Practice test

What is GST?

GST (Goods and Services Tax) is a 10% tax on most goods and services in Australia, collected by businesses for the government.

Who collects GST?

The government (ATO).

What organization receives GST payments?

Australian Taxation Office (ATO)

When must a business register for GST?

When annual turnover reaches $75,000 or more.

What if a business earns less than $75,000?

It may choose to register for GST, but it is not compulsory.

What must a business obtain when registering for GST?

An ABN (Australian Business Number).

What is an ABN?

An 11-digit number used by the ATO to identify a business.

How often do businesses send GST to the ATO?

Quarterly if sales are under $20 million
• Monthly if sales are $20 million or more

What is a BAS?

A Business Activity Statement is a report businesses submit to the ATO to report GST collected and GST paid.

Why must BAS be completed?

To calculate how much GST the business must pay or receive from the ATO.

What information is recorded on the BAS?

GST collected from customers
GST paid on purchases

How does BAS work?

• Business records GST collected from sales

• Records GST paid on purchases

• The difference determines payment or refund from the ATO

When must BAS be completed?

Must be submitted within 21 days after the quarter ends.

What is GST collected?

GST charged to customers on sales.

What is GST paid?

GST paid by the business when purchasing goods or services.

What happens if GST paid is greater than GST collected?

The ATO refunds the difference to the business.

What happens if GST collected is greater than GST paid?

The business must pay the difference to the ATO.

Which transactions involve GST?

Cash purchases
• Credit purchases
• Cash sales
• Credit sales
• Purchase returns
• Sales returns
• Discounts

What is a sale called in GST terms?

a taxable supply, where goods or services are provided for consideration.

What are the three types of GST supplies?

Taxable supplies

GST-free supplies

Input taxed supplies

What are the characters for taxable supplies

1⃣ Must involve ‘furthering an enterprise’ (carry out activities)
2⃣ Must be ‘connected with Australia’ (sold in/imported in)
3⃣ Must be made for consideration
4⃣ No ‘exempt from GST’

What are GST-free supplies?

Goods/services where GST is not charged but businesses can still claim GST credits.

Examples of GST-free supplies

• Fresh food
• Education services
• Medical and health services
• Child care
• Charities
• Water
• International travel
• Exported goods

What are input taxed supplies?

Goods/services where GST is not charged AND businesses cannot claim GST credits.

Examples of input taxed supplies

• Residential rent
• Financial services (loans, interest, insurance)