Some terms used in our information about the goods and services tax (GST) may be new to you or have a specific meaning in GST law. For the meaning of a particular GST term, see below. Also, when we say:
- Australia – we mean the term indirect tax zone
- aggregated turnover – we mean your business turnover plus the turnover of closely associated entities.
- you – we mean you as a business. For example, a sole trader, a partnership, a trustee (of a trust or a superannuation fund), or a company
- business – we mean the GST term enterprise
- GST turnover, we mean the turnover figure you use to work out if you need to be registered for GST (GST turnover does not include the turnover of businesses you are connected with)
- sales – we mean the GST term supplies
- purchases – we mean the GST term acquisitions
- payment (made or received) – we mean the GST term consideration
- GST credit –we mean the GST term input tax credit
- property – we mean the GST term real property
You use an activity statement to report your business tax entitlements and obligations for a reporting period, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax instalments.
Australian business number
Your Australian business number (ABN) is your identifier for dealings with us and other government departments and agencies.
Business activity statement (BAS)
A business asset is something you use for your business, for example, manufacturing equipment, a delivery van or an office computer. Intangible items, such as goodwill, may also be business assets. You generally incur a GST liability when you sell a business asset.
An enterprise includes a business. It also includes other commercial activities but does not include:
- private recreational pursuits and hobbies
- activities carried on as an employee, labour-hire worker, director or office holder
- activities carried on by individuals (other than trustees of charitable funds) or partnerships (in which all or most of the partners are individuals) without a reasonable expectation of profit.
It includes the activities of entities such as charities, deductible gift recipients, religious and government organisations, and certain non-profit organisations.
- MT 2006/1The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian business number
A financial acquisition is an acquisition that relates to the making of a financial supply (other than a borrowing).
Financial acquisitions threshold
The purpose of the financial acquisitions threshold is to allow entities that make a relatively small amount of financial supplies, as compared to their taxable supplies or GST-free supplies, to claim full GST credits relating to those financial acquisitions.
If you make financial sales without exceeding the financial acquisitions threshold – for example, you make both financial and other sales and your financial sales are only a small part of your total sales – you can claim GST credits for your purchases that relate to making those financial sales (providing you have a tax invoice).
Financial sales (supplies)
Financial sales (supplies) are input taxed, provided certain requirements are met. A financial sale (supply) is the provision, acquisition or disposal of an interest listed in the GST Regulations. Examples include:
- lending or borrowing money
- buying or selling shares or other securities
- creating, transferring, assigning or receiving an interest in, or a right under, a super fund.
GST credits (input tax credits)
You can claim a credit for the GST included in the price of goods or services (the inputs) you buy for use in your business, unless you use the purchase to make input-taxed sales.
If you use the purchase partly for private purposes, you will not be able to claim a credit for the full amount of GST, only for the amount that relates to business use.
Some goods and services are not subject to GST and are sold without GST in their price. These sales are referred to as GST-free sales.
Examples of GST-free sales include basic food, exports, sewerage and water, the sale of a business as a going concern, non-commercial activities of charities, and most education and health services.
If you sell GST-free goods or services you are entitled to credits for the GST included in the price of your 'inputs' (the goods or services you used to make the goods or services you sold).
GST turnover threshold
GST turnover thresholds are used to work out whether you:
- must register for GST
- must report GST monthly
- can report and pay GST annually
- can choose to account on a cash basis
- can make an annual private apportionment election
- must lodge GST returns and pay GST electronically
- can choose to pay GST by instalments.
Inbound intangible consumer sale (supply)
'Inbound intangible consumer supply' means sales of anything other than goods or real property to an Australian consumer. It doesn't include things done wholly in Australia (the indirect tax zone), or sales made wholly through a business (enterprise) carried on in Australia (the indirect tax zone).
Indirect tax zone
'Indirect tax zone' means Australia, but does not include external territories and certain offshore areas. The goods and services tax (GST), the wine equalisation tax (WET) and the luxury car tax (LCT) operate in the indirect tax zone. The GST, WET and LCT do not operate in Australian external territories and certain offshore areas.
- GSTR 2000/31 Goods and services tax: supplies connected with Australia
- GSTR 2006/9 Goods and services tax: supplies
The goods or services you use in your business to make the goods or services you sell are referred to as your inputs.
Input tax credits
Some goods and services are sold without GST in their price, even though GST was included in the price of the inputs used to make or supply them. These sales are referred to as input-taxed sales.
If you make an input-taxed sale you are not entitled to credits for the GST in the price of your 'inputs' (the goods or services you used to make the goods or services you sold).
Two of the most common types of input-taxed sales are:
- financial sales (supplies)
- supplies of residential premises by way of rent or sale.
In special cases, you may be entitled to a GST credit for a purchase that relates to making financial supplies.
Limited registration entity
If you are a non-resident you may choose to be a limited registration entity for GST purposes if you have made, or intend to make, one or more inbound intangible consumer sales. If you choose to be a limited registration entity you are not entitled to GST credits for purchases, and you must have quarterly tax periods.
You can choose to use the margin scheme when you make a taxable sale of property. GST to be paid is one-eleventh of the margin for the sale and not the normal one-eleventh of the sale price. However, you cannot use the margin scheme in certain circumstances, for example, if you purchase the property through a taxable sale where the GST was worked out without applying the margin scheme.
You cannot claim a GST credit for a purchase made under the margin scheme even though you may have paid GST on the margin.
Payment for GST purposes is anything you receive for providing goods, services or anything else. Payment is usually money, but can be in the form of other goods or services, as in the case of barter transactions. Payment may also be made by way of refraining from doing something.
Property (real property)
- an interest or right over land
- a personal right to call for or be granted any interest in or right over land
- a licence to occupy land or any other contractual right exercisable over or in relation to land.
For GST, a purchase or acquisition includes the acquisition of goods or services such as trading stock, a lease, consumables and importations.
Recipient-created tax invoices
In most cases, tax invoices are issued by the supplier. However, in special cases, you, as the purchaser or recipient of the goods or services, may issue yourself a tax invoice. This is known as a recipient-created tax invoice (RCTI).
Find out more:
Reduced-credit acquisitions are purchases (acquisitions) of some types of things that relate to making input-taxed financial supplies. You can claim a reduced GST credit on reduced-credit acquisitions. The reduced GST credit is generally 75% of the full GST credit to which you would otherwise be entitled, although in some instances relating to recognised trust schemes, the reduced credit is 55% of the full GST credit.
Sale of a business as a going concern
A business is sold as a going concern if:
- all of the things required for the continued operation of the enterprise are supplied to the buyer
- the supplier carries on the enterprise until it is sold.
For GST, a sale or supply includes:
- a sale of goods or services
- a lease of premises
- hire of equipment
- providing advice
- exporting goods.
A sale will be any of the following:
The self-assessment system for indirect taxes began on 1 July 2012. When you lodge an activity statement for tax periods that begin on or after that date, you will still need to include the indirect tax payable amounts and any credits that make up your net amount. The Commissioner is taken to have made an assessment based on that net amount on the day you lodge the return. Your return is treated as a notice of assessment signed by the Commissioner and issued on the day the return is lodged.
Sales of goods and services that must have GST included in their price are referred to as 'taxable sales'.
You make a taxable sale if you are registered or required to be registered for GST and:
- you make the sale for payment
- you make the sale in the course or furtherance of a business (enterprise) you carry on
- the sale is 'connected with Australia'.
If you make a taxable sale you must include GST in your price and you are entitled to claim credits for the GST in the price of your 'inputs' (the goods or services you used to make the goods or services you sold).
A tax invoice is a document generally issued by the seller. It shows the price of a sale, indicating whether it includes GST, and may show the amount of GST. You must have a tax invoice before you can claim a GST credit on your activity statement for purchases of more than $82.50 (including GST).
- GSTR 2013/1 Goods and services tax: tax invoices
- GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover
For GST purposes a tax period may be a month, a quarter or a year and refers to how frequently you lodge your activity statements.
There are a number of terms that may be unfamiliar to many people, or have a specific meaning in GST law.