GST calculations too complicated?
By Anand Shukla
It can be difficult for small businesses to accurately record and identify GST free sales and taxable sales from a point of Small business accounting and bookkeeping. To address this issue, the ATO has introduced five Simplified Accounting Methods for GST for food businesses to easily account for their GST liability for small business bookkeeping purposes. Once a SAM is chosen, small businesses need to continue to use this same method for 12 months.
Small Businesses may be eligible to use a SAM when:
· They are registered for GST.
· They sell both taxable and GST-free food.
· Their SAM/GST turnover is less than $2 million.
It also depends whether the business is:
· A re seller – resell stock without converting it into different products
· A converter – Selling taxable goods by converting GST free stock purchases
There are 5 methods that small businesses can choose from. They are below:
Method 1: Business Norms
Businesses like cake shops, convenient stores, continental delicatessens, health food shops, hot bread shops, pharmacies that also sell food and fresh fish retailers can consider using this method by following the business norm table given on the ATO website which outlines the standard percentage for each type of retailers to work out their GST-free sales and purchases.
Method 2: Stock purchases
Only businesses that are re sellers, not converters can use this method, for example, butchery, service station, news-agency, convenience/grocery store and video hire outlet. The GST free sales and GST free purchases will be the same when using the stock purchase method.
Businesses can choose to complete worksheets every tax period for two four-week sample periods. It is possible to use 5% GST free stock estimation basis.
Method 3: Snapshot
The snapshot method is similar to stock purchases method, with businesses measuring both GST free sales and GST free purchases.
Businesses can choose to complete worksheets every tax year or twice a year. It is possible to use 5% GST free stock estimation basis.
Method 4: Sales percentage
The sales percentage method works the best for re sellers that are supermarkets or convenience stores that convert 5% or less of your goods into taxable products.
For this method, businesses need to work out the GST free percentage according to the total sales in the tax period, and use this percentage to their trading stock purchases.
Method 5: Purchases snapshot
The purchases snapshot method is similar to the snapshot method, but it only applies to businesses’ trading stock purchases.
Businesses should work out the estimated GST free trading stock purchases for the tax period by the percentage of GST free trading stock purchases over 2 four-week sample periods and apply the normal GST rules to work out the GST credits and liability.
For more detailed information and calculation examples on SAM, please call us and speak to one of our friendly staff.
https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Food/Simplified-GST-accounting-methods-for-food-retailers/
(This article is accompanied with a disclaimer, to avail a full copy of this please call 03-86091889 or send an email to info@a1accountants.com.au)