST), what must the tax invoice state?
A
The buyers identity or ABN.
GSTR 2001/8 - tax invoice must show
19
Q
What 4 conditions are present when there is a taxable supply under s9-5 of the GST act?
A
- supply is for consideration
- supplier is registered or required to be registered for GST
- supply is made in the course or furtherance of an enterprise
- supply is connected with the ITZ
20
Q
True or false:
A supply for GST purposes includes the supply of money, such as Bitcoin.
A
False.
Supply of money is not a supply for GST purposes.
21
Q
What is the definition of mixed supply?
A
Per GSTR 2006/9, separately idenitfiable items that are subject to different GST treatments.
For example, partly taxable, partly input tax supply.
22
Q
What is a composite supply?
A
Single supply that is made of different (non-separated, non-identifiable) parts.
Treated as a single supply.
23
Q
What is the definition of “consideration” under the GST act?
A
- any payment or act / forbearance in connection with the supply of anything OR inducement of a supply of anything
It does not matter whether the payment, act or forbearance was voluntary or whether it was by the recipient of the supply.
Based on contract law = anything given that is of value (both monetary and non-monetary).
24
Q
How is GST on barter transactions handled?
A
GST is based on the GST-inclusive market value of the property / services.
Tax issues need to be issued to be claimed by either party.
25
How are supplies to an associate for no consideration treated?
Deemed to have consideration of the market value if the associate is not registered for GST, or does not use the services wholly for a creditable purpose.
26
What is the definition of an enterprise?
Activity, or series of activities, done by / as:
(a) Business, adventure or concern in the nature of trade
(b) Regular / continuous basis in granting property interests
(c) Complying superannuation funds
(d) Charities
(e) Religious Institutions
(f) Commonwealth, States / Territories of Australia.
27
What is excluded from the meaning of a enterprise?
Activities done:
(a) By an employee
(b) As a hobby
(c) By an individual / partnerships without reasonable expectation of a profit
(d) As a member of a local governing body under state / territory law.
28
Under what circumstances are supplies of goods connected with the ITZ?
- delivered in ITZ to recipient
- made available in ITZ to the recipient
- removed from ITZ (exports)
- real property located in Australia
- low-value goods and digital products delivered to Australian consumer by an offshore supplier (e.g. streaming movies or games)
- offshore supplies of commercial accommodation in Australia
- brought into the ITZ and the supplier is either importing the goods or installing or assembling the goods in the ITZ.
29
How are goods imported into the ITZ but assembled within the ITZ treated?
Part of the supply involving installation or assembly in ITZ is treated as a separate supply.
30
What are low-value goods?
Those physical goods (excluding tobacco products or alcoholic beverages) valued at $1000 or less.
$1000 is based on customs value, which means transport and insurance costs are excluded.
31
What does customs value mean?
Transport and insurance costs are excluded.
32
Prior to 1 July 2018, how were goods imports under $1,000 treated?
Not subject to GST.
33
From 1 July 2018, how are goods imported under $1,000 treated?
$1,000 threshold was abolished.
All goods imported into Australia are subject to GST, unless specifically GST free.
Overseas business with Australian annual turnover more than $75,000 are required to register for the Australian GST.
34
What simplified GST registration process applies to overseas suppliers that are not conducting an enterprise in Australia?
Simplified registration means that the supplier does not have to provide a tax invoice and is not able to claim input tax credits.
35
After 1 July 2017, how are the online digital products and services treated for GST?
Now subject to GST - previously wasn't GST.
aka "Netflix Tax".
36
When is the initial supply of a voucher not a taxable supply?
Provided the monetary value of the voucher is stated and the entitles the holder to buy goods or services up to the stated monetary value.
37
Is a voucher is issued for no monetary value but entitles the holder to receive specified goods or services, how is GST treated?
Taxable supply occurs when the voucher is issued (not redeemed).
38
Which section deals with security deposits?
Division 99
39
Does GST apply to payments / refunds of security deposits?
No.
40
What is required for a payment to be considered a security deposit?
1. Held as security for performance of an obligation
2. Contract, conduct, intent consistent with a deposit
3. Be at risk of forfeiture upon failure to performance the obligation
4. Be a reasonable amount.
41
What is generally considered to be "reasonable amount" for security deposit purposes?
Per GSTR 2006/2, reasonable if it is 10 percent or less of the total cost of the supply.
Unless a high risk that sale will not proceed.
42
What is considered in whether a security deposit is reasonable?
- duration and time of contract / payment
- uniqueness of the goods / process to supply
- vulnerability of the goods to loss in value
- other extraordinary conditions.
43
Does GST apply on accrual or redemption of points under loyalty programs?
No, as there is no consideration for the supply.
However yes if the redemption of points does not fully cover the cost of the supply (part taxable supply has occurred).
44
Does GST apply to fines, penalties and taxes?
No. Specifically excluded, not a consideration.
45
Does GST apply to a court order / out-of-court settlement?
Yes when related to court settlement of a dispute.
No where damages are ordered to compesnation for property damage, negligence causing loss of profits, wrongful use of trade name, breach copyright, personal injury.
No on payment of either pre/post judgment interest.
46
True or false:
A supplier who sells GST-free product cannot claim GST input tax credits onn purchases.
False
47
What are examples of supplies that are noted as GST-free in Division 38 of the GST act?
- Most basic food
- Some medical services / supplies - health, medicines, medical aids, feminine hygiene
- Education (excluding CPD courses)
- Childcare
- Exports
- Religious Services / charities
-
48
What is the definition of GST-free food under section 38-4?
Fresh food & beverages
For human consumption
Does not inlcude live animals, unprocessed milk, grains and plants, prepared meals or hot food consumed away from premises.
49
True or false:
Hot food consumed away from premises is still considered fresh food
False
50
What are examples of input taxed supplies?
- financial supplies - loans, bank charges, interest & dividends
- residential rent
- sale of residential premises thatt are not new
- sale of precious metals (> 99.5% fineness)
- food and drinks in school tuckshops (excludes boarding student meals)
51
What is included in the definition of financial supply?
* Bank account
* debt / credit arrangement
* charge or mortgage
* regulated superannuation fund
* annuity or allocated pension
* life insurance
* guarantee or indemnity
* hire purchase entered into before 1 July 2012
* Currencies (including digital)
* Securities
* Derivative
* Foreign super fund.
52
True or false:
Credit card and merchant fees are input taxed
False.
GST applies
53
True or false:
An entity that makes input-tax sales cannot claim input tax credits on purchases.
True
54
True or false:
The lease of a property that is used for non-commercial rental purposes is a GST supply
False.
It is input-taxed
55
Is the sale of non-new residential properties a GST supply or input-taxed supply?
Input-taxed
56
Rental or sale of commercial property (e.g. a factory, shop or restaurant) - input-taxed or GST supply?
GST supply
57
What is the definition of new residential premises for GST purposes?
Either:
1. Not previous sold as residential and not previously the subject of a long-term lease
2. Created through substantial renovation
3. Built to replace demolished premises on the same land
58
Sale of new residential premises - GST or input taxed?
GST supply
59
How long should new / substantially renovated residential houses be rented for, before being input-taxed?
5 years.
That is, must rent for residential purposes for 5 years - only after that time will it be input-taxed.
60
What are substantial renovations?
Renovations in which all, or substantially all, of a building is removed or replaced.
61
What is the definition of commercial residential premises?
A hotel, motel, inn, hostel or boarding house
Will be subject to GST
62
Sale of commercial residential premises ... GST or input-taxed?
GST supply
63
Who does the GST liability fall to for taxable importations?
Falls to the importer, not the international supplier.
64
What happens when a importer is not registered for GST?
GST still applies - importer is liable.
Goods will not be released from customs until the GST and other duties are paid (unless a GST deferral option applies).
65
What is a taxable importation under the GST act?
Goods are imported AND
Goods are for home consumption.
66
An importer is registered for GST, and uses the imported goods for a creditable purpose.
What is the GST treatment?
Nil net GST effect for the importer.
Pay the GST on import, but claim back the GST.
67
Importer is not registered for GST and imports goods.
What is the GST treatment?
Still liable for GST on the import, however NOT able to claim an input tax credit.
68
For taxable importations, what costs is GST levied on?
- Customs value of the goods
- Transportation and insurance
- Customs duty
- Wine tax (if applicable)
69
What 4 components are necessary for a creditable acquisition?
- entity acquires anything (solely or partly) for a creditable purpose
- thing is a taxable supply
- provides / liable for the supply
- entity is registered or required to be registered.
70
True or false:
Oil rigs can be classed as being in the indirect tax zone (ITZ)
True
71
Supply of goods to ITZ?
Delivered
Made available
Removed from ITZ
Brought into ITZ
72
When is real property in ITZ?
When located in ITZ
73
Supply of services and intangibles - when is it in the ITZ?
Contractual rights - where agreeement is made in ITZ
Services - when performed in ITZ
When enterprise is carried on in ITZ - fixed place or > 183 day test
Exception applies with B2B.
74
What is a non-taxable importation?
Not subject to GST when imported.
GST free, input-taxed or low-value imports (<$1000)
75
What $ value is low-value goods based on?
Less than $1000
76
Who is responsible for the GST on low-value goods for importations made by a non-resident supplier?
The seller, if registered for GST
77
True or false -
Private or domestic purchases are considered a creditable purpose
False
78
True or false:
Purchases relating to input-taxed supplies are considered a creditable purpose
False
79
What are other types of non-creditable / non-deductible purchases
Penalties
Relatives travel expenses
Maintaining your family
Recreational club expenses
Non-business boating
Leisure facilities
Div 32 entertainment expenses
Div 34 non-compulsory uniforms
non-deductible non-cash business benefits.
80
What is a creditable importation?
* Goods are imported soley or partly for a creditable purpose
* Importation is a taxable importation
* Importer is registered or required to be registered
Registered importer can then claim an input tax credit.
81
When can a business claim GST on second-hand goods, even if no GST was included?
- Business acquiring is registered
- No GST included
- Goods acquired for resale and not manufacture.
Then can claim GST on purchase, regardless if no GST in the transaction.
82
Are gold, silver or platinum ingots treated as second-hand?
No, if pure gold / silver / platinum.
83
Can input tax credits on company pre-establishment costs be claimed?
Yes. Newly formed company claims, not the entity that incurred the cost.
84
Reimbursements of expenses paid by employees / agents - can you claim GST input tax credits?
Yes, provided the employee provides a tax invoice or receipt.
85
Real property margin scheme - can GST ITC's be claimed?
No
86
What are the 2 main periods for GST reporting?
Monthly and quarterly
87
When must an entity use monthly for GST reporting?
- has a GST turnover of $20m or more
- is only carrying on enterprise for less than three months
- has a history of failing to comply with tax obligations.
88
If an entity is a monthly GST lodger and fall belows the $20 million annual turnover, can they change back to quarterly?
Yes
89
For SBE's of less than $10 million GST turnover, how can they lodge BAS's?
Pay instalments quarterly, then complete an annual return
90
What are the 2 attribution types for GST?
Cash or accruals
91
Which entities can elect to report GST on a cash basis?
- Entity is an SBE
- Non-business and GST turnover of $2 million or less
- Cash basis is used for income tax purposes
- Entity is a gift-deductible charity or government school (irrespective of turnover)
- Commissioner makes determination to lodge on cash basis.
92
How are sales on a accrual basis for GST attributed?
Declare GST on the earlier of:
- First receipt from the sale OR
- invoice issued
93
How are purchases on a accrual basis for GST attributed?
Claim GST ITC on the earlier of:
* First date of payment
* date invoice received
94
True or false:
A taxpayer must have a tax invoice by the time the BAS is lodged to claim an ITC
True
95
Supplies and acquisitions made on a periodic basis - e.g. leases - what period is GST accounted for?
Not upfront, but oover the period of the lease.
96
What simplified GST accounting methods are available for small food retailers who are an SBE?
Simplified treatment of apportioning taxable supplies v GST-free supplies.
Applies to taxpayers with less than $50 million turnover.
97
How is GST on hire purchases treated?
Changed for agreements after July 2012.
Costs of hire purchase are treated as the purchase of a capital item.
If item used for taxable purpose, ITC can be claimed at the start of the agreement.
Total of all future payments, regardless of cash or accruals.
98
What is an adjustment event?
Any event that changes a GST supply or acquisition, resulting in a change to the liability / ITC entitlement.
Either an increasing adjustment (increases the GST liability)
or a decreasing adjustment (reduces the GST liability)
99
What should be included on an adjustment note for GST purposes?
* Identity of the supplier and recipient
* ABN of the supplier
* issue date
* brief explanation of the reason for the adjustment
* amount of the GST adjustment
If relating to a tax invoice of $1000 or more, an explanation for the adjustment and difference.
100
What is now required in relation to GST on the purchase of new residential property?
Purchaser of new residential property or land is required to withhold GST from the purchase price and remit to the ATO.
Does not apply the the deposit, only necessary from first instalment after.
Withholding is not required where the purchaseer of land is registered for GST.
101
What are sellers of new residential property / land required to tell the purchaser?
Must notify the purchaser whether the sale is subject to the GST withholding rules - unless seller is not registered or required to register for GST.
102
What does division 48 of the GST act make it possible for members of the group to do?
Be treated as one GST entity and thereby avoiding the GST transactions between each member.
Only GST with outside parties are taken into account for GST.
103
True or false:
When a GST group is formed, there must be multiple entities nominated as the representative member?
False.
Only one (typically the parent) needs to be nominated as the respresentative member. Must be an Australian resident for tax purposes.
104
In a GST group, how are BAS's lodged?
Representative member (typically a parent) is soley responsible for the GST of all group members.
105
Under Division 48 of the GST Act, what is the primary test of whether separate entities can be treated as one GST group?
Whether entities satsify the membership requirements described in the Act.
Two companies and either one has a 90% stake or greater in the other.
Where three companies, one needs to have a 90% or greater stake in the other companies.
106
For GST grouping, what percentage is required to group entities together?
90% or greater stake.
Defined as either 90% of the voting power OR
right to receive 90% of the dvidends / capital distributions.
107
For GST grouping, what must be completed in addition to the membership requirement test?
1. Each of the entities must agree in writing to the formation of the group
2. One entity is nominated as the representative member, and that entity notifies the Commissioner of the formation of the group
3. Representative must be an Australian resident
4. Each entity must be GST registered
5. Each entity has the same tax period and accounting basis
6. Must not be a member of another GST group
7. Must not have a branch registered under Division 54 of the GST act.
108
True or false:
An entity can still be grouped if they have different tax periods or different methods of cash v accruals
False
109
What is a GST branch?
Registration of an entity which is treated as a separate GST entity.
110
When can a GST branch be registered?
* Parent carries on or intends to carry on an enterprise through the branch
* Branch is separately idenitfiable by location / nature of activities
* Parent entity is registered
* Branch maintains independent accounts.
111
How does a GST branch remit GST?
Branch is treated as a separate entity for GST.
Required to remit own GST return, including transactions with the parent entity.
112
How is GST treated during amalgamations? (e.g. mergers)
Remove GST liability / ITC entitlements for transactions between the original entities and the amalgamated entity during the process of amalgamation.
113
What is required for anti-avoidance provisions to be applied by the commissioner?
- Scheme entered into after December 1998
- Scheme has the sole or dominant purpose / principal effect of obtaining a GST benefit
