The GST (Goods and Services Tax) is a value added tax on the supply of goods and services in Australia, including items that are imported. In most cases, GST does not apply to exports of goods or services, or other items consumed outside Australia.
It was introduced by the Howard Government on 1st July 2000, replacing the previous Federal wholesale sales tax system and designed to phase out a number of various State and Territory Government taxes, duties and levies such as banking taxes and stamp duty. The basic premise of the new tax was to broaden the tax base, which was heavily biased toward
the provision of services.
Prior to the GST, Australia operated a Wholesale Sales Tax (WST) which imposed a tax on wholesales of goods. The WST was implemented in the 30's when Australia had an economy dominated by goods. Over the years however, Australia's economy evolved to be more services based, and the GST served to strip the unfair tax advantage that service providing businesses had over suppliers of goods.
The GST is levied at a flat rate of 10% on most goods and services, apart from GST exempt
items, and input taxed goods and services.
GST is administered by the Tax Office on behalf of the Australian Government, and is appropriated to the states and territories.
Registration under GST
Not every business in Australia needs to register for GST. A company should register for
GST if both the following conditions are satisfied:
A business is liable to charge GST if is registered under GST and it makes a taxable supply. A business makes a taxable supply when:
Claim back GST
If the business is registered, then the GST can be claimed back on any creditable acquisition or creditable importation. This term is similar to claiming credit of amount of GST paid.
A creditable acquisition (or creditable importation) is made if the business:
Some common creditable acquisitions include:
Creditable purpose is something that is acquired for the purpose of the enterprise. The GST can be claimed back when submitting the Business Activity Statement (BAS). The Business Activity Statement (BAS) is a form submitted to the Australian Taxation Office by all businesses to report their taxation obligations. BAS is similar to the returns that are filed under India’s taxation system.
Submission of Business Activity Statement
If the turnover is less than $2,000,000 and is a small business entity, then it can elect to lodge the Business Activity Statement (BAS) either monthly, quarterly, or annually. If the turnover is more than $2,000,000 then it must be lodged monthly in the Australian Taxation Office.
Maintenance of Records
To claim the GST back on a creditable acquisition, there must be a valid tax invoice from the supplier.
There is an exception for individual items costing less than $75.
Generally, the tax invoice should contain the following
These invoices should be kept for a period of 5 years.
GST Free Supplies
There are a small number of supplies that are GST free.
If a GST free supply is made, then GST cannot be charged, but the GST paid can be claimed back.
GST supplies include:
Health and Medical Care
Educational Supplies and Childcare
Fresh Food and Beverages
Items specifically excluded from the definition of food are:
In effect, the exclusions mean that food will not generally be excluded from the GST until
they have been processed or treated in some way. So sale of products by primary producers
to processors or treaters will be subject to GST.
Other GST-Free Supplies
Input taxed Supplies
There are a small number of supplies that are Input-taxed.
If an input taxed supply is made, then GST cannot be charged ad GST paid also cannot be claimed back.
Input-taxed supplies include: