Case Study

Case Study

XYZ Inc, a US company, trades in car parts. Representatives of XYZ made a business trip to Melbourne, Australia. Whilst in Australia, XYZ’s representatives paid for hotels, taxi fares, meals and miscellaneous other expenses. All of these expenses included GST. XYZ purchased car parts from an Australian company. The price that XYZ paid to the Australian company included GST because the car parts were exported to XYZ more than 60 days after XYZ had been invoiced for them. XYZ was also required to pay the rail costs to move the goods from the Australian company to the point of export, again including GST.

XYZ contacted EasyGSTrefunds. EasyGSTrefunds assisted XYZ to register for GST and claim back a refund of the GST it had paid. This provided a boost to XYZ’s cash flow and profit margin. Easy.

Glossary

ABN – Australian Business Number. An ABN is allocated as an identification number for businesses and other entities dealing with the Australian Taxation Office and other government departments. Businesses that charge GST have an ABN and this number will be shown on the relevant tax invoice.

Adjustment Note – After a supply or importation has been made, there may be some subsequent event which alters the GST consequences for the parties. For example, the price may be reduced following spoilage of the goods in transit. The supplier will then issue an adjustment note setting out the change in price. An adjustment note may increase or decrease an entitlement to a GST refund.

ANTS – An acronym to describe the package of legislation which includes the goods and services tax legislation. For example, two pieces of ANTS legislation are A New Tax System (Goods and Services Tax) Act 1999 and A New Tax System (Luxury Car Tax) Act 1999.

Creditable Acquisition – An acquisition that gives rise to input tax credits (see ITC). Your business makes a creditable acquisition if it acquires something during the course of carrying on the business, the acquisition is a taxable supply, your business is liable to provide consideration for the supply and your business is registered or required to be registered. However, if the acquisition is for private or domestic purposes, or relates to your business making input taxed supplies, the acquisition will not be a creditable acquisition.

EasyGSTrefunds – The leading provider of GST refund services to businesses outside of Australia.

GST-free Supplies – GST-free supplies are not subject to GST. Therefore, the price paid for these supplies does not include GST and hence does not give rise to any entitlement to a refund of GST. In general terms, GST-free supplies include many goods and services under the headings of healthcare, education, childcare, religious services and most exports. The makers of GST-free supplies do not include GST in the price they charge for their supplies but are entitled to claim back the GST they have paid on the inputs used to make those GST-free supplies.

ITC – Input tax credit.

Input Tax Credit – Input tax credits are offset against liability to pay GST, giving either a net liability to pay GST or an entitlement to a GST refund. Input tax credits arise from creditable acquisitions.

Input Taxed Supplies – Input taxed supplies are not subject to GST. Therefore, the price paid for these supplies does not include GST and hence does not give rise to any entitlement to a refund of GST. In general terms, input taxed supplies include residential rent and many financial services, such as loans and share trades. The makers of input taxed supplies do not include GST in the price they charge for their supplies but are not entitled to claim back the GST they have paid on the inputs used to make those input taxed supplies.

RITC – Reduced input tax credit.

Reduced Input Tax Credit - Banks and other institutions providing financial supplies may not be entitled to claim input tax credits, but will be entitled to reduced input tax credits in respect of certain acquisitions.

Tax Invoice – For an invoice to be recognised as a tax invoice it must meet certain requirements. In particular, a tax invoice must show the supplier’s name and ABN, a brief description of the goods or services provided and whether GST has been included in the invoice total. The requirements vary depending upon whether the total amount payable exceeds Aus $1,000.

Taxable Supply – A supply that gives rise to GST liability for the supplier. For a supply to be a taxable supply, the supply must be for consideration, made in the course of furtherance of an enterprise, be connected with Australian and made by an entity that is registered or required to be registered.