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  • Examples

    You need to report sales and purchases of second-hand goods on your activity statement in accordance with the instructions at GST – completing your activity statement (NAT 7392). The examples below demonstrate how to do this using the:

    Accounts method

    Example: Using the accounts method

    Scott is a second-hand goods dealer who purchases second-hand goods that are eligible for GST credits under the global accounting method. Scott accounts for GST on a cash basis. Scott also purchases second-hand goods that he divides before selling.

    Scott uses the global accounting method so that he doesn't have to keep records of what goods have been divided before selling. Scott keeps only one set of records to determine the amount of GST payable at the end of each tax period. He also receives full payment at the time of making each sale.

    First reporting period

    Scott has the following transactions for the first reporting period:

    • purchases of $9,900, of which one-eleventh (that is, $900) is available as GST credits
    • sales of $8,800, of which one-eleventh (that is, $800) is GST payable on sales.

    At the end of the tax period, Scott works out any GST liability by offsetting his total available credits of $900 against his total GST payable of $800. Scott doesn't have to pay any GST on sales of second-hand goods as his total credits ($900) are more than his total GST payable ($800).

    However, Scott is still required to complete and lodge his activity statement showing the purchases and sales for the relevant reporting period.

    Scott carries the credit balance of $100 ($900 − $800) over to the next reporting period.

    Scott would report the following amounts on his activity statement:

    • $8,800 at G1
    • $9,900 at G11.

    Since the available credits are more than the GST payable on sales, Scott would not report any amount for the sale of second-hand goods at 1A.

    Scott would not report any amount for GST credits at 1B.

    Second reporting period

    Scott has the following transactions for the next tax period:

    • purchases of $2,200, of which one-eleventh (that is, $200) is added to his available credits, and
    • sales of $13,200, of which one-eleventh (that is, $1,200) is GST payable.

    Scott has an opening credit balance of $100, carried over from the last reporting period.

    At the end of the reporting period, Scott works out any GST liability by offsetting his total credits of $300 (that is, $200 + $100) against his total GST payable on sales of $1,200. Scott has to pay $900 GST as his total GST payable on sales ($1,200) is more than his total available credits ($300). Scott is required to complete and lodge his activity statement showing the purchases and sales for the reporting period, as well as calculating the amount of GST payable.

    Scott would report the following amounts on his activity statement:

    • $13,200 at G1
    • $2,200 at G11.

    Since the available credits are less than the GST payable on sales, Scott would report $900 ($1,200 − $300) at 1A.

    Scott would not report anything at 1B.

    End of example

    Calculation worksheet method

    Example: Using the calculation worksheet method

    Scott is a second-hand goods dealer who purchases second-hand goods that are eligible for GST credits under the global accounting method. Scott accounts for GST on a cash basis. Scott also purchases second-hand goods that he divides before selling.

    Scott uses the global accounting method so that he doesn't have to keep records of what goods have been divided before selling. Scott keeps only one set of records to determine the amount of GST payable at the end of each tax period. He also receives full payment at the time of making each sale.

    First reporting period

    Scott has the following transactions for the first reporting period:

    • purchases of $9,900, of which one-eleventh (that is, $900) is available as GST credits
    • sales of $8,800, of which one-eleventh (that is, $800) is GST payable on sales.

    Scott reports the following amounts on his calculation worksheet:

    • $8,800 at G1
    • $9,900 at G11
    • $1,100 at G7 = G11 ($9,900) + G18 ($0) − G1 ($8,800).

    The amount Scott reports at G7 is the amount Scott will need to report at G18 for the next period.

    Scott has no GST or GST credits to report at 1A and 1B.

    Second reporting period

    Scott has the following transactions for the next tax period:

    • purchases of $2,200, of which one-eleventh (that is, $200) is added to his available credits, and
    • sales of $13,200, of which one-eleventh (that is, $1,200) is GST payable.

    Scott reports the following amounts on his calculation worksheet:

    • $13,200 at G1
    • $2,200 at G11
    • $1,100 at G18 (carried forward credit of $100 × 11).

    Scott does not have to report an amount at G7 as amounts reported at G11 and G18 do not together exceed the amount reported at G1. Accordingly, Scott will not report an amount at G18 in the next reporting period.

    After completing the calculation worksheet, Scott will find that the amount he has to report at 1A is $900. Scott would not report anything at 1B.

    End of example

    See also:

    • How to complete your activity statement
    • GSTR 2005/3 Goods and services tax: arrangements of the kind described in Taxpayer Alert TA 2004/9 – exploitation of the second-hand goods provisions to obtain input tax credits
    • GSTR 2000/8 Goods and services tax: special credit for sales tax paid on stock
    • GSTD 2000/2 Goods and services tax: can you claim input tax credits under Subdivision 66-A of the A New Tax System (Goods and Services Tax) Act 1999 for goods that have been incorporated into second-hand goods prior to 1 July 2000?
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      Last modified: 25 May 2017QC 17481