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FAQs on Goods & Services Tax

  1. How does GST work?
  2. Why is the GST charged on each transaction in the supply chain if the final consumer ends up paying the tax?
  3. What does input taxed mean?
  4. Will my cost centre be charged GST?
  5. What is the effect of the GST on University Budgets?
  6. How will I know if the price includes GST?
  7. Do all businesses charge GST?
  8. How will GST affect students?
  9. I have heard that payment to independent contractors will now be taxed. Is this true?
  10. What are the consequences if I am not issued an ABN?
  11. Receiving Quotes and the GST
  12. Textbooks and GST
  13. Third Party Payments/Transactions
  14. Excursions & Field Trips
  15. Sale of University Items

 


How does the GST work?

The GST is charged on each transaction in the supply chain, but registered businesses receive a credit for GST paid on purchases. As a result, GST effectively becomes a 10% tax on the retail price of goods and services.


What does input taxed mean?

Input taxed means that GST is paid on purchases (inputs), but is not charged to the customer and a refund cannot be claimed from the Tax Office. The main activities that are input taxed are residential accommodation (including student accommodation) and financial activities.


Will my cost centre be charged GST?

In most cases no. GST charged to clients and paid on inputs will all go to a central clearing account managed by the Finance Unit. The only exceptions will be:


What is the effect of the GST on University Budgets?

University budgets will be determined and managed on a GST exclusive basis. This means that cost centres will generally not bear GST. This is because the University, like all businesses, is responsible for collecting GST for the government while being able to claim a refund on GST paid on non-salary purchases. As a result therefore only net receipts and expenditures are actually borne by the University.

The Finance Unit will we be responsible for reconciling a GST clearing account and either remitting or receiving GST (as the case may be) on a monthly basis.

It is likely that prices borne by cost centres will actually fall slightly as suppliers pass on lower costs as a result of the abolition of sales tax.


How will I know if the price includes GST?

All prices eg on supermarket shelves, must be GST inclusive ie the price shown is what you will pay. If you multiply the price shown by 1/11 that will calculate the GST paid.

Businesses that charge GST, will be required to issue Tax Invoices which allow the University to clearly determine the GST paid and enable a refund from the tax office.


Do all businesses charge GST?

No. In order to charge GST, a business must register with the Australian Taxation Office (ATO). There is no requirement for a business to register for GST where their total revenue is less than $75,000 pa. Businesses not registered can not obtain refunds for GST paid on their purchases and cannot charge GST to their customers.


How will GST affect students?

University courses will generally be GST free eg all undergraduate and postgraduate award courses, both for Australian and FPOS.

Short course programs that are not a prerequisite to entering a trade or profession in Australia, or to commence the practice of (but not to maintain the practice of) a profession or trade in Australia will be GST taxable.

The Student Amenities Fee will not attract GST, as will textbooks.

Course materials will be GST free if they are transformed or consumed as part of the course eg chemicals, art supplies and readers.

Field trips taken as part of a course are GST free (but the associated accommodation and foods will attract GST).


I have heard that payment to independent contractors will now be taxed. Is this true?

Payments to independent contractors will fall under a new tax collection system known as Pay As You Go (PAYG) withholding tax. It will start from 1 July 2000, and will simplify and consolidate existing tax collection systems such as PAYE and provisional tax.

The system requires the University to withhold 48.5% of payments to contractors that do not quote an Australian Business Number (ABN) on invoicing.


What are the consequences if I am not issued an ABN?

Under the PAYG system, a business must withhold at the top marginal rate plus medicare levy (currently 46.5 per cent) from a payment it makes to a supplier if the supplier does not quote an ABN.

Under the GST system you must have an ABN in order to be registered for GST. If you are not registered for GST you can not charge GST nor claim refunds for GST paid.


Receiving Quotes and the GST

The general rule is that where a quote is supplied with no mention of the GST, it is reasonable to expect that the price is GST inclusive.  This is the view supported by law.

The law governing fair trade practices is The Competition and Consumer (Cth) Act 2010 (CCA).  The Australian Consumer Law (ACL) which forms Schedule 2 to this Act requires that:

  1. consumers are not misled or deceived about the total price that must be paid to receive the goods, services or packages advertised; and
  2. when a price representation is made, the total quantifiable price is clear to the consumer.  

Advertising, displaying or listing separate components of price, without also giving the total price payable, may constitute a breach of the CCA if presenting the price in such a way is ambiguous, or the total price cannot be readily calculated.  

Thus, if you receive a quotation with no mention of GST, and you would normally expect to pay GST, it seems reasonable to expect that GST is included in the price.  Otherwise the quotation would fail the above requirements which outline Australian trade practices and consumer law obligations.

Further information in relation to trade practices and consumer law obligations can be found at:


Textbooks and GST

  1. Sales of text books by the University as the owner of those textbooks are subject to GST.

  2. Sales of textbooks by the University as agent for a student are GST free.

  3. Where the University acts as agent for a student in (2) above and the individual sale is $75 or less no amount is withheld from what is paid to the student.

  4. Where the University acts as agent for a student in (2) above and the individual sale exceeds $75, no amount is withheld from what is paid to the student providing a Statement by a Supplier form is completed by that student (see enclosed). The wholly of a private or domestic nature is the likely exemption field.

    If a fee is charged by the University for the sale on behalf of students that will be a separate taxable supply and I can comment on that if it is relevant.

    So as a matrix:

Activity Owned by Sold by GST?
Text Book UniSA UniSA Yes
Text Book - up to $75 Student UniSA as agent No
Text Book - above $75 Student UniSA as agent No - obtain Supplier Statement

Third Party Payments/Transactions

 

Third parties often contract with UniSA to provide an education course to specific students. These students are specifically listed on the tax invoices issued to the third party. The question here for GST purposes is whether the supply is being provided to the third party or to the students.
 

The answer from the ATO is that the contractual flow of the supply is key. The contract could be between UniSA and the student or between the third party and UniSA but the actual flow is between UniSA and the students.
 

If the third party is merely paying for the course, there will be no supply made to the third party, however, in most cases, it appears that a contract exists between the third party and UniSA, which suggests that the supply is being made to the third party and being provided to the students. Where third parties are merely paying for the course, UniSA should not provide a tax invoice (ie an invoice with GST) to that third party because there is no supply.
 

This area of the GST legislation is quite complex so should you require any further clarification, please contact Kristian Thoroughgood in Central Finance on ext: 21922 to ensure the correct treatment of these transactions.


Excursions & Field Trips

If the excursion or field trip is directly related to the curriculum, and is not predominantly recreational in nature, the supply is GST-free, except for any food or accommodation supplied. The GST legislation requires GST to be charged on such food and accommodation. If food or accommodation are included in a single charge for an excursion or a field trip, the supply is a mixed supply, and the charge must be apportioned. Whenever such an excursion includes food or drink, an apportionment of the cost will be required and the food and drink components will be subject to GST.

This area of the GST legislation is quite complex so should you require any further clarification, please contact Kristian Thoroughgood in Central Finance on ext: 21922 to ensure the correct treatment of these transactions.


Sale of University Items

 

The sale of University items such as computers are required to be sold GST Free if the below conditions are met.
 

The payment received for the sale is:

As an example, if the University paid $1,100 GST inclusive for a computer screen and sold for $400, the University must not charge GST, however if the University sold for $800 then the University would charge GST and the total price would be $880 GST inclusive.
 


 

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