Australian Civil Liberties Union
from Your Rights 2000
GUIDE TO G.S.T.
Sources of Information. Where G.S.T. applies and doesn't apply. How will the G.S.T. Work? Tax cuts. Child care. Education. Exports. Selling your home. Health services. Medicines. Effect on Prices. Pensioners. Families. First home buyers. Motor vehicles. G.S.T. and food. Australian Business Number (ABN). How to register for ABN. Communications and G.S.T. Input tax credits for business.
The Goods and Services Tax comes into operation on 1st July, 2000. The G.S.T. will replace the wholesale sales tax but will also apply to many services. The increase in costs to the citizen will be off set by significant reductions in taxation, by increases in pensions, by reduction in the prices of diesel oil, etc., by the abolition of provisional tax, the removal of the assets test for family assistance and by grants to new home buyers etc.
Sources of Information on G.S.T. and Tax Reform
As the start of the New Tax System on 1 July 2000 comes closer, the Tax Office will provide more information over the coming months. In the meantime, if you want more detailed information on such issues as the G.S.T., family assistance, pensions, or how the New Tax System will benefit your family you can-
If you do not speak English and need help from the Tax Office, phone the Translating and Interpreter Service (TIS) ON 13 1450.
How will Prices change?
The Government says that under the New Tax System, some prices will go up, others will come down, and others will not change. Prices will not go up by the full 10% because old unfair taxes such as wholesale sales tax will be removed and many things will be G.S.T. free. Sales tax on many items has already been reduced from 32% to 22%. This has led to the price of the following goods to fall from late July 1999 - tape recorders, video recorders, radios, televisions and their components and auxiliary equipment, cameras, including video cameras, film projectors and clocks, watches and watch bands.
The Government says that these items and hundreds of others will drop in price again when wholesale sales tax is abolished altogether from 1 July 2000. Besides wholesale sales tax, many other hidden taxes, including financial institutions duty, will be abolished after The New Tax System begins. The ACLU is not in a position to pass judgement on various claims by the Government about the likely effect of the GST. For instance the Government says that the price of new cars will fall but some commentators claim that car prices will rise due to increased production costs in Japan and fluctuations in the dollar.
How will I identify which goods are subject to GST?
Where GST is included in the price of goods, this will be identified on the cash register receipt. A "%" or ">" sign before the product description on the cash register receipt (e.g. "%" toothpaste or ">" toothpaste) will indicate that GST has been included in the price of that product. The total amount of GST included in the total amount payable will also be shown separately at the bottom of the cash register receipt. All prices displayed in stores will include the GST, as appropriate, but the amount of the GST within the price of each product will not be separately displayed on the shelf edge label, price ticket, or menu board.
How can I work out how much GST is payable?
The total amount of GST you have paid will be shown separately on the cash register receipt. If you want to calculate the amount of GST included in the price of a taxable item, simply divide the GST inclusive price by 11. For example, a television item, that has a marked price of $649 includes a GST component of $59 (i.e. $649 divided by 11).
Claimed Benefits of the New Tax System At A Glance
For every Australian the Government says that there will be personal income tax cuts-$12 billion a year; that around 80% of Australians will pay an income tax rate of no more than 30 cents in the dollar; that there will be no GST on basic food, health, education, childcare services, hospitals and nursing homes as well as local government rates; and that the GST locked in at 10 per cent replaces wholesale sales tax and other taxes such as financial institutions duty. It says that provisional tax is abolished; that a dedicated watchdog will ensure price reductions are passed on; and that health insurance is now more affordable with the new 30% rebate for private health insurance.
For families with children -The Government states that typical families will gain $40 to $50 a week, that an extra $2.4 billion a year will be paid to 2 million Australian families, that there will be an extra $350 a year for each dependent child, and an extra $350 a year for single income families with a child under 5. There will be more help for families with older children, a simplified family assistance, a right for parents to earn more before losing their family assistance, extra childcare assistance, and the removal of assets test for family assistance.
For people who receive pensions and allowances - The Government says that pensions and allowances will go up 4% on 1 July 2000; that maximum rent assistance rate will go up 7% on 1 July 2000; that pensions and allowances are guaranteed to remain at least 2% ahead of any rise in the cost of living; that more income will be allowed before payments reduce; that the pension income test will be eased; and that there will be part pension and concessions for more people.
For senior Australians - The Government says that pension rates will increase by 4% on 1 July 2000 and are guaranteed to remain at least 2% ahead of any rising in the cost of living; that more income and assets will be that allowed before pension payments reduce; that pensioner rebate and low income aged persons rebate will increase by $250 a year for singles and $350 for couples; that there will be an Aged Persons Savings Bonus up to $1,000 per person; and that there will be Self-funded Retirees Supplementary Bonus of up to $2,000 per person.
For rural and regional Australians - The cost of diesel for heavy transport will decrease by about 23 cents a litre; that the cost of petrol used in the commercial operations of farmers and other businesses will decrease by 7 cents a litre; that the assets tests for family allowances will be removed; that export costs will be down over $3.5 billion a year; credit for GST will be included in the price of farm and other business inputs.
For small businesses - Small businesses will pay all taxes once a quarter on one form; that GST registration is optional for businesses with turnover under $50,000; that up to $500 million for GST startup costs will be available for small and medium businesses, charities and education; and that there will be an immediate tax write-off for GST- related expenditure in 1999-2000.
Personal income tax cuts for you
Every taxpayer will receive a tax cut from 1 July 2000. Personal Income tax cuts are part of The New Tax System. The Government claims that tax rates will be fairer and lower. Under The New Tax System, the tax burden will be reduced for all taxpayers and spread more fairly so everyone pays their fair share of tax. This means that around 80% of tax payers will pay a top marginal tax rate of 30% or less.
* In addition, a low income rebate of up to $150 continues to apply.
The Government says that the key features of the new scale include an increase in the tax-free threshold from $5400 to $6000. This is worth $120 a year to taxpayers with taxable incomes over $6000, and up to $120 a year with those with taxable incomes lower than $6000. A reduction in the lowest marginal tax rate from 20% to 17%. This will benefit all income taxpayers but especially those taxpayers on low incomes. The lower tax rate of 30% for people in the $20 701-$550 000 taxable income bracket. A $10 000 increase in the level of taxable income at which the top marginal rate takes effect.
What is subject to GST
All goods and services (unless GST- free) Prepared food such as hot chicken, quiches, sandwiches (using any type of bread or roll), pizza, food marketed as a prepared meal (not soup), hamburgers, hot dogs, platters of cheese or fruit, cordial, flavoured milk, confectionery and chocolate.
Take-away foods, restaurant meals. Muesli or health food bars but not breakfast bars; Savoury snacks such as potato chips, seeds or nuts that have been salted or roasted, caviar. Biscuits, pretzels; Bakery products such as cakes, slices, pavlova, pies, pasties, sausage rolls, tarts, doughnuts, croissants, scones, pastizzi and buns. Not bread (unless it has a sweet filling or coating) Confectionery, ice cream, frozen yoghurt; Flavoured milk.
All non-food groceries such as toilet paper, shampoo, cleaning products (many items will be cheaper because of the removal of sales tax); Gas, electricity and heating; Cars and all transport, including public transport fares; New homes and renovations (first home buyers receive a $7000 rebate)
Books; Tourism, Tradesmen; Ticket to the football, the opera and movies. Clothing and footwear. Hotel room. Swimming lessons; Insurance policies (excluding private health insurance); Video hire; All white and brown goods such as televisions and refrigerators (although most will be cheaper because of the removal of sales tax). Pet food (already taxed); Compact discs (could be cheaper due to the removal of sales tax); Phone bill (only long distance, mobile calls and service charges. Local call costs have been capped and will not rise)
Fresh food, such as meat, fruit and vegetables, fish, chicken (from frozen and cooked but sold cold) eggs, milk and most dairy products, cereals, tea, coffee, canned food, fruit and vegetable juice (with 90% fruit or vegetable), soup, seeds and nuts, infant and invalid formula, cake mixes, sauces. Still water (not carbonated); All bread (unless it has a sweet filling or coating); Cooking ingredients.
Most health, medical and hospital services; All medicines (also public health goods such as sunscreen and condoms, if approved by the Health Minister); Qualified naturopaths, acupuncturists and herbalists; All education courses (as approved by the Education Minister) except adult recreational courses; Religious services; Child care provided by facilities that receive government funding(not baby sitters, play centres, although most will not be required to charge GST); Nursing homes; The noncommercial activities of charities; Any service funded under the Disability Services Act, 1986. Exports; Financial services (but investment advice will be taxed); Residential rents, sale of a business as a going concern, supplies through inward duty free shops, Local government charges such as rates, water and sewerage charges, car registration; Lifesaving and first aid courses provided by non-profit organisation; Relationship counseling provided by an accredited psychologist or social worker; Private health insurance.
Application of the GST-an overview.
Selling Your House. If you sell your house or residential land you will not pay GST. However real estate agent services will attract GST. Buying a home. If you purchase a new home or residential land after 1 July 2000 from a registered business (such as a builder or developer) the price you pay will include GST. There will be no GST if the home is not new. From July 1 2000, under the First Home Owners' Scheme, eligible first home buyers will receive non-means-tested assistance of $7,000.
Mortgage and bank accounts, financial services and legal advice. There will be no GST on bank account fees and mortgage repayments for the consumer. Some services associated with financial transactions will be subject to GST. For example, legal services, accounting services, tax agent services, payroll services, financial advice and insurance policies (except for life insurance) will attract GST.
Residential rent. You will not be charged GST on rent but landlords will not get any credits for GST on their costs. Any rent increase will be more than offset by tax cuts or increased pensions, allowances or benefits like rent assistance.
Second-hand goods. Second-hand goods purchased from individuals not in a GST - registered business, for example, at a garage sale, are not subject to GST. However, GST will be included in the price of goods purchased from a GST - registered second-hand dealer, for example, antiques, used cars or furniture.
Tobacco and alcohol. The Government introduced a per - stick tobacco excise duty from 1 November 1999. This will mostly affect cigarettes sold in large packets, to discourage the consumption of these products for health reasons. From 1 July 2000 there will also be a change in the way alcoholic drinks are taxed. Other tax changes will offset the removal of wholesale sales tax. All alcoholic products will be subject to a wine equalisation tax or excise or import duty. GST will also be payable on these products.
Price of cars. The price of cars will fall when wholesale tax is abolished and replaced with the 10% GST from 1 July 2000. The Government claims the price of a new $30,000 family car will fall by around $2,400. A new luxury car tax of 25% will ensure that the price of luxury cars will fall by about the same proportion as family cars.
Agreements made beyond 1 July 2000. Any subscriptions, agreements or contracts that you sign or pay now that include a period beyond July next year will generally have some GST included in the price. For instance, a 12-month membership for the year between November 1999 and November 2000 will have GST included for the period between July 2000 and November 2000. However, no GST can be charged for the period before 1 July 2000.
Childcare. Childcare provided at government-funded facilities or where the parents qualify for a government childcare payment will be GST - free. There will be no GST on such services as long day care, outside school hours care (before and after school and vacation car), family day care, occasional care and care provided by registered childcare providers.
Education. The Government states that education services will be GST - free. Broadly speaking, recognised courses delivered by recognised educational institutions, from preschool to tertiary level, will be GST - free. Adult education and training that is likely to develop employment - related skills will also be GST- free. However, that hobby and recreational courses will not be GST - free.
Exports. Goods physically exported from Australia and exported services consumed outside Australia will be GST - free. The Government claims that the New Tax System will reduce the cost of producing goods and services for export by over $3.5 billion by removing wholesale sales tax and other taxes such as financial institutions duty. The Government claims this reduction in the cost of Australian exports will encourage investment and help create jobs.
Health services. Most health services will be GST - free. Most medical services will be GST - free if provided by or for a medical practitioner or while you are in hospital. Health providers cannot charge you GST but can claim back the taxes they have paid on their business inputs from the Tax Office. Examples of health services which will be GST - free include: general practitioner and most specialist consultations; private health insurance premiums; diagnostic imaging procedures (such as X-rays and ultrasounds); pathology (such as blood tests ordered by your doctor); speech therapy; dental services; physiotherapy and some complementary medical services (those provided by qualified naturopaths, acupuncturists or herbalists).
Medicines. Prescription medicines, medicines sold by a pharmacy under the advice of a pharmacist, certain other medicines (such as painkillers) and some other health goods (such as most sunscreens) will be GST - free.
Charitable activities and religious services. The non-commercial activities of charitable institutions, charitable funds or gift deductible entities will be GST - free. Charities will have access to the Government's $500 million GST start-up funding. Government "fact sheets" state that these organisations can register for GST so they can claim back any GST they pay. Religious services, such as a marriage ceremony conducted by a religious practitioner, will be GST - free.
GST rate increase. Australian legislation now demands that the GST rate is locked in at 10% and that there is the guarantee that every State and Territory Government in the country would have to agree to ask the Federal Government to increase the rate. Even then, both the Federal Government and the Federal Parliament, including both the House of Representatives and the Senate, would have to agree.
Monitoring of prices. The Government consumer watchdog, the Australian Competition and Consumer Commission (ACCC) will monitor the prices of goods and services to make sure consumers benefit from lower prices. The ACCC has issued guidelines to help businesses comply. There are severe penalties for those who do not pass on the savings to ordinary consumers. If you think a business has not adjusted its prices correctly, you can contact the ACCC on 1300 302 502 or through the website: www.acc.gov.au
How will GST work? The easiest way to work out how much you have paid in GST is to divide the overall price by 11. For example, if you buy a book for $11 this price includes 10 per cent GST. To find out how much GST was included in the price of the item, you divide the 11 by 11 giving $1 as the amount paid for GST.
How will The New Tax System benefit aged and other pensioners?
The Government claims that under the New Tax System, aged and other pensioners will benefit from increased pensions and allowances (which will be maintained at higher levels), higher pensioner rebate, a one-off Aged Persons Savings Bonus and lower tax rates.
The government states that the New Tax System will ensure that aged and other pensioners are not disadvantaged by the impact of tax reform on prices. The Government will increase the maximum rates of all social security and service pensions by 4% from 1 July 2000. The 4% increase will be paid as a pension supplement on top of the base pension. The base pension will continue to be protected by ensuring that the maximum single rate is at least 25% of Male Total Average Weekly Earnings (MTAWE). The 4% increase will consist of an upfront advance of 2% and a real increase of 2%. This will ensure that pensioners will be ahead at least 2%, regardless of the actual 'price effect' of the goods and services tax (GST) - that is, how the GST will affect the Consumer Price Index (CPI). The increase cannot be eroded over time. The exact amount of the increase will depend on what the pension rate is at 30 June 2000. If the increase was applied in late 1999, it would mean around $14.50 a fortnight extra for single pensioners and around $12.00 a fortnight for each member of a pensioner couple. The actual increase may be slightly more than this if pension rates increase between now and 30 June 2000.
Other associated allowances will also increase. For instance, the pharmaceutical allowance and mobility allowance will be increased by 4% on 1 July 2000. Rent assistance will be increased by 7%. There will also be a 2.5% increase in the income and asset test free areas for social security and service pensions. The free area is the amount of income or assets that a a person can earn or have before their payments start to reduce. Easing of the income test means that pensions will be reduced by 40 cents for every dollar of income earned above the free area, instead of the current 50 cents of every dollar. The eased pension income test will also enable around 50 000 additional people to receive a part pension and the Pensioner Concession Card. These people currently do not qualify for the pension on the basis of income. To ensure that these assistance measures are maintained over time, the Government will set up an independent compensation review in 2003.
The amount of the pension rebate will be adjusted to ensure that maximum rate pensioners continue to pay no personal income tax. In addition, the Maximum rebate will be increased by $250 a year or single pensioners and $175 a year for each member of a pensioner couple. Australians aged 60 or more with personal income from savings and investment will receive a one-off, non-taxable Aged Persons Savings Bonus, subject to an income test. This will help maintain the value of their savings and assets following the introduction of the GST. It will provide $1 for each $1 of income from savings and investments, up to a maximum of $1000 for a single pensioner and $1000 for each member of a pensioner couple. The bonus will phase out between total incomes of $20 000 and $30 000 per eligible person. Many pensioners will also benefit from personal income tax cuts.
All nursing home and hostel residents will be fully and permanently protected from any fee increase resulting from the Government compensation package in July 2000. Residential care fees increase in line with the basic pension. As the GST pension increase is paid as a supplement, it will not change the basic pension and there will be no rise in residential aged care fees. From 1 January 1999 there has been a 30% tax rebate available on the cost of private health insurance. When combined with the new personal income tax rate scale, this measure will provide a benefit similar to, and in some cases greater than, allowing a full tax deduction for health fund premiums.
The New Tax System and families.
The Government states that families are major beneficiaries of The New Tax System. The new families package builds on the Family Tax Initiative introduced by the Government in 1997. In addition, the Government has ensured that under the goods and services tax (GST) essential family services, such as most health services and products, education and eligible childcare, are GST-free. The families package takes effect from 1 July 2000 and will provide assistance worth more than $2.4 billion each year to around two million families.
The first part of the families package provides large increases in assistance for most families by providing an extra $140 a year per child, providing additional assistance of $350 a year per family for single income families (including sole parents) with a child aged under five years, extending assistance from 1 October 1999 to families with older dependent children not receiving Youth Allowance, and increasing the maximum assistance for childcare for lower income families.
The second part of the families package increases incentives for low-to-middle income families to escape poverty traps by increasing the level of income at which family assistance begins to be income-tested $28 200 - a projected increase of $3850 a year, and by allowing families to keep 70 cents of every dollar of income they earn above the free area, instead of the current 50 cents of every dollar. The free area is the amount of income that a person can earn before their payments start to reduce. The Government claims that combined with personal income tax cuts, these measures will greatly increase the rewards for low-to-middle income families from working harder. They will also ensure that families are much better off when moving to full-time employment.
The third part of the families package simplifies the administration of family assistance. It reduces the existing complex family assistance system from 12 benefits to just three, namely Family Tax Benefits, Part A, which provides help with the cost of raising children, Family Tax Benefits, Part B, which provides extra help to single income families, and Child Care Benefits, which helps with childcare costs.
From l July 2000 a new Family Assistance Office will deliver these benefits. Families will no longer need to deal with three separate agencies the Australian Taxation Office (ATO), Centrelink, and the Health Insurance Commission to obtain their benefits. This will make it much easier for families to understand and gain access to the system and to make sure they get their correct entitlement. All Centrelink, AT0 and Medicare offices will have a Family Assistance Office. Families will be able to contact the office on a new '13' telephone number that will be announced before the office opens in July 2000. The Government has consulted with families and community organisations to develop the details of the new family assistance arrangements.
The First Home Owners scheme
From 1 July 2000, eligible first home buyers will receive non means tested assistance of $7000. The payments will be made through the First Home Owners Scheme (FHOS). The scheme will be administered by the States and Territories. The scheme covers only the purchase or your first home in Australia. If you are married or living in a defacto relationship, you must make a joint application with your spouse or defacto. Neither of you can have owned a home, whether individually or with any other person.
You will be eligible to apply if you, are buying or buying your first home, are an Australian citizen or permanent resident, intend to make the home your principal residence, and start living in the home within a reasonable time. The payment will be the same regardless of your income. (Trusts and companies will not be eligible for FHOS payments. The payment will be the same regardless of the area in which you are buying. It does not matter if you are buying a new or established home. The home can be a house, unit, flat or any other type of self-contained, fixed dwelling that meets local planning standards. Fixed dwellings will include demountable dwellings where these meet local planning standards. The benefit will only be paid for the purchase of your principal place of residence - not for a holiday house or investment property, for example. The payment will be available if you enter into a binding contract to buy an existing home or build a new home after 1 July 2000. It will also be available to owner builders who commence building a home after 1 July 2000.
Self-funded retirees and the Self-Funded Retirees Supplementary Bonus?
From 1 July 2000 a one-off Self-Funded Retirees Supplementary Bonus will be available to self-funded retirees who meet the eligibility criteria. This bonus is in addition to the one-off Aged
Persons Savings Bonus. Both bonuses will help maintain the value of the savings of senior Australians following the introduction of the goods and services tax (GST). The Self-Funded Retirees Supplementary Bonus will be paid to each Australian resident who is either of age pension age on 1 July 2000, and is not receiving a social security or service pension (and did not
receive one in the three months up to 30 June 2000), and had personal income from savings and investments (including superannuation) and total taxable income of less than $30 000 in either the 1998-99 or 1999-2000 financial year, aged between 55 and age pension age on 1 July 2000, and did not receive a Commonwealth pension or allowance in the 1999-2000 financial year, had personal income from savings and investments and total taxable income of less than $30 000 in either the 1998-1999 or 1999-2000 financial year, and had business income or wage income of less than $1000 in the 1999-2000 financial year.
Australians who meet the above criteria will be eligible for an untaxed payment of up to $2000 per person on top of the one-off Aged Persons Savings Bonus of up to $1000 if they are aged over 60 on 1 July 2000. People under the age of 60 will not be eligible to receive the Aged Persons Savings Bonus. These bonuses will target lower income groups with taxable incomes less than $30 000 in 1998-99 (or 1999-2000). The bonuses will be reduced for every dollar of taxable income over $20 000 and cut out altogether when taxable income reaches $30 000.
Motor vehicles and the GST
From 1 July 2000, the current 22% sales tax on motor vehicles will be replaced by a 10% GST. The price of both new and used cars is expected to fall. This means that while the price of a new car may be lower, the trade-in value for a used car may also be lower. The Government has taken steps to avoid purchasing delays in the motor vehicle market. For example, input tax credits for business purchasers will be phased in over a two year period. The Government states that supply and demand pressures are likely to lower the price of used cars before 1 July 2000. Discounting is also likely to lower the price of new cars in advance of the GST. Any fall in prices after l July 2000 will be less abrupt as a result of this. An expected fall in trade-in values will be important for many buyers.
Businesses will benefit from reduced vehicle prices from 1 July 2000. After a transition period, they will also be able to claim input tax credits for GST included in the price of new business vehicles. Access to these input tax credits will further reduce vehicle costs for business. Generally, input tax credits will not be claimable for new vehicles purchased in the GST's first year of operation. That is, businesses will not be able to claim input tax credits for vehicles bought before 1 July 2001. Businesses will be able to claim only a 50% input tax credit for vehicles purchased in the following year. Full input tax credits will only be claimable on vehicles purchase on or after 1 July 2002. The phasing in of input tax credits should encourage businesses not to delay their vehicle purchases until after 1 July 2000. The phasing in of input tax credits will apply if you purchase a new motor vehicle, a new detachable trailer designed to be towed by a heavy prime mover, or a new body for a motor vehicle, including an insulated body, tank body or other body designed for transporting goods.
In some circumstances, you will be able to claim a full input tax credit from 1 July 2000. The phase in of input tax credits will not apply if: you would have been entitled to a sales tax exemption had sales tax still applied, you acquire a second-hand motor vehicle, you are an insurer and are replacing a vehicle under an insurance policy, or you are acquiring motor vehicles to hold as trading stock (this excludes stock used for hire). When a registered business sells a used vehicle, it will include GST in the price. For example, used car dealerships will need to include GST in their prices, as will fleet owners when they sell their stock. Private owners and unregistered businesses will not include GST when they sell a vehicle.
How the Australian Business Number will benefit business
The Australian Business Number (ABN) is a new single identifier for use in business dealings with the Australian Taxation Office (ATO) and for future dealings with other government agencies. The government has introduced the ABN in response to the Small Business Deregulation Task Force report, which called for a simplification of the way business deals with government. The ABN will form an essential part of The New Tax System. For example, a business will quote its ABN each time it remits GST to the tax office. An ABN is needed because businesses currently deal with numerous government regulatory bodies. Business taxpayers need to use different identification numbers and returns for the various taxes they pay. Other government bodies require further Identifiers.
When the ABN is fully introduced businesses will be able to use one number to reliably identify themselves in their dealings with the Commonwealth Government. The system will also be available to State, Territory and local governments, so that the ABN will eventually reduce the number of government registration and reporting requirements.
When fully implemented, the ABN will enable business to comply with regulatory requirements and receive government assistance through fewer entry points. For example, if a business changes its address it will need to notify only one authority. Businesses, especially small businesses, are likely to benefit from improved information flows from Commonwealth, State, Territory and local government. The new system will reduce requests from Commonwealth Government agencies for information. This will cut paperwork and compliance costs. You can register for an ABN, the GST and other elements of The New Tax System on the same application. Registration for the GST will ensure that you can claim an input tax credit for any GST you have paid for goods and services you have used in your business. You will use your ABN to identify your business to the Tax Office when you remit or claim a refund of GST.
Businesses registered for GST will be required to issue tax invoices that quote their ABN. Under the proposed Pay As You Go taxation changes, businesses receiving an invoice will be required to withhold tax from their payments for goods and services if ABN is not quoted. Applying for an ABN is not compulsory. However, if you are required to register for GST, you will need to apply for an ABN as well. This can be done on the same form. lf you are not required to register for GST, you can still apply for an ABN.
How to register for an Australian Business Number
The Australian Business Number (ABN) is a new single identifier for all business dealings with the Australian Taxation Office (ATO) and for future dealings with other government departments and agencies. You will need an ABN to register for the goods and services tax (GST) and other elements of The New Tax System. The Government has introduced the ABN in response to the Small Business Deregulation Task Force report, which called for a single identifier to simplify business dealings with government. You can apply for an ABN, GST and other elements of The New Tax System on the same form.
Not everyone will be entitled to an ABN. Companies registered under the Corporations Law and business entities carrying on an enterprise in Australia are entitled to a ABN if they apply. Employees and hobbyists will not be entitled to an ABN as they are not carrying on an enterprise. Self-funded retirees will not need an ABN - they will continue to use their tax file number when reporting their annual income to the ATO. All businesses with an annual turnover of $50 000 or more must register for GST and will need an ABN to do this. Organisations with a lower annual turnover may choose to register. All non-profit organisations with an annual turnover of $100 000 or more must register for GST and will therefore need an ABN. The ABN will eventually replace the Australian Company Number (ACN) and the Australian Registered Body Number (ARBN). Your ABN will be based on your ACN but it will have 2 additional leading digits and become an 11 digit number.
If you are carrying on an enterprise, you will need an ABN and GST registration in order to claim GST credits from 1 July 2000. You should apply for an ABN as soon as possible after November 1999 as ABNs will be allocated progressively from this date. During November 1999, the ATO will contact current business taxpayers, inviting them to apply for registration. Most businesses will receive a registration package in the mail, others will be contacted by phone. Businesses not contacted by the ATO during this period can ring the business Tax Reform Infoline on 13 24 78 to request a registration package. You can register electronically through the Business Entry Point (BEP) at: www.business.gov.au, by mail or through your tax agent. When fully implemented, the ABN will: give businesses access to participating government agencies through a single entry point, enable businesses to notify government of changes in details only once, and streamline business reporting of tax entitlements and obligations (including GST) on a Business Activity Statement.
Communications and the GST
The Government states that Industry costs in the communications sector are expected to fall substantially when The New Tax System begins on 1 July 2000. Under the old tax system, many of the electrical goods used in the communications sector carried a high rate of sales tax - sometimes as much as 32 %. Under The New Tax System, businesses will pay a uniform 10% cent GST when they purchase these goods. Businesses will be able to claim input tax credits for goods and services acquired for use in their business. They will deduct these credits from the GST they remit to the Australian Taxation Office (ATO). Many communications businesses are exporters. Services that are consumed overseas will generally be GST-free, as will exported goods. Businesses will be able to claim input tax credits for these goods and services but will not need to include GST in their prices.
Transactions in the communications sector are often complex. Businesses will need to identify what they are supplying and which supplies are taxable. For example, an Internet service provider may provide internet access and collect payments on behalf of website operators. GST is payable on both activities. All businesses with an annual turnover of $50 000 or more must register for the GST. Businesses with turnovers of less than $50 000 have the option to register. You can apply to register from November 1999. You must register by 31 May 2000 to be part of the GST system on 1 July 2000. You can register for GST and other elements of The New Tax System when you register for an Australian Business Number (ABN). Whenever a registered business supplies taxable goods or services, GST must be included in the price.
A supply is taxable when: it is made for consideration, it is connected with Australia, it is not GST-free or input taxed, the supplier is registered or required to register, and it is made in the course of the supplier's business.
Consideration includes any payment (in money or kind) made in return for a supply of goods or services. It includes, for example, contra agreements or exchanges of services between businesses. Supplies of service are connected with Australia when either: they are made through an enterprise that the supplier carries on in Australia, or the supplier performs the service in Australia. GST will not be payable on supplies that are GST-free or input taxed. A registered business will not include GST in the price when it supplies GST-free goods or services. However, it is still entitled to claim input tax credits for GST included in the price of goods and services acquired to make the supply. GST-free supplies include: services that are provided by Australian suppliers and consumed overseas, and exported goods.
A registered business will also not include GST in the price when it makes input taxed supplies. However, it will not be entitled to claim input tax credits for GST included in the price of goods and services acquired to make the supply. Input taxed supplies include some financial services, such as loans. In the communications sector, GST-free supplies are most likely to occur when goods are exported or services supplied in Australia are consumed overseas. Exported goods will generally be GST-free when the supplier exports them within 60 days of issuing an invoice or receiving consideration for them. Services will generally be GST-free if the recipient of the supply is outside Australia when the service is performed, and either: the recipient is a non-resident, or the service is consumed outside Australia. However, GST will be payable on services that are directly connected with goods or real property in Australia.
Input tax credits for business
The New Tax System will allow you to claim an input tax credit for any GST included in the price you pay for goods and services you use in your business. Input tax credit will provide a way of passing GST liability along the production or supply chain, so that the GST is included in the price paid by the final consumer of the goods and services. The final consumer cannot claim input tax credits.
If you are registered for GST, you will be liable to pay to the Australian Taxation Office (ATO) 1/11th of the price you charge for taxable goods and services you supply as part of your business. You will pay this GST to the ATO. GST will be included in the purchase price of many things you acquire for your business. You will be entitled to an input tax credit for GST included in the price of these things. You can offer these input tax credits against the amount of GST payable to the ATO. If your input tax credits are greater than the amount of GST payable, you may be entitled to a refund.
Some supplies of goods and services will be GST-free for example basic food, exports and some health services. This means that GST will not be included in the price of these goods and services. However, if you make GST-free supplies, you can claim an input tax credit for GST included in the price of things purchased for use in your business. For example, a hospital will not include GST in the price of most of its services. However, if it buys a shipment of disinfectant, it will be able to claim an input tax credit for GST included in the price of that shipment.
Some goods and services are input taxed, for example certain financial supplies. If you are providing these supplies, you will include no GST in your price. However, you cannot claim input tax credits for GST included in the price of things you acquire to make these input taxed supplies. For example, if a bank buys a calculator to calculate interest on its housing loans, GST will be included in the price of the calculator. The bank will not be able to claim an input tax credit for this GST.
You must have a tax invoice for your purchase in order to claim input tax credits. You cannot claim input tax credits for GST included in the price of goods and services that you use for private purposes. For example, if you own a roof tiling business, you cannot claim input tax credits for GST included in the price of any tiles you use on you own house. You are allowed a partial input tax credit for GST included in the price of things used partly for business purposes and partly for private purposes or for making input taxed supplies. The amount of the input tax credit you are entitled to depends on the extent you use the thing acquired for the purpose of your enterprise. The input tax credit is also reduced where you only provide part of the cost of the thing acquired.
Businesses with an annual turnover of $50 000 or more and non-profit organisations with an annual turnover of $100 000 or more must register for the GST. Businesses with a turnover of less than these thresholds can still choose to register. If you have a small business and decide not to register, GST will not be included in the price of supplies you make, and you will not be able to claim input tax credits. Unregistered businesses will have GST included in the price of most things acquired for use in the business.
You will report your GST and most other tax obligations on a new single form, called a Business Activity Statement (BAS). This single form replaces several current business tax forms.
You will need to lodge your BAS monthly if your annual turnover is greater than $20 million dollars. Otherwise, you have the option to lodge your BAS either monthly or quarterly. Businesses that choose to change from quarterly to monthly periods may change back again after 12 months.
When you buy goods and services that include GST, the supplier will have to give you a tax invoice. The tax invoice must show the price paid, the supplier's Australian Business Number and other information as advised by the ATO. You will need to keep your tax invoices to claim your input tax credits. Tax invoices will help you keep track of any input tax credits you can claim. GST is included in the price when a business makes a sale. The business claims an input tax credit for GST included in the price of things used in the business. The final consumer bears the cost of the GST.
The information in this chapter is based on Commonwealth of Australia copyright material reproduced by permission including GST. GST Facts Sheets: NAT 3039, NAT 2942, NAT 3023, Personal Incomes Tax Cuts For You, GST Food and You, How will the New Tax System benefit aged and other pensioners? How will the New Tax System benefit self-funded retirees? and How will the New Tax System benefit families?
Contents of Your Rights
Australian Civil Liberties Union