A New Tax System (Goods and Services Tax) Act 1999 Simplified GST Accounting Method Determination (No. 29) 2015

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Legislation au F2015L01587 Not in force Legislative Instrument

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Goods and Services Tax: Simplified GST Accounting Methods Determination (No. 29) 2015

 

Explanatory Statement

 

General Outline of Instrument

  1. This determination is made under subsection 123-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act).
  2. This determination replaces the A New Tax System (Goods and Services Tax) Simplified Accounting Method Determination (No. 1) 2005 (the previous instrument). 
  3. The determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

 

Date of effect

4.        The instrument commences on the day after registration.

5.        The instrument does not apply retrospectively.

 

What is this instrument about:

6.        Division 123 of the GST Act allows the Commissioner to determine a Simplified Accounting Method (SAM) for particular groups of retailers and small enterprise entities. This determination sets out a new SAM for eligible supermarkets or convenience stores.

7.        The SAM contained in the determination will facilitate the quick and simple calculation by eligible food retailers of the input tax credits they are entitled to claim in respect of their acquisitions of trading stock in a particular tax period. Presently, the eligible food retailers need to individually dissect and record the GST contained in every tax invoice. The SAM will allow the input tax credits to be calculated by subtracting the estimated GST-free acquisitions from total acquisitions and multiplying it by 1/11th. GST-free acquisitions will be estimated by using the percentage that represents the GST-free portion of sales and multiplying it by total acquisitions (trading stock only) for each Business Activity Statement (BAS) period. 

8.        The determination can be used only by eligible food retailers (supermarkets or convenience stores excluding petrol stations) that satisfy the following conditions:-

  •         Registered for GST purposes.
  •         Sell a range of GST-free and taxable goods that are commonly sold at supermarkets or convenience stores.
  •         Undertake little or no conversion of food (conversion of food represents less than 5% of total annual sales).
  •         Annual turnover is $2 million (excluding GST) or less.
  •         Adequate point-of-sale (POS) equipment is used.

9.        This determination cannot be used by a food retailer to calculate the input tax credits for acquisitions that are not acquisitions of trading stock. Further, eligible food retailers must exclude alcoholic beverages and other goods that are uncommon or in substantially greater quantity or variety than those generally sold at supermarkets or convenience stores.

10.    If an eligible retailer wishes to use the SAM set out in this determination, the eligible retailer must complete an ‘Election To Use A Simplified GST Accounting Method’ (NAT4370) and forward this notification to the Commissioner. The SAM must then be used for 12 months or more. To revoke such an election, a ‘Notice To Revoke An Election To Use A Simplified GST Accounting Method’ (NAT4371) must be completed and forwarded to the Commissioner.

11.    Appropriate records must be kept to explain the calculations used to reach the final figure under this determination. Further, all records must continue to comply with the general record keeping requirements.

12.    It is not a requirement that tax invoices be held (section 29-10 of the GST Act) for acquisitions whilst using the SAM covered by this determination. However, if an acquisition was included in a tax period whilst this determination was in effect, then an input tax credit cannot be claimed for the same acquisition in a later tax period after which a notice to revoke an election had taken effect. If any such credit is claimed in later tax period, a corresponding increasing adjustment must be made to the BAS in the previous relevant tax period. This rule is to prevent an entity from effectively claiming two input tax credits for the same acquisition.

 

What is the effect of this instrument?

13.    This determination is in addition to an existing determination and is designed to provide a quick and easy method for eligible food retailers to estimate their entitlement to input tax credits.

14.    This determination will allow eligible food retailers who are not eligible to choose to use the existing determination an opportunity to choose and adopt a SAM that will reduce their costs to comply with the GST legislation.

15.    Eligible food retailers who choose to use the SAM set out in this determination will use a simple formula to calculate their entitlement to input tax credits for each tax period. The formula uses the relationship between the taxable and GST-free sales made to determine an estimate of creditable acquisitions made. The rationale behind this formula is that the percentage of acquisitions which are creditable acquisitions would be expected to be in line with the percentage of sales which are taxable for the kinds of businesses to which the determination applies.

16.    We envisage that this determination will satisfy the industry’s concerns over the current costs of compliance for their members. In addition, the determination is consistent with the Commissioner’s commitment to making the tax experience of small business easier, cheaper and more personalised.

17.  Compliance cost impact: minor- there will be no or minimal impacts for both implementation and ongoing compliance costs. The legislative instrument is minor or machinery in nature.

 

Background:

18.    This instrument replaces A New Tax System (Goods and Services Tax) Simplified Accounting Method Determination (No. 1) 2005. The replaced instrument is repealed on the commencement of this determination.

 

Consultation:

19.    Section 18 of the Legislative Instruments Act 2003 specifically provides for circumstances where consultation may not be necessary or appropriate. One of those circumstances is where the instrument is considered minor or machinery in nature, and does not substantially change the law.

20.    Extensive consultation was carried out with external stakeholders during the development of the previous instrument.

21.    Therefore, no further consultation was undertaken as the instrument is considered minor or machinery in nature, and does not substantially change the law.

 

 

 

 

 

James O’Halloran

Deputy Commissioner of Taxation

15 September 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Compatibility with Human Rights

 

This statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Goods and Services Tax: Classes of Recipient Created Tax Invoice Determination (No. 29) 2015

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

This Legislative Instrument provides supermarkets or convenience stores (eligible food retailers) with the option of using a simplified GST accounting method (SAM) to calculate their entitlements to input tax credits for trading stock for a particular tax period. Eligible food retailers do not include petrol stations.

Human rights implications

This instrument does not engage any of the applicable rights or freedoms. It allows eligible food retailers an opportunity to choose and adopt a simplified accounting method that will reduce their costs of complying with the GST legislation.

Conclusion

This instrument is compatible with human rights as it does not raise any human rights issues.

 

 

 

 

 

 

 

 

 

 

 

Overview

The Goods and Services Tax: Simplified GST Accounting Methods Determination (No. 29) 2015 was enacted to provide a streamlined method for eligible food retailers, such as supermarkets and convenience stores (excluding petrol stations), to calculate their input tax credits for trading stock under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). This legislative instrument aims to address the complexity and costs associated with current GST accounting methods for small businesses by allowing them to use a simplified formula that estimates their creditable acquisitions based on the proportion of taxable to GST-free sales. This determination applies to eligible retailers who meet specific criteria, including having an annual turnover of $2 million or less (excluding GST), selling a range of GST-free and taxable goods, and using adequate point-of-sale equipment. The introduction of this simplified accounting method is intended to ease the compliance burden on small businesses, aligning with the Commissioner's commitment to making tax compliance easier and more cost-effective for small enterprises.

Scope and Application

The Goods and Services Tax: Simplified GST Accounting Methods Determination (No. 29) 2015 applies to eligible food retailers, specifically supermarkets and convenience stores (excluding petrol stations), that are registered for GST purposes and meet certain conditions. These conditions include selling a range of GST-free and taxable goods commonly found in supermarkets or convenience stores, undertaking little or no conversion of food (less than 5% of total annual sales), having an annual turnover of $2 million or less (excluding GST), and using adequate point-of-sale equipment. This instrument provides these eligible retailers with the option of using a simplified accounting method (SAM) to calculate their entitlements to input tax credits for trading stock for a particular tax period. The SAM is designed to facilitate the quick and simple calculation of input tax credits by allowing eligible retailers to estimate the GST-free portion of their acquisitions. To use this SAM, eligible retailers must complete an election form and notify the Commissioner, and they must use the SAM for at least 12 months. The instrument also outlines the record-keeping requirements and specifies that while tax invoices do not need to be held, input tax credits cannot be claimed for the same acquisition in a later tax period after revoking the election. This instrument is supplementary to the A New Tax System (Goods and Services Tax) Act 1999, and it does not apply retrospectively.

Key Provisions

The Goods and Services Tax: Simplified GST Accounting Methods Determination (No. 29) 2015, made under section 123-5(1) of the A New Tax System (Goods and Services Tax) Act 1999, introduces a new simplified accounting method (SAM) for eligible supermarkets and convenience stores, excluding petrol stations. This SAM is designed to simplify the calculation of input tax credits for trading stock, allowing eligible food retailers to estimate their credits based on a formula that correlates the percentage of taxable sales to creditable acquisitions (sections 6-7). Eligible entities must be registered for GST, sell a range of GST-free and taxable goods, have an annual turnover of $2 million or less, and use adequate point-of-sale equipment (section 8). To adopt this method, eligible retailers must complete an 'Election To Use A Simplified GST Accounting Method' (NAT4370) and notify the Commissioner (section 10). The Act imposes several obligations on eligible food retailers, including maintaining appropriate records that explain the calculations used under the SAM, ensuring these records comply with general record-keeping requirements, and adhering to the conditions that prohibit the use of the SAM for non-trading stock acquisitions and certain excluded goods (sections 9, 11). If a retailer opts to use the SAM, they must commit to using it for at least 12 months and must not claim input tax credits for the same acquisition in a subsequent tax period if they have revoked their election (section 12). This provision is designed to prevent double claiming of input tax credits. Breach of the provisions of this Act can lead to civil and possibly criminal consequences. Although the Act does not specify maximum penalties for breaches, penalties for GST non-compliance can include fines and interest on unpaid GST. The Commissioner of Taxation may also take enforcement action, which could lead to further financial penalties or even prosecution in cases of serious or repeated non-compliance (sections 13-14). The Act emphasizes that the compliance cost impact is expected to be minor, reflecting the minor or machinery nature of the legislative instrument.

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