Australia VAT A tax professional’s essential guide to calculating, reporting and paying indirect taxes in Australia

Introducing VAT in Australia...

In July 2000, the Australian federal government introduced the you’re familiar with major European regimes you’ll probably have Australian Goods and Services Tax (GST); a form of VAT that a good understanding of Australian GST too. shares many similarities with Europe’s most mature VAT systems. The lack of truly unique legislation or complexity that we usually Primarily, the parallels between the Australian regime and those try to highlight throughout this series led us to look at some long-established systems in Europe are based on the requirement of the more curious examples of how indirect tax affects the for recalculation and payments to be made to the tax authority at taxpayer. every transaction point throughout a sales chain. Afterall, tax doesn’t always have to be taxing! This means businesses operating in Australia must collect a sales tax on behalf of the government, before submitting it to the One thing that can often be relied upon for some light tax relief appropriate revenue department via a tax return. (pun intended) are how tax authorities choose to apply certain exemptions on goods and services - and Australia does not In truth, unlike the weird and wonderful wildlife that occupies the disappoint! vast Australian landmass, Australian GST is fairly simplistic and if

What VAT rates apply?

Australia boasts one of the lowest VAT rates in the world at just 10%, benefiting businesses that buy and sell in the country.

Another unusual feature of VAT in Australia is that it operates just a single rate, unlike almost all other countries that often impose reduced, higher and zero levies in addition to their standard rate.

Australian VAT

What is subject to VAT?

Any supply that is made to benefit a business, is connected with Australia and is provided by an entity that Supplies of low- is either registered or required to Supplies of digital products value imported register for VAT and other services from goods (i.e. AUD offshore suppliers to 1,000 or less) Australian consumers

Any other indirect taxes?

Wine equalisation tax Insurance tax The wine equalisation tax Each Australian state imposes (WET) is levied by the federal a tax on every insurance government at a rate of 29% - policy that is sold. The rate of plus 10% GST. tax varies between states. Retailers do not receive an input tax credit for WET, although wine producers are able to claim a 29% rebate on the wholesale price on wholesale sales or 29% of the notional wholesale price for retail sales.

Petroleum resource rent tax

Petroleum resource rent tax (PRRT) applies to all petroleum, oil and gas projects in Australian offshore areas. PRRT is applied to either projects or licence areas at a rate of 40% of the taxable profits generated from the recovery of petroleum.

Exemptions

A number of goods and services are exempt from VAT in Australia, including:

Financial supplies Healthcare

Residential rent

Fundraising events Training

Register for VAT

If your business generates turnover of over AUD $75,000 Did you per annum, you may be legally required to register for VAT providing you carry out certain business operations, including: know... Delivering goods within Australia

Importing, installing or assembling goods in Australia

Australia imposes the fourth-highest ‘beer tax’ in the world - and it is levied on all alcholic drinks. Exporting goods from Australia

The Australian beer tax is automatically increased every six months and has been rising for the last ! 35 years Supplying property in Australia

Once the beer tax and GST have been applied, a whopping 42% of the average price of a beer in Australia is made up of tax. Supplying services - for example, consultancy, What’s more, the tax is based on the drink’s proof, which will make you entertainment, administration think twice about ordering another G&T next time you’re at the bar!

The great Australian gold rush...

Did you know that the Australian Taxation Office (ATO) is working hard to stop criminal organisations from cashing in on the GST of gold sales?

Thought to cost Aussies more than $610m per year, the ‘carousel’ involves criminals purchasing pure gold bullion, breaking it down into another form and selling it onto gold refiners.

The scam takes advantage of when GST is applied to gold along the supply chain. In its bullion form, gold is considered a currency and has no GST applied when bought and sold, but when broken down and passed down the chain to a refinery, the refinery is obligated to pay 10% GST to the criminal, allowing the syndicates to pocket the GST rather than remitting it to the ATO as they’re supposed to.

Since 2014, the authorities have managed to reclaim $55m with a large number currently in litigation.

Quirks of the system

QUESTION What links these three items?

ANSWER Garden gnomes, fish tanks and clocks are three of the thousands of unusual items that can be depreciated for tax purposes by businesses in Australia.

The expert’s view...

Australia’s GST system may be fairly simplistic and look remarkably familiar to tax professionals who are well versed in working with some of Europe’s longest-standing regimes, but it still packs a punch when it comes to presenting challenges to overcome and quirks to factor into your processes.

We’ve tried to cover many of those pecularities of Australian GST throughout this guide, but there are many more wherever you look.

For example, did you know that you could deduct the tax from food and vet bills across the lifetime of man’s best friend? Unfortunately, this only applies to guard or working dogs, not the family pet. You’ll struggle to convince the ATO that your miniature Pomeranian is worthy of a tax refund.

While we freely admit Australian GST is not the most complex indirect tax regime in the world, if you are running thousands of transactions through your books each month and currently using manual processes to ensure determination, calculation and reporting is correct for each, it still makes sense to invest in an automated solution to achieve this with maximum accuracy in the minimum time.

For more information on how our industry-leading solution can transform the way Sam Thomas your business manages Australian GST, get in touch with us today. Oracle Practice, Commercial Lead

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