Australian Goods and Service Tax Basics

Goods and Services Tax is part of a taxation system governed by the Australian Tax Office (ATO). The tax applies to all product and service purchases at a rate of 10% including those take place between suppliers, manufacturers and retailers. Businesses are able to claim credits on their own payments and on any other business purchases. Only the end consumer pays Goods and Service Tax without being able to reclaim any of the payments that they have made.

Registering for Goods and Services Tax

In Australia, businesses have to meet the following criteria before they can register for Goods and Services Tax:

The business must act as an enterprise and have a turnover in excess of $75,000 in each financial year (or $150,000 if the business is a non-profit organisation)
The business must act as an enterprise and project a turnover of $75,000 or more in the forthcoming financial year (or $150,000 if the business is a non-profit organisation)
The business must act as an enterprise and provide taxi travel as part of its services
GST registrations must be made through the Australian Tax Office. This can be done independently or by using a third-party service provider.

Making Payments

Business activity in Australia is recorded on Business Activity Statements (BAS) and for Goods and Services Tax purposes, these are returned to the Australian Tax Office on a quarterly basis unless the business turns over more than $200,000 in a financial year, in which case the statements are submitted on an annual basis.

Businesses must pay the full amount of tax at the time of any business purchase but registration allows them to claim back credits on any payments that have been made. Business Activity Statements highlight the amount of Goods and Services Tax paid on transactions and the amount being claimed back as tax credits.

Keeping Records

Record keeping is an integral part of managing Goods and Services Tax payments. To claim back tax credits successfully, you will need to present a valid tax invoice from your suppliers. Tax exemptions are applied to any individual products or services that cost less than $75. A valid tax invoice will contain the name of the supplier, their Australian Business Number and the price of the product or service including any Goods and Services Tax paid.

Invoices should be kept on record for five years after the date each Business activity Statement is lodged. The same invoices must be kept for five years for income tax return purposes. Understanding the basics of the tax can help businesses keep a tighter control on spending and ensure that they claim the credits they are entitled to.

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Economic and Social Implications of Goods and Services Tax

The overwhelming majority of product and service transactions in Australia are subjected to a 10% value-added tax called Goods and Services Tax (GST). Introduced by the Australian Howard Government in July 2000, the tax has effectively replaced the former Federal Wholesale Tax System and has phased out a number of state and territory levies including stamp duty and highly unpopular banking taxes.

Despite the success of the Goods and Services Tax, observers still believe that the 10% charge applied on business and customer transactions has a series of economic and social implications. In particular, these concerns are levelled towards the end consumer who ultimately picks up the cost of Australian GST payments.

While business that are Goods and Services Tax registered can claim credits that see them reimbursed for any payments made, it is the everyday citizen who is already paying income tax on their earnings who continues to be penalised. Indeed, it could be easily argued that GST is simply a regressive tax that potentially targets low income earners and that the Australian Government is now consuming more of their earnings than ever.

Peter Costello, the former Treasurer of the Australian Government, certainly seems to believe that Goods and Services Tax is anything but regressive. During his tenure, which ran from 1996 to 2007, Costello argued that the abolition of state and territory taxes and their subsequent replacement had left consumers no better off or worse off than they originally were.

Consumer behaviour spiked dramatically in the months preceding the introduction of Goods and Service Tax, with many end users rushing out to purchase high-end consumer products that would become much more expensive as soon as the new tax system began. It is significant to note that Australian consumer spending and economic performance spiralled into negative growth during the first GST fiscal year.

Small businesses have also felt the impact of the new taxation system. Unlike consumers, a business that is registered for Goods and Services Tax can claim refunds from the Government in the shape of GST credits for any payments made under the new regime. Even so, small business owners claim that the increased cost of administration and continuous interaction with the Australian Tax Office is little more than the result of bureaucratic red tape.

Goods and Services Tax also had a negative impact on the Australian property market. The tax itself led to an increase of 8% in the price of new homes while demand fell by over 12%. Although the market recovered by 2004, arguments continue to rage over economic and social implications of the new tax and to a certain extent, this is largely justified b

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