NEWSLETTER NOVEMBER 2013
Peregian Accounting Services
Unit 3 12 Grebe Street
Peregian Beach Q 4573
Businesses, big and small, are not immune from following trends especially when it comes to jargon. Recently a list was published by a marketing firm that scoured the web and ranked the most popular business words of 2013. Perhaps not surprisingly "content" and "social media" topped the list, but other words such as "guru", "moving forward", "transparency" and "big data" all made the Top 15 list. In a news article reporting the list it's suggested these words are overused, and arguably some of them are - in at least one workplace we know of "guru" is a term of derision. It's hard to think of alternatives to "social media" and "the cloud" that are as succinct and commonly understood though.
Income estimates and tax lodgements for Centrelink recipients
If you receive family benefit payments or income support payments you may recently have been contacted by Centrelink or the Family Assistance Office regarding 2013-14 income estimates, or even been requested to lodge your outstanding returns.
Generally, if you are a client of a Registered Tax Agent your tax returns are not due until May 15 of the year after June 30 (ie your Tax Returns for the year ending 30 June 2013 would be due on 15 May 2014). Some Centrelink customers, however, may be required to provide income estimates or even lodge earlier than this in order for payments to continue. This is especially true for parents and guardians of dependant students receiving Youth Allowance; you will probably already have been contacted about income estimates for the Parental Means Test and/or been required to lodge tax returns.
Centrelink don't usually give you much time to act once they send a letter requesting this, and they don't send us a copy letting us know that they have asked you to do this so don't delay in letting us know if you need us to prepare income information for you.
If you or your spouse don't need to lodge a tax return you must either notify Centrelink or, as Tax Agents, we can lodge a "Return Not Necessary" advice with the ATO if required. Although you may have nothing to declare in your tax return, neither Centrelink nor ATO will assume this if you don't lodge, they will just stop payments.
Peregian Beach near our office
Peregian Accounting -
Phone: 61 7 5448 1218
Fax: 61 7 5448 1221
In Tax News
The ATO and the Department of Immigration and Border Protection have issued a warning about recent income tax fraud schemes.
Upcoming Due Dates
FAQ: Reimbursements and GST - Who claims the GST when you are reimbursed for a bill you paid? How do you charge out GST when you recover the cost?
When you buy things that you are reimbursed for by your client, you are treated as an "intermediary" for GST law. As the GST-registered legal owner of the bill you are entitled to claim the GST input credit if the supplier charged GST on the sale. When you go to recover that expense from the person reimbursing you, you need to issue them a tax invoice and the reimbursement is treated as income on your BAS and must include GST if you supplied goods or services to your client that were GST-taxable. *
The rationale behind this is that you are still providing goods or services, no matter whether you were the ultimate owner or not. You arrange goods or services on behalf of someone else by purchasing them yourself and onselling them, and are therefore providing a supply of goods or services that may be taxable.
Where it gets sticky is when you purchase something that doesn't have GST when you bought it but for which you must charge GST on its sale. If it was for an item that is a GST-free sale if made within Australia, eg health products and food, then it's fairly straightforward: you don't pay GST on the purchase but you also can't charge it in the invoice for reimbursement. If you, however, buy something from overseas and didn't pay GST on it, but it is something that is usually GST-inclusive when sold in Australia then you must include GST in your reimbursement invoice. For example, if you import a $500 piece of equipment from China for your client then you wouldn't pay the GST on import, but because you are onselling it to your client within Australia you must charge GST on your invoice and pay this to the ATO at BAS time. In order to break-even on the transaction you should charge your client $550 including GST to cover the $50 GST you have to give the ATO. Your client would be able to claim a GST input credit of $50 when they pay your invoice if they are GST-registered.
If you charge a margin on top for your services as an intermediary (ie a commission, finder's fee, etc) and are GST-registered you will also have to invoice GST on your margin. To illustrate, suppose you arrange to buy a $1,300 wheelchair for a client of yours and they insist on paying you a $143 commission for your trouble then you would not charge GST on the wheelchair because health products are generally GST-free sales but your commission of $143 would have GST included. The total amount charged to the client would be $1,443 ($1,300 plus commission of $143), which includes $13 GST. You would have to pay the $13 to the ATO, and your client (if GST-registered) would be able to claim $13 as a GST input credit.
Another circumstance where the general rule about reimbursements and GST is less than simple is for lease agreements. Generally, lease agreements are subject to GST on the full amount received under contract, and landlords must usually charge 10% GST on all rent and recoveries (eg rates, electricity) invoiced to the tenant, regardless of the GST on the expense being recovered from the tenant. This is because any recoveries the landlord and tenant agree to in the lease agreement are income for the landlord which has been generated from the lease contract, they are not reimbursements in the usual sense. They are requirements of the lease agreement, effectively making the payment a legal obligation of the tenant.
Are there any times you don't have to consider GST on reimbursements? Yes, when you act as an agent. To be a true agent, you must have the authority to act on someone else's behalf but don't actually participate in the transaction yourself. The major test of agency for GST law is whose name is on the bill; whom will the supplier chase if it's not paid? Usually it doesn't actually matter who uses the item that was bought, or even who paid the cash for the bill, if your business' name is on the bill then you will probably be the legal owner of that debt. An example of an agent transaction is when accountants pay ASIC bills on behalf of clients. The client's name is on the bill, and in addition the risk of de-registration because of non-payment is borne by the client, not the accountant. When the accountant pays it, it is essentially a loan from the accountant to their client. The client would be entitled to claim the GST input credit on the expense (in this case ASIC fees are GST-free), the accountant cannot claim it. The accountant would also not include GST on the invoice for reimbursement, and the client would therefore not be able to claim GST input credits on the money repaid to the accountant.
* If you are not GST-registered you are not required to invoice with GST, nor are you entitled to claim a GST input credit on the purchase.
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