Introduction to Gst free essay sample

Introduction to GST A goods and services tax (GST) was introduced into Australia on 1 July 2000 * It is a tax levied at the rate of 10% on the supply (sale) of most services and goods * Business registered under the GST legislation collect the tax on behalf of the Australian tax office (ATO) and remit the amounts collected to the ATO at regular intervals * Business are allowed to offset and GST they pay on buying services and goods against the GST collected on supplies * Any business which is registered for GST typically has two accounts: * GST collection (GST payable in the GST legislation) for any GST received or receivable by the entity from its customers. This is what the company â€Å"owes† to the government. Therefore, it a liability * GST Outlays (GST credit in the GST legislation) for any GST paid or payable by the entity to its suppliers. This is what the entity can claim as a refund from the government. We will write a custom essay sample on Introduction to Gst or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Therefore, is an asset all * All supplies of services and goods are subject to GST unless they are Non-taxable * There are two types of non taxable supplies * â€Å"GST-free† supplies are services and goods that would normally attract GST but are exempted under the legislation. (e. g. fresh food, educational courses, wages and salaries, capital contribution and withdrawals) * â€Å"Input taxed† supplies (e. g. bank fees, bank charges, a loan from a bank) Items| GST/No GST| Contribution of cash by the owner| No GST| Purchase of supplies on credit| GST| Payment of tuition fees| No GST| Payment of wages to employees| No GST| Sales of service on credit| GST| Cash paid to accounts payable| No GST| Purchase of services for cash| GST| Interest received from a bank| No GST| Cash received from accounts receivable | No GST| Accounting for GST * The GST legislation provides rules for allocating GST payable and GST credits to the relevant tax period * The tax period entities account for GST will depend on whether they account for GST on a cash basis or an accruals basis * Entities that issue or receive an invoice but do not account for the sale of purchase until the cash is received or paid are using a cash basis * Entities that account for the sale of purchase at the time of issue or receipt of an invoice are using the accruals basis Cash Basis * An entity is eligible to use a cash basis for GST if: The entity is a small business with an annual turnover or less than 2,000,000 * The entity accounts for income tax on a cash basis * Under the cash accounting system: * The GST collections are recorded at the time cash is received for supply of services and goods * GST outlays are recorded when cash is paid for services and goods Accruals basis * An entity can choose to account for GST on a non-cash basis even if it is eligible to account for GST on a cash basis * If it is not eligible to account for GST on a cash basis, it must account on a non-cash basis * Under the accruals accounting system: * GST collections and GST outlays are recorded when a tax invoice is issued/received or cash is received/paid, whichever event occurs first.