Your Business GST Responsibilities
Business Tax Update│February 2018
A look at the GST updates and reporting changes that could affect your business this year.
- Changes are coming to GST from 1 July 2018: is your business ready?
- How to make your GST reporting easier
- Did you know that some fresh foods are subject to GST?
Changes are coming to GST from 1 July 2018: is your business ready?
From 1 July 2018, Australian GST will apply to sales of low value goods (AUD $1,000 or less) that are imported by consumers into Australia.
Simply put, these GST changes mean that:
- all goods imported by Australian consumers, even those worth less than $1,000, will be subject to 10% GST;
- overseas retailers who sell goods to Australian consumers and make more than AUD $75,000 per year will be required to register and impose GST. Under the old GST laws, this only applied to retailers who were selling goods valued at over $1,000.
The existing processes to collect GST on imports above $1,000 at the border are unchanged.
If your business meets the $75,000 registration turnover threshold, you will need to act now to review your business systems to ensure that you are compliant from 1 July this year. You will also need to:
- ensure you are registered for GST
- charge GST to customers on low value imported goods
- lodge a return to the ATO.
Why the GST reorm?
The Government’s intention is to ensure that Australian businesses, particularly small retailers, are not unfairly disadvantaged by the current GST exemption that applies to imports of low value goods. The new GST laws ensure that low value goods imported by consumers in Australia are treated in the same manner as goods that are sourced domestically.
Which businesses are affected?
- Suppliers of low value goods
- Electronic distribution platforms (EDPs) – online marketplaces that assist in the importation of goods into Australia will essentially be treated as a supplier under these new measures, and be required to register for, collect and remit GST.
- Re-deliverers – re-deliverers are used by Australian consumers in cases where the overseas retailers do not deliver to Australia (e.g. offshore mailbox services). The re-deliverer will charge GST on the goods and for their services in bringing the goods to you, if they are registered or required to be registered.
Sales of low value imported goods to Australian GST-registered businesses
GST only applies to sales of low value imported goods to consumers in Australia. Your customer is not a consumer if they are a GST-registered business who purchases the goods for use in their business in Australia.
If your business is the recipient of low value goods, you should notify suppliers of your GST registration to ensure you are not being charged GST twice.
- Make sure you are not charged GST twice by providing a copy of your receipt that shows GST has already been paid if you were charged GST when you bought the goods; and the goods are low value goods.
- If you do not provide this receipt before GST is charged at the border, you will have to pay GST again and will need to seek a refund of GST from the supplier, by declaring or providing evidence that you paid GST when the goods were imported.
Your business systems will need to be able to determine whether the sales are made to consumers in Australia or to businesses that are registered for Australian GST.
If you are affected by these changes, speak to us to discuss process strategies and options to manage the impact of these new obligations on your business.
How to make your GST reporting easier
If you are a small business with a GST turnover of less than $10 million, Simpler BAS is now your GST reporting method. This means you only need to report total sales, GST on sales and GST on purchases, which will save you time and money.
If you use accounting software, you can keep your original detailed GST classifications, or choose the Simpler BAS bookkeeping settings with reduced codes. It is completely optional and the choice is yours.
Paper BAS forms have not changed, just leave the sections blank where information is no longer needed.
The ATO has developed a Simpler BAS GST bookkeeping guide. This helps with the classification of sales and purchases, and explains common and also misunderstood GST transactions. You can find the guide on the ATO small business newsroom website
Did you know that some fresh foods are subject to GST?
Some fresh foods, including salads, sushi and cooked pasta with sauce may be subject to GST.
Are you a GST-registered food business?
If you operate a GST-registered food business, you will need to include GST where your food is:
- for consumption on the premises where it is sold (e.g. sold at a restaurant or cafe)
- hot food for consumption away from the premises where it is sold (e.g. a takeaway meal with a hot component)
- ‘food marketed as a prepared meal’ (which can include some salads).
‘Food marketed as a prepared meal’
You need to weigh up a number of factors to work out if your food is ‘food marketed as a prepared meal’. Ask these questions:
- Does the packaging and labelling indicate it is a prepared meal (e.g. referred to as lunch)?
- Does the menu or signage at the point of sale indicate the food is marketed as a prepared meal (e.g. ‘lunch to go’)?
- Does it include all of the necessary ingredients for a complete meal?
- Is it packaged for immediate consumption and cannot be resealed?
- Is it supplied with cutlery and a napkin?
- Is it priced similar to other comparable prepared meals?
- Is it competing with other takeaway meals?
5 simplified accounting methods for food retailers
Five simplified accounting methods (SAMs) have been designed for food retailers who buy and sell a mixture of products, where some are taxable and some are GST-free.
You use a SAM to estimate your GST at the end of each tax period.
- Business norms: Apply standard percentages to your sales and purchases. This is the simplest method but can only be used by specified business types.
- Stock purchases: Apply the percentage of your GST-free purchases to your GST-free sales.
- Snapshot: Take a snapshot of your trading and use this sample to estimate your GST-free sales and GST-free purchases.
- Sales percentage: Work out what percentage of GST-free sales you made in a tax period and apply this to estimate your GST-free purchases.
- Purchases snapshot: Take a snapshot of your purchases and use this sample to calculate your GST credits. Available to restaurants, cafés and caterers only.
To use a SAM, make sure you are registered for GST and your turnover is not more than $2 million. You must also be a retailer who sells both taxable and GST-free food at the same premises (or, for the purchases snapshot method, you buy both taxable and GST-free food).
For more information or to schedule an appointment, please contact us below or call us on 1300 627 829
Source: TaxWise 2018