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Paul Carrazzo CPA has been extremely active in the area of GST implementation.
His activities in this area include:
- Providing seminars not only to the clients of
Carrazzo Consulting CPAs but to the clients of other Melbourne accounting practices;
- Feature tax writing on GST issues, pre and post implementation;
- Guest Radio and Television appearances discussing various GST issues; and
- A member of the "National Racing Industry Partnership", an ATO initiative to assist the racing industry in the implementation of GST.
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The specialist services available within this area include:
- Review and preparation of Business Activity Statements ("BAS");
- GST registration;
- Specialist GST advice and projects; and
- GST seminars and workshops for businesses and industry groups.
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Q.
A taxpayer has two small businesses, each with an annual turnover of $30,000. As the turnover of each small business is under $50,000, does he or she have to register for GST? |
A. Yes. If your total (or projected) annual turnover from all businesses is $50,000 or more, you must register for the GST. You do not look at each business in isolation. In terms of completing the BAS, the details of both businesses are consolidated by the entity.
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Q.
Can GST registration be cancelled within 12 months of being registered? |
A.
Yes - a new law allows the ATO to cancel voluntary registration from as early as 1 July 2000, subject to certain conditions.
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Q.
A taxpayer must conduct an "enterprise" to be able to register
for GST. What are the current "enterprise" tests? |
A. For GST
purposes, you must demonstrate that you are
conducting the activity in
the "form of business", with a reasonable
expectation of profit or gain, and that the
activity is not a private recreational pursuit or
hobby. This is especially important for those who
wish to claim GST paid in relation to a horse
breeding activity (and also those who wish to
claim income losses for horse breeding
activities).
The ATO has a number of tests to determine whether an entity is engaged in a viable
business enterprise. Some of the more important criteria include:
- whether the activity has a significant commercial purpose or character;
- whether the taxpayer has a purpose of profit as
well as a prospect of profit from
the activity;
- whether there is repetition and regularity of the activity;
- whether the activity is of the same kind and carried on in a
businesslike manner
such that it is directed at making a profit;
- the size, scale and permanency of the activity;
- the keeping of proper records;
- the existence of a Business Plan
evidencing viability;
- are the goods and services being regularly sold in order
to generate a profit; and
- the use of experts and consultants.
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Q.
A taxpayer in business acquires an ABN, but due to turnover and projected
turnover being less than $50,000, chose not to register for GST. If that taxpayer
turnover subsequently exceeds $50,000, must he or she register for GST immediately?
Is GST payable on the "plus $50,000" sales? When can input tax credits commence being
claimed? |
A.
The taxpayer must immediately register for GST when sales exceed $50,000. GST is
payable on the sale proceeds and tax credits can be claimed only from the date of
registration.
Many small businesses will be caught out by this requirement.
Accordingly, I strongly suggest that registration take place well in
advance of the turnover exceeding $50,000 - at least 10% GST can be added
to the sale prices and the taxpayer will not be "out of pocket" for 1/11th
of the sale proceeds.
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Q.
If a service or good is provided on or after 1 July 2000,
but is fully paid before 1 July 2000, is it still subject to
GST? |
A.
Yes. Supplies made on or after 1 July 2000 will be subject to GST.
The fact that payment is made before 1 July 2000 does not avoid GST
applying. This will obviously be of concern to businesses who received
prepayments for goods and services before 1 July 2000, unless their
contracts permitted the levying of the GST.
As a general rule, you are liable for GST on any contract you make after
1 July 2000. However, there are exceptions. GST may not apply to goods
or services sold after June 2000 under some contracts entered into before
8 July 1999 or 2 December 1998 depending on the circumstances.
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Q.
A taxpayer accounts for GST on a "cash" basis. A supply is made before
1 July 2000 but payment is not received until after that date. Will GST apply
because the taxpayer operates on a cash basis and receives payment after 30
June 2000? |
A.
No. As the supply was made before 1 July 2000, it will not be subject to GST even though
payment is received after that date. The fact that you account for GST on a cash basis
makes no difference.
Payments for these pre GST supplies received after 1 July 2000 are not
included at item G1 of the BAS.
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Q.
Must a tax invoice show the amount of GST payable separately? |
A.
No. The tax invoice must show the GST inclusive price and need not
show the GST separately if the GST payable is merely 1/11th of the GST
inclusive price. If it is not 1/11th of the GST inclusive price, for
example it is a mixed supply, the GST must be shown separately.
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Q.
Can an entity that accounts for GST on a cash basis, pay the GST up
front on a motor vehicle hire purchase and claim the input tax credits
immediately? |
A.
No. The common consensus is that the hirer cannot make a lump sum payment
for future GST up front and say all future monthly payments are simply the
remaining GST exclusive amounts. The amount of input tax credit should simply
be 1/11th of any amount paid.
Reminder - GST credits cannot be claimed for any new motor vehicles acquired
before 1 July 2001.
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Q.
A car is used partly for business. Can input tax credits be
claimed? |
A.
If you are not registered for GST because, for example, you are an employee,
you cannot claim input tax credits. Even if you are registered for GST, you
cannot claim input tax credits in respect of the use of your car for employment
purposes. If you run your business as a sole trader and are registered for GST,
you will be entitled to input tax credits if you use your car for business
purposes.
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Q.
A GST registered businessperson uses his or her car for business
purposes, however a car log book is not kept. If the alternative "set-rate
per business kilometre method"is used, what is the basis for claiming the
input tax credits for car expenses (e.g. fuel, repairs etc)? |
A. If the car is
used for less than 5,000 business kilometres p.a.,
then a business operator can use the assumed
claim percentages issued by the ATO, i.e. 5% of credits claimed if business
travel between 0-1250 kms, 10% if 1251-2500 kms, 15% if 2501-3750 kms and
20% if 3751-5000 kms. If business travel exceeds 5,000 kms, the claim
percentage is arrived at by dividing a reasonable estimate of business
kilometres per tax period by a reasonable estimate of total kilometres per
tax period.
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Q.
If a taxpayer paid GST on expenses before 1 July 2000, can that GST
be claimed back through a subsequent BAS? |
A.
Yes. The GST on these expenses should be multiplied by 11 and included at
item G11 of the BAS, preferably in the first BAS lodgment.
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Q.
Is the sale of a farm property GST-free? |
A.
A farm property will be GST-Free if:
- the business and farm sold as a
"going concern";
- if not a "going
concern", the property remains GST-Free if a
breeding business carried on for at least 5
years before the sale; and
- the buyer intends to
carry on a farming business on the land.
N.B. If all above tests are failed and the property is not GST-Free, the
sale of the farm is subject to the GST, however the GST is not payable on
the house and surrounding "curtilage" (i.e. 2 hectares including the
property).
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Q.
If I run a business from home, do I have to pay GST when I sell it? |
A.
Generally no, because the house will not be sold in the course or
furtherance of an enterprise. If it was being sold as business premises,
or as part house part business premises, then GST may be payable.
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Q.
I am a share trader. Must I pay GST when I sell shares? |
A.
No. The sale of shares is a financial supply and therefore input taxed.
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Q.
I elect to lodge my GST return monthly. Does this mean I must pay
my FBT, PAYG etc monthly? |
A.
No. You look at each tax separately and pay it according to its own payment
rules. Even though you will be lodging a BAS each month, you will not be
completing the PAYG boxes if you only have to pay PAYG quarterly.
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