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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.
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