(upbeat music)
-: Beta Limited,
is an Australian resident retailer,
that is registered for GST.
It purchases board games from an Australian distributor,
Alpha Limited.
It then sells the board games to retail customers,
in Australia.
Beta has made creditable acquisitions from Alpha
and is entitled to an input tax credit for the GST paid.
Beta has also made taxable supplies to customers
and has a GST liability for the GST collected.
The net GST amount, will subsequently be remitted
to the ATO.
The Goods and services tax is a broad-based,
indirect consumption tax
that targets the end domestic consumer.
It is charged as a flat rate of tax, on the value
of goods, services and certain other supplies,
made in Australia.
Entities in the supply chain,
make purchases from suppliers
and pay GST to those suppliers.
Those same entities, make sales to customers
and collect GST from those customers.
The net amount of GST is remitted by the enterprise,
to the ATO, as part of the BAS submission.
In this way, the GST is effectively only payable,
on the value added, at each stage in the supply chain.
There are three types of supply
in the Australian GST system.
Taxable supplies, GST-free supplies
and input taxed supplies.
However, a GST liability only arises
when a taxable supply is made.
Meaning that GST-free supplies and input taxed supplies
are not liable for GST.
Taxable supplies include things like the sale
of manufactured goods, the provision of consulting services
and the supply of real commercial property.
For Taxable supplies, a GST liability arises,
when a supply is made for consideration, such as the sale
of goods for cash payment,
the supply is made in the course
or furtherance of an enterprise, which is broader
than just operating a business,
but excludes activities as an employee, as well as hobbies.
The supply is connected to the indirect tax zone,
referring mainly to delivery or availability, in Australia,
and the supplier is registered or required to be registered
for GST.
Where the supplier carries on and enterprise
and meets the GST registration turnover threshold.
However, there is an override, where certain supplies
are deemed to be GST-free or input taxed.
And are therefore, not taxable supplies.
GST-free supplies, include things like the sale
of fresh food, exports of goods and the supply
of a going concerned enterprise.
For GST-free supplies,
no GST liability arises on the supply.
But a registered supplier may be entitled
to an input taxed credit on acquisitions used
to make the supply.
Input taxed supplies include financial supplies,
such as the provision of loans,
leases of residential properties
and supplies of residential premises.
For input taxed supplies, no GST liability arises
on the supply and the registered supplier
is also not entitled to an Input tax credit
on acquisitions used, to make the supply.
Businesses that are not registered
or required to be registered for GST,
effectively make input taxed supplies,
as they are not liable to charge GST
and are not entitled to input taxed credits
for acquisitions.
Where a GST liability arises for an enterprise,
making a taxable supply,
an entity is entitled to an input taxed credit
for a creditable acquisition.
Creditable acquisitions arise on the acquisition
of taxable supplies for consideration,
that are at least partly for carrying on an enterprise
and where the acquiring entity is registered
or required to be registered.
The input tax credit will generally be based
on the price paid for the acquisition,
and is generally only available
once a valid tax invoice, has been received.
It is these input taxed credits
that offset the GST liability, enabling the net amount
to be calculated for remission to the ATO.
In addition to taxable supplies, a GST liability also arises
in respect to taxable importations.
In this case, for administrative expediency,
the GST liability generally falls on the importer,
rather than the non-resident supplier.
However, where the importer is registered for GST,
they may be entitled to an input taxed credit,
to offset the GST paid,
so-called, creditable importations.
It should also be noted that apportionment
of GST liability or input taxed credit,
may need to be made where there are mixed supplies
or composite supplies
or where the acquisition is only partially
for a creditable purpose.
To re-cap, the GST is a broad-based,
indirect consumption tax, that applies a flat rate of tax
to the value of taxable supplies.
Input taxed credits are available
for creditable acquisitions,
meaning that only the net amount of GST collected,
is remitted to the ATO.