GST & FBT for Accounts Payable

1. GST & FBT for Accounts Payable Anne Harvey – Group Tax Manager, Corporate Finance Eric McCallum – Group Tax Accountant, Corporate Finance 24 August 2012

2. Objectives When does GST apply What are the GST Codes What is FBT What does Taxable Value mean Types of benefits which attract FBT When is FBT charged Vendors Thesis Examiners

3. When does GST apply When is it not applicable • GST free sales • Basic food - meat, milk, bread, fruit and vegetables • Most education, child care, health • Some exports • Input Taxed sales • Residential property • Financial transactions • Cannot claim GST credit When is it applicable • Taxable supply • for consideration • in course of furtherance of carrying on enterprise • connected with Australia • registered or required to be registered • not GST free or input taxed • Taxable sales • price includes GST • pay GST on sales • claim GST on purchases • 1/11th of Total invoice/sale price

4. How Does GST work Supplier Raises Tax Invoice Vendor UNSW Purchaser Receives Tax Invoice Sponsor

5. GST Codes: Acquisitions – AP/ Expenses/Credit Card Most goods and services Basic food; consumed/used overseas i.e. international airfare, accommodation Customs clearance e.g. Equipment; overseas subscriptions Financial supplies, residential accommodation Cannot claim GST, no Tax Invoice, student entertainment Taxes, wages, donations Travel Allowance, Advance • Taxable – AC/AO • GST Free – FRAC/FRAO • Imports – IMAC/IMAO • Input Taxed – ACIT/AOIT • Non deductible – NIAC/NIAO • Out of scope – EXCL • Advances - EXAD “C” in AC, FRAC, etc refers to Capital. “O” in AO, FRAO, etc refers to Other.

7. Supply and Consideration Supply (goods) Goods used in business, can claim GST charged UNSW Lab Equip Coy Consideration ($) Payment AC, AO, FRAC, FRAO Cash advance EXAD No supply for consideration Travel Advance – Funds Payment only UNSW Employee Out of Scope EXCL Pay Taxes – Funds Payment only UNSW ATO

8. Claiming ITC for GST charged • Tax Invoice showing GST or GST inclusive price • Can rely on other supporting documentation issued by supplier if minor defects in Tax Invoice • Purchase $82.50 or less (including GST) with Tax invoice, Receipt, invoice, docket • Sale < $1,000 – Tax Invoice, name & ABN of supplier, date, description, if each item is taxable sale, $ GST or Total price includes GST. • Sale $1,000+ also show buyer’s name or ABN

9. Common GST Mistakes • Mixed Supplies – need to enter Taxable items and GST free items on separate lines with GST code (Telstra bills, Cabcharge, Hotels, Qantas, basic food) • Assume GST applies to total – check for GST free • Use GST code from PO - check if agrees to Tax Invoice • Relying on default GST codes in EMS • Tax calculated in system not agree to GST on Tax invoice – may need to split lines • Deposits – claiming GST on deposit. Adjust on final Tax invoice • Credits from prior month. Check GST charged on Invoice.

10. Risk to UNSW if GST Not correct • No entitlement to ITC if GST not charged, or no Tax Invoice held (except for low value items, i.e. < $82.50) • No entitlement to ITC if goods or services not used for creditable purpose (used in business) • No entitlement to ITC if expense non deductible for Income Tax under Income Tax rules • Private or domestic in nature – if pay FBT(AO). No FBT (NIAO) • Entertainment • If pay FBT (staff & associates), can claim ITC (AO) • If don’t pay FBT (students, clients, guests) cannot claim ITC (NIAO) • Audit risk – inadequate processes and controls • Penalties and Fines • Reputational risk • BAS amendments

11. Mixed Supply – GST free and Taxable Supply

12. Mixed Supply

13. GST Calculated Processed 3.07 93.10 9.31 $105.48

14. GST(VAT) calculated not agree to GST entered VAT entered ≠ VAT calculated As FRAO used VAT on Invoice of $8.46 shows as Non Recoverable. GST does not go the GST account in GL

15. Cabcharge Mixed Supply

16. FBT year 1 April to 31 March Tax Rate 46.5% - Calculated on Grossed Up Taxable Value FBT paid by employer – UNSW Includes benefits under a salary sacrifice arrangement Reportable Fringe Benefit included on Payment Summary in June, if > $2000 FBT is tax on benefits (right, privilege, service or facility) provided to employees & associates (relative, partner/ spouse, child) by an employer, associate of employer or under an arrangement with a third party in respect of employment – reward for service “Employee” includes current, former and future employees No FBT for students, clients, volunteers or independent contractors If pay Salary  PAYG deduction  Employee pays tax If provide fringe benefit  no PAYG deduction  Employer pays tax Fringe Benefits Tax - Facts

17. What is Taxable Value Determined by the rules applying to each category of fringe benefit Generally the cost of the benefit Some benefits concessional tax, e.g. Motor Vehicles Some reductions and exemptions provided in legislation FBT Calculated on Taxable Value • GST Impact • Taxable Value based on GST inclusive amount • FBT payable depends on whether entitlement to ITC credit • Can claim Input Tax Credit for GST paid Important correct GST codes are used and GST amount is correct.

18. When Does FBT apply

19. If expenses charged to the GL account, FBT will be accrued at month end

20. Examples of Benefits Incurring FBT • Salary packaged Motor Vehicles or UNSW provided – personal use. • Medical Insurance - inpatriates • Permanent Residency – application, police & medical checks, lawyers fees (Exempt if to enter Australia on relocation) • Gifts, awards and prizes - $300 or more • Travel for family – SSP, accompany employee on business (exclude relocation) • VC Child care support • Furniture purchase in lieu of relocation transport/ relocation allowance • Kensington College accommodation and meals – provided to tutors/employees • Reimburse deferred HECS/HELP fees • Write off Advance - Debt waiver • Outstanding Advance not acquitted within 6 months  Loan – calculate interest • Home phone/ internet – private % • Dual purpose travel – business and private • Entertainment – tax exempt body

21. Exemptions, Concessions or reductions in legislation Exemptions – No FBT • work related item - provided for work purpose. Limit one item per type pa – e.g. laptop, mobile phone, electronic diary, tool of trade, protective clothing • minor benefit < $300 and infrequent / irregular (consider associated benefits) • relocation – Required to change usual place of residence for employment. Flights including family, relocation consultant, etc. HR administer • Airport lounge, professional subscriptions, child care/gym on premises, car parking • LSL awards Concessions – Lower TV • e.g. Cars, Car Parking benefits • holiday transport for overseas employment – 50% concession. Limit of one trip per FBT year. • Temporary accommodation on relocation. HR administer Reductions – TV reduced • otherwise deductible with declaration reduced by % of business use, e.g. home internet use • full time education of children of Overseas employees. Less than 25 years. At school, college, university or by tutor.

22. Entertainment v Sustenance

23. Entertainment – FBT Sustenance – no FBT (6611) Morning and afternoon tea for employees Birthday cake – morning tea for employees Light lunches, sandwiches, finger food, salad, juice, etc for employees Light breakfast at training seminar – incidental to seminar Finger food and light refreshments (with moderate alcohol) immediately after training or CPD seminar – incidental to seminar Meal at seminar that goes for over 4 hours Meal (with alcohol) while travelling on business - employee Tea / coffee – employee Overtime meal in office Account 6611 • Social function, farewell • Party, Christmas party • Restaurant meals • Business lunch & drinks • Celebrations, Dinners • Spouse meal of employee travelling on business • Non travelling employee (when dines with travelling employee) • Morning, afternoon tea, light lunches – associates • Leisure or amusement activities • Sporting activities, golf days • Gym membership, sporting club memberships • Holiday • Theatre/movie ticket • Cruises • Account 6457

24. GST - claiming ITC and interaction with FBT

25. Travelling on business ATO view of travelling on business is away for short periods - up to 21 days at a time Stay in hotel, motel, serviced apartment Unaccompanied by family ATO set Travel Allowance rates – based on Salary band and destination Travel Allowance rates based on 1 July to 30 June year Travel Allowance for Payroll Tax (State based tax) to be split between Taxable and Non taxable • Tax Exempt (Domestic 7014, International 7114) • Taxable component (Domestic 7013, International 7113) • For 2012/2013 year tax exempt portion is • Accommodation $189.00 per day • Food and Drink $98.40 per day • Incidentals $17.85 per day • Any excess above these rates to 7013/7113

26. Travel Benefits Business Purpose Dual Purpose Travel to conference then holiday Holiday at same or different location Book Annual Leave days in myUNSW Family accompanies Private portion 40% or more of total days Travel Allowance only for business days Frequency of trips No restrictions on private travel Flight cost split 50/50 between business (7103) and private (6630) FBT on 50% private If employee pays 50% of airfare directly to Travel Agent  No benefit  No FBT • Predominantly business undertaken • Considered Incidental to business – extra day to acclimatise • Weekends during business period, e.g. 2 week business trip • Day to prepare/ wrap up • Make Flight connections • Due to flight availability/ delays • 1 day Stopover en route – no extra cost • Day between business meeting

27. ABN Australian Business Number – www.abr.gov.au • Shows type of entity – company, sole trader, partnership, etc • If registered for GST – charge GST on invoices Must withhold 46.5% of total payment for supply unless • Invoice with ABN quoted • ABN of agent quoted where supply made through agent • Exception to withholding applies • Supplier not entitled to ABN • Exceptions – no Withholding • Payment $75 or less, excluding GST • Not entitled to ABN - not carrying on enterprise or business in Australia • Statement by Supplier provided – ATO declaration of reason ABN not quoted

28. Contractors and VN1 Form All new Vendors to complete VN1 form – process and system to manage VN1 form has questions in relation to the services provided and ABN status To assess if employee or contractor Assess for PAYG withholding, Superannuation and Payroll Tax Vendor Classification assists in identifying for upfront Payroll Tax exemption, ongoing Payroll tax assessment or SGC. If “Refer HR” – needs to be referred to HRC for setting up in HR system. Cannot be paid through AP. Standard UNSW Contact • Sole Trader Contractor Agreement • Other Entity Contractor Agreement (Company, Partnership, Trust)

29. Service Provider – Payment for Service Note: Some Sole Traders may be assessed(VN1 result) to be paid via A.P, if no Superannuation or PAYG obligations

30. Thesis Examiners Pay in AP Pay in HR Payment to individuals in Australia Subject to PAYG deduction TFN Declaration Existing employees Individuals – in Australia Sole Trader entity with/without ABN • Payment to Non Individuals/ Non residents • Payment to another University • Payment to Organisation/ Company • Overseas Individual • non resident of Australia • No Australian bank account • Cannot be paid in HR • Statement by Supplier required

31. Questions Further Information Finance website: http://www.fin.unsw.edu.au/PoliciesProcedures/AccountingManual/FBT.html Contact: Anne Harvey - Ext 51635. Email: a.harvey@unsw.edu.au Eric McCallum – Ext 52825, Lucy Lowe – Ext 51204