ARMSARMSARMSARMS Presented by

Peter Gibson

02 9267 9344

Quote from Australian Financial Review (dated 4 February 2000)Quote from Australian Financial Review (dated 4 February 2000)

““Our GST, for example, is in Our GST, for example, is in excess of 360 pages now excess of 360 pages now compared to New Zealand’s compared to New Zealand’s 100 or so pages”.100 or so pages”.

Basic Rules Basic Rules

• Important ConceptsImportant Concepts• When is GST TriggeredWhen is GST Triggered• Input Tax Credits (I.T.C’s)Input Tax Credits (I.T.C’s)• Partial I.T.C’sPartial I.T.C’s• Tax InvoicesTax Invoices

Specific Issues Specific Issues

• Pricing ExamplesPricing Examples • • Duty Free SalesDuty Free Sales• Lay-BysLay-Bys • • Refund 30/6Refund 30/6• Gift VouchersGift Vouchers • • ACCC IssuesACCC Issues• AdjustmentsAdjustments • • Two Company StructureTwo Company Structure• ValuationsValuations • • Must Do ListMust Do List• RepairsRepairs • • Sales Tax IssuesSales Tax Issues• 2nd Hand Goods2nd Hand Goods

Fact Sheet OverviewFact Sheet Overview

GST EffectsGST Effects -- EVERYONEEVERYONE

GSTGST - - Triggered by a supply of Triggered by a supply of thingsthings for consideration for consideration

GST RateGST Rate -- One rate - 10%One rate - 10%

Value of GoodsValue of Goods Or ServiceOr Service -- 10/11 of the price 10/11 of the price paidpaid

RegistrationRegistration -- Turnover 50k p.a.Turnover 50k p.a. ThresholdThresholdNon profit bodies 100k p.a.Non profit bodies 100k p.a.

Fact Sheet OverviewFact Sheet Overview

Cash AccountingCash Accounting -- Up to $1,000,000Up to $1,000,000

Quarterly ReportingQuarterly Reporting - - Up to $20m p.a.Up to $20m p.a.

Electronic LodgmentElectronic Lodgment -- Turnover > $20m p.a.Turnover > $20m p.a.

Commencement DateCommencement Date -- 1.7.20001.7.2000

Triggering GSTTriggering GST

TAXABLE SUPPLY OCCURS AT THE EARLIER TAXABLE SUPPLY OCCURS AT THE EARLIER OF:OF: Any consideration is received for the supplyAny consideration is received for the supply

OROR An invoice is issued relating to supplyAn invoice is issued relating to supply

FULL AMOUNT OF GST BECOMES PAYABLEFULL AMOUNT OF GST BECOMES PAYABLE

WATCH OUT FOR DEPOSITS, PREPAYMENTSWATCH OUT FOR DEPOSITS, PREPAYMENTS

Quarterly P & L Quarterly P & L

OutgoingsOutgoings Income Income $ $$ $*Purchases 200,000 Sales 350,000 *Purchases 200,000 Sales 350,000 *Accountancy 700 Repairs 75,000*Accountancy 700 Repairs 75,000 Bank Charges 680 Valuations 11,000Bank Charges 680 Valuations 11,000*Cleaning 900*Cleaning 900*Insurance 1,600*Insurance 1,600*Rent 15,000*Rent 15,000 Wages 120,000Wages 120,000*Repairs & Maint 800*Repairs & Maint 800*Leases *Leases 3,300 3,300 ______ ______ 342,980 436,000342,980 436,000

*222300 *222300 11 = 20209.09 1/11th 39636.36 11 = 20209.09 1/11th 39636.36

GST PAYABLE $19427.27 GST PAYABLE $19427.27

Part Business Use OnlyPart Business Use Only

Input tax credit available to the extent of Input tax credit available to the extent of business use onlybusiness use only

An adjustment process will be in placeAn adjustment process will be in place Adjustment will usually be made once per Adjustment will usually be made once per

yearyear

Invoices Invoices

Under $50 No Invoice Required.

It is not compulsory to issue a tax invoice however if a customer requires one it must be issued within 28 days.

Over $50 and * the words “Tax Invoice”

Under $1,000 * the issuer’s ABN

must * date of issue of the tax invoice

include * the name, or trading name of the supplier

* the quantity or volume of what was supplied

* the GST inclusive price of the taxable supply

Invoices (cont)

Over $1000 must * as per previous slide

include PLUS

* the name of the recipient

* the address or ABN of the recipient

* a brief description of each thing

supplied.

Invoices (cont)

Pricing Jewellery Pricing Jewellery

Before AfterBefore After $ $$ $ 100 100 100100+32% (cost +6%) +32% (cost +6%) 33.9233.92 10 10

133.92 110133.92 110 (10)(10)

+GP (100%) +GP (100%) 133.92133.92 100 100 267.84 +GP 267.84 +GP 133.92133.92

233.92233.92 +GST +GST 23.3923.39

257.31257.31 REDUCTION = 3.93%REDUCTION = 3.93%

NO NO

Before AfterBefore After $ $$ $ 100 100100 100+32 (cost + 6%) +32 (cost + 6%) 33.9233.92 1010 133.92 110133.92 110

(10)(10)+GP (100%) +GP (100%) 133.92133.92 100 100 267.84 + 100% 267.84 + 100% 100100 200200 + GST + GST 2020

220220

Pricing Watches Pricing Watches

Before 29/7/99 29/7/99 to 30/6/00 1/7/00 $ $ $

100 100 100+32% (cost+6%) 33.92 22% 23.32 10 133.92 123.32 110+GP (85%) 113.83 113.83 (10)

247.75 237.15 100 113.83

213.83 +GST 21.38

235.21

Pricing Aged Stock Pricing Aged Stock

BEFORE AFTER$ $

100 100TAX 16 10

116 110G.P. 17.92 (10)

133.92 100 + 17.92

117.92 + 11.79

129.71

Pricing Aged Stock Pricing Aged Stock

BEFORE AFTER

$ $OR 100 100

16 10116 110151.84 (10)267.84 100

151.84251.84

+ 25.18277.02

Lay Bys Lay Bys

• Cash/AccrualCash/Accrual

• CancellationCancellation

• NZ TreatmentNZ Treatment

Gift Vouchers Gift Vouchers

• Before Before 1 July1 July

• AfterAfter 1 July1 July

Adjustment Events Adjustment Events

• Settlement DiscountsSettlement Discounts

• RefundsRefunds

• ReturnsReturns

• Bad DebtsBad Debts

Other Issues Other Issues

• ValuationsValuations

• RepairsRepairs

• Debtors/CreditorsDebtors/Creditors

• Buying GroupsBuying Groups

Second Hand Goods Second Hand Goods

• Trading StockTrading Stock

• Business AssetsBusiness Assets

• Stock on Hand 30/6Stock on Hand 30/6

Tax Free Sales Tax Free Sales

• Open BagOpen Bag

• Closed BagClosed Bag

• RefundRefund

Refund 30/6 Refund 30/6

• Stock For SaleStock For Sale

• ConsumablesConsumables

• By 22 Jan 2001By 22 Jan 2001

Interposed Wholesale Entity Interposed Wholesale Entity

• ABN/GST RegABN/GST Reg

• Retain???Retain???

• Sales Tax MattersSales Tax Matters

ACCC Guidelines

Prices should be reduced immediately to pass on the full effect of the tax reductions

Price increases based on the GST should include a full offset for other indirect tax reductions

No mark up on GST component

Prices should reflect actual tax increase

Dollar margins should not be increased

Pricing Pricing

ACCC requirementsACCC requirements

- pass on savings created by abolition - pass on savings created by abolition of of sales tax sales tax

Systems-Capturing The InformationSystems-Capturing The Information

Accounting Systems to separate, calculate Accounting Systems to separate, calculate and record GST paidand record GST paid

Information systems to ensure you have Information systems to ensure you have received a ‘Tax Invoice’received a ‘Tax Invoice’

Filing system to maintain your period tax Filing system to maintain your period tax invoicesinvoices

A reconciliation systemA reconciliation system

Likely Audit Focus Areas Likely Audit Focus Areas

• Sales incorrectly returned;Sales incorrectly returned;• Purchases/expenses claimed in the incorrect period;Purchases/expenses claimed in the incorrect period;• Arithmetical errors made on the GST return;Arithmetical errors made on the GST return;• Claims for expenses that have no GST charged on their Claims for expenses that have no GST charged on their

supply;supply;• Claims for private expenses;Claims for private expenses;• Input tax credit claims without the required tax invoices Input tax credit claims without the required tax invoices

being held or produced in the required time-frame;being held or produced in the required time-frame;• Sales and income returned in the wrong GST period; andSales and income returned in the wrong GST period; and• Purchases and expenses claimed on GST-free items.Purchases and expenses claimed on GST-free items.

Must Do List - Before July 1 Must Do List - Before July 1

• Apply for ABNApply for ABN• Apply Before 31 May 2000Apply Before 31 May 2000• Review Contracts & AgreementsReview Contracts & Agreements• Unbundle Sales Tax (+ other) SavingsUnbundle Sales Tax (+ other) Savings• Determine PricesDetermine Prices• Record any GST charged by SuppliersRecord any GST charged by Suppliers• Prepare StationeryPrepare Stationery• Ensure Accounting Systems are AdequateEnsure Accounting Systems are Adequate

Must Do List - Before I July Must Do List - Before I July

• Determine whether you will account for GST Determine whether you will account for GST on a cash or accrual basison a cash or accrual basis

• Consider Timing of Capital AcquisitionsConsider Timing of Capital Acquisitions• Train StaffTrain Staff• Conduct cash flow exercise and prepare (if Conduct cash flow exercise and prepare (if

necessary) for extra working capitalnecessary) for extra working capital• Charge GST now if necessaryCharge GST now if necessary• Send Questionnaire to SuppliersSend Questionnaire to Suppliers

Must Do List (cont) Must Do List (cont)

• Decide whether you will lodge monthly or Decide whether you will lodge monthly or quarterlyquarterly

• Ensure suppliers provide “Tax Invoices”Ensure suppliers provide “Tax Invoices”