GST Questions And Answers

Calculating GST Amount and GST Inclusive Amount

Calculate the GST amount for the following unrelated circumstances. Show your answer in the column provided.

(a) The GST exclusive price of a Taxable Supply was $150
How much GST is applicable to the supply?	$15
What will be the GST Inclusive amount? Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	$165
The GST Inclusive amount of a Taxable Supply was $187.
How much GST is embedded?	$17
What is the GST Exclusive amount?	$170
What amount will show as the total on the tax invoice?	$187

Teachers Comments:

Check the appropriate box for each of the following items:

Item description	GST Taxable	GST- Free	Input taxed
Rent paid on a residential home
Fees charged by a doctor
Radio advertisement
Sale of business as a going concern
Export of wine to France
Fees charged for cleaning the work premises
Interest paid on borrowed money
Purchase of postage stamps for domestic use
Rent received on commercial premises
HELP fees charged for higher education courses
Purchase of a loaf of bread
Payment of telephone bill
Sale of a residence
Airfare to Adelaide
Tax invoice for plumbing repairs to a residence

In the space provided below complete a tax invoice for a taxable supply of 10 gold plated taps advertised at $440 each from Get Rich Plumbing Co of 22 Hopetoun Drive Richville NSW; ABN 61 231 586 999 to I. Wash 13 Happy Circuit Haytown NSW. The transaction took place on the 25^th January 2010.

Tax Invoice Get Rich Plumbing Co 22 Hopetoun Drive Richville NSW ABN 61 231 586 999 Date 25th January 2010 TO Wash 13 Happy Circuit Heytown NSW Qty Description of Supply Unit Price GST Total 10 Gold Plated Taps $440 $44 $4840                                                                                                                                                 Total Amount Payable    $4840

Teachers Comments:

Check the correct response to the following unrelated questions;

1 – Unless the Australian Taxation Office(ATO) gives alternate approval you can use the cash basis of accounting if your turnover is:

  Any amount

  Less than $100,000

  Between $2Million and $3Million

  Less than $2Million

2 – Under the cash basis of accounting you account for GST Payable on taxable supplies when:

  You pay for your creditable acquisitions

  At the end of the month

  You receive payment for them

  The income is earned

3 – Most small businesses with a turnover less than $2 million will report their GST to the ATO:

 September, December, March and June quarters

 At the end of the month

 August, November, February and May quarters

 At the end of the financial year; that is 30^th June.

4 – The amount of GST to be remitted to the ATO is:

 The amount estimated to be collected

 The amount of GST Input Tax Credits available

 The actual amount of GST collected less the actual amount of GST Input Tax Credits available

 The total shown on all the tax invoices for the period

5 – As part of small business concessions you can pay a GST instalment rate calculated by the ATO if:

 You report monthly and your turn over is less than $2 million

 You have a quarterly tax period and your turnover is more than $2 million

 You have a quarterly tax period

 You have a quarterly tax period and your turn over is less than $2 million

6 – Tax invoices are required for all supplies with a GST exclusive value of:

  Any amount

  $50 or more

  $75 or more

  $100 or more

Teachers Comments:

Before you attempt this question please study the sample question and answer which is located at the end of this question.

Kirby and Company sell motor mowers and associated equipment. The firm sell mainly in Australia with an occasional sale overseas. The business owns its own premises with a commercial tenant in the shop next door. You note that the proprietor has taken from stock of motor mowers a mower for private use with a GST inclusive cost of $330.

Creating a valid Tax Invoice

Details of outputs and inputs follow:

Total Income and Revenue	Details of Total Income and Revenue
Account	Total $	Taxable $	Exports $	GST-free $	Input-taxed $
Sales	115,500	115,500
Export sales	7,700		7,700
GST Free sales	1,800			1,800
Commercial rent	22,000	22,000
Interest received	900				900
Sale of asset	880	880
Total outputs	148,780	138,380	7,700	1,800	900

	Inputs	Details of Total Inputs
		Non-Capital Purchases	Capital Purchases
Account	Total $	Taxable with GST $	No GST in Price $	With GST $
Purchase trading goods	56,540	56,540
Accounting fees	1,320	1,320
Rent expenses	8,954	8,954
Repairs & Maintenance	3,916	3,916
Bank charges	650		650
Electricity & Phone	7,018	7,018
Interest expense	4,730		4,730
Shop Fittings	9,636			9,636
Total Inputs	92,764	77,748	5,380	9,636

Required:

• Complete the GST calculation worksheet for the Business Activity Statement covering the period 01/04/2010 to 30/06/2010

(b) Show on the bottom of the work sheet the net amount payable to or receivable from the ATO in regard to GST.

G9-G20	Net amount payable to or receivable from the ATO ($)	Receivable or	$3840
	Receivable or	Payable
	Payable		Payable

 NOTE: TO answer this question you are to use the replica BAS worksheet named BSBFIA402A_BAS_Worksheet.xls.

You should download and save this worksheet adding the question number to the file name.

e.g. BSBFIA402A_BAS_Worksheet_Q6.xls

When you have completed all questions in this assignment including a BAS worksheets for Q6 attach both documents to your assignment submission on the OLS site. Alternatively you can print both documents and post them together to OTEN for marking.

You must submit;

1. This worksheet covering answers to Q1 to Q5
2. BAS Worksheet for Q6

Please see instructions on the Assessment Guide for submitting assignments via the OLS site.

Assignment Feedback:

Example Question and Solution

Bryden and Company sells specialised batteries and associated electrical equipment. The firm sell mainly in Australia with an occasional sale overseas. The business owns its own premises with a commercial tenant in the shop next door and a residential flat on top of the premises from which rent is received. You note that the proprietor has taken from the stock of electrical equipment material for private use with a GST inclusive cost of $506. You also note that a tax invoice for the purchase of a washing machine for private use with a GST inclusive price of $1,364 is included in the Capital Purchases.

As a guide we have:

 (a) Complete the GST calculation worksheet for the Business Activity Statement (BAS) on the following page covering the period 01/10/2010 to 31/12/2010.

(b) Show on the bottom of the BAS work sheet the net amount payable to or receivable from the ATO in regard to GST.

You will note that there are 2 possible approaches from G10 to G16. It is recommended that you follow the example where the washing machine is NOT included in G10.

See below the example solution additional reading material.

Details of outputs and inputs follow:

Total Income and Revenue	Details of Total Income and Revenue
Account	Total $	Taxable $	Exports $	GST-free $	Input-taxed $
Sales	177,540	177, 540
Export sales	2,900		2,900
GST Free sales	1,300			1,300
Commercial rent	19,800	19,800
Residential rent	15,000				15,000
Interest received	840				840
Sale of old plant	473	473
Total outputs	217,853	197,813	2,900	1,300	15,840

INPUTS		Details of Total Inputs
Non- Capital Purchases	Capital Purchases
Account	Total	Taxable with GST	Input Taxed	No GST in Price	With GST
	$	$	$	$	$
Purchase trading goods	93,489	93,489
Stationery	3,883	3,883
Freight charges	6,776	6,776
Rent expense (commercial)	4,510	4,510
Rent expense (residential)	3,058		3,058
Bank charges	777			777
Interest expense	1,236			1,236
Electrical testing equipment	23,573				23,573
Washing machine (private use)	1,364				1,364
Total Inputs	138,666	108,658	3,058	2,013	24937

The difference between GST “correction of errors” and “adjustments”

Errors and adjustments to GST only occur when dealing with transactions from previous BAS periods. You cannot have adjustments or errors that relate to the current BAS period. It is critical that you fully understand the difference between correcting an error and making an adjustment when entering this type of data into the BAS.

Correcting an error means correcting a mistake in a past tax period. These corrections are subject to both time limits and dollar value limits. All of these errors are carried out in the regular boxes on the BAS worksheet and BAS Summary. You do not use the adjustment boxes. Errors might be the failure to record a tax invoice received in a prior period, an error made in recording taxable supplies on a BAS or you simply failed to claim some input tax credits due on a prior BAS.

Checking appropriate items for GST Taxable, GST-Free, and Input Taxed

Adjustments on the other hand arise from changes in transactions that may occur after a BAS has been lodged. Examples include a change in the price of a prior taxable supply, a change in the private use of creditable acquisitions, sales and purchase returns, alterations to the classification or coding of past transactions or the adjustment due to bad debt write offs or recovery (only for those firms that account for GST on an accrual basis). In these cases, only one of the boxes G7 or G18 is used on the BAS worksheet. This is because you net off the increasing adjustment against any decreasing adjustment. These adjustments are not subject to either time or value limits.

One of the best ways to decide whether or not a transaction from a previous BAS period is an adjustment or an error is to apply this simple definition:

1. If the entry required in the current BAS is to change a past reported transaction in any way, then it is an adjustment and is not subject to any limits of time or value.
2. If the entry in the current BAS is to bring in some new evidence that was previously left out, understated or overstated, then it is an error or omission and therefore it is subject to both time and value limits shown in Table 1 below.

In both these assessment questions you are dealing with current period transactions and therefore they are neither adjustments nor errors.

A special entry in the BAS is required because the owner takes a mower from the stock valued at $330 which is taken up in G11. This is neither an adjustment nor an error, simply a reflection of how transactions in the business have been recorded. The amount of $330 must be placed in G15 on the BAS because it is a private use of acquisitions. This has the effect of reducing the input tax credit by $30 because the owner personally pays this GST when a journal entry of $330 is made later as follows:

Date	Details of Account	Ref	Debit	Credit
30 June	Drawings		330
	Purchases stock			300
	GST (input tax credit)			30
Being a mower valued at $330 taken by the owner And the GST written back

Again, the taking of stock by the owner and the purchase of a washing machine for private use is neither an adjustment nor an error. The business has paid for these so you must reflect these transactions in the general boxes of the BAS worksheet.

The washing machine amount of $1364 and the taking of stock at $506 require these combined amounts to be placed in G15 as they are taken up in G11. The general journal entry to adjust the accounts is made later as follows:

Date	Details of Account	Ref	Debit	Credit
31 Dec	Drawings		506
	Purchases stock			460
	GST (input tax credit)			46
Being trading goods taken by the owner And GST now written back
31 Dec	Drawings		1364
	General purchases			1240
	GST (input tax credit)			124
Being a washing machine purchased but now transferred to the owner and GST written back

This makes a total of $1870 that must be entered in G15. The amount at G11 includes both the washing machine purchase and the trading goods purchases. Entering $1870 at G15 reduces the input tax credits available to the business by a total of $170 ($46 for the trading goods and $124 for the washing machine).

• Table 1Time and value limits for correcting errors

Entity’s annual turnover	Time limit for corrections	Correction limit
Less than $20 m	Up to 18 months (18 monthly BASs, 6 quarterly BASs or 1 annual GST return)	Less than $5000
$20 m to less than $100 m	Up to 3 months (3 monthly BASs)	Less than $10 000
$100 m to less than $500 m	Up to 3 months (3 monthly BASs)	Less than $25 000
$500 m to less than $1 b	Up to 3 months (3 monthly BASs)	Less than $50 000
$1 b and over	Up to 3 months (3 monthly BASs)	Less than $300 000

Timing is an issue in all these cases. If the business records the transactions for private use (shown in the above general journal extracts) prior to extracting relevant data for the BAS, then there would be no sign of these transactions in the BAS because “Drawings” are excluded from reporting.

For example, in Q6 the amount reported at G11 would be $82,798 (not $83,128), G15 would be zero, G17 remains $87,054 and the net GST of $4666 also remains unchanged.

I have:

• Made a copy of my assessment
• Answered all six questions