GST and Indirect Taxes
GST mechanics
GST is a broad-based 10% tax on supplies and importations. A GST-free supply includes most food, health and education; input-taxed supplies include financial supplies and residential rent. Registered entities claim input tax credits on creditable acquisitions used in carrying on an enterprise. GST is imposed by the GST Act 1999 and collected by the Commissioner.
Registration and reporting
Registration is compulsory above the turnover threshold ($75,000, or $150,000 for not-for-profits), and voluntary below it. Tax periods are generally quarterly or monthly, with the option of cash or accrual accounting. Tax invoices are required for input tax credits above $82.50 (including GST).
Adjustments and special rules
Adjustment events arise where consideration changes or an acquisition is used for a different purpose. The margin scheme applies to real property, and going concerns can be GST-free if the parties agree in writing. The GST group and branch rules allow consolidation.
Traps
Frequent traps include claiming input tax credits on input-taxed supplies, treating a GST-free supply as taxable (or vice versa), and forgetting that a tax invoice is required. Another is confusing the threshold for registration with the threshold for the cash accounting basis. Questions also test whether a supply is connected with the indirect tax zone.
Worked example
A registered business sells goods for $11,000 including GST. GST payable is $1,000. If it bought inputs for $5,500 including GST, the input tax credit is $500, so net GST remitted is $500.