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Details

  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 2/10/2014

Australia: GST essentials 

Essential information regarding GST as it applies in Australia.


Scope and rates

What supplies are liable to GST?


Goods and services tax (GST) is payable on taxable supplies. A company makes a taxable supply if it makes a supply for consideration; the supply is made in the course or furtherance of an enterprise; the supply is connected with Australia; and the company is registered or required to be registered for Australian GST.


Supply means any form of supply whatsoever, and consideration includes non-monetary consideration.


What is the standard rate of GST?


The standard rate of GST is 10 percent on the value of the taxable supply.


Are there any reduced rates, zero rates, or exemptions?


There are no reduced rates. Some supplies are not taxable supplies: they may be either GST-free (other countries call these zero rated) or input taxed (other countries call these exempt).


GST-free supplies include:


  • some food products
  • most medical and health services, drugs, medical aids, and appliances
  • most education courses
  • child care
  • exports
  • religious services
  • water, sewerage, and drainage services
  • international transport
  • Input taxed supplies include:
  • financial supplies
  • residential rent
  • residential premises
  • fund-raising events conducted by charitable institutions

Note: there is some restriction on the recovery of GST on costs incurred in making input taxed supplies.


What are the other local indirect taxes beside GST?


Yes, other indirect taxes include:


  • Wine Equalisation Tax
  • Luxury Car Tax
  • Fuel Tax
  • Customs duty
  • State taxes, including stamp duty and land tax.

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Registration

Who is required to register for Australian GST?


An entity that is carrying on an enterprise, and whose current or projected annual turnover is AUD 75,000 or more (exclusive of GST), is required to be registered for GST. However, non-profit bodies are not required to be registered for GST unless their current or projected annual turnover is AUD 150,000 or more (exclusive of GST). A resident agent acting as agent for a non-resident and a representative of an incapacitated entity must register if the non-resident or incapacitated entity is registered or required to be registered. Taxi operators are required to be registered regardless of their annual turnover.


If an entity’s current or projected annual turnover is below the relevant GST registration threshold, it can voluntarily elect to register for GST provided it is carrying on an enterprise, whether in or outside of Australia.


Broadly, the current or projected annual turnover includes the value (exclusive of GST) of all taxable and GST-free supplies, and excludes the value of input taxed supplies and supplies that are not connected with Australia.


As part of the GST registration process, companies also apply for an Australian Business Number (ABN). This is the single identification number for all dealings with the Australian Taxation Office. Businesses can apply for GST and ABN registration at the website.


Are there penalties for not registering or late registration?


There is an administrative penalty (currently AUD 3,400) if a business fails to apply for registration as required. The administrative penalty is not payable in circumstances where a general tax offense penalty is imposed. This will be the case where a prosecution is instituted for the offense and a court convicts the business of the offense. In that case, the applicable general tax offense penalty is currently a maximum of AUD 3,400 on the first offense, rising to a maximum of AUD 6,800 on the second offense, and for third and subsequent offenses, a maximum of AUD 8,500 and/or imprisonment for a period not exceeding 12 months.


Further, if any GST is payable, the amount of penalties and interest charges which may be imposed by the Australian Taxation Office are based on the length of delay of the late or non-payment of GST.


Is voluntary GST registration possible for an overseas company?


Yes. An overseas entity that is carrying on an enterprise, whether in or outside of Australia and whose current or projected annual turnover is below the relevant GST registration threshold, may voluntarily register for GST. Registration allows the entity to claim input tax credits through lodging their GST return, and this is permitted even if this is the only reason why the overseas entity carrying on an enterprise chooses to register. However, registration also means that the overseas entity must account for Australian GST on all its taxable supplies (except in limited circumstances where the reverse charge rules apply with the effect that the overseas entity's customer must account for the GST, or the overseas entity appoints a Division 57 resident agent through which it makes any taxable supplies).


Are there any simplifications that could avoid the need for an overseas company to register for GST?


Non-residents who make taxable supplies can avoid registration if they agree with a registered customer to reverse charge the GST liability to the registered customer.


Bear in mind that these provisions are subject to particular requirements.


Does an overseas company need to appoint a fiscal representative?


No. An overseas entity does not need to appoint a fiscal representative. However, the bank account to which any GST refund is made must be domiciled in Australia subject to limited exceptions.


KPMG in Australia can provide advice on GST registration and other related matters, assist with GST registration and completion of GST returns. Such services are charged on an hourly basis depending on the complexity of the work.

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VAT grouping

Is GST grouping possible?


Yes, provided various criteria are met. The main criteria are that there is at least 90 percent common ownership among the members of the GST group, and the group members are registered for GST, account for GST on the same basis (cash or non-cash), have the same tax periods and are not members of any other GST group. Individuals, partnerships, trusts and companies can all join GST groups.


Can an overseas company be included in a GST group?


Yes, but the representative member of the GST group must be an Australian resident.

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Returns

How frequently are GST returns submitted?


GST returns (also known as a "Business Activity Statement") are lodged either monthly or calendar quarterly, and in certain limited situations, an election can be made to lodge annually. Electronic monthly lodgments are compulsory if an entity's annual turnover is AUD 20 million or more.


Are there any other returns that need to be submitted?


No.


If a business receives a purchase invoice in foreign currency, which exchange rate should be used for GST reporting purposes?


For tax invoice requirements, any payment made in a foreign currency for a supply must be converted into Australian currency using the daily exchange rate:


  • set by the Reserve Bank of Australia
  • set by a foreign exchange organization (e.g. a commercial bank), or
  • agreed between the parties.

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VAT recovery

Can a business recover GST if it is not registered?


The general rule is that businesses have to be registered to recover GST. One exception is that under the tourist refund scheme, a person can obtain a refund of GST included in the purchase price of goods if the goods are exported within 30 days as accompanied baggage or he/she is a resident of an external Territory and send goods home. There are particular requirements that need to be satisfied and so one should check carefully whether he complies with them.


Does your country apply reciprocity rules for reclaims submitted by non-established businesses?


Australia does not have reciprocity rules. Provided an entity is registered for Australian GST and makes acquisitions in carrying on its enterprise, it will be entitled to refunds for input tax credits which exceed its GST liability. Special rules will apply if a non-resident entity carries on business through a resident agent.


Are there any items that businesses cannot recover GST on?


Yes. There are certain items in respect of which businesses cannot recover GST.


For example:


  • acquisitions that relate to making input taxed supplies (other countries call this "exempt"), although there are several exceptions to this general rule. Where the acquisition relates to making input taxed and other supplies, the company needs to make an apportionment that gives rise to a fair and reasonable recovery of GST
  • acquisitions of a private or domestic nature
  • certain acquisitions where income tax deductions are not allowable (such as, entertainment expenses, recreational club expenses and non-compulsory uniforms)
  • acquisitions of freehold interests in land, stratum units, or long-term leases subject to the margin scheme, which provides for GST to be accounted for on the sales margin of land, stratum unit or long-term lease, but does not allow GST recovery on the acquisition

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International supplies of goods and services

How are exports of goods and services treated?


Goods


A supply of goods is GST-free if the supplier exports the goods from Australia within 60 days of invoicing for the supply, or receiving consideration for the supply. If the exported goods are paid for by installments, the supply is GST-free if the supplier exports the goods from Australia within 60 days of invoicing for the final installment, or receiving the final installment. The supplier should maintain sufficient documentary evidence to show the goods were exported from Australia and within the specified timeframe.


Subject to specific requirements, other exports of goods that may be GST-free include:


  • exports of aircrafts or ships (including specific requirements if paid for by installments)
  • exports of goods that are to be consumed on international flights or voyages
  • exports of goods used to repair etc. imported goods
  • goods exported as accompanied baggage of international travelers services

Subject to specific requirements and exceptions, a supply of something other than goods or real property that is GST-free includes:


  • a supply that is directly connected with goods or real property situated outside Australia;
  • a supply where the recipient of the supply is not in Australia at the time of the supply and the effective use or enjoyment of the supply takes place outside Australia, provided the supply is neither a supply of work physically performed on goods nor a supply directly connected with real property in Australia
  • a supply where the recipient of the supply is not an Australian resident and is not in Australia at the time of the supply, provided the supply is neither a supply of work physically performed on goods nor a supply directly connected with real property in Australia, or the recipient is not registered or required to be registered for Australian GST; and the supply is not under an agreement to be provided to another entity in Australia.
  • a supply in relation to rights that are for use outside Australia, or that are supplied to a recipient who is not an Australian resident and is outside Australia at the time of the supply or
  • a supply of services being the repair, renovation, modification, or treatment of goods from outside Australia whose destination is outside Australia.

How are goods dealt with on importation?


Imported goods can be subject to GST when they are entered for home consumption. Generally the GST is payable at the same time as the customs duty is payable, unless GST deferral has been approved. GST deferral on importation of goods must be applied for and there are certain specific requirements that must be met before approval, including the requirements that the importer must be registered for Australian GST and lodge monthly electronic GST returns, If GST deferral is granted, the GST on importation of goods is payable in the GST return by the 21st day of the following month.


How are services which are brought in from abroad treated for GST purposes?


If a company buys in certain services from outside Australia, it will be required to apply reverse charge GST. This is intended to take away any GST advantage of buying those services from outside Australia.


Under the reverse charge the recipient is required to account for GST on its GST return, but only if it is not entitled to full input tax credits. If it is only entitled to partial input tax credits, then it claims them, using its usual apportionment methods, on its GST return. It may also be entitled to reduced input tax credits equal to 75 percent of the GST incurred on certain specifically listed acquisitions related to making input taxed financial supplies and 55 percent of the GST incurred on the acquisition of trustee services.


The reverse charge applies to the acquisition of all supplies of anything other than goods or real property, if the supply is not connected with Australia.


There are particular provisions which apply to non-residents who make telecommunications supplies into Australia, or who make supplies of rights or options to acquire other supplies that would be connected with Australia, such as a holiday package to Australia that is supplied overseas may be connected with Australia.

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Invoices

Is a business required to issue tax invoices?


Yes, if requested to do so by the recipient.


What do businesses have to show on a tax invoice?


Tax invoices only have to be issued by a supplier if requested by the recipient of the taxable supply (this should be done within 28 days of the recipient's request) and if the GST exclusive value of the taxable supply is more than AUD 75.


If a business has to issue a tax invoice and the GST inclusive amount payable for the taxable supply or supplies is AUD 1,000 or more, it should contain the following information:


  • the supplier's identity, for example, the legal name of the supplier, the business name, or the trading name
  • the Australian Business Number (ABN) of the supplier
  • the recipient's identity or the ABN of the recipient
  • the words 'Tax Invoice' or 'GST Invoice' stated prominently
  • a brief description of what is supplied, including the quantity (if any) and the GST inclusive price of the supply
  • the extent to which each supply to which the document relates is a taxable supply:
  • the total amount of GST payable or
    • a statement of the extent to which the supply is a taxable supply; or
    • asterisking each taxable supply with a corresponding statement of the extent to which the supply is a taxable supply
    • the date of issue of the tax invoice
    • the amount of GST (if any) payable in relation to each supply to which the document relates.

If the GST inclusive amount payable for the taxable supply or supplies is less than AUD 1,000, a tax invoice must contain all of the above information except for the recipient’s identity or the recipient’s ABN.


Can businesses issue invoices electronically?


Yes. These must be capable of being downloaded or printed in a readable format and must contain all the details noted above. For example, if an electronic tax invoice is issued via posting on a web site, it must be readily accessible to the recipient to whom the tax invoice is issued, downloadable or printable in a readable format by the recipient and the recipient must have been informed or be aware of the arrangement that tax invoices will be posted on the website.


Is it possible to operate self-billing?


Yes. The Australian Commissioner of Taxation has authorized the use of recipient created tax invoices for eligible recipients of taxable supplies in some general situations and for a variety of more specific industry transactions.


In order to issue recipient created tax invoices, an eligible recipient must fall within one of the classes set out in a Legislative Determination issued by the Commissioner of Taxation. One example of an eligible class is recipients with a turnover in excess of AUD 20 million per year. The recipient must then enter into a written agreement with the supplier and agree that the eligible recipient of the taxable supply can issue a recipient created tax invoice and certain other specific requirements must be met.


Can a business issue GST invoices denominated in a foreign currency?


Yes, however it will be necessary for the value of the supply to be converted to Australian currency for the purposes of determining GST liability. Therefore if the value of the supply is expressed in a foreign currency, the supplier is required to provide the recipient with sufficient information to work out the GST payable in Australian currency. The Australian Taxation Office (ATO) considers that sufficient information has been provided where the GST payable, price or value is expressed in a foreign currency and there is a conversion rate used by the supplier or a statement to work put the GST payable in Australian currency.

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Transfers of business

Is there a relief from GST for the sale of a business as a going concern?


Yes, in certain circumstances the supply of a going concern is GST-free (other countries call this zero rated).

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Options to tax

Are there any options to tax transactions?


There is a limited option to tax certain supplies, which would otherwise be GST-free, in the areas of medical aids and appliances and certain specified health goods.

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Head office and branch transactions

How are transactions between head office and branch treated?


Transactions between head office and a branch office are not supplies and therefore there is no GST payable. An exception is where the branch chooses to register separately so that it can account for GST separately from head office. In this case the branch is treated as if it were a separate entity, so that transactions between head office and the branch are treated as if they were supplies. Where certain conditions are met, cross-border supplies of services between head office and a branch may be subject to the reverse charge of GST, and recovery of part of the GST reverse charged may be possible.

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Bad debt

Are businesse able to claim relief for bad debts?


Yes, businesses can claim GST back on the unpaid element through their GST return if the debt has been wholly or partly written off as a bad debt and also if the debt has been wholly or partly overdue for 12 months or more, even if you do not write it off. If they subsequently receive payment for the supply then they will have to pay back the GST element in the same way.


Likewise, if businesses have recovered GST on an acquisition they have made but either the debt you owe has been wholly or partly written off as a bad debt by their supplier, or the debt they owe has been wholly or partly overdue for 12 months or more, then they are required to repay some or all of the GST previously claimed as Input Tax Credits. If they subsequently pay their supplier for the supply then the input GST can be claimed again.

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Anti-avoidance

Is there a general anti-avoidance provision under GST law?


Yes. It applies in any case where one gets a GST benefit from a scheme, and it is reasonable to conclude that the sole or dominant purpose, or the principal effect, is to obtain the GST benefit.

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Penalty regime

What is the penalty and interest regime like?


Under the Australian penalty regime, some acts and omissions attract a penalty that is imposed by operation of the law (this is called an administrative penalty) and also constitute an offense, the penalty for which is imposed by a court upon conviction after prosecution.


Administrative penalties are payable when GST is underpaid. The penalties range from set penalty dollar amounts, to 25 percent of the shortfall amount for failure to take reasonable care, through 50 percent for recklessness, to 75 percent for intentional disregard of the law. Set penalty dollar amounts are usually payable on the happening of an act or omission that attracts that penalty, while penalties calculated by percentages can be increased if the business carried over poor compliance behavior from the past, and they can be reduced if it makes a voluntary disclosure of underpayment to the Australian Taxation Office.


The administrative penalties are usually not payable if a prosecution is instituted for the offense and a court convicts the business of the offense, in which case fines and/or imprisonment would apply.


In addition, there is a general interest charge (GIC) applied to GST underpaid. The GIC compounds daily and the average rate are set at the 90-day bank bill rate plus 7 percent per year.

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Tax authorities

Tax audits


How often do tax audits take place?


The ATO conducts GST reviews and audits on a regular basis and there is no specific measure of its regularity. The focus of the ATO’s compliance activities is outlined on an annual basis in its Compliance Program.


Are there audits done electronically in your country (e-audit)? If so, what system is in use?


Yes. The ATO uses third-party data, data modeling techniques and benchmarking studies to carry out its compliance activities.


Advance rulings and decisions from the tax authority


Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?


Yes. An entity may apply for a private binding ruling from the Australian Commissioner of Taxation. Informal rulings are not issued.


Are rulings and decisions issued by the tax authorities publicly available in your country?


Yes. GST public rulings are available.

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Miscellaneous

In your country, are there unique specific indirect tax rules (regimes) that differ from standard indirect tax rules in other jurisdictions?


Yes, these include:


  • for taxable supplies of real property, the supplier may calculate the GST as 1/11th of the "margin"
  • reduced input tax credits (either 75 percent or 55 percent where expenses relate to trustee fees) for certain acquisitions that are related to making input taxed financial supplies
  • GST registration of non-resident companies to claim back GST.

Are there indirect tax incentives available in your country (e.g. reduced rates, tax holidays)?


No

 

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