• ## Worked example

Andrew runs a supermarket in which he resells all his goods – he does not convert any GST-free goods into taxable products.

Andrew looks at his records to check his total stock purchases for quarters 1 and 2 and works out the percentage of GST-free purchases, based on a sample of two four-week periods (June–July). The percentage will be the same for GST-free sales.

Purchases

Andrew works out that his:

• total stock purchases for quarter 1 are \$203,000
• percentage of GST-free purchases is 49%
• total GST-free purchases for quarter 1 are \$99,470 (49% x \$203,000).

Sales

Andrew works out that his:

• total stock sales for quarter 1 are \$219,500
• percentage of GST-free sales will also be 49%
• total GST-free sales for quarter 1 are \$107,555 (49% x \$219,500).

Other quarters

Andrew works out that his:

• GST-free percentage is for quarter 2 is also 49%
• GST-free purchases for quarter 2 are \$105,350 (49% x \$215,000)
• GST-free sales for quarter 2 are \$122,500 (49% x \$250,000).

After examining his purchases for quarters 3 and 4, Andrew works out that 45% of his stock purchases are GST-free, rather than 49%. He works out his GST-free purchases and sales for quarters 3 and 4 using this new percentage.

Andrew records the results for these quarters, and for the whole year, in a summary (see the table Andrew's purchases and sales record for the whole year).

Andrew then chooses one of the following three options for calculating and reporting GST:

• calculating and reporting quarterly (or monthly)
• paying or claiming quarterly but lodging a report annually
• reporting annually and paying a GST instalment amount quarterly.

The following pages show what would happen if Andrew selected: