Show download pdf controls
  • Business norms method

    The business norms method is the simplest way for you to work out your GST.

    You can use this method if you meet all of the following conditions:

    • GST registration: Required
    • Required transactions: Sell both taxable and GST-free food
    • Turnover threshold: SAM turnover of $2 million or less
    • Point-of-sale equipment: Inadequate
    • Nature of business: Reseller or converter. Available to specified business types only (see Business norms table).

    For the business norms method, you estimate your GST-free sales and purchases by applying standard percentages (known as business norms) to your total sales and purchases for every tax period.

    Find out about:

    Standard percentages

    With this method of SAM you use the standard percentage rate of GST-free sales and purchases that applies to your type of business, rather than having to calculate the percentage. The percentages for the eligible business types are listed in the Business norms table below.

    To develop these standard percentages we consulted with industry representatives and gathered data directly from retailers. Each standard percentage is considered to be a business norm.

    We have defined each business type that can use the business norms method to clarify the conditions for eligibility.

    If your business type is not listed in the Business norms table you cannot use the business norms method.

    Table: Business norms

    Type of retailer

    GST-free sales of stock

    GST-free purchases of stock

    Cake shops

    2%

    95%

    Continental delicatessens

    85%

    90%

    Convenience stores that prepare takeaway food but do not sell fuel or alcohol

    22.5%

    30%

    Convenience stores that do not prepare takeaway food and do not sell fuel or alcohol

    30%

    30%

    Fresh fish retailers

    35%

    98%

    Health food shops

    35%

    35%

    Hot bread shops

    50%

    75%

    Pharmacies that also sell food

    Dispensary: non-claimable 98%

    Over the counter: 47.5%

    Nil

     2%

    Rural convenience stores

    Converters: 22.5%

    Non-converters: 30%

    30%

    30%

    Cake shops

    For the business norms method to apply, your retail cake shop:

    • has a cash flow which is mainly from sales of cakes, pastries, or similar products (as opposed to products of bakeries or bread shops), and
    • does not operate as a cafe.

    Continental delicatessens

    For the business norms method to apply, your delicatessen (or continental delicatessen):

    • mainly sells processed meats, small goods, salamis, cheeses and similar items
    • does not sell mostly grocery items, and
    • does not make any cafe or restaurant sales.

    You must meet these conditions even if your store is known as a 'deli' or delicatessen.

    Convenience stores that do not sell fuel or alcohol

    The standard percentages for convenience stores (also known as a mixed business, milk bar or deli) depend on whether you sell any takeaway food.

    Convenience stores that prepare takeaway food (converters)

    For the business norms method to apply, your convenience store:

    • sells mixed business product lines such as milk, bread, soft drinks, cigarettes, confectionery, ice-cream or groceries
    • does not sell fuel or alcoholic beverages, and
    • converts GST-free food into taxable food (for example, you prepare hamburgers or sandwiches).

    This definition does not include stores where the majority of sales are of takeaway food.

    Convenience stores that do not prepare takeaway food (non-converters)

    For the business norms method to apply, your store:

    • sells mixed business product lines such as milk, bread, soft drinks, cigarettes, confectionery, ice-cream or groceries
    • does not sell fuel or alcoholic beverages, and
    • only resells products (you do not prepare taxable food, such as hamburgers, from GST-free ingredients).

    If you convert GST-free food into taxable food (for example, you prepare hot cooked chickens and sandwiches) the business norms percentages for converters (above) apply.

    Fresh fish retailers

    For the business norms method to apply, your fresh fish retail shop:

    • mainly sells fresh fish and other seafood, with some sales of cooked fish and chips, and
    • is not a 'fish and chip shop' or takeaway that mainly sells cooked fish and chips with only a very small amount of fresh seafood sales.

    Health food shops

    For the business norms method to apply, your retail health food shop:

    • has a cash flow which is from sales of food, food supplements, vitamins and other health food products, and
    • does not convert GST-free food into taxable foods, (for example, you only resell items and don't prepare sandwiches or make your own health food bars).

    Hot bread shops

    For the business norms method to apply, your retail hot bread shop's cash flow is mainly from sales of bread (as opposed to shops that specialise mainly in cakes).

    Pharmacies that also sell food

    For the business norms method to apply, you operate a pharmacy with:

    • dispensary sales (for example claimable NHS prescriptions)
    • non-claimable private prescriptions and over-the-counter (OTC) sales, including food sales, and
    • a SAM turnover of $2 million or less after deducting dispensary sales of claimable NHS prescriptions, including any patient contributions.

    Your pharmacy must also:

    • be registered for GST
    • not have adequate point-of-sale equipment to identify and record your OTC mix of taxable and GST-free sales, even if your dispensary systems (with your shopfront point-of-sale equipment) can identify and record your dispensary sales (for claimable NHS prescription), and
    • sell taxable and GST-free food from the same premises.

    If you meet all of the eligibility requirements, you can use the business norms percentages to estimate your GST-free sales and purchases at the end of each tax period, rather than having to record every transaction at the point of sale.

    Before applying the business norms percentages you must:

    • deduct the patient contribution for claimable NHS prescriptions from your total amount of sales (that your shopfront point-of-sale equipment has recorded)
    • identify the non-claimable dispensary and OTC components of your sales, and
    • apply the relevant business norms percentages to each component.

    These figures, plus the total of your claimable dispensary sales, will give you your total GST-free sales.

    Your dispensary sales of claimable NHS prescriptions, including any patient contributions, should be included in total sales at box G1 of your activity statement. All claimable NHS dispensary sales are GST-free, while all purchases of dispensary items (both claimable and non-claimable) are taxable.

    Rural convenience stores

    For the business norms method to apply, your rural convenience store (also known as a mixed business, milk bar or deli):

    • sells taxable and GST-free food from the same premises
    • derives its income mainly from the sale of 'mixed business' product lines (such as bread, milk, dairy products, cigarettes, confectionery, and grocery lines), but not where the majority of sales are of takeaway food items
    • does not sell alcoholic beverages, and
    • has a SAM turnover of $2 million or less after deducting any  
      • fuel sales, and
      • Australia Post agency business. 
       

    Your rural convenience store must also:

    • be registered for GST, and
    • not have point-of-sale equipment that can identify and record your mix of taxable and GST-free sales such as groceries, drinks etc (even if you have adequate point-of-sale equipment to identify and record your fuel or Australia Post agency business sales).

    Before applying the business norms percentages, you must:

    • deduct any fuel or Australia Post agency business sales from total sales
    • deduct any fuel or Australia Post agency business purchases from total purchases, and
    • apply the relevant business norm percentage for a:
      • converter, for example, you may convert some GST-free bread and fillings into sandwiches, or GST-free potatoes and fish into taxable fish and chips, or
      • reseller, that is, you do not prepare takeaways or hot food.
       

    Any fuel and/or Australia Post agency business sales should be included in total sales at box G1 of your activity statement.

    If you do not want to use the business norms method, you can use the stock purchases method (if you are a reseller) or the snapshot method (if you are a converter).

    Estimating your GST

    To estimate your GST-free sales:

    • work out your total stock sales for the tax period.
    • multiply your total stock sales by the percentage from the Business norms table that is relevant to your business. The result is your total GST-free sales.

    To estimate your GST-free purchases:

    • work out your total stock purchases for the tax period.
    • multiply your total stock purchases by the percentage from the Business norms table that is relevant to your business. The result is your total GST-free purchases.

    Example: Business norms method

    Carlo has a hot bread shop. His transactions include GST-free sales and GST-free purchases. He uses the business norms method to calculate his GST, applying the standard percentages (from the Business norms table) of 50% for his GST-free sales and 75% for his GST-free purchases.

    Using this method, Carlo works out his total sales for the period then takes 50% of that figure to arrive at his GST-free sales figure. He works out his total stock purchases then takes 75% of that figure to arrive at his GST-free purchases figure.

    Sales

     

     

    Total stock sales for tax period

    =

    $120,000

    GST-free sales (50% of $120,000)

    =

    $60,000

    Purchases

     

     

    Total stock purchases for tax period

    =

    $95,000

    GST-free purchases (75% of $95,000)

    =

    $71,250

     

    End of example

    See also:

      Last modified: 30 May 2017QC 16262