GST PROCEDURES€¦ · Web view(Schools should read the word charitable institution to also mean a government school) 6.319.1The GST law provides that the commercial activities

Updated 2014

SCHOOL GST MANUAL

Reviewed March 2014

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Updated 2014

CONTENTS

SCHOOL GST MANUAL..................................................................................................................................................1

GST PROCEDURES..........................................................................................................................................................4

PURPOSE..................................................................................................................................4INTRODUCTION.......................................................................................................................4

THE GST TAX SYSTEM............................................................................................................4REGISTRATION......................................................................................................................4SUB ENTITIES.........................................................................................................................5

AN OVERVIEW OF KEY GST ELEMENTS FOR SCHOOLS...........................................................5PRICE MONITORING & PRICE GUIDELINES...........................................................................6TAXABLE SUPPLIES................................................................................................................7GST-FREE SUPPLIES...............................................................................................................8INPUT TAX CREDITS..............................................................................................................8INPUT TAXED SUPPLIES.........................................................................................................9IMPORTATIONS...................................................................................................................10ADJUSTMENTS....................................................................................................................10TAX PERIODS.......................................................................................................................11

TRAINING...............................................................................................................................12SCHOOL STAFF AND SCHOOL BOARD.................................................................................12STATIONERY REQUIREMENTS.............................................................................................13

PAY AS YOU GO (PAYG).........................................................................................................13CHECK FOR SUPPLIER’S STATUS..........................................................................................13REPORTING TO PAYEES.......................................................................................................14REPORTING TO ATO............................................................................................................14

SPECIAL GST PROVISIONS: EDUCATION...............................................................................14EDUCATION COURSES.........................................................................................................14MARKET VALUE...................................................................................................................15DEFINITION OF MARKET VALUE.........................................................................................15PRINCIPLES..........................................................................................................................15DETERMINING MARKET VALUE - THE PROCESS.................................................................16OTHER METHODS APPROVED BY THE COMMISSIONER.....................................................17RECORD KEEPING................................................................................................................17CHECKLIST FOR USE IN DETERMINING MARKET VALUE.....................................................17GST TREATMENT OF NEWSLETTERS, MAGAZINES AND JOURNALS PROVIDED BY SCHOOLS............................................................................................................................................18DETERMINE THE COST OF SUPPLYING PUBLICATIONS.......................................................18SUPPLY OF A PUBLICATION TO BE GST-FREE......................................................................18DETERMINE THE MARKET VALUE OF SCHOOL PUBLICATIONS..........................................18DETERMINE THE COST OF SUPPLYING SCHOOL PUBLICATIONS........................................19TUITION (FEES) AND COURSE MATERIALS..........................................................................20REFUND OF A NON-TAXABLE CONTRIBUTION...................................................................22SECURITY DEPOSITS............................................................................................................22PART PAYMENTS.................................................................................................................22FIELD TRIPS, CAMPS AND EXCURSIONS..............................................................................22DONATIONS........................................................................................................................23APPROPRIATIONS...............................................................................................................24

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GRANTS AND PAYMENTS....................................................................................................24SPONSORSHIPS...................................................................................................................25

FUNDRAISING........................................................................................................................26WHERE A SCHOOL TREATS FUNDRAISING AS INPUT TAXED (SUB ENTITY)........................26WHERE A SCHOOL TREATS FUNDRAISING AS TAXABLE.....................................................27SECOND-HAND GOODS.......................................................................................................29PURCHASE OF SECOND-HAND GOODS FROM UNREGISTERED ENTITY.............................30TRADE-IN OF SCHOOL EQUIPMENT....................................................................................31SALE OF SURPLUS SCHOOL ITEMS......................................................................................31SALARIES AND WAGES........................................................................................................31RELIEF DAYS (PURCHASE OR PAYMENT).............................................................................32REIMBURSEMENT OF EMPLOYEE’S/VOLUNTEERS/PARENTS EXPENSES............................32

CONTRACTS............................................................................................................................32REVIEWABLE AND NON-REVIEWABLE CONTRACTS...........................................................32SALE OF GOODS AND SERVICES (WHERE SCHOOL IS THE SUPPLIER).................................33PROGRESSIVE SUPPLIES & PREPAYMENTS SUCH AS SUBSCRIPTIONS...............................33CONTRACTS OF GOODS AND SERVICES (WHERE SCHOOL IS THE CUSTOMER).................33LEASING, RENTAL/HIRE.......................................................................................................34SUBSCRIPTIONS & MEMBERSHIPS......................................................................................34INSURANCE.........................................................................................................................34

ACCOUNTING FOR GST..........................................................................................................34RECEIPTS.............................................................................................................................34RECEIPTING GOVERNMENT PROVIDED FUNDS..................................................................35RECEIPTING TUITION FEES..................................................................................................35RECEIPTING COMMERCIAL ACTIVITIES...............................................................................35RECEIPTING ADJUSTMENTS................................................................................................35RECORDING PURCHASE ORDERS & INVOICES....................................................................35RECORDING PAYMENTS......................................................................................................36PAYMENT ADJUSTMENTS...................................................................................................37TAX INVOICE REQUIREMENTS............................................................................................38ADDITIONAL REQUIREMENTS FOR TAX INVOICE...............................................................38RECIPIENT CREATED TAX INVOICES....................................................................................39PLANNING YOUR CASH FLOW............................................................................................40ROUNDING..........................................................................................................................40BUSINESS ACTIVITY STATEMENT........................................................................................40PAYMENTS AND REFUNDS..................................................................................................40LODGEMENT OF BAS...........................................................................................................41IF A MISTAKE IS MADE ON THE BAS...................................................................................41SUPPLIER REGISTRATION FLOWCHART..............................................................................42CONTRACTS FLOWCHART...................................................................................................43

GLOSSARY..............................................................................................................................44SCHOOL TRANSACTIONS ANALYSIS......................................................................................46

SCHOOL TRANSACTION ANALYSIS TABLE...........................................................................46NOTES TO TRANSACTIONS ANALYSIS TABLE......................................................................52

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GST PROCEDURESPURPOSE

This document is provided as a reference document to principals, senior teachers, registrars, office manager, finance officers, P&C member and other interested parties. It will assist these people to apply the goods and services tax (GST) to the purchase and sale of goods and services in their schools.The manual complements the ATO “Schools GST Booklet” and the ETD video “GST and Schools” that was sent to schools in October 1999.

INTRODUCTION

THE GST TAX SYSTEM

6.300.1 The introduction of the GST on 1 July 2000 represented a major change to the Australian taxation system.

6.300.2 It includes the abolition of wholesale sales tax and reductions in and removals of a number of other indirect taxes, as well as a decrease in income tax rates. A feature of the reform is the streamlined reporting of tax-related business to the Australian Taxation Office (ATO), namely, Fringe Benefits Tax and Pay As You Go (replacing Pay As You Earn and other instalment and withholding taxes) on one report – the Business Activity Statement (BAS). This is in addition to GST-related data.

REGISTRATION

6.301.1 The GST legislation is very specific regarding the compulsory and/or optional registration of all organisations for GST purposes. Upon registration, entities will receive an Australian Business Number (ABN), which will become a new identifier to be used for dealings with the ATO and future dealings with other government departments and agencies. It should also be noted that an entity carrying on an enterprise is able to register for an ABN without registering for the GST.

6.301.2 All ACT schools have been registered as separate entities for ABN and GST purposes. Each ACT school will have its own ABN. Other registered entities within this Department Instrumental Music Program and the Active Leisure Centre, as well as Departmental Operating and Territorial accounts.

6.301.3 All enterprises with an annual turnover of $75,000 ($100,000 for non-profit bodies) must register for GST with the ATO. Below this threshold, registration is optional (refer Suppliers Regist r at i on flowchart ). This will enable registered suppliers to obtain a credit for GST included in the prices of inputs purchased in the course of carrying on their enterprise.

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SUB ENTITIES

6.302.1 Schools may choose to treat separately identifiable units of the school as though they are separate entities for GST purposes (SRC, fundraising activities, fetes, etc), provided the sub-entity:

maintains an independent system of accounting; the activities of the sub-entity can be separately identified on the basis of

either the nature of the activities or the location of the sub-entity; and the sub-entity turnover must be less than $100,000.

On this basis a separate sub-entity can be created for each of the fundraising activities conducted by the school. For example free dress days, school fete, walkathon, etc.The requirement to maintain an independent system of accounting does not necessarily require a separate bank account or separate set of books. It is essential however that the records of the sub entity can be clearly and easily distinguished from the records of the main entity. Schools must open a separate ledger code in MAZE (8000) for each of the sub-entities.

6.302.2 Unlike the registration requirements for commercial entities and non-profit bodies, there is no annual turnover threshold that dictates where a government entity is required to be registered. All ACT government entities are required to register for GST.

AN OVERVIEW OF KEY GST ELEMENTS FOR SCHOOLS

6.303.1 The general intention of the GST legislation is that although the consumer will bear the cost of the GST, the liability to collect and remit GST to the ATO rests with the supplier of the goods and services and not the consumer. As a registered entity, even if schools do not factor GST into the price of their goods and services, they will still be liable to remit GST on all taxable supplies to the ATO.

6.303.2 Like businesses, schools will, as suppliers, in many instances: collect, and

remit GST to the ATO and claim back GST amounts which they are entitled.

6.303.3 In the case of collection of GST, the school is in effect collecting the GST from the consumer on behalf of the ATO.

6.303.4 Schools will see increases in GST-inclusive prices as a result of GST for most goods and services they acquire from registered entities, except where the supply is GST-free or input taxed. Depending on the status of the supply (i.e. GST-free, taxable, or input taxed), and provided the school holds a complying tax invoice where required, schools will generally be able to claim back the GST component included in the price as an input tax credit. The claim for the input tax credit is off-set against the liability that the school has incurred in relation to its taxable supplies. The amount remitted to the ATO is referred to as the schools “net amount”, which if negative, will be refunded to the school following lodgement of the BAS.

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This is demonstrated as follows:

PRICE MONITORING & PRICE GUIDELINES6.304.1 The Australian Competition and Consumer Commission (ACCC) are monitoring prices

to ensure that entities are not using the GST as an excuse to unnecessarily increase prices. This has implications for both schools and suppliers.

6.304.2 Schools are advised to adhere to the ACCC guidelines explained in the publication “Schools and the New Tax System” pages 9-10 or access the website: www.acc c .gov.au when setting GST-inclusive prices for goods and services.

6.304.3 Schools will need to decide whether the “supply” being provided by the school is a taxable supply. If so, the school will be required to remit 1/11 th of the price of the supply to the ATO. Where a supply is taxable, regardless if the school factors GST into the price of the supply, it will still be required to report the requisite amount of GST liability to the ATO.

6.304.4 The following is a simplified example of the steps in working out your prices for taxable goods and services:

work out your cost and add CPI if necessary; this gives you the value of the supply; add 10% GST on the value; and this will give you the selling or hiring price.

Example:Hire of hall 100.00Add CPI of 2.5% 2.50Value 102.50Plus GST 10% 10.25Total Price GST inclusive $112.75

6.304.5 It should be noted that the ACCC has specified that no prices are to rise by more than 10% as a result of GST. The basis for any price rise of more than 10% must be fully documented for the purposes of explanation to the ACCC if required.

6.304.6 If your school is part of the Directorate’s community use program, prices will be inclusive of GST.

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http://www.accc.gov.au/

TAXABLE SUPPLIES6.305.1 As schools will be registered entities, GST will be payable on many goods and

services that they sell or supply. GST will also be included in the price of most things schools acquire.

6.305.2 MAZE Finance individually allocates a GST-effect or status to each transaction. This is covered in more detail in the receipting, ordering and payment procedure sections.

6.305.3 It is necessary to identify when a supply to your school is subject to GST. This is termed a taxable supply by the supplier to you.

Example: Taxable Supply

A manufacturer sells 100 scientific calculators to an electronics wholesaler for $2,200 (including $200 GST).

The wholesaler sells the calculators to a secondary school for $3,300 (including $300 GST). The chain of supply to the school will almost always include GST, even though many goods and services provided by the school are “GST-free”. The wholesaler can only make a taxable supply to you if it is registered for GST purposes.

The secondary school sells the calculators to students at the cost price of $33 each (including $3 GST). Even though the calculators are used as part of providing an education course, they are subject to GST because they become the property of the students. Therefore the secondary school makes a taxable supply when it sells the calculator to the student and becomes liable to the ATO for GST.

The diagram below explains how only the student (end consumer) bears GST on the final product and the ATO collectively accumulates 10% ($300) of the final sale price ($3,300) from the supply chain:

Manufacturer Wholesaler School Sales = $2,200 $3,300 $3,300

_____________________________________________________________________

ATO receives:

$200 GST $300 GST $300 GSTLess Input Tax Credits 0* 200 300Net Amount $200 + $100 + $ 0 = $300*assumes no business inputs

6.305.4 The ATO has collected a total amount of $300 (that is, the sum of the net amounts received from each supplier in the supply chain. This $300 equals the total amount that the students have paid in GST to the school. Therefore, students pay a total of $3,300 (including $300 GST) to the school.

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GST-FREE SUPPLIES6.306.1 It is important to determine when a supply is a GST-free supply. (ref e r 6 .3 1 8.1),

entitled “Special GST Provisions: Education”, will explain this in more detail. Essentially, accredited educational courses provided by a recognised education provider are GST-free (as per A New Tax System (Goods & Services Tax) Act 1999, Sec. 38-85). This means that GST is not payable on an education course, and the course provider will be entitled to claim input tax credits for GST included in the price of goods and services acquired to provide the course. This is illustrated in the following example:

Example: GST-free SupplyABC Primary School conducts a zoo excursion for grades 2 and 3 as part of the standard school curriculum. Zoo charges the school $6.60 (including .60c GST) per student.The school charges the students $6.00 admission (GST-free).The school will then claim an input tax credit of 60 cents (included in the price charged by the Zoo) for each student who attends the excursion.

Zoo School Zoo ticket price $6.60 $6.00

___________________________________________________________ATO receives:GST on sales .60c 0Less Input TaxCredits 0* .60Net Amount .60c (.60c) = Nil* assumes no business inputs

6.306.2 Therefore, the ATO does not receive any GST in relation to the transaction and accordingly, the student has not paid GST for an activity considered a GST-free supply (under Sec. 38-90 – Excursions or Field Trips). The school has incurred a temporary negative cash flow effect until the appropriate refund or offset has been processed.

6.306.3 Education-related supplies that are considered GST-free under Ruling GS T R 2 000/30 include:

tuition, facilities and other curriculum related activities and instructions; field trips and excursions; administrative services; course materials; and lease or hire of curriculum related goods.

INPUT TAX CREDITS6.307.1 Both of the above examples have referred to input tax credits. These are clearly

defined in the legislation and only available once certain criteria are met. Entities must have an ABN and be registered for GST with the ATO to enable them to be entitled to claim input tax credits.

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http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR200030/NAT/ATO/00001

http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR200030/NAT/ATO/00001

6.307.2 Input tax credits enable businesses, including schools, to claim back the GST component of the good or service acquired. A full input tax credit is always equal to 1/11th of the consideration paid or owed by you to the supplier.

6.307.3 In the case of the calculators above, the school paid $3,300 including GST of $300 (1/11th of $3,300). To be able to claim the input tax credit, the calculators must have been a “creditable acquisition” for the school. A creditable acquisition is one that is:

not private or domestic in nature; made in the course of the school’s enterprise; not made for the purposes of the school making an input taxed supply.

6.307.4 In addition, to be a creditable acquisition, the supply by the supplier to the school must have been a taxable supply. For example, a supply by an unregistered person to a school will not be a taxable supply, and therefore the school will not be entitled to an input tax credit in respect of that supply.

6.307.5 With the calculators, as a taxable supply, the GST is passed on to the end consumer and the ATO refunds the school the $300 that it paid to the wholesaler. The school is not any worse-off as all GST liabilities are recovered from students and all GST included in purchases are refunded by the ATO.

6.307.6 In the second example concerning the zoo excursion, the school does not incur a GST liability, as the excursion is deemed a GST-free supply. Therefore, there is no need for the school to increase the fees for the students and so the students are charged $6.00 each. The ATO will refund to the school as an input tax credit 60 cents for each ticket sold (1/11th of $6.60) by allowing an input tax credit, resulting in a break-even funding position for the excursion.

6.307.7 Input tax credits cannot be claimed in some circumstances. They are only available for creditable acquisitions made for a creditable purpose, claimed by an organisation registered for GST. For example a purchase acquired for private usage would not be for a creditable purpose, and input tax credits will therefore not be available for any GST incurred in the cost of the purchase.

Partial claims – You are allowed a partial input tax credit for GST included in the price of things used partly for business purposes and partly for private purposes or partially for making input taxed supplies. The amount of the input tax credit you are entitled to depends on the extent you use the thing acquired for in the non-input taxed purpose of your enterprise. The input tax credit is also reduced where you only provide or are liable to provide part of the cost of the thing acquired. (In Maze, this will be represented as two transactions).

For instance, example 6.304.4, if a teacher purchases one of the calculators for private use at home, the entire $300 could not be claimed by the school as input tax credits. The school would only be entitled to an input tax credit to the value of $297, for the value of the GST incurred on the purchase of the 29 calculators utilised for business purposes.

INPUT TAXED SUPPLIES6.308.1 Input taxed supplies include:

most financial supplies; supplies of residential rent and residential premises; some supplies of precious metals; and supplies made in certain circumstances by school tuckshops and canteens.

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6.308.2 If a supply is input taxed, no GST is payable on the supply and there is no entitlement to an input tax credit for anything acquired or imported to make the supply. Some examples of input taxed financial supplies are:

money: eg creation, issue, transfer, assignment, receipt of, dealings such as: lending/borrowing money, creating/transferring a debt or an interest in a debt, an advance/granting of credit;

accounts: eg creation, keeping or closing a saving/cheque/deposit account, superannuation funds etc; and

life insurance premiums.6.308.3 It is anticipated that schools will be impacted only to a small extent in the area of

input taxed supplies, where a school has elected to treat a fundraising activity as a sub-entity (refer 6.302.1) and elected to have the activity treated as input taxed (eg. fete, activity or SRC organised formal etc).

IMPORTATIONS6.309.1 GST is payable on goods imported into Australia if they are imported for home

consumption within the meaning of customs legislation. In this situation it is the importer who is liable for the GST on taxable importation and not the supplier.

6.309.2 If a school is directly importing goods from overseas, the school will pay GST on taxable imports at the rate of 10% of their value. Value is the sum of:

the customs value of the goods; the amount paid or payable to transport the goods to Australia and to insure

the goods for that transport to the extent that this is not already included in the customs value; and

any customs duty payable on the importation of the goods.6.309.3 An input tax credit is available for GST on importations for goods under rules that are

similar to input tax credits for other acquisitions.

Example: Importations

Secondary College imports specialised sporting equipment into Australia as part of the physical education curriculum. The customs value plus transport and insurance costs add up to $7,000. The school is liable for $700 GST on the importation and is entitled to an input tax credit of $700, effectively netting off the amount to zero.

ADJUSTMENTS6.310.1 In the normal course of daily business, it will sometimes be necessary to adjust the

GST net amount, which is owed by the school or to the school. Termed an “adjustment event”, specific instances are:

cancelling a supply or acquisition, e.g. return of goods;

changing the price (consideration), e.g. discount; and

a supply becomes/ceases to become, a taxable supply.

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6.310.2 The adjustment, which results is either an “increasing adjustment” (GST amount on a supply is increased or the input tax credit is decreased) or a “decreasing adjustment” (opposite effect). This will be documented with an adjustment note. Importantly, adjustments resulting for a bad debt being written off will not require the issuance and retention of an adjustment note.

6.310.3 MAZE will record and monitor adjustments necessary to complete the ATO-required report ‘Business Activity Statement’ (BAS).

Example: Making an Adjustment (school returns supply)

ABC Primary School purchased 20 computers from IT Stores for $22,000 (including $2,000 GST). The school claimed an input tax credit of $2,000.

During installation, it is discovered that one computer is incompatible and a refund of $1,100 with an adjustment note is forwarded to the school. In its next BAS, the school is required to increase the amount of GST to be paid to the ATO by $100 in the adjustments section of the BAS. This is because the school has previously claimed an input tax credit of $100 (as part of the $2,000 from the bulk computer purchase), which has now been refunded by IT Stores.

Example: Making an Adjustment (supply returned to school)The Red Rock Primary School hires their gymnasium to the Police Citizens Club to run Red Light Discos once a month. The club prepays for the hire of the gymnasium on a term basis the amount of $330, (including $30 GST). At the end of the tax period, the school accounts for the $30.00 GST on its BAS for the hire. However, during the following tax period, the Police Citizen Club has to cancel a disco. The school refunded the Club $110.00 (the cost of one hire) together with an adjustment note.In its next BAS, the school is required to decrease the amount of GST to be paid to the ATO by $10.00 (being the GST component of the cancelled gymnasium hire) in the adjustments section of the BAS.

Example: Making an Adjustment (discount by supplier)Mt Tremendous Primary School operates a bookshop for students. In the July 2000 tax period, the school claimed $200 input tax credits for book purchases totalling $2,200 (including $200 GST). In September, the bookseller gave the school a discount of $100 for purchases made in the July tax period.The school has now effectively claimed too much input tax credit. The correct amount of input tax credit for the books purchased is $190.90 (GST on $2,100 or $2,200 - $100). To correct this, the school needs to make an adjustment that reduces its input tax credits by $9.10 ($200 - $190.90) in the September tax period. The bookseller will have effected an equivalent adjustment also.

TAX PERIODS6.311.1 Any GST on supplies made, input tax credits on acquisitions and importations and

adjustments are all attributable to a particular tax period. The nominated tax period for schools will be monthly. Therefore, all transactions taking place from the first day of the month to the last day of the month (inclusive) will need to be reported in the monthly BAS. Schools will have 21 days following the end of their tax period to complete and lodge the BAS to the ATO.

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6.311.2 As schools currently use a cash basis of accounting, they will account for the GST payable when they receive payment for a taxable supply and claim input tax credits when they actually pay for acquisitions. This may cause a temporary cash flow effect until the ATO refunds any credit amounts due. The ATO is bound by the Taxation (Interest on Overpayments and Early Payments) Act 1983 to pay interest.

TRAINING

SCHOOL STAFF AND SCHOOL BOARD6.312.1 The GST will impact on your school community in varying degrees. In order to

ensure minimum confusion and procedural problems, it is recommended that the school identify any group/s for specific information on guidelines and advice.

6.312.2 Once identified, it is possible to communicate information formally (eg in the way of a specially convened briefing or meeting), and/or informally (eg verbal and prepared instructions for guidance). The following groups are considered to be significant in the school community and therefore, targeted for GST information delivery:

school board/finance committee;

P & C Association (includes Fundraising Group);

teaching/non-teaching staff; and

parents/guardians.

6.312.3 From the above list, and adding other relevant groups, consider the type of GST-related information that needs to be passed on. For example, the finance committee and clerical/administrative staff will require a more in-depth and detailed understanding of the GST, while other groups may require only a brief and general coverage. Also, amongst the teaching staff, program/KLA/curriculum coordinators in charge of program budgets will require more GST-related knowledge. This is because they are more likely to deal directly with suppliers and need to be aware of minimum requirements relating to suppliers’ GST registration, valid tax documents, prices etc.

6.312.4 Understand the GST status of each transaction processed, that is, taxable supplies, GST-free supplies or input taxed supplies.

Know how to issue appropriate tax invoices for goods or services provided by your organisation, reconciling total taxable supplies, GST- free supplies or input taxed supplies with the total invoices issued.

Ensure all moneys receipted are analysed into taxable supplies, GST-free supplies, and input taxed supplies for reconciliation of supplies to the BAS.

Know how to account for credit card transactions.

Understand how to process tax invoices received from creditors.

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Know how to deal with adjustment notes, credit notes, and refunds.

Understand and follow the rules for reconciling all the accounts.

Understand the attribution rules which determine the tax period in which a transaction is accounted for in GST purposes.

Practice preparation of a BAS by preparing a “dummy” BAS.

STATIONERY REQUIREMENTS 6.313.1 When schools order new stationery, it would be advisable to include their ABN in

their letterhead.6.313.2 Forms in the School Management Manual have been updated to comply with GST eg

Petty Cash Claim Form, Advances Register, Community Use Rates etc.6.313.3 Financial documentation through Maze is GST compliant. 6.313.4 Schools will find it useful to:

file documents in a logical and consistent way (for example, with numerical referencing);

ensure relevant personnel understand the need for, and use of, the documents; and

where necessary, cross-reference documents to provide additional details.

PAY AS YOU GO (PAYG)

6.314.1 Under the new Pay As You Go (PAYG) system, if a business supplies goods or services to another business and does not quote their ABN on their invoice (or other documentation relevant to the supply), the business that receives the goods or services is required to withhold tax of 46.5% from the payment to the supplier.

CHECK FOR SUPPLIER’S STATUS6.315.1 If a supply is made in the course or furtherance of a business, and the supplier does

not provide the school with their ABN, ask if the supplier has an ABN. If no ABN, advise the supplier that you would need to withhold 46.5% of the payment irrespective of the amount involved.

6.315.2 Schools should not withhold if: the payment is $75 or less (GST exclusive);

the supplier is an individual under 18 years of age, and the payments you make to that person do not exceed $120 per week;

if the whole of the payment is exempt income of the supplier (eg a charitable organisation); and

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if the supply is private, domestic, or of a recreational nature, or relates to a hobby (ie the supply is not made in the course or furtherance of a business) and the supplier provides the school with a declaration to this effect. (ATO “Statement by a Supplier” form can also be used by a supplier to cover the above situations).

Note: If a school has any reason to suspect that an individual is conducting a business they must withhold 46.5% from the payment.

Schools can check the ABN of a supplier at the following website address http://w w w.abr.bu s iness.gov.au/

REPORTING TO PAYEES6.316.1 Schools must keep appropriate records of all the payments withheld. A statement

containing details of the payment withheld must be provided to the supplier. A report must be provided to the supplier from whom the payment deductions have been withheld by 14 July of the following year. (This will be produced in Maze.) It must contain the following details:

name of the payer (this is the school) and payee (the recipient);

school’s ABN;

total gross payments and amounts withheld; and

date of payment.

REPORTING TO ATO6.317.1 The amount withheld must be included in the BAS and must be remitted to the ATO

on the lodgment of the statement.6.317.2 In addition, schools will be required to report (Maze will produce a report) annually

to the ATO: details of each recipient to whom an ABN withholding has been made by 31

October each year, for the previous financial year.

SPECIAL GST PROVISIONS: EDUCATION

EDUCATION COURSES6.318.1 The legislation has determined that the supply of eligible education courses or

administrative services directly related to the supply of such courses (supplied by the same supplier) are GST-free. “Education course” is defined as:

a pre-school course;

a primary course;

a secondary course;

a tertiary course;

a masters/doctoral course;

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http://www.abr.business.gov.au/

a special education course;

an adult and community education course;

an English language course for overseas students;

a first aid or life saving course;

a professional/trade course; and

a tertiary residential college course.

MARKET VALUE (Schools should read the word charitable institution to also mean a government school)

6.319.1 The GST law provides that the commercial activities of charitable institutions will be taxable (or input taxed) but the non-commercial supplies provided by charitable institutions will be GST-free. Where a charitable institution registered for GST makes a supply in return for consideration, this will be a taxable supply, unless it is provided for nominal consideration.

6.319.2 "A supply is GST-free if the supply is for consideration is: a supply of accommodation less than 75% of the GST inclusive market value

of the supply; or the supply is not a supply of accommodation less than 50% of the GST

inclusive market value of the supply."

6.319.3 The entities to which market value applies are: charitable institutions; trustees of charitable funds; gift-deductible entities; or Government schools.

DEFINITION OF MARKET VALUE6.320.1 Market value is generally taken to be the price a buyer in the open market is

prepared to pay for a good or service.6.320.2 Market value will be taken to be:

the consideration in money a buyer in an open market is prepared to pay for a good or service when the transaction is at arm’s length; and

once established a market value of a supply can be used for a period that aligns with the practice of the market in which the school operates. Schools should review their prices as market forces dictate and at a minimum they should also review the appropriate market values at the same time.

PRINCIPLES6.321.1 Schools will need to establish whether they are making a taxable supply by using the

four tests.(a) you make the supply for consideration; and(b) the supply is made in the course or furtherance of an enterprise that you

carry on; and

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(c) the supply is connected with Australia; and(d) you are registered or required to be registered for GST.

6.321.2 A school needs to look to the actual market it operates in, in the first instance to establish a market value. It is the supply that is compared in the market not the recipient of the supply or the provider of the supply.

6.321.3 If there is no market for the supplies the school makes then it should look at similar supplies in the market place. Again using comparable features of the supply.

6.321.4 As a last resort where no commercial equivalent exists for a particular supply the school could calculate its own market value for that supply.

DETERMINING MARKET VALUE - THE PROCESS The actual market value for a supply in the open market.6.322.1 A school will need to establish whether the same supply exists in the open market.

The school needs to determine what it is actually supplying to determine the relevant market. Further, the 'market selling value' is the current selling value of the goods or services.

Example:

The local school may supply its school hall for functions - the market value in this case is the price charged by other halls in the locality with similar facilities, for example the scout hall, RSL hall or community centre that may provide the same type of facility.

6.322.2 A school will need to ensure the market they are comparing with is a market within which they operate. Therefore, the locality becomes a necessary component in deciding the reasonableness of the market value that has been derived by the school for most types of supply.

Market value of a similar supply6.322.3 Where a school is unable to use the first test to determine a market value of their

supplies, for example there is no commercial equivalent, it may seek to identify similar supplies that exist in the open market and use that consideration/s to establish the GST inclusive market value for its supplies.

Example:

A school provides training that is not offered elsewhere - in this case it could use as the market value the price charged by a commercial provider for a course of similar duration.

6.322.4 In order to make decisions on which supplies are thought to be similar schools should consider the following aspects:

the local market place should have priority in identifying these similar supplies;

broad categorisations of things can be used as a way of substantiating the rationale to use certain supplies, such broad categorisations may include clothing, furniture, food, education and the like (such a broad categorisation is not appropriate for accommodation);

a school should be able to distinguish between a service and a good they provide unless it is normal practice in the market to provide a 'bundle' of

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goods and services for an inclusive price, for example the provision of 'bed and breakfast';

where a service is offered a school should seek comparisons that are similar in nature, quality, of similar size or time length and conditions of supply; and

a school should be able to distinguish between a second hand and new good and not make comparisons where second hand and new goods are interchangeable.

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Example:

A school offers a half-day class in relaxation techniques to unemployed adults for which it charges a small fee. The school would be able to use any half-day adult education course that is offered by other organisations that is akin to their half-day course in terms of nature, duration, standard of tuition and activities during the course.

OTHER METHODS APPROVED BY THE COMMISSIONER6.323.1 For information on the full absorption costing see following website (Part 5 Non

Commercial A c tivities of Charities) . Schools can use this method to determine the cost of supplying the publication, but only costs actually incurred can be included (thus volunteer labour cannot be included).

RECORD KEEPING 6.324.1 Schools should maintain and retain records that adequately document the process

and information collected in establishing the relevant market values to which consideration of their own supplies are to be compared. For example, the market values established and the methods used must be notated and placed in a folder for later reference. This information should be compiled in such a way that will enable cross-referencing to accounting statements and therefore what will be recorded on Business Activity Statements (documentation should be kept for a period of 5 years).

CHECKLIST FOR USE IN DETERMINING MARKET VALUE6.325.1 The following checklist is offered and can be used by schools as part of their

documentation and verification procedures in determining market value and establishing their supplies as non-commercial and therefore GST-free.

identify the supply; determine whether the supply is taxable according to the first four (4) tests

under refer 6 .321.1; determine the boundaries of the market within which you are making the

supply; find the same supply in the open market and use at least two prices to

determine the market value; if the same supply cannot be identified then find a similar supply in the open

market and use at least two prices to determine the market value; if a similar supply cannot be identified then isolate the cost in making that

supply and use a methodology to determine the commerciality of the supply with respect to the open market; and

use of the benchmark market values by those organisations identified.

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http://www.taxreform.ato.gov.au/ind_partner/charities/qna/qna3.htm#5

http://www.taxreform.ato.gov.au/ind_partner/charities/qna/qna3.htm#5

GST TREATMENT OF NEWSLETTERS, MAGAZINES AND JOURNALS PROVIDED BY SCHOOLS

Background6.326.1 The Treasurer has requested the ATO to consider a ruling, to provide certainty to

schools, which deems that newsletters, magazines and journals which are not commercial sales be GST-free.

6.326.2 The following points are addressed in this regard: does the provision of newsletters, magazines and journals (publications) by a

school registered for GST constitute a taxable supply for the purpose of the GST legislation?

under what circumstances would the supply of a publication be GST-free? how can a charitable institution determine the market value of its

publications?

DETERMINE THE COST OF SUPPLYING PUBLICATIONS6.327.1 For the purposes of these guidelines and application of ‘the cost plus’ rule (detailed

below), publications would include newsletters, magazines and journals that are not marketed in a commercial context. The term publication does not apply to books and the ISN will be used as a basis for determining whether a publication is a book. For books the ‘general’ rule (detailed below) would apply to determine the market value. Similarly the ‘general’ rule would apply to all sales of publications where there is a market.

6.327.2 Where the GST registered school makes a supply in return for consideration, this will be a taxable supply, unless it is provided for nominal consideration. The requirements for a taxable supply are therefore met, and the sale of the publication is subject to GST.

SUPPLY OF A PUBLICATION TO BE GST-FREE6.328.1 Under the GST legislation, if a school makes a supply for less than 50% of the market

value of the supply or less than 75% of the costs the school incurred in making the supply, the supply will be GST free.

6.328.2 For example, if a publication has a market value of $5, and costs $3 to make, it will be GST-free if it is sold for less than $2.50 (under the market value rule) or less than $2.25 (under the cost rule). Only one of the tests need be satisfied in order to render the supply of the publication GST-free.

DETERMINE THE MARKET VALUE OF SCHOOL PUBLICATIONS6.329.1 To simplify the compliance burden placed on schools, they will be permitted to use

any of the following methods in determining a market value for their publications, where there is no commercial market. For sales of books and publications where there is a market the ‘general’ rule should be used to determine their market value.

General Rule6.329.2 The market value of an item is the price that a willing but not anxious buyer would

have to pay to a willing but not anxious seller for the item. Put differently, it is the

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best price that may reasonably be obtained for the items if sold in the general market.

6.329.3 If there is no general market, (ie. there is a small number of potential buyers), then this limited market is used as a substitute for the general market, and the price these buyers are willing to pay becomes the market value. On this basis, the market value of newsletters sold by a school would naturally equal the amount the arm’s length market (however limited it may be) is willing to pay for the item.

Benchmark Rule6.329.4 Schools will be permitted to adopt a suitable benchmark as a substitute for market

value. A suitable benchmark would be a publication of similar length, that does not have a high level of advertising, and that focuses on industry specific issues. An example is an investment newsletter. Given the prices charged for investment newsletters, this would effectively make the sale of most newsletters by charities GST free.

Cost Plus Rule6.329.5 Where no commercial equivalent exists, a school could calculate its own market

value, based on the costs it incurs in producing each publication and applying a standard mark up to these costs. Where a school relies on voluntary labour in producing its publications, it would be reasonable to determine a ‘deemed’ cost of labour and add this to the actual costs of production before applying the mark up in determining market value.

6.329.6 The costs of production would be based on full absorption costing, incorporating direct material and labour, and direct and indirect manufacturing overhead. A mark up of 100% on cost would be considered reasonable for the purposes of calculating the ‘deemed’ market value of publications.

6.329.7 Given many schools price their publications on a cost recovery basis, the ability to determine market value in this manner (incorporating a 100% mark up) would effectively render the sale of publications GST-free.

DETERMINE THE COST OF SUPPLYING SCHOOL PUBLICATIONS6.330.1 A school may employ full absorption costing in determining its costs of supply.

Accordingly, direct materials and labour and direct and indirect manufacturing overhead may be included in the calculation.

6330.2 Under the GST legislation, only those costs paid or payable may be included in the cost calculation. As volunteer labour does not involve an actual outlay of monies by the school, it cannot be included in the calculation of the cost of supply.

Substantiation6330.3 Where a school seeks to apply the nominal consideration provisions (s38-250 ANTS

Act 1999) it should keep appropriate records to substantiate the market value it has calculated. Appropriate records would include a written self-assessment that is reviewed regularly for example, yearly or when prices or costs change.

The Treatment of Advertising6330.4 Please note that a supply of advertising in a newsletter is distinct from the supply of

the newsletter itself. The provision of advertising by a school will be subject to GST unless either the 50% of market value, or 75% of cost of supply rule is satisfied.

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TUITION (FEES) AND COURSE MATERIALS6.331.1 Tuition fees (including voluntary contributions, subject levies) paid to a school during

the delivery of a course that directly relates to the curriculum in a defined education course, will not be consideration for a taxable supply, and therefore will not give rise to a GST liability.

6.331.2 A supply of course materials for a subject undertaken in an education course (as defined in Section 6. 3 18.1 ) is GST-free. “Course materials” are defined as materials provided by the entity supplying the GST-free education course that are necessarily consumed or transformed by the students undertaking the course for the purposes of the course. For example, the following materials fall within the above definition:

laboratory equipment and chemicals used in a chemistry class;

art supplies used in a graphics/art class;

wood, metal, plastics used in a technology class;

food ingredients used in a food science class; and

photocopied educational materials that are consumed or transformed by the students by way of “filling in the blanks” for example.

6.331.3 Administrative services related to the supply of an education courseFor example:

enrolment processing;

issue of identity cards;

assessment of students;

processing academic and sporting results;

preparation and printing of students progress reports; and

administration of Speech Days and other similar school activities and record keeping.

6.331.4 Supply of Course-Related Booklets - Related to the above is the provision of materials generally regarded as “transformed or consumed” by students undertaking the course making them a GST-free supply. For example, the school supplies Health booklets and other course materials, which are then distributed to students for use in a Health Education course on a fee-paying basis. Where these booklets are used by the students in such a way as to render them unusable to another student, these will qualify as GST-free course material (assuming the course itself is GST-free).

6.331.5 Special Events - A significant number of schools conduct special events (eg school concerts) and the issue regarding sale of tickets to students, parents, family and friends arises. If it can be argued that the event is part of the curriculum (it is a curriculum related activity), schools need to note on the approval sheet the educational outcomes of the event, then the supply of tickets to students will not be taxable, so long as the supply is by the school. If relatives and friends attend the event, the supply of tickets will be taxable. Each special event would need to be considered individually.

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6.331.6 Student Teacher Supervision - When the school receives consideration from a tertiary teacher training institution for its supply of supervision of student teachers, the school is receiving consideration for this supply and this is a taxable transaction.

6.331.7 The lease or hire of goods by schools to students will be GST-free provided the school retains property of those goods. These supplies will be GST-free as long as there is not any transfer, or agreement to transfer, ownership of goods to any student or another person at any stage. In addition, the supply must be directly and principally for use by that student in a GST-free education course supplied by the school.

6.331.8 Text-books, Equipment and Other Materials Sold - GST will be payable on textbooks, equipment and other materials sold by the school. For example, where the school holds a production and the video tape made of the production is later sold by the school to students, this type of supply would not satisfy the definition of “course materials” (even though the production itself may be directly related to the course). As such, GST equal to 1/11th of the payment received by the school for the video sales must be accounted for.

6.331.9 Textbooks purchased from school or school contractor or from across the counter - Textbooks purchased by students are taxable. However, with the introduction of the GST on 1 July 2000, the Commonwealth Government introduced the Education Textbook Subsidy. The subsidy is capped at 8% off the retail price of textbooks and will be paid to GST registered retail sellers of textbooks. To claim this subsidy, businesses will need to provide evidence that the books sold are on an approved reading list. Schools are required to provide the student with documentary evidence (textbook is on the school reading list) when a student purchases a textbook from a bookseller.

6.331.10 The objective of the Education Textbook Subsidy scheme is to equalise the effect of GST on the sale of textbooks, such that students should not be subject to increased prices. The GST liability will be incurred by the school, however the subsidy should, at least partially, offset the liability and therefore, prices of textbooks should not need to be increased.

6.331.11 Payment for Presentation by Teacher - If the school supplies the services of its staff to give lectures, workshops, (or similar) outside the normal terms of employment, (this includes another government school) and the school receives consideration for time off work, compensation etc, this is deemed a taxable supply, as it is unlikely to be a supply of an education course, nor an administrative service directly related to an education course.

6.331.12 Professional development activities – The distinction between professional development activities that are GST-free and those that are taxable, depends on whether the course is undertaken to obtain or maintain qualifications. The supply of courses undertaken to gain qualifications are GST-free if the qualifications are an essential prerequisite to employment in a trade, profession or occupation. However, courses undertaken to maintain qualifications are not automatically GST-free, but may be covered within the definition of “adult and community education courses”. If you are unsure whether a particular course offered by your school should be classified as GST-free or taxable, please seek assistance from the Department.

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REFUND OF A NON-TAXABLE CONTRIBUTION6.332.1 A non-taxable refund credit note (no GST has been applied to supply) must be

created, showing details to support the refund action. The credit note should include these details:

the name of the student;

words stating that it is a GST-free supply;

details of the supply being refunded;

the amount of the refund; and

a cross-reference to the original invoice.

SECURITY DEPOSITS6.333.1 GST is not payable on deposits held as security unless the deposit is forfeited or

applied against the cost or consideration of the supply. For example, if students pay a $10 key deposit for locker usage, no GST will be payable unless the key is lost, in which case the deposit is forfeited and GST of $0.91 (1/11th of $10) is payable to the ATO in the tax period in which the deposit is forfeited. The same treatment would apply in the case of security deposits held by the school for the cleaning contracts and textbook deposits.

6.333.2 Where the school pays a refundable deposit for hire of facilities, then recovers the bond, no GST applies as the Act regards a deposit held as security for the performance of an obligation, not a consideration for the supply. Therefore, the school would not be required to account for GST when the bond is paid nor upon recovering the bond paid.

PART PAYMENTS6.334.1 Schools use a cash basis of accounting, so they will account for the GST payable on a

taxable supply in the tax period the payment is received. Similarly, they are entitled to claim input tax credits when acquisitions are actually paid for. In this regard, where a school receives part payment for a taxable supply, they will be liable upon receipt to account only for the GST payable on the amount of consideration received during the current tax period, not the entire GST liability of the supply.

FIELD TRIPS, CAMPS AND EXCURSIONS6.335.1 The supply of an excursion or field trip/camp is GST-free if directly related to the

curriculum of an education course and is not predominantly recreational. Except the cost of the food component which will be subject to GST.

6.335.2 The collection of entry fees for excursions (swimming, movies etc), will need to be tested against the curriculum of the course to which it related in order to determine whether it is directly related or alternatively, whether it is predominantly recreational in nature. While it is likely that a swimming activity will be seen to be part of the curriculum of a primary school education course, the secondary school would have to determine how “predominantly recreational” the swimming excursion is.

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6.335.3 In the case of movie tickets, the supply would be GST-free if the object of seeing the movie was directly related to the course of study (eg as study for an english, drama or media class), but taxable where the movie activity was not part of the students’ curriculum, such as an optional form of entertainment for the students.

6.335.4 The following is an example of costing a school excursion:

Lakeside College is organising a two day excursion (curriculum based) to Melbourne for 45 students. It decides to use the local Bus Company to transport the students.A Melbourne hostel quotes on the accommodation, meals and entry fees.

Price inclusive GST Net Costof GST $ $ $

Bus 2227.50 202.50 2025.00Accommodation 2475.00 225.00 2250.00Meals 990.00 90.00 990.00Entry Fees 550.00 50.00 500.00Total Cost 6242.50 567.50 5765.00Cost per Student $128.11

6.335.5 In the above example the prices quoted from the Bus Company and hostel include GST. The school can claim $567.50 as an input tax credit. In the above example the excursion is GST-free to the students except for the food component. The school does not make any profit from the excursion fees.Note 1: It is important to remember that only an excursion that is curriculum

related is GST-free. Note 2: If a charitable organisation does not add GST to the food on their tax

invoice then the food component will be GST-free to students. Eg YMCA, Camp Sturt.

Note 3: The school must ensure that all documentation is kept for any expenditure during the excursion and it is crucial for amounts greater than $75 (total value of the supply, not each individual item from the one supplier) that tax invoices are obtained and retained by the school for a minimum of 5 years. Otherwise the school cannot claim input tax credits.

DONATIONS6.336.1 Any donation to your school that is unconditional is not subject to GST because

there is no obligation attached to the receipt. In other words, no material benefit or rights are given to the donor in exchange for the donation.

Example:

A school is bequeathed $10,000 from a former student’s estate with no requirement to provide any goods or services in return. This is a donation and will not be subject to GST.

6.336.2 Where schools make donations to organisations (eg charities), GST should not apply providing the donation does not give rise to a material benefit to the school.

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6.336.3 Casual Days and Walkathons – Where the school collects donations from students for Casual Clothes Days and Walkathons the GST treatment may vary. Where the proceeds are collected for a charitable purpose and donated directly to a charity, these proceeds would not be subject to GST. This is because the money would be seen as a donation and therefore would not be consideration for a supply. If these activities were used as fundraisers for the school, the collection would be treated as consideration for a taxable supply (for example, the right to wear casual clothes to school). In this case it would be a taxable supply and GST would need to be accounted for. For casual days and walkathons to be GST-free refer Sub E n tities

APPROPRIATIONS6.337.1 An appropriation is the maximum amount of public moneys authorised through

legislation by the government for expenditure from the Consolidated Revenue Fund or Loan Fund for a particular purpose. These are administered under the Appropriation Acts passed by Parliament.

6.337.2 Appropriations from one Australian government entity to another will not be subject to GST, as they are not regarded as consideration for a taxable supply. (Although if schools receive payments from another government entity other than ETD by cheque/EFT etc generally there will be GST added to this payment. Commonwealth Own Purpose Expenditure (COPE) grants through ETD will be GST free.) Once these appropriations are used to purchase goods and/or services from government or non-government entities or are provided as grants to organisations, the appropriation will be subject to the normal GST rules in most cases giving rise to an input tax credit for the grantor/payer.

GRANTS AND PAYMENTS6.338.1 From within ETD – All grants receive from ETD will not attract GST as they will be

classified as appropriations. This includes the quarterly SBM Funding, grants, relief days etc. These grants should be treated as outside of scope ‘OS’.

6.338.2 External Grants - Specific purpose and conditional grants from outside of ETD to schools will attract GST in most cases as entities normally enter into an obligation or undertaking (a supply) in return for receiving the grant (consideration).

Examples:

A school receives a grant of $1100 to fund a dance program from the ACT government. The school must undertake to provide the dance program. The ACT government is receiving a material benefit as it is helping to fulfil its community service obligations. This will be a taxable supply and the school will remit $100 GST (1/11th of $1100) to the ATO and the ACT government will claim the $100 as an input tax credit.

A specific purpose grant is provided to the school by the local Rotary Club. The school must undertake to provide shade cloth in certain parts of the schoolyard. This will be a taxable supply and the school will receive $4,400, being a GST-inclusive grant. The school will remit $400 GST (1/11th of $4,400) to the ATO and the Rotary Club will claim the $400 as an input tax credit.

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6.338.3 If your school provides a grant to a person or organisation, GST is only included if that person or organisation is registered for GST with the ATO. If this is the case, your school will be able to claim the GST component (1/11 th of the grant) of the payment as an input tax credit. A tax invoice will be needed to substantiate your school’s claim. If the organisation that you provide the grant to does not provide you with their ABN, the school will be obliged to withhold 46.5% of the grant under the PAYG ABN withholding legislation (refer to Section 6. 3 14.1 ).

SPONSORSHIPS6.339.1 Sponsorships can be an important financial issue in schools and the nature of the

sponsorship can vary significantly. As in the case of donations (Refer Section 6. 3 36.1 ), the key point is the material benefit (if any) derived by the payer from the sponsorship arrangement.

6.339.2 Sponsorship fees are typically payment for services (e.g. advertising), and will therefore be subject to GST where the sponsored entity is registered. The organisation paying the sponsorship fee will be entitled to an input tax credit of 1/11th of the payment if it is registered for GST. If there is no material benefit or consideration existing, or the sponsored entity is not registered, no GST is payable. The PAYG ABN withholding legislation may apply to the sponsorship. The following example illustrates GST treatment of sponsorships:

Example 1: Sponsorships (no material benefit)

A school receives a sponsorship from a local business to cover the fees or curriculum-related text books up to a value of $2,000 for eligible student/s. No goods and services are requested or paid in return, and the local business does not derive a material benefit from the sponsorship. Therefore, the sponsorship is not subject to GST and no GST liability arises for the school.

6.339.3 If there is an obligation to exchange the sponsorship for a supply or service such as where the sponsor is a book store and the school is required to purchase the textbooks from that store, GST is payable by the school (equal to 1/11 th of the sponsorship amount) and the organisation paying the sponsorship can claim 1/11 th

of the payment as an input tax credit if it is registered for GST with the ATO. This is explained as follows:

Example 2: Sponsorships (material benefit)

A school’s sporting oval is sponsored by a local business in exchange for an advertising sign erected along the fence boundary. The sponsorship is subject to GST because the school is a registered GST entity, and because consideration (advertising) is provided in return. The local business can claim an input tax credit of 1/11th of the payment (provided it is registered also) and the school must pay GST of the equivalent amount.

6.339.4 A sponsorship arrangement can also exist where the school and the sponsor mutually provide goods and services to each other. This is called a contra sponsorship. If the sponsoring organisation is also registered for GST, each party will be liable to pay GST on the supply to each other. Each party will also be entitled to claim input tax credits provided tax invoices are held. Where the supply made is of

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the same market value and made in the same tax period no net GST will be payable to the ATO. However, accounting for GST payable and input tax credits on each transaction is still necessary. Schools should treat the contra sponsorship as a manual adjustment to the BAS. Documentation supporting the sponsorship must be retained for audit purposes. Consider the following example:

Example 3: Sponsorships (contra)

A clothing manufacturer supplies tracksuits to a school tennis squad in return for advertising. The tracksuits are valued at $1,100 and the advertising is also valued at $1,100 (including $100 GST).

GST would be payable by the clothing manufacturer as 1/11th of the market value (including GST) of the advertising received as consideration for the supply of the tracksuits. The school would also be liable for GST as 1/11th of the market value (including GST) of the tracksuits it received as consideration for the advertising. Both organisations can claim input tax credits equal to the amount of GST payable provided they are entitled to a full input tax credit, and a complying tax invoice is held (where the GST-exclusive value of the supply exceeds $75).

The net GST effect of the transaction would not be zero if either party is not registered for GST or not entitled to full input tax credits.

FUNDRAISING

WHERE A SCHOOL TREATS FUNDRAISING AS INPUT TAXED (SUB ENTITY)6.340.1 The GST treatment of fundraising varies according to the nature of the activity,

hence schools need to consider each fundraising activity on a case by case basis and determine the best outcome for the school.

6.340.2 Schools can elect to treat a fundraising event as either taxable or input taxed. If the school elects for the fundraising event to be input taxed all the following requirements must be satisfied:

the supplier is a charitable institution, trustee of a charitable fund or gift deductible entity or a government school;

the supply is made in connection with a fund-raising event; the supplier chooses to have all supplies that it makes in connection with the

event treated as input taxed; and the school records that the event is being treated as input taxed (written

record).6.340.3 The school can treat the event as input taxed if it is:

an event that is conducted for the purpose of fundraising and does not form any part of a series or regular run of like or similar events (fifteen fundraising events in any income year) and is any of the following;

a fete, ball, gala show, dinner, performance or similar event; and an event comprising the sale of goods provided that each sale is for

consideration that does not exceed $20 or such other amount and selling those goods is not a normal part of the school’s business.

6.340.4 Please note the following:Where a school elects to treat a fundraising activity as input taxed they will not be

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entitled to claim input tax credits for any purchases in relation to the event and they will not be required to charge GST on the sales they make.An event that involves the sale of goods as described above cannot involve the sale of alcoholic beverages or tobacco products.

RAFFLES 6.341.1 A raffle is a game of chance where the prizes are either goods or cash or a

combination of the two. Where the prize is cash only the charity must be careful that they do not contravene state lottery laws. A supply of a raffle that contravenes the state lottery laws will not be GST free.

6.341.2 Supplies of raffles and bingo by schools are GST-free if they do not contravene State or Territory law. Generally, when activities require the purchase of a ticket and are liable to chance then they will be considered GST-free.

6.341.3 Schools must code sub-entity receipts SIT and payments AIT.

WHERE A SCHOOL TREATS FUNDRAISING AS TAXABLE

Fundraising involving sale of food/beverages etc6.342.1 Many fundraising activities are related to the supply of food and/or drinks for sale. A

sausage sizzle for example, would give rise to a GST liability (as sausages are sold for consumption on the premises) and 1/11th of the sale price will need to be reported to the ATO as a GST liability. Similarly, a chocolate or lolly drive will attract GST on the final selling price because these items are outside the definition of “basic” food.The following example illustrates the above:

Example: Fundraising (food etc)

EFG School undertakes regular fundraising activities in the form of chocolate drives, sausage sizzles and hot cross buns at Easter time. The food is purchased from the local supermarket and sold to students, staff and parents. All prices charged include GST. The sale of the items by the supermarket will give rise to an input tax credit for the school and the sale of the items by the school will give rise to a GST liability for the school.

The school also conducts an annual fair with a wide range of foods and beverages. The same GST-inclusive pricing applies because it is assumed that all food is prepared and consumed on the premises.

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Fundraising Involving a Cash Prize6.343.1 Many fundraising activities take the form of competitions where a ticket (or similar

consideration) is sold in exchange for the chance to win a prize or prizes. Lotteries and raffles are included as “gambling” under the Act. If the prize is a cash prize, GST is usually payable on 1/11th of the total collections in ticket sales. However, if schools are endorsed as a charitable organisation, no GST is payable on the sale of the tickets. The school will make a profit of the difference between the total ticket sales and the amount of the cash prize. If the school was not entitled to endorsement as a charitable organisation, it would be subject to the gambling provisions in the GST legislation, which state that GST will be applicable on the difference between the total ticket sales and the cash prize money. This may be illustrated by the following examples:

Example: Fundraising (cash prize)

XYZ Non-Charitable School (which is not endorsed by the ATO as a charitable organisation) conducts a fundraising competition with a cash prize of $750. A total collection for the competition raised $1,300 resulting in a difference of $550 ($1,300 less $750). The amount of GST payable is $50 (1/11th of $550). As there are no input tax credits on the cash prize, XYZ Non-Charitable School must pay $50 GST to the ATO. The result is a profit of $500 for the school.

ABC Charitable School (which is endorsed by the ATO as a charitable organisation) also conducts a fundraising competition, also with a cash prize of $750. ABC Charitable School makes a profit of $550 from the fundraising because its ticket sales of $1,300 are not subject to GST.

Fundraising Involving a Non-Cash Prize6.344.1 Where a school purchases non-cash prize/s, it can claim input tax credits for the GST

included in the price paid. Otherwise the procedure is the same as for a cash prize situation described in 6.343.1 above. Consider the following example:

Example: Fundraising (non-cash prize)

XYZ Non-Charitable School (not endorsed as a charity) raffles an interstate holiday package as a fundraising activity. The prize is valued at $900. The school acquires the prize for $770. Total raffle tickets sold amounted to $1,100. GST payable is $100 (1/11th of $1,100). An input tax credit of $70 can be claimed for the non-cash prize. Note that the input tax credit is determined on the price paid for the supply ($770), not the value ($900) where the supplier of the interstate holiday package is not an associated entity. The school must pay $30 to the ATO for GST (GST component of raffle tickets sold less input tax credit claimed). The school makes $300 profit from the raffle. In this regard, the school accounts for GST on the margin earned on the supply.

ABC Charitable School (endorsed as a charity) would make a profit of $400 on the raffle because it would be entitled to an input tax credit of $70 on the purchase of the prize, but would not be liable to GST on the ticket sales.

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Fundraising Involving a Combination of Cash & Non-cash prizes6.345.1 In this case, a non-charitable school must determine the net proceeds of sales (total

ticket sales less cash prize component) and apply 1/11th GST to this figure. Then it determines any input tax credit due from the purchase of the prize component. Follow the next example:

Example: Fundraising (combination of cash and non-cash prizes)

XYZ Non-Charitable School raffles a minor cash prize of $100 and a 12 month movie pass voucher worth $550 (including $50 GST). A total of $860 was collected for the combined raffle, leaving a difference of $760 ($860 less cash prize of $100). The amount of GST payable on the difference is $69.09 (1/11th of $760). An input tax credit of $50 can be claimed for the non-cash prize. The school must pay $19.09 GST (GST for $69.09 less input tax credit of $50) and achieves a resulting profit of $190.91.

ABC Charitable School would make a profit of $260 from the raffle. An input tax credit of $50 could be claimed on the purchase of the movie pass voucher and no GST liability would be incurred on the sale of the tickets. Therefore the profit is a result of the $860 ticket proceeds, less $100 cash prize, less $550 purchase of movie pass, plus $50 input tax credit.

SECOND-HAND GOODS6.346.1 Definition

Second-hand goods are considered to be goods which have been used previously.If schools acquire second hand goods for the purpose of sale or exchange in the ordinary course of business, the fact that the supply of the goods to you is not a taxable supply does not stop the acquisition being a creditable acquisition

6.346.2 Several factors must be considered carefully in relation to second-hand goods for resale:

the GST registration status of suppliers of second-hand goods the value of second-hand goods in order to claim input tax credits.

6.346.3 Donated second-hand goods will be GST-free where supplied by a school and provided they retain their original character. The sale of school items that has been cleaned and repaired for sale is GST-free, but the sale of items made from recycled items is subject to GST.

Example:

Donated second-hand goods

A school receives donations of damaged second-hand desks. If the donated desks are cleaned and/or repaired prior to sale it will be GST-free. If the second-hand desks are broken down and sold as scrap, the sale of the scrap will be subject to GST as they are no longer the same as the goods that were donated, but have been manufactured by the school into a new product, that is, scrap.

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PURCHASE OF SECOND-HAND GOODS FROM UNREGISTERED ENTITY6.347.1 Where schools purchase second-hand goods (excluding animals and plants) from

parents or organisations not registered for GST, no GST will be incurred on the cost of the goods. However, the school will generally still be entitled to claim an input tax credit if those second-hand goods are later sold as a taxable supply. The amount of input tax credit that can to be claimed is as follows:

6.347.2 If the value of the purchase is $300 or less The amount of input tax credit will be 1/11th of the value of the second-hand goods at the time of purchase

6.347.3 If the value of the purchase is greater than $300. The amount of the input tax credit claim is the lesser of:

1/11th of the price paid for the goods or the amount of GST payable when you resell the goods.

Example:

The school purchases a second-hand desk from a parent to the value of $80; 1/11th of this is $7.28. It sells the goods on to a staff member for $95 + 10% GST ($9.50).

The school claims the input tax credit amount of $7.28 and has GST payable to the ATO of $9.50 GST. The credit can be claimed during the tax period in which payment is received for the goods upon resale. If the value of the second-hand goods is less than $300, the school is entitled to claim the input tax credit upon payment for the goods.

Example:

Second-hand goods have been purchased by a school from a non-registered entity for an amount greater than $300.

The school has bought second-hand school trampoline from a parent for $350 and was later sold for $450 (GST-inclusive price). The purchase will not be a taxable supply because it was not supplied by a registered entity.

An input tax credit is available to the school, provided the goods were purchased for resale. As the value of the supply in this instance is greater than $300, the school is entitled to (whichever is the lesser):

· the input tax credit upon payment for the goods, or

· the value of the GST payable amount.

Notional input tax credit will be 1/11th of the price paid for the goods ($31.82).

The GST payable amount on $450 is $40.91.

The school will claim the $31.82 input tax credit (being the lesser amount), have $40.91 of GST payable on the sale and remit the net amount to the ATO of $9.09.

*Note: you can only claim the input tax credit at the time of the sale for amounts greater than $300.

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TRADE-IN OF SCHOOL EQUIPMENT6.348.1 Example:

The school decides to buy a new photocopier and the dealer has offered a trade-in of $1,100 on the existing school machine.Price of new machine $5,500Trade-in $1,100Net price paid $4,400For GST purposes, the dealer has made a taxable supply consideration of $5,500. A tax invoice needs to be raised to the school for that amount, and not the net amount. The input tax credit claim for the school is 1/11 th of the GST-inclusive price of $5,500.The registered school will need to issue a tax invoice to the dealer for the trade-in amount of $1,100, being the GST-inclusive value of the trade-in. This will be treated as a taxable supply. On the BAS, the trade-in amount was the taxable supply, while the GST-inclusive value of the acquisition will be the full $5,500. As the photocopier is used as an aid in the provision of the educational curriculum, the school can claim the input tax credit on the acquisition.When the school is determining budgets, the sale/trade-in prices must be the GST-inclusive price.

SALE OF SURPLUS SCHOOL ITEMS6.349.1 The disposal of surplus school items is the responsibility of individual schools

however, schools must adhere to the requirements outlined in the SBM 6.160.1 (Disposal of Furniture & Equipment). If the sale of the item is a taxable supply then the school must add 10% GST.

6.349.2 Note: Market Value and Cost RuleSchools should be aware and keep in mind the market and cost value rule in relation to the sale or purchase of goods (refer 6.3 2 0.1 and 6. 3 29.5 for further information). The sale of second hand items surplus to a schools requirements for less than 50% of the market value or less than 75% of the cost of the items will be GST-free.

Example:

A school has a trampoline for sale that it no longer requires and when purchased ten years ago cost $650, the market value today is $910. The sale of the trampoline for $470 will be GST-free as it is less than 75% of the cost ($487.50). If the sale of the trampoline was for $450 then the school could use the market value rule less than 50%. If the sale was for $430 the school could use the most convenient rule for the supply to be GST-free.

SALARIES AND WAGES6.350.1 Salaries and wages fall outside the GST regime. This means that no GST will be

payable on the supply of services from an employee where payment is made by way of salary and wage.

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RELIEF DAYS (PURCHASE OR PAYMENT)6.351.1 The payment of relief days from the central office will be outside the scope of GST

(OS) as it is considered to be part of Salary and Wages. The staff are employees and paid by ETD.

6.351.2 Purchase of relief days from the central office will be considered to be reimbursement of salary and wages and be treated as outside the scope of GST (OS).Note: The payment of moneys from one school to another for relief days will be a taxable supply and subject to GST. Schools must add 10% GST to the cost of the supply i.e. $195 + 10% ($19.50)= $214.50.

REIMBURSEMENT OF EMPLOYEE’S/VOLUNTEERS/PARENTS EXPENSES6.352.1 Schools may be entitled to input tax credits for reimbursing employees, agents, for

expenses incurred in connection with the carrying on of the enterprise (school). The entitlement extends to government schools reimbursing their volunteers (parents, students etc).

6.352.2 The payment of an allowance to an employee/volunteer/parent will not entitle the school to an input tax credit.

6.352.3 Schools can claim an input tax credit when they reimburse expenses if: the expense incurred was directly related to school; GST was payable on the expense incurred; the individual was not entitled to an input tax credit for the expense you are

reimbursing; and the expense is not listed as a non-deductible expense.

6.352.4 When employees/volunteers/parents act as agents for the school in making an acquisition, the school will be entitled to claim input tax credit for those acquisitions where GST charges are included in the reimbursement. The ‘agent rules’ applies and the school can claim the input tax credit, provided the relevant documentation has been obtained (tax invoice/receipt) and on pass it to the school for reimbursement.

CONTRACTS

REVIEWABLE AND NON-REVIEWABLE CONTRACTS 6.353.1 A reviewable contract is one that allows reviews of the price of anything supplied

under the contract. 6.353.2 The GST Transition Act and Ruling GSTR 2 000/16 define a review opportunity as an

opportunity that arises under the agreement for the supplier to: change the consideration because of the imposition of the GST;

take account of the imposition of GST in conducting a general review, renegotiation or alteration of the consideration before 1 July 2000; or

conduct a general review, renegotiation or alteration of the consideration on or after 1 July 2000.

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http://www.taxreform.ato.gov.au/cgi-bin/bye.cgi?url='http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR200016/NAT/ATO/00001'

6.353.3 Contracts likely to be affected are those: for the supply to, or by, your school of both goods and services;

for the lease of capital equipment;

for the purchase of capital assets; and

for other long term contracts.

6.353.4 A non-reviewable contract is one where the price paid for the supply is fixed (or calculated to some specific formula) and cannot be varied or reviewed by either party to the agreement. It may contain provisions that mean that the contracted price does not include GST. Specifically:

where there is a formula or set calculation for the consideration so unless the formula or calculation itself can be varied, the contract is non-reviewable.

6.353.5 Where there is an adjustment clause based on an economic indicator (such as the consumer price index), this will not in itself constitute a review opportunity.

SALE OF GOODS AND SERVICES (WHERE SCHOOL IS THE SUPPLIER)6.354.1 Where schools are entering into a new contract with a customer (ie the school is the

supplier) for the delivery of goods and services, they should ensure than any contract signed includes GST.

PROGRESSIVE SUPPLIES & PREPAYMENTS SUCH AS SUBSCRIPTIONS6.355.1 These are supplies such as subscriptions to magazines, maintenance contracts etc

that are supplied continuously over a determined period. Where such supplies are taxable, GST is payable.

CONTRACTS OF GOODS AND SERVICES (WHERE SCHOOL IS THE CUSTOMER)6.356.1 As the GST turnover threshold for registration purposes is $75 annual turnover, some

cleaners (and other small suppliers) may choose not to register for GST with the ATO. In this case, GST is not payable for the supply of their services and the cleaner cannot claim input tax credits for GST included in the price of their work-related purchases. However, there may be implications from a PAYG perspective (refer Section 6. 3 14.1 ) and therefore, suppliers should register for an ABN (not necessarily for GST) and provide this ABN on documentation connected with the supply.

6.356.2 When renegotiating cleaning contracts with registered cleaners a clause relating to GST should be inserted into the standard cleaning contract. Again, it is important to note however, that the ultimate liability for GST under the contract rests with the supplier, in this case the cleaner. Accordingly, it is the supplier’s responsibility to ensure that the contract accounts for GST, not the schools.

6.356.3 Schools must ensure that they receive a Tax Invoice from their cleaner on a monthly basis to claim input tax credit. If the cleaner is not forthcoming with the relevant Tax Invoice, the school can request that the cleaner issue the Tax Invoice, and the cleaner will be legally obliged to do so within 28 days.

LEASING, RENTAL/HIRE 6.357.1 Leases, rentals/hire arrangements are contractual in nature. Leases are a taxable

supply and are therefore subject to GST. As such, GST will need to be accounted for

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on the entire value of the supply and any GST paid will be fully claimable by schools as an input tax credit, provided the lease is for a creditable purpose and the relevant Tax Invoice is obtained.

6.357.2 The GST payable on leases will be determined on a progressive and periodic basis. This is because the nature of the lease provides that both the supply and the payment are made on a progressive basis. Hence GST would be payable by the lesser with each periodic payment under the lease, and input tax credits can be claimed by the lessee upon each periodic payment.

6.357.3 It is not necessary to obtain a separate tax invoice for each component of the supply under a lease agreement. A single document can be a tax invoice for all components of the supply if it satisfies the tax invoice requirements, and shows the price of each component of the supply. For example, a lease agreement for an item of equipment may show the price as $1900 a month. This agreement is a tax invoice for all the months if it also satisfies the tax invoice requirements of the GST Act at Section 29-70(1) and the GST Regulations. In this regard, schools should ensure that these requirements are satisfied in order to facilitate the efficient receipt of input tax credits.

SUBSCRIPTIONS & MEMBERSHIPS6.358.1 Membership joining and renewal fees are subject to GST because they are paid in

return for a supply. The supply is the entitlement to be a member of an association or other organisation.

INSURANCE6.359.1 The supply of general insurance (including policies for motor vehicles, third party

property, fire, theft and loss of income insurance) is a taxable supply and subject to GST. The only types of insurance that are not subject to GST are supplies of life insurance (which will be input taxed) and supplies of private health insurance (which will be GST-free).

6.359.2 Importantly, schools will be required to notify insurance companies of the schools’ entitlements to input tax credits on premiums. Failure to notify will result in GST applying to settlement of claims.

ACCOUNTING FOR GST

RECEIPTS6.360.1 Like businesses, schools will need to record receipts and the GST-effect of each

receipt transaction accurately, in order to complete the monthly Business Activity Statement.

6.360.2 To this end, each general ledger code in MAZE should be “flagged” to show appropriate GST type for each transaction.

6.360.3 Sales and other receipts will be recorded on a GST-exclusive basis, with the GST liability being recorded in a current liability account (GST payable to ATO).

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RECEIPTING GOVERNMENT PROVIDED FUNDS6.361.1 As covered in Section 6. 3 3 8.1 “Grants”, certain government provided funds will be

taxable, and others will be GST-free to schools.

RECEIPTING TUITION FEES6.362.1 Schools receive voluntary contributions and subject levies which will not be taxable

(Refer Section 6.3 3 1.1 ).

RECEIPTING COMMERCIAL ACTIVITIES6.363.1 Aside from receiving funds from Government and contributions from students or

parents, schools take part in various forms of commercial activity in order to raise additional funds. For example:

photocopying/printing facilities for external parties; pay phones; dispensing machines; commissions (school photographs, banking); hire of school facilities; sale of a calculator, compass or dictionary; sale of keys (students); and forfeiture of deposit (locker, textbook etc).

As these activities fall outside of the scope of the GST-free treatment afforded to the provision of education courses, schools would be required to account for GST on these supplies.

RECEIPTING ADJUSTMENTS6.364.1 Certain instances will arise where a receipt adjustment will occur. This will include

refunds (eg hire of school facilities) where GST has been included in the fees charged for the hiring. The recording of such adjustments is required for reporting to ATO on the BAS.

6.364.2 Where an adjustment event arises in relation to a taxable supply greater than $75 (GST-exclusive), the school may be required to issue an adjustment note to the customer. Note however, that where no tax invoice was previously issued for the supply (i.e. because the customer was not registered for GST for example), there is no requirement for the school to issue an adjustment note. Where an adjustment note is required, the note must be issued within 28 days of the customer requesting the note, or within 28 days of the school becoming aware of the adjustment.

RECORDING PURCHASE ORDERS & INVOICES6.365.1 These documents trigger the eventual payment process, and from a GST viewpoint,

must identify the category and type of supply requested (purchase orders) and acquired (invoices).

6.365.2 Purchase orders represent an internal request to incur expenditure (not mandatory). While internal control for correct authorisation and fund sufficiency needs to be maintained, teachers and non-teaching staff responsible for purchasing goods or services should be aware of the GST impact

6.365.3 For MAZE data entry, certain minimum information about the transaction needs to be known (e.g. whether the item is taxable, GST-free, input taxed etc).

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6.365.4 The tax invoice (for items valued at more than $75) is the single most important substantiation document in the GST system. Schools operating a petty cash system need to be aware that some petty cash expenditure may exceed the $75 threshold (GST-exclusive). If so, a tax invoice will be required in order to substantiate a claim for input tax credits. Schools will be entitled to claim back the GST from the ATO in most instances.

6.365.5 Where requested, a registered supplier must provide a tax invoice within 28 days of the request. The tax invoice must comply with minimum legal requirements (refer to section 6.3 7 2.1 for a description of what must be included as per the tax invoice requirements). It is recommended that no invoice is processed (recorded) or payment made to a supplier until a valid tax invoice is received. The school may choose to build into a contract that payment will not be made by the school until the tax invoice is issued. This will ensure that input tax credits can be claimed in the same tax period that the payment is made for a purchase.

6.365.6 Tax invoices are required for claiming input tax credits where the GST-exclusive value of the supply exceeds $75. Documentary evidence also needs to be kept for expenditure under $75 to substantiate a claim for input tax credits (e.g. supplier’s sale receipt). 6.365.7

RECORDING PAYMENTS 6.366.1 Providing tax invoice and purchase order procedures are met (see Section 6. 3 65

above), payment of the invoice/s will be relatively straight forward, as MAZE will guide the operator through various “flagged” fields in order to:

generate the appropriate cheque; and

record the GST (if any) for eventual summary to the Business Activity Statement.

6.366.2 Expenses and capital purchases will be recorded on a GST-exclusive basis, with the input tax credit being recorded in a current asset account (GST recoverable from ATO).

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PAYMENT ADJUSTMENTS6.367.1 Instances will arise when a payment adjustment will be necessary to process. For

example, a cancelled cheque or where the school refunds amounts to parents etc.6.367.2 Similar to receipt adjustments, this is a correction to a previously paid item and will

now need to be amended in order to correct the cash balance figure and the BAS for the current tax period.

Example: Parent Reimbursements/Refunds

A parent at Model Primary School is due refunds for

payment of a curriculum-related excursion for her child, but cancelled due to a booking mix up;

over-payment for purchase of school books due to one being out of print

The excursion was originally a GST-free excursion, therefore any refund would not include GST.

The supply of a book is a taxable supply and will include GST upon payment. In the event of a refund, both the cost of the book and its portion of GST component are refunded. If the refund occurs in a subsequent tax period to which the supply was initially provided, the school, in effect, has accounted for too much GST and needs to make an adjustment in its next BAS.

6.367.3 The school is only required to issue an adjustment note to the customer where a tax invoice was previously issued for the initial supply. Thus in the example above where the supply was made to a parent (an unregistered individual) a tax invoice may not have necessarily been issued, therefore a adjustment note may not be required. Further, not every refund will result in a decreasing adjustment (decreasing the net GST amount). Consider the following example:

Example: Staff Reimbursements

A science teacher at Enterprising Secondary College purchases several science kits, valued at $55.00 (including GST) which he noticed while shopping over the weekend. He presents the receipt (tax invoice) to the school for reimbursement.

As the purchase of the science kits was a taxable supply, which will be used in the provision of an education course, the school will be entitled to an input tax credit of $5.00 for the reimbursement.

The same teacher later incurs entertainment expenses when dining with an overseas education visitor. The cost was $132.00 (including GST) and a receipt is again presented for reimbursement.

As entertainment expenditure is specifically identified within the GST Act, wherein no input tax credit entitlement exists unless subject to FBT, the school will not be entitled to an input tax credit for the $12 GST incurred within the cost of the entertainment expense.

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TAX INVOICE REQUIREMENTS6.368.1 A Tax Invoice must be produced by a GST registered entity when receiving income

from another GST registered entity for a taxable supply and when they are requested to issue it by the customer.

6.368.2 The GST regulations specify minimum information requirements for three types of tax invoices:

tax invoices where the total amount payable is $1,000 or more; tax invoices where the total amount payable is less than $1,000; and recipient created tax invoices.

6.368.3 Tax invoices must contain certain information to be valid. A valid tax invoice is a document that meets all of the following requirements:

it is issued by the supplier, unless it is a recipient-created tax invoice (RCTI), in which case, it is issued by the recipient

it contains enough information to enable the following to be clearly ascertained

the supplier's identity and Australian business number (ABN) a brief description of what is sold, including the quantity (if applicable) and

the price of what is sold the extent to which each sale is a taxable sale – this can be shown separately

or, if the GST to be paid is exactly one-eleventh of the total price, as a statement such as ‘total price includes GST’

the date the document is issued the amount of GST (if any) payable for each sale if the document was issued by the recipient and GST is payable for any sale –

that the GST is payable by the supplier that the document was intended to be a tax invoice or an RCTI if it was

issued by the recipient.In addition, if the total price of the sale is at least $1,000, or if the document was issued by the recipient, the recipient's identity or ABN must be able to be clearly ascertained.Maze will provide only one type of Tax Invoice which will incorporate all the information required by the ATO.

ADDITIONAL REQUIREMENTS FOR TAX INVOICE6.369.1 There are additional information requirements depending on whether the tax

invoice relates to one or more taxable supplies only or relates to a combination of a taxable supply and other supplies. Supplies other than a taxable supply may either be GST-free or input taxed.

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6.369.2 For each of the variations the additional requirements are as follows.

Type of SupplyRequirement for Tax Invoice

Taxable supply or supplies only and the GST payable is 1/11th of the price

Must show either: a statement to the effect that the total

amount payable includes GST for the supply or supplies; or

the total amount of GST payable and a total inclusive of GST (and words to that effect)

Taxable supply and the GST payable on it is less than 1/11th of the price

Must show the GST exclusive value of the supply and the amount of GST payable. Note: This will apply to the supply of long-term accommodation in commercial residential premises (Division 87 of the GST Act).

A combination of taxable supply and other supplies (mixed supplies)

Must clearly identify each taxable supply and show: the total amount of GST payable; and the total amount payable.

RECIPIENT CREATED TAX INVOICES6.370.1 The GST legislation requires that a GST registered organisation must provide a tax

invoice to the school within 28 days of a request. Alternatively, the legislation enables a Government Entity (school) to issue the tax invoice on behalf of the organisation at the time of the grant payment. This will relieve the organisation from the task of issuing tax invoices as in some situations the organisation is not aware of the amount to be paid.

6.370.2 The tax invoice that is issued in this manner is known as a “Recipient Created Tax Invoice” (RCTI).

6.370.3 The requirements for recipient created tax invoices are essentially the same as for tax invoices where the total amount payable is $1,000 but with the following differences:

the words ‘recipient created tax invoice’ must be shown prominently on the document instead of ‘tax invoice’;

the ABN of the supplier must be shown in addition to the ABN of the issuer of the document; and

words to the effect that the GST shown is payable by the supplier must also be included.

6.370.4Recipient created tax invoices are not a recommended form of issuance of tax invoice. This is because of the additional administrative burden that results, for example in executing a written agreement of the practice between supplier and customer. Should a school decide to issue RCTI’s it is recommended that you contact the GST contact in the Department to ensure you comply with the requirements for issuing them.

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PLANNING YOUR CASH FLOW6.371.1 As schools maintain MAZE financial transactions under a cash method, the GST will

result in a temporary negative cash flow effect. This is because a school cannot claim an input tax credit until the time that the goods and services have been paid for. Consequently, a time delay will occur between paying for the supply and lodging a claim to the ATO for the appropriate credit amount.

6.371.2 Therefore, sufficient cash funds need to be on hand in order to absorb the GST effects of transactions until a claim for input tax credits is reported to the ATO through the BAS. This needs to be recognised when monitoring cash flow budgets and approval procedures for fund sufficiency in program and other areas.

ROUNDING6.372.1 If the total amount of GST payable on a tax invoice or recipient created tax invoice

includes a one, two, six or seven cent denomination, the total of the tax invoice is to be rounded down to the nearest five cents. Where the total includes a three, four, eight or nine cent denomination, the total of the tax invoice is to be rounded up to the nearest five cents. Payment rounding (to the nearest five cents) does not apply to individual prices but rather to the total of the bill where payment is by cash, not credit card or EFTPOS transactions.

BUSINESS ACTIVITY STATEMENT6.373.1 The Business Activity Statement (BAS) is a single form used to account for GST and

some other taxes. A BAS must be lodged by a registered entity for each tax period. For schools this is monthly.

6.373.2 The BAS is a two-sided form:the front shows the school details and a summary of transactions;the reverse side shows the details of supplies, acquisitions, withholding tax and

fringe benefits tax.6.373.3 You will not have to complete all the sections on the form. Some of the fields deal

with items such as salary payments and fringe benefits tax, which are paid by Central Office and will be shown in the Central Office BAS returns if appropriate. Other fields, like wine equalisation tax and luxury car tax, should not be relevant to your school.

6.373.4 To complete the return, all you need to do is: print the relevant GST report from your accounting system; transfer the information to the appropriate fields on the second side of the

BAS; and transfer the relevant summarised data to the front of the form (the

instructions are given on the form).

PAYMENTS AND REFUNDS6.374.1 Amounts owed must be sent in with the return.6.374.2 A refund must be paid by the ATO in accordance with Taxation guidelines. The ATO

must pay interest where the refund is not paid within these guidelines.6.374.3 The amount finally claimed from the ATO is the difference between:

the GST you charge in the sales you make, and

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the input tax credits you are entitled to claim for the GST you have paid on items you have purchased;

plus any withholding tax payments.

LODGEMENT OF BAS6.375.1 BAS must be lodged on or before the 21st day of the month following the end of the

tax period. For schools, the tax period is monthly.6.375.2 A BAS return must be lodged every month, even when the net amount is zero or no

transactions have occurred.

IF A MISTAKE IS MADE ON THE BASSchools must fill in their activity statement correctly and the law imposes:6.376.1 penalties if you understate your tax liability. If you make an honest mistake and

you voluntarily tell the ATO about it, any penalty that applies will be remitted in full. However, you will have to pay interest on any understated tax or over claimed credit.

6.379.2 You can correct your mistakes by lodging a revised activity statement. You should contact the ATO on 1300 130 248 if you need a revised activity statement.

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SUPPLIER REGISTRATION FLOWCHART

43

CONTRACTS FLOWCHART

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SCHOOL RECEIVES A SUPPLIER INVOICE

Is the Invoice a Valid Tax Invoice?

Enter details in MAZE and print cheque

Complete Expenditure Voucher and have Invoice approved

Have the Goods or Services been received?

Contact Supplier and request a valid Tax Invoice (DO NOT PAY)

Does the Invoice have an ABN?

Wait for Goods or Services to arrive

NO ABN Note withholding requirement 46.5%

Valid Tax Invoice (received)

YES

YES

YES

NO

NO

YESNO

GLOSSARY

ACCC Australian Competition and Consumer Commission

Acquire Includes buying goods and services (and other things) for the enterprise and other transactions as explained in the definition of acquisition

Acquisition A broad term including: things bought (goods, services and other), obtaining advice/information, lease/hire/rental contractual arrangements

Adjustment Any change made to the BAS to increase or decrease the net GST amount payable or refundable for a tax period

Adjustment Note A document generally issued by suppliers where the price for a supply has changed. Required to substantiate an input tax credit claim where the value of the supply exceeds $75.

Adjustment Period The tax period in which adjustment/s for acquisitions or importations are made

Annual Turnover The value of the goods and services supplied through the school for a 12 month period, excluding the amount of GST and any input taxed supplies. Annual turnover must be calculated both retrospectively and through a prospective viewpoint.

Attributing Attribution rules determine to which tax periods GST is payable and input tax credits belong

Australian BusinessNumber (ABN A unique identifier for dealings with the ATO and for future

dealings with) other departments and agencies

ATO Australian Taxation Office

Business Activity Statement (BAS The official ATO form used for accounting for GST and other taxes

(Fringe) Benefits Tax, Pay As You Go [PAYG] etc)

Consideration Anything of value (money or in kind) in return for a supply

Creditable acquisition Any instance where a thing is acquired for a creditable purpose by a registered entity, the supply of which is a taxable supply and consideration is provided, or will be provided, for the supply.

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Creditable purpose A thing acquired for carrying on the enterprise but not to the extent that it relates to making input taxed supplies or is of a private or domestic nature

ETD Education & Training Directorate

Enterprise Any activity/ies performed: as a business; as a trade adventure or concern; on a regular or continuous basis in the form of a lease, licence or grant of an interest in property; activities of gift-deductible funds and charities, authorities or institutions; activities of governments and government corporations

Entity An individual (e g sole trader), partnership, body corporate, corporate sole, body politics, any other unincorporated association or body of persons, trusts, superannuation funds

GST Free Supply A supply where no GST is payable but an entitlement to input tax credits exists for inputs acquired to provide the supply

GST Group Entities operating as a group for GST purposes. Intra-group transactions are not treated as taxable supplies

Input Tax Credit The GST included in the price of goods and services acquired by a GST registered business that can be claimed back from the ATO

Input Taxed Supplies Supplies of goods and services that do not have GST included in the price and generally do not qualify for input tax credits

Supplies Includes the goods and services sold by an enterprise; provision of advice/information; leasing/hire/rental agreements etc

Tax Invoice An invoice with certain “prescribed” information contained wherein. Required to substantiate a GST input tax credit claim from the ATO

Tax Period The period for which GST liabilities and claims are attributable. These are to be reported on a BAS, usually depending on annual turnover or election by the taxpayer. (Quarterly: 31 March, 30 June, 30 September and 31 December; or monthly: last day of each calendar month)

Taxable Importations Importations where GST is payable on goods imported into Australia unless the goods qualify for certain customs duty concessions or would have been GST-free/input taxed if they had been supplies

Taxable Supplies Supplies of goods and services and other things that result in a GST liability for the supplier and therefore have GST included in the price

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SCHOOL TRANSACTIONS ANALYSIS

The following information is based on the Transactions Analysis of government schools in the ACT.

It is important to note that the GST Treatment indicated refers specifically to the details outlined in the notes which follow the Transactions Analysis Table. Please refer to these detailed notes in order to understand the specific circumstances. The information contained in this document is based on the interpretation of 'A New Tax System (Goods and Services Tax) Act 1999' and is current to date. It could be subject to change as legislation changes.

To go to the note section click on the link below:

Notes t o T r a n s act i o n Analysis Table

SCHOOL TRANSACTION ANALYSIS TABLE

(Click on the Note Number to go to the relevant explanation)Name Details GST Treatment Note

RevenueGovernment Provided Funds

All Grants from ETD GST-free 1

External Funds School Grants received from External Organisations (NRMA, DETYA, etc)

Taxable 1

Subject Contributions General Levies, specific subject levies, instrumental levies, parent contributions towards arts materials, library books, excursions (no food), life education materials

GST-free 2

Payment from book supplier/store relating to parent contribution initially collected by the book supplier/store on behalf of school

GST-free 3

Reimbursements from students for art & craft materials

GST-free 4

Food levies for cooking classes GST-free 5Sale of Class Materials

Sale of second hand class materials Taxable/GST-free 6

Sale of art/craft items made in class Taxable 7Trading Operations Sale of maths calculators, discs, photographic

paper Taxable/GST-free 8

Sale of uniforms (old and new), school bags, combination locks for lockers

Taxable 9

Payment received for advertising space in school newsletter

Taxable 1 0

Sale of books/textbooks Taxable 1 1 Canteen sales Input Taxed/

Taxable (election) 1 2

Reimbursements from staff or students Taxable/GST-free 13

47

relating to newspaper subscriptions, dinners and petrol

Fund Raising Activities

School Formal/School Concert tickets Taxable/GST-Free 14

Chocolate drives, coffee shop stall income, ice cream days, sausage sizzles

Taxable /GST-free 15

Casual days, walkathons GST-free 1 6 Movie nights Taxable/GST-free 17

Second hand book sales Taxable/GST-free 1 8 Lolly drives, Hot Cross Buns drive Taxable/GST-free 1 9 Fair proceeds (mainly from food and wine stalls)

Taxable 20

Raffle tickets Taxable/GST-free 21Fees from car boot sales, stallholders at fairs Taxable/GST-free 22Sale of Christmas puddings Taxable 23

Donations Donations from Students Representative Committee, Parents club, other sources

Outside Scope 2 4

Charities GST-free 2 5 Hire of schools facilities and equipment

Sale of Health Booklets or other course materials

GST-free 26

Hire of badge maker, musical instruments, school facilities eg hall, gym

Taxable/GST-free 27

Students Camps and Excursions

Payments for camps (including food component)

Taxable/GST-free 28

Payments for excursions (no food provided) GST-free 28Swimming excursions (parents pay for classes and pool entry)

GST-free/Taxable 29

Recoups Reimbursements received relating to PD courses

GST-free/Taxable 30

Monies received relating to science & maths competition for students

GST-Free 31

Payments for service provided - Student Teacher Supervision

Taxable/GST-free 3 2

Sale of furniture Taxable/GST-free 33Recoup of bond paid for hire of outside venues

GST-free 34

Fines recovered from students for damaged lockers and lost books

Taxable/Outside Scope

35

Phones Taxable 3 6 Photocopying machine Taxable 3 7 Insurance monies received from Department of Education

Effectively outside scope of GST

3 8

Commission School photograph commission Taxable 3 9 Uniform shop commission Taxable 4 0 Canteen food commission Taxable/

Adjustment 41

48

School banking commission Taxable 42Before/after school care

Fees received from parents for before & after school care

GST -free 4 3

Voluntary Contributions

Voluntary contributions, building and library contributions

Outside the Scope of GST

4 4

School Based Activities

Payment received for a presentation performed by a school teacher

Taxable 45

Sale of school production videos Taxable 46Ticket sales for Socials Taxable/GST-Free 47

Bank interest Interest on Bank Accounts GST-free 4 8

ExpenditureSalaries & Allowances Payment of salaries Not subject to

GST 49

Salaries & Allowances Payment to contractors Taxable 51Purchase of Furniture Purchase of new furniture and goods Taxable 52

Purchase of second hand furniture and goods Taxable 5 3 Purchase of Equipment

Purchase of equipment Taxable 52

Purchase of medical aids Taxable/GST- Free 55Reimbursements for staff purchases Taxable - Input

tax credit restrictions

56

Repairs, Maintenance & Hire of Equipment

Hire fees for equipment Taxable 52

Payments to contractors for maintenance and repairs

Taxable 52

Purchase of spare parts for medical aids Taxable/GST-Free 55School Requisites - Payments for computer software, paper,

phones, lease and rentals etc Taxable 52

Office/Teacher Requisites

Purchase of goods incidental to administration and teaching

Taxable 52

Purchase of medical goods Taxable/GST-Free 55Class Materials Purchase of books and materials for classes Taxable 52

Purchase of food for use as class materials Taxable/GST Free 58Reimbursement of staff purchase of materials Taxable - Input


56

Books & Publications - Library Books

Purchase of books for library Taxable 52

Purchase of second hand goods for library Taxable/Not subject to GST

5 3

Books & Publications - Teacher Periodicals/ Reference Materials

Reimbursement of staff purchases and travel costs

Taxable - Input tax credit restrictions

56

Books & Publications - Class Sets

Purchase of books and publications Taxable 5 2

Purchase of second hand books Taxable 53

49

Telephone, Postage Payment of telephone and postage expenses Taxable 52Communication Costs - Other

Payments for internet services, includes purchase of goods

Taxable 52

Oil, Electricity, Gas Payments for utilities Taxable 52Water Rates Purchase of water GST Free 59

Payment of memberships Taxable 54Travel & Subsistence - Camps & Excursions

Payment for accommodation, activities and travel on camp

Taxable 5 2

Payment for food on camps GST-Free/Taxable 58Payment for excursion tickets Taxable 52Refund of camp monies to parents Not subject to

GST 5 7

Travel & Subsistence - School Mini Bus

Purchase of diesel fuel Taxable 6 0

Payments for car/bus insurance Taxable 6 1 Voluntary payments to shopping centre for bus shuttle service

Taxable 6 7

Property Maintenance - Building Works

Payments to contractors for maintenance Taxable 51

Purchase of goods incidental to maintenance Taxable 52Property Maintenance - Ground works

Payment to contractors for ground works Taxable 51

Payments for waste management Taxable/GST Free 62Property Maintenance - Security, Safety & Fire

Prevention Purchase of security goods and security services

Taxable 52

Property Maintenance - Sanitation

Payments to contractors for sanitation Taxable 51

Property Maintenance - Contract Cleaning

Payments to contract cleaner Taxable 51

Property & Maintenance - Refuse & Garbage

Payment for garbage disposal - contractor Taxable 62

Miscellaneous Expenditure - Bank

Bank Charges Input taxed 6 3

Miscellaneous Expenditure - Parent Reimbursements

Reimbursement of funds to parents Not subject to GST

57

Miscellaneous Expenditure - Insurance

Insurance taken out by the school Taxable 61

Miscellaneous Expenditure - Advertising

Payments for advertising for the school Taxable 52

50

Miscellaneous Expenditure - Conferences, Seminars and in service education

Payment for professional development courses and associated costs

GST Free/Taxable 64

Payment for non work related dinners and seminars

Taxable 64

Miscellaneous Expenditure - Trading Operations Payments

Purchase of food for canteen, including payments in advance (rebates) for food

Input taxed/GST Free/Taxable

65

Purchase of second hand uniforms Taxable 53Refund to parents for uniforms Adjustment event 6 6

Miscellaneous Expenditure - Donations and Gifts

Purchase of gifts Taxable 6 7

Donations to Charities GST Free 67Reimbursement of staff purchases Taxable - Input


5 6

Miscellaneous Expenditure - Fund Raising Expenses

Purchase of food Taxable/GST Free 58

Purchase of goods, hire of goods Taxable 52Reimbursement of staff expenses Taxable - Input


56

Miscellaneous Expenditure - Affiliations

Affiliations payments, includes membership fees

Taxable 54

Miscellaneous Expenditure - Freight

Payment for freight Taxable 52

Misc Expenditure - Consultancy Services

Payments for services eg Audit Taxable 5 2

Misc Expenditure - First Aid Materials

Purchase of medical supplies Taxable/GST Free 5 5

Payment of trainers registration fee Taxable 5 2 Reimbursement of staff purchases Taxable - Input


56

Misc Expenditure - Hospitality


Payments for staff lunches/dinners Taxable 68Payments to contractors for services Taxable 51

Misc Expenditure - Public Relations


Purchase of goods and services Taxable 52Payment of donations to charities Not subject to

GST 67

51

Misc Expenditure - Science Technology Centre Fund

Travel and education program costs for children.

Taxable 52

Misc Expenditure - School Based

Activities Payments for courses for teachers and students - eg Drivers Ed

Taxable/GST Free 6 4

Purchase of food Taxable/GST Free 58Purchase and hire of goods Taxable 52

Misc Expenditure - Transition

Purchase of food Taxable/GST Free 5 8

Payment for entertainment Taxable 68Taxable Purchase of goods and services 52Taxable - Input tax credit restrictions

Reimbursement of staff costs 5 6

Not subject to GST Accounts Transfer 69Misc Expenditure-Permit

Permit to conduct raffle Taxable 70

Misc Expenditure- Float

Float from bank for fair Not subject to GST

71

Investment Transfers Transfer of monies to investment funds Not subject to GST

72

52

NOTES TO TRANSACTIONS ANALYSIS TABLE(For further information refer Fact Sheets)

1. Grants:

The school receives 'consideration' in the form of grants from ETD and from external organisations.

Recommendation:The amounts received from ETD are not classified as consideration and therefore they will be GST-free. However the position in relation to grants from external organisations will be taxable.

2. Levies:

The school receives consideration in the form of general levies, to pay for subject costs, and specific subject levies, where a particular subject is cost intensive and more funds are required. Where the levy paid by students at the beginning of the year is insufficient to cover subject costs, an additional levy is charged. An Instrumental Music levy is also charged to some students to cover the costs of hiring music teachers.

The school may also receive consideration in the form of levies to cover art materials and library book expenses, excursion expenses, life education expenses and ground maintenance.

Recommendation:

The school is making a supply of an education course and so any levies charged, provided they are curriculum related, will constitute a GST-free supply made by the school. If goods are supplied to the students as part of the education course they may be taxable if they are not 'course materials' (see definitions provided) and a separate fee is charged for the supply. Any materials supplied during the education course for which a separate fee has not been paid would not be taxable under the Act. An example of this is where a student uses a text book as part of his/her fee for the course it will not be taxable. However, where the student purchases that text book from the school for the purposes of using in the course and the text book is the students to keep the supply will be taxable.

3. Payments from Book Store:

The school, as part of an agreement with a Book Store, collects some contributions from parents through the Book Store, eg. The Book Store collects money from parents for books and contributions at the same time before reimbursing the school for the amount of parent contributions collected.

Recommendation:

The school is effectively receiving contributions from parents through a third party, which effectively acts as the school's collection agent. The money received is not consideration for a supply, it is merely handing over the school's money to the school. The relevant supply is of an education course, for which the contribution is the consideration. This will be GST-free.

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4. Contributions from Students for Arts/Craft Supplies :

The school receives contributions from students relating to costs incurred in the art and crafts subjects.

Recommendation:

The supply of these materials would constitute a supply of course materials under the GST Act (see definitions provided) and would therefore be a GST-free supply.

5. Food Levies f or Cooking Classes:

The school receives consideration from students attending cooking classes to pay for course materials supplied by the school (ie ingredients) that are used in the course.

Recommendation:

The school would not be required to account for GST on these payments from students as the supply of ingredients would be a supply of course materials under the GST Act and therefore a GST-free supply.

6. Sale of Maths Materials:

An item used in the maths department was supplied to a student for a separate charge. The item had been previously used in the maths class and would therefore be a second hand item.

Recommendation:

The school would be required to account for GST on the supply. Please note that this is regardless of the fact that the item is a second hand item or a new item. If the sale of the item is less than 50% of the “market value or less than 75% of the cost of the item it will be treated as GST free

7. Sale of Art/Craft Items:

Students of the school produce crafts in their art/craft classes which are then supplied by the school to the public for consideration.

Recommendation: The sale of crafts made in the art/craft classes of the school would constitute a taxable supply and GST equal to 1/11 of the proceeds must be accounted for on these supplies.

8. Sale of Course Materials:

The school buys maths calculators, discs and photographic papers and then receives consideration for the supply to students for a separate charge.

Recommendation:

Where the school buys items such as the above and supplies them to students the GST treatment will depend on whether the item in question meets the definition of 'course materials' (see the definitions provided). Provided the items sold to students are "consumed or transformed" by students for the purposes of the course, the supply will be GST-free. Photographic paper, provided it is being used in courses undertaken by students and not for purposes outside the scope of the education course, would meet the definition of course materials and therefore the supply should be GST-free (ie. to be a GST-free supply of photographic paper, the photographic paper should be used by students as part of a media studies class and not for their own private use).

54

9. Sale of Goods:

The school receives consideration for the supply of these items to students.

Recommendation:

The school will be required to account for GST on all sales of uniforms (both second hand and new), school bags, school magazines, school produced CD's and combination locks for lockers, as these would not meet the definition of 'course materials' in the Act.

10. Advertising in Newsletter:

The school publishes a weekly newsletter in which it sells advertising space. The school receives consideration for supplying an advertising service.

Recommendation:

The supply of an advertising service such as the above would not constitute a supply of an education course under the Act and so would be a taxable supply. GST equal to 1/11 of the consideration received must be accounted for. When requested, the school will be required to issue a tax invoice to registered entities using the advertising service.

11. Sales of Books:

Where the school receives consideration for a supply of books (including textbooks), and there is a separate charge.

Recommendation:

Where the school sells items other than those meeting the definition of 'course materials' for a separate charge, GST equal to 1/11 of the proceeds must be accounted for on the supply.

12. Canteen Sales:

The school runs a canteen supplying food to the students and receives consideration for food supplied through the canteen.

Recommendation:

As the school provides only food to students, the school has a choice to either have its supplies of food input taxed, or to apply the general GST rules to its supplies of food. Where the school chooses to have its supplies input taxed, no GST would need to be accounted for on supplies of food to students. However, no input tax credit would be available relating to any GST incurred in the supply of food through the canteen. As most of the supplies to the canteen would be GST-free supplies of food the canteen should not suffer too much from the inability to claim input tax credits, and the administrative burden of accounting for GST on supplies would be reduced.

Other Issue:

The implications of choosing to be input taxed are that the school may need to determine the proportion of costs such as electricity that are used in the supply of food through the tuckshop, as no input tax credit can be claimed relating to the GST paid on that portion of electricity used in running the canteen. Another implication is the impact of pricing of food upon students.

55

13. Reimbursements from Staff:

Staff members or students will reimburse the school for expenses initially paid by the school on behalf of staff members or students.

Recommendation:

The GST treatment of the reimbursement received by the school will vary. If GST was paid on the item in question then the school must account for GST on the reimbursement received from the staff member or student (ie. Where a staff member pays for petrol out of petty cash and pays $33 which includes GST of $3, and then subsequently reimburses the school for that amount, the school will be required to account for GST of $3 and remit this amount to the ATO).

The school in this case has received reimbursements relating to newspaper subscriptions, dinners, petrol and music reeds. GST equal to 1/11 of proceeds received must be accounted for as these would be taxable items.

Other Issues - Systems:

Where staff reimburse the school for expenses initially paid by the school, for example, for food expenses, detailed records must be produced as to the types of foods purchased so that any GST liability may be accounted for.

14. School Formal/Concerts:

Where the school organises a School formal for students or school concerts and receives consideration for tickets to the event sold to students, parents, family and friends.

Recommendation:

The supply of a school formal/ concert could be argued to not be part of an education course, and so the sale of tickets to the school formal/concert will be a taxable supply, and GST equal to 1/11 of the proceeds from the ticket sales must be accounted for. However, if the formal/concert is argued to be part of the curriculum the supply of tickets will not be taxable to the students. If relatives and friends attend the formal the supply of tickets to them will be taxable. Schools may elect to input tax the activity.

15. Fundraising events:

The school holds fundraising events such as chocolate drives, where chocolates are purchased in bulk and then sold for a small profit, coffee and ice cream stalls, where coffee and ice creams are sold, and sausage sizzles.

Recommendation:

Where sales of chocolates are made as part of a chocolate drive, or coffee, ice cream or sausages are sold as part of a fund raising activity, GST equal to 1/11 of the proceeds must be accounted for on the supply. This applies to the above mentioned supplies of taxable food items. Where a supply of a GST-free item of food is made, GST would not need to be accounted for. Schools may elect to input tax the activity.

56

16. Casual Days and Walkathons:

The receipt of payments from students for Casual Days and Walkathons.

Recommendation:

The GST treatment of the receipt of payments from students for the right to wear casual clothes may vary. Where the proceeds are collected for a charitable purpose and donated, it would not be necessary to account for GST provided ALL the monies collected is passed on. This is because the money would be seen as a donation and therefore would not be consideration for a supply. If the school receive a commission from the charity it will be taxable (refer Fundraising input taxed and Regular Events for school activities).

17. Movie Nights:

Where the school receives consideration for a supply of movie tickets.

Recommendation:

Where an excursion is made by students as part of their curriculum, such as a movie, the students are required to study for an English class, the supply of the movie to the students would be a GST-free supply. Tickets purchased from the movie theatre by the school would include GST charged of 10%. The school would then be entitled to sell the tickets to students, less the 10% GST charge. The GST paid to the movie theatre could be claimed as an input tax credit.

However, where a movie night is held that is not part of the students curriculum (ie a premiere or showing of a movie mostly attended by parents), the supply would be taxable and the school must account for GST on tickets sold to parents or students.

18. Second Hand Book Sales:

The school received consideration for a supply of second hand books.

Recommendation:

The school has made a taxable supply of second hand goods and therefore will need to account for GST on the payment it receives for the goods.

An input tax credit may be claimed equal to 1/11 of the amount of the consideration paid, by the school, when acquiring the second hand book, even if the acquisition was not taxable. If that amount is more than the amount of GST charged, then the input tax credit claimable will be equal to that amount of GST charged. (See note 53 for more information).

If the second hand books were donated and there was no consideration paid, then there would be no input tax credit available to the school.

19. Hot Cross Buns and Lolly Drives:

The school receives consideration for the supply of hot cross buns and lollies.

Recommendation:

The supply of hot cross buns and lollies sold as part of a fundraising activity will be a taxable supply, as hot cross buns and lollies would be a taxable supply of food under the Act (refer Fundraising input taxed and Regular Events).

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20. Fair Proceeds:

The school holds a fair and receives consideration through running various stalls at the fair. The stalls sell mainly food and wine.

Recommendation:

The sale of food from stalls at the fair would be subject to the general GST rules relating to the supply of food. Provided that the food supplied was for consumption on the premises from which it was supplied, GST equal to 1/11 of the consideration received on the supply would need to be accounted for. In the case of the school fair it would be argued that all food is for consumption on the premises and is therefore taxable.

Other Issue:

The school will need to be able to distinguish between GST-free supplies of food and taxable supplies of food to ensure that the correct amount of GST is accounted for.

21. Raffle Tickets:

The school holds a fundraising event where it receives consideration for the supply of raffle tickets. If the school is a charitable institution, the supply of raffle tickets will be a GST-free supply.

Recommendation:

Lotteries and raffles are included as 'gambling' under the Act. The treatment of 'gambling' is different to the treatment of normal supplies under the Act.

GST is applied to the margin of the school providing the gambling operations and the amount of GST the school must account for is 1/11th of the margin. The margin is calculated as total wagers/monies received minus total monetary prizes paid. For the school the GST would be 1/11th of the monies received from the sale of the raffle tickets less any money paid out in prizes. Non monetary prizes are not used to calculate the margin because the school can get an input tax credit for any GST it pays on the purchase of these prizes.

For example, a school sells 1000 raffle tickets at $2 each and purchases a television and stereo as prizes. It also provides a main cash prize of $200.

Monies received $2,000 Prize money $200 Cost of goods $800

The margin on which GST will be calculated in this example is $1,800, ie the $2,000 received less the $200 paid out in monetary prizes. The school will need to account for 1/11th of $1,800 as GST. The school would be entitled to claim an input tax credit of 1/11th of $800 in relation to the goods purchased to make the gambling supply.

22. Fees for Participating in Car Boot Sales and Fairs:

The school received consideration from a secondary school for the right to hold a stall at the school fair. The school also receives consideration from car owners for participating in a car boot sale. The school is therefore supplying the right to participate in the fair or the car boot sale.

Recommendation:

The supply of the right to participate in the fair or car boot sale would not be considered to be a supply of an education course under the Act and would therefore be a taxable supply. GST equal to 1/11 of the consideration received must be accounted for.

58

23. Christmas Puddings:

The school received consideration for the supply of Christmas Puddings.

Recommendation:

The supply of pudding is a taxable supply of food. Therefore, GST equal to 1/11 of the consideration received must be accounted for.

24. Donations:

The school receives donations from outside parties.

Recommendation:

GST should not be payable in relation to donations received by the school, as there would be no supply made by the school, provided that the donation is not in the form of a sponsorship. Also, as the school is a non-profit body, any donations provided to them are not the provision of consideration and are therefore not subject to GST. There must be no benefits given to the persons making the donation in return for the donation. An example of a donation is money provided to the school by a local business for the good of the school, with the local business receiving no benefit. An example of a sponsorship is monies received from a sporting goods shop in return for the school allowing the sporting goods shop to have a display stand at the school.

25. Donations towards charities:

The school received consideration in the form of donations and towards a building fund.

Recommendation:

GST should not be payable in relation to donations received by the school, as there would be no supply made by the school, provided that the donation is not in the form of a sponsorship. This means there must be no benefits given to the persons making the donation in return for the donation, ie. monies received from a sporting goods shop in return for allowing the sporting goods shop to have a display stand at the school would be considered a form of sponsorship.The donations received for the charities and for the building fund would be GST-free.

26. Sale of Health Booklets and other course materials:

The school makes a supply of Health Booklets and other course material which are then distributed (and a fee charged) to students for use in their course.

Recommendation:

Although there is a separate charge for this item, the Health Booklets and other course material would appear to be materials which are to be 'consumed or transformed' by students undertaking the course and therefore the supply of these material would be GST-free.

59

27. Hire of Goods:

The school receives consideration for making a supply by way of hiring a badge maker, musical instruments, a Hall and a Basketball Court.

Recommendation:

The GST Act specifically states that a supply by way of sale, lease or hire of goods (other than course materials), are not GST-free. However, the lease or hire of goods by schools to students will be GST-free provided the school retains ownership of those goods. In addition, the supply must be directly and principally for use by that student in a GST-free education course supplied by the school.

28. Camps and Excursions:

The school receives consideration for the supply of a camp or an excursion.

Relevant Legislation:

A supply is GST-free if it is a supply of an excursion or field trip, but only if the excursion or field trip:

(a) is directly related to the curriculum of an education course; and (b) is not predominantly recreational

However, any supply of food as part of the excursion or field trip is not GST-free if it is taxable under the food provisions of the Act.

Recommendation - Payments for Camps :

We understand that the school runs camps where food is provided. Where payments are received from students for camps where food is provided, GST equal to 1/11 of the consideration paid by the students in relation to food must be accounted for as the food is supplied on premises. For example, where the total cost of the camp is $200 and $50 relates to food, GST of $5 must be charged on the food component. The total charge for the camp should then be:

Camp expenses $150Food $50GST on food $5Total $205

Recommendation - Payments for excursions:

The school does not provide food to students on excursions. Where food is not provided to students on excursions, the supply of the excursion will be a GST-free supply. However, if food which would normally be taxable, is provided to students on the excursion, then GST must be charged on the food component of the excursion in the manner detailed above.


Where food is provided on a camp or excursion the school will be liable to account for the GST equal to 1/11 of the portion of the camp or excursion fee that was charged for taxable food. The school will need to determine how much of the total fee they are charging to students for the camp or excursion relates to taxable food.

60

29. Swimming Excursions:

The school organises swimming excursion for the students. Consideration is received from students for the supply of a swimming course.

Recommendation:

The supply of the excursion by the school will be a GST-free supply if it is directly related to the curriculum of the education course (bronze medallion, lifesaving course etc). The GST treatment in this case will depend on whether a swimming course is deemed to be part of a school curriculum. It is likely that a fun swimming excursion is not related to the education curriculum and will be taxable.

30. Reimbursements from Schools:

A school arranged for a professional development course to be held at the school, and provided a venue, a speaker and refreshments. The school was then reimbursed by another secondary school who sent teachers to the course.

Recommendation:

Any school providing a professional development course for teachers will be a taxable supply and schools must add 10% GST to the cost of the course..

31. Science & Maths Competitions:

The school receives entry money from students to enter a science competition. The entry money is collected and then a cheque written by the school to pay the competition organisers.

Recommendation:

The science competition satisfies the definition of an education course under the Act and is therefore GST-free. If the science competition organisers charge GST on entry fees, the school would collect the fee excluding GST from the students. The school could then claim an input tax credit when the cheque is paid to the science competition organisers.

32. Student Teachers:

The school receives consideration for its supply of supervision of student teachers.

Recommendation:

The school is effectively supplying part of the student teachers education course, being either part of a tertiary education course or a part of a professional or trade course, and so the supply will be a GST-free supply.

However there are universities who will provide schools with a Recipient Created Tax Invoice” indicating the supply is taxable.

33. Sale of furniture:

The school received consideration for the supply of furniture.

Recommendation:

The supply of furniture by the school will be a taxable supply and GST equal to 1/11 of the proceeds from the sales must be accounted for.

61


The school will need to be able to generate tax invoices, where requested, on any sales of furniture and equipment to registered persons. For example, where the school sells desks to a timber recycle business it may be requested to provide a tax invoice so that the timber recycle business is able to claim an input tax credit. If the sale is less than 50% of the market value or less than 75% of the cost the sale will be GST-free.

34. Payment of refundable deposit:

The school hired out a hall and was required to pay a refundable deposit to the party hiring out the hall. The school then recovered the bond paid.

Recommendation:

A deposit held as security for the performance of an obligation is not treated as consideration for a supply. Therefore, upon recovering the bond paid the school would not be required to account for GST.

35. Fines:

Full Payment of lost library books

If the school receives full consideration from students for the lost library books in order to replace those books. The full payment received would be the foregoing of the right to fine (partial cost of the book) the student for losing the library book.

Recommendation:

The supply made by the school would not be a supply of an education course and so would be a taxable supply and GST equal to 1/11 of the fine paid must be accounted for.

Damaged Lockers & Library Fines

The school receives partial consideration from students in the form of fines for damaged lockers or library books.

Recommendation:

A charge imposed for the damage of the locker or lost library books that is designed to induce compliant behaviour with the use of library facilities, or to cover additional administration costs in relation to the damage, would be characterised as a fine and not subject to GST (OS).

36. Public Phone:

The school receives consideration for the supply of allowing a public phone to be on the school premises and for phone calls made from the phone.

Recommendation:

Money collected from public phones will include GST that was charged on the supply of the phone service. Therefore, GST equal to 1/11 of the consideration received from phones must be accounted for.

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37. Photocopy Machines:

The school receives consideration from students using the schools' photocopying machines. The school is supplying a photocopying service.

Recommendation:

The supply of a photocopying service would be GST-free if it is related to the curriculum if it is of a private nature GST equal to 1/11th of the consideration received from the photocopying service must be accounted for.

38. Receipt of Insurance Monies:

Departments hold general insurance policies on behalf of the school. When the school makes a claim, the departments will eventually pay the claim to the school. The consideration received by the school is for the foregoing of the right to pursue the claim further.

Recommendation:

GST is payable in respect of general insurance premiums. Additionally, however, a GST liability can arise where the insured makes a claim and receives a settlement from the insurer.

As the insurance policy is held on behalf of the school by the departments, the departments would presumably be claiming input tax credits on premium payments made to the insurer. Therefore, the departments would be the party foregoing the right to pursue the claim further and the departments would be required to account for GST equal to 1/11 of the insurance settlement monies received from the insurer.

Under the Transition Act, input tax credits are not allowed to be claimed in relation to GST paid on insurance premiums before 1 July 2003 unless the Commissioner is notified that you are claiming an input tax credit in relation to the premium.

The departments should then pay the amount received from the insurer (less the GST remitted to the ATO) to the school. Therefore, the school should not have to account for GST on insurance claims received through the department.

39. School Photograph Commission:

The school receives consideration from the photographer for the supply of the right to take school photographs.

Recommendation:

The school is making a supply of a right to the photographer. The supplies made by the school would be taxable supplies and therefore GST equal to 1/11 of the commission received from the photographer must be accounted for.

40. Uniform Shop Commissions:

The school receives consideration in the form of a commission from the uniform shop it has identified as the preferred outlet to buy uniforms from. The school is in effect making a supply of advertising services.

Recommendation:

The supply of advertising/promotional services by the school would not be seen as part of the supply of an education course and would therefore be a taxable supply. Therefore, GST equal to 1/11 of the commission paid by the uniform shop must be accounted for.

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41. Canteen Food Commission:

The school receives consideration in the form of a rebate from a food supplier in connection to supplies of food it makes through the canteen.

Recommendation:

The provision of a rebate to the school from a food supplier would constitute an adjustment event under the Act. When the school originally purchased the food they may have paid a certain amount of GST and consequently claimed this as an input tax credit. When a volume rebate is received the price of the food is reduced. Therefore, the school may have claimed too much of an input tax credit and this will need to be adjusted.

42. Bank Commission:

The school receives consideration from a bank for supplying the right for the bank to market itself at the school and for depositing students' money into the bank.

Recommendation:

The school is making a supply of a right to the bank. It is also supplying a service to the Bank by arranging for the deposit of students' money into the bank. The supplies made by the school would be taxable supplies and therefore GST equal to 1/11 of the commission received from the bank must be accounted for.

43. Child Care:

The school receives consideration in the form of fees for the supply of before and after hours school care to students.

Recommendation:

The supply of outside school hours care services by the school is a GST-free supply, provided that the school is eligible for funding from the Commonwealth under guidelines made by the Child Care Minister that relate to the funding of outside school hours care. The funding does not have to be in relation to this particular service.

As the school is an eligible school under these guidelines, the supply of the outside school hours care would be a GST-free supply.

44. Voluntary Contributions:

The school receives voluntary contributions and contributions from parents for building and library funds.

Recommendation:

This contribution would be considered to be a donation to the school from the parent as it is a unconditional contribution. As the school is a non profit body the provision of a gift to the school would not be the provision of consideration and GST would therefore not apply.

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45. Payment for Presentation by Teacher:

One of the teachers from the school gives occasional lectures and workshops. The school receives consideration for allowing them to take time off work to give the lecture or workshop and to compensate the school for their time. The school is supplying the services of one of its staff.

Recommendation:

The school is supplying the services of one of its staff which would be a taxable supply as it is not a supply of an education course, nor an administrative service related to the education course. Therefore, GST equal to 1/11 of the payment received by the school for services performed by the teacher must be accounted for. The party paying for the service would be able to claim an input tax credit in relation to the supply.

6. Sale of School Production Videos:

The school held a production and a video tape was made of the production which was later sold to students wishing to purchase the video. The school receives consideration for the supply of the video.

Recommendation:

The video tape of the school Production would not satisfy the definition of 'course materials' in the Act and so the supply of the video by the school would be a taxable supply. Therefore, GST equal to 1/11 of the payment received by the school for the video must be accounted for.

47. Ticket Sales for Socials:

The school organised a Social event for students and received consideration for tickets to the event.

Recommendation:

The supply of a Social is not part of an education course, and so the sale of tickets to the Social is a taxable supply, and GST equal to 1/11 of the proceeds from the ticket sales must be accounted for.

The supply of the social may be argued to be part of the curriculum and therefore GST-free as an education course. This needs to be carefully considered in regards to the definition of an education course within the State or Territory.

48. Bank Interest Received:

The school received bank interest on bank balances held in a bank.

Recommendation:

Financial Supplies are input taxed under the Act and so there will be no GST component included in the interest income received. Schools will code interest as GST-free SNT in MAZE.

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49. Salaries and Wages:

Payment of salaries and wages to various types of staff. Some payments may be to contractors, rather than to employees. Other payments include those in respect of the superannuation of employees.

Recommendations:

A supply is taxable if, among other things, it is made in the course or furtherance of carrying on an enterprise. The activities of a PAYE (PAYG) earner, ie a salary and wage earner, do not constitute an enterprise as defined in section 9-20 of the Act. Therefore these payments do not fall within the scope of the GST.

If payments are made to contractors or companies, ie those persons/entities with an Australian Business Number, the school will need to pay GST for the supply by the contractor. The school will be able to claim any input tax credits in relation to the supply.

Payments of superannuation are in relation to the PAYE/PAYG activities of the employee and are therefore also not within the scope of the GST.

51. Payments to Contractors:

Payments to contractors for services. Some contracts made with service providers may span the implementation date of the GST.

Recommendations:

The supply of goods and services is generally a taxable supply. The provision of services by a contractor will be subject to the GST as they will generally be registered for GST purposes and conduct an enterprise of their own.

The Transition Act outlines the treatment of contracts which span the implementation date of the GST. The treatment depends primarily upon whether or not the supplier has the opportunity to review the terms of the contract during the transitional period. It is recommended that the School review all contracts with service providers that may span the implementation date of the GST, ie 1 July 2000.

52. Purchase of Goods and Services:

Purchase of goods, payments for the provision of services and payments for rental or hire. This includes the purchase of general goods such as sports goods, paper, stationery, payments for services such as electricity or audit fees, payments for hire of goods such as photocopiers as well as the purchase of excursion tickets. However it excludes some medical or health related costs which may be GST-free.

Recommendations:

The provision of goods and services to the school will generally be taxable supplies under section 9-5 of the Act. The school will be entitled to claim input tax credits on its creditable acquisitions, thus recouping any GST paid on its inputs. However, the school needs to be issued with a tax invoice from the supplier before any applicable input tax credits can be claimed.

It is important that the school obtain invoices for purchases when the payment for the good or service is made. This is to ensure that any applicable input tax credits can be claimed as soon as possible.

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Other Issues:

Cash flow implications arise from the ability of the school to claim input tax credits on the GST they have paid on goods and services. The school will be paying GST during a tax period and, provided an invoice is received when payment is made, will be able to claim the applicable input tax credit when it lodges its GST return 21 days after the end of the tax period.

Accounting systems used by the school will need to be able to recognise where an input tax credit is able to be claimed in a timely manner.

53. Purchase of Second Hand Goods:

Purchase of second hand goods from parents and others.

Recommendations:

The purchase of second hand goods from a registered entity will be a taxable supply and the normal GST rules will apply.

The purchase of second hand goods from a non-registered entity will not be a taxable supply and persons such as parents will not charge GST on the supply of the second hand goods to the school. (However, the original purchase of the goods by the unregistered entity (ie the parent) may have included GST.) Since the supply to the school of the second hand goods is not a taxable supply because it was not supplied by a registered entity, under normal GST rules the school would not be entitled to an input tax credit.

The Act allows registered persons to claim a "notional" input tax credit in relation to the acquisition of second hand goods from non registered persons. The credit only becomes available when registered persons subsequently sell the second hand goods. The amount of the credit is "capped" at the amount of GST payable on the subsequent supply, meaning the registered person cannot claim a "notional" input tax credit for GST purposes greater than the amount of GST it will collect on the sale of the second hand goods.

54. Affiliations:

Payments made to associations/organisations in return for goods such as newsletters or for membership.

Recommendations:

Payments made to affiliated associations/organisations will need to include GST. Payments made for membership of an organisation will also need to include GST. This is because the association or organisation is making a taxable supply to the school. The school will be able to claim back the input tax credits in relation to the supply.

Other Issues:

Transitional issues - any subscriptions and the like entered into after 8 July 1999 that span the implementation date of the GST will need to include a GST component in the consideration. The school will be able to claim input tax credits in relation to the supply.

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55. Medical Aids and Appliances:

Purchase of items listed under Schedule 3 to the Act.

Recommendations:

Schedule 3 to the Act lists medical aids and appliances that are GST-free under the Act. The schedule lists such items as communication aids for people with disabilities, daily living items for people with disabilities, hearing and speech aids and aids for people with physical disabilities.

Only purchases of aids and appliances included in Schedule 3 will be GST-Free. Other medical aids and appliances purchased will be taxable.

56. Staff Reimbursements:

Staff are reimbursed for costs they have incurred in purchasing goods on the behalf of the school. They are also reimbursed for travel costs and incidental costs incurred in relation to their employment.

Recommendations:

When a school pays GST on its inputs and the acquisition of these inputs is a creditable acquisition, the school will be able to claim input tax credits for the GST paid. However, the legislation places restrictions on the availability of employers to claim input tax credits for purchases made by, and reimbursed to, their employees.

Generally, the legislation states that an employer will be entitled to input tax credits for reimbursements made to employees of expenses the employees incur that are directly related to their activities as an employee.

If the employee is reimbursed for costs incurred that are not entirely related to their activities as an employee, and the payment of this cost is not subject to Fringe Benefits Tax, the employer is only entitled to an input tax credit to the extent that the cost is related to the employment related activities.

The payment of a cents per kilometre allowance to an employee would not be likely to constitute a reimbursement (currently not defined) for the purposes of the Act. This would be an allowance paid to a PAYE earner and, as such, would not be subject to GST.

57. Refund of Funds to parents:

Return of money to parent, for example, the return of money paid for a camp to a parent as the child is no longer attending the camp.

Recommendation:

Where the original transaction did not include GST ie for a GST Free camp or excursion, then the refund would not include GST. (See Note 66 for refund of uniforms where the original transaction included GST).

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58. Food:

The purchase of food by the school.

Recommendations:

A supply of "food" is GST-free, unless it is a supply of food for consumption on the premises, hot food for consumption away from the premises, food contained in Schedule 1, a beverage other than those specified in Schedule 2 or food of a kind specified in the regulations. Basic food will be GST-free. This means that most ingredients for cookery classes (provided they are not listed in Schedule 1) will not be subject to the GST.

"Food" is defined as food for human consumption, ingredients for food for human consumption, beverages (including water) and ingredients for beverages, goods to be mixed with food for human consumption and fats and oils marketed for culinary purposes. It does not include live animals (other than crustaceans or molluscs), any grain, cereal or sugar cane that has not been treated or processed or an plants under cultivation that can be consumed as food for human consumption.

59. Water:

Payments for water.

Recommendations:

A supply of water is GST-free if it is not supplied in a container or transferred into a container that has a capacity of less than 100 litres or such other quantity as the regulations specify.

60. Diesel Fuel:

Payment for diesel fuel for Minibus.

Recommendations:

The purchase of diesel fuel will be a taxable supply. The school will be able to claim input tax credits in relation to the GST paid on the supply.

Other factors affecting the price of diesel fuel are the Diesel Fuel Rebate Scheme (DFRS) and the Diesel and Alternative Fuels Grant Scheme (DAFGS). The current DFRS has been extended until 30 June 2002. The DAFGS has been introduced and will be available for diesel fuel and other alternative fuels.

The grant will be available for all on road use of these fuels in vehicles with a gross vehicle mass of 20 tonnes or more. The grant will also be available for on road use of these fuels in vehicles with a gross vehicle mass of 4.5 tonnes to 20 tonnes used for transporting the goods or passengers. However, for vehicles under 20 tonnes, the grant is not available where the sole use of the relevant fuels is in certain metropolitan areas.

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61. Insurance Premiums:

Payment of insurance premiums such as car insurance.

Recommendations:

The payment of general insurance premiums will need to include GST as the payment constitutes consideration for a taxable supply. Note for information that life insurance policies will be input taxed and health insurance policies will be GST-free.

Under the Transition Act, input tax credits are not allowed to be claimed in relation to GST paid on insurance premiums before 1 July 2003 unless the Commissioner is notified that you are claiming an input tax credit in relation to the premium. See also the discussion under item 38.

62. Waste Management:

Payments for waste management.

Recommendations:

The supply of sewerage services and the emptying of septic tanks is GST-free. Any other waste management services not falling within these categories will be taxable supplies. The school will be able to claim an input tax credit in relation to any GST paid on the supplies.

63. Bank Charge Payments:

The payment of bank charges by the school.

Recommendations:

Bank charges are input taxed under the legislation. This means that the school is not charged GST on the bank charges except for merchant banking charges.

64. Professional Development:

Payments for teachers to undertake educational courses, non-educational courses and other associated courses and dinners.

Relevant Legislation:

Section 9-5 Taxable Supplies, Subdivision 38-C Education.

Recommendations:

The supply of an education course is GST-free. An education course is defined to include a special education course, an adult and community education course, a first aid or life saving course and a professional or trade course. Where the course undertaken by the teachers would fall within the definition of an education course it will be GST-free. Where the course partly falls within the definition of an education course it will be GST-free to the extent that it is an education course. Where the course is not an education course it will be subject to GST.

The school will be entitled to claim an input tax credit in relation to any GST paid on the course.

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65. Food for Canteen:

Purchase of food for sale in the canteen.

Recommendations:

The legislation states that where food is supplied by a non-profit body through a school canteen, and no other items are supplied through the canteen except for food, the school may choose to treat all of its supplies through the canteen as input taxed. This means that GST will not be charged on the supply of food to customers, however, the school will not be able to claim any input tax credits in relation to GST that may have been paid on the inputs into the canteen. (Refer to note 12 for more information).

66. Refunds for Uniforms:

Refund payments to parents for returned uniforms.

Recommendations:

When uniforms are sold to parents the school accounts for GST on the uniforms as the supply is taxable. When uniforms are returned and credits are paid to the parents an adjustment will need to be made by the school. The school has effectively collected too much GST.

Under the legislation this type of occurrence is called an "adjustment". However from the schools perspective all this means is the school will include GST in the refund and receive a credit for the amount of GST included in the refund.

67. Donations and Gifts:

The purchase of gifts and provision of donations by the school. The payment of voluntary contributions to service providers.

Recommendations:

Gifts to non-profit bodies are not consideration for a supply under the Act and therefore no GST applies. The payment of a voluntary contribution to a service provider for some form of service will however need to include GST if the service provider is registered or required to be registered for GST. The school will be able to claim input tax credits in relation to the GST paid on the supply from the service provider. If a school has paid GST on the purchase of a gift for somebody it will be able to claim input tax credits in relation to the GST paid on the purchase.

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68. Entertainment:

Payment for dinners and other entertainment for staff.

Recommendations:

The purchase of dinners and other entertainment by the school will be a taxable supply and GST will therefore need to be paid in relation to these items. Under normal GST circumstances, the school would be entitled to claim an input tax credit for the GST paid on these supplies. The legislation states that an acquisition is not a creditable acquisition, ie one for which input tax credits can be claimed, if it is a "non-deductible expense". A non-deductible expense is defined in the Act as an expense which is not deductible under Division 8 of the Income Tax Assessment Act 1997 because it is a certain type of expense. These expenses include penalties, recreational club expenses and entertainment expenses.

However, where the expense is paid to an employee and it is the provision of a fringe benefit to the employee, the school will be able to claim input tax credits in relation to the supply. For example, a school pays for a lunch for a staff member and a parent. The provision of the lunch would be an entertainment expense and normally non-deductible. However, the school will be subject to Fringe Benefits Tax (FBT) on the lunch provided to the staff member, but not on the lunch provided to the parent. Therefore, the school will be able to claim an input tax credit in relation to the GST paid on the staff member's lunch, but not in relation to the GST paid on the parent's lunch.

69. Transfers of Funds:

The transfer of funds between accounts of the school.

Recommendations:

The transfer of funds between accounts of the school is an internal transaction and, as such, will not fall within the scope of the GST.

70. Permit for a Raffle:

The purchase of a permit to enable the school to conduct raffles.

Recommendations:

The payment of a tax is consideration for a supply under the Act. Therefore the purchase of a permit to undertake raffles would be argued to be a taxable supply and subject to GST. Under Division 81 the Treasurer may state that certain taxes (as listed in a determination yet to be published) are not consideration for a supply and are therefore not subject to GST. It remains to be seen if gambling permits will fall within this Division.

71. School Float:

Withdrawal of money from the bank to provide a float for the school fair.

Recommendations:

The withdrawal of money from the bank in order to provide a float for the school fair would be outside the scope of the GST.

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72. Transfer of Money to Investment Accounts:

Transfer of monies from the accounts of the school to investment funds.

Recommendations:

The investment of money with investment funds will not be subject to GST. However, if a fee is paid to the fund for the management of the money this will be taxable supply according to the Government's consultative document on financial supplies.

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GST PROCEDURES€¦ · Web view(Schools should read the word charitable institution to also mean a government school) 6.319.1The GST law provides that the commercial activities

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