GST audit by the Australian Taxation Office (ATO)?
If you are under a GST audit by the Australian Taxation Office (ATO), you should contact King Lawyers immediately for legal advice and representation.
What is GST and how does it work in Australia?
In Australia, Goods and Services Tax (GST) is an indirect, board-based consumption tax of 10% that is imposed on most goods, services and other items sold or consumed in Australia.
GST is legislated under A New Tax System (Goods and Services Tax) Act 1999 and came into operation on 1 July 2000.
Generally, if you are a business in Australia and registered for GST, you will:
- include GST in the price that you charge for your goods and services
- claim credits for the GST included in the price of goods and services that you purchase for your business
If you run a business or other enterprise and have a GST turnover of $75,000 or more, or you provide taxi travel (including ride-sourcing such as Uber), you must:
- register with the ATO for GST
- work out whether your sales are subject to GST and include GST in the price of your taxable sales
- issue tax invoices for your taxable sales
- obtain tax invoices for your business purchases
- claim GST credits for GST included in the price of your business purchases
- account for GST on either a cash or non-cash basis
- put aside the GST that you have collected so you can pay it to the ATO when it is due (usually quarterly)
- lodge activity statements with the ATO to report your sales and purchases (usually quarterly)
- once the activity statement has been processed by the ATO, pay the net GST amount to the ATO or receive a GST refund from the ATO
Are you under a GST audit by the ATO?
The ATO’s compliance program aims to protect businesses, taxpayers and the Australian community by detecting and dealing with taxpayers who deliberately avoid their GST obligations.
The ATO may conduct a GST audit of your business affairs to ensure that:
- you have correctly reported your business sales and paid the correct amount of GST to the ATO
- you have correctly reported your business purchases and claimed the correct amount of GST credit from the ATO
If the ATO’s GST audit identifies a GST shortfall, the ATO will send you a tax bill for additional tax, penalties and interest charges.
GST reporting to the ATO
If your GST turnover is less than $10 million, you need to use the Simpler BAS reporting method and report the following to the ATO in your business activity statement:
- G1 Total sales
- 1A GST on sales
- 1B GST on purchases
If your GST turnover is over $10 million, you also need to report the following additional amounts to the ATO in your business activity statement:
- G2 Export sales
- G3 Other GST-free sales
- G10 Capital purchases
- G11 Non-capital purchases
Quarterly lodgment and payment dates for GST in Australia
For the September quarter, the payment and lodgment date is 28 October.
For the December quarter, the payment and lodgment date is 28 February.
For the March quarter, the payment and lodgment date is 28 April.
For the June quarter, the payment and lodgment date is 28 July.
Requirements of a tax invoice in Australia
If a customer asks you for a tax invoice for a taxable sale of more than $82.50 (including GST), you must provide a tax invoice to the customer within 28 days of their request.
Tax invoices for taxable sales of less than $1,000 must include:
- the words “tax invoice” stated prominently
- the seller’s name
- the seller’s Australian business number (ABN)
- the date of the issue of the tax invoice
- a brief description of the items sold, including the quantity (if applicable) and the price
- the GST inclusive price of the taxable sale
- the GST amount (if any) payable, which can be shown separately or, if the GST amount is exactly one-eleventh of the total price, with a statement which says “Total price includes GST”
Tax invoices for taxable sales of $1,000 or more must also include the following additional details:
- the buyer’s name
- the buyer’s address
Claiming a GST credit or GST refund from the ATO in Australia
Your business must be registered for GST to be able to claim GST credits from the ATO.
You can claim a credit for any GST included in the price that you pay for items that you use in your business. This is called an input tax credit or a GST credit.
You claim GST credits in your business activity statement.
You can claim GST credits if the following conditions apply:
- You intend to use your purchase solely or partly for your business, and the purchase does not relate to making input-taxed supplies
- The purchase price included GST
- You provide or are liable to provide payment for the item you purchased.
- You have a tax invoice from your supplier
When claiming GST credits, it is important to ensure that your suppliers are registered for GST.
When you cannot claim a GST credit from the ATO
You cannot claim a GST credit:
- without a valid tax invoice
- for purchases that do not have GST in the price
Goods and services that do not have GST in their price include:
- GST-free items (such as most basic foods, some education courses and some medical, health and care products and services)
- Input-taxed items (such as bank fees and loan interest)
- purchases from a business that is not registered for GST (and therefore cannot charge GST)
You also cannot claim GST credits for the following, even if GST is included in the price:
- purchases you intend to use for private or domestic purposes
- purchases you intend to use to make input-taxed supplies, such as those associated with providing residential accommodation
- some purchases that you cannot claim as an income tax deduction, such as entertainment expenses
- land purchases under the margin scheme
Time limits on GST credits and refunds from the ATO
If you are entitled to a GST credit or GST refund, you need to claim it from the ATO within four years.
Cancelling your GST registration with the ATO
You must cancel your GST registration with the ATO if you close or sell your business. You may also need to cancel your ABN.
You may need to cancel your GST registration if your business structure changes (e.g. from a partnership to a company).
You cannot continue to charge GST and claim GST credits after the date you cancel your GST registration with the ATO.
Legal advice from experienced tax lawyers for a GST audit by the ATO
This content of this article is offered as general information only and should not be relied on as specific legal advice.
To get legal advice from King Lawyers on your specific circumstances for a GST audit, please contact us to arrange an initial consultation with our expert tax lawyers.