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  • Snapshot method

    The snapshot method is similar to the stock purchases method except you have to measure GST-free sales as well as GST-free purchases.

    You can only use the snapshot 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 most food retailing businesses.

    You may be eligible to use the snapshot method if you operate a:

    • grocery shop or supermarket
    • convenience store or milk bar
    • video hire outlet
    • fish and chip shop
    • health food shop
    • continental delicatessen
    • butchery
    • cake shop
    • hot bread shop or bakery
    • restaurant (dine-in and takeaway)
    • sandwich bar
    • kiosk or canteen
    • tuckshop that is not input-taxed.

    This is not a complete list – there are other businesses that may be eligible.

    How it works

    There are three ways you can use the snapshot method:

    • Two sample periods – you reduce your administrative workload by choosing to estimate both your GST-free sales and purchases.
    • Every tax period – you work out your GST-free purchases accurately but estimate your sales.
    • The 5% GST-free stock estimation basis – you only track the GST-free goods that you purchase and resell (such as bottled water, pure fruit juice, milk or fresh fruit). This will reduce your administrative workload even further.

    If you think that taking a snapshot like this is suitable for your sales but not for your purchases, you can work out your actual GST-free purchases every tax period from your tax invoices.

    Two sample periods

    If you use this option, you can take a snapshot of your trading and use the results to estimate your GST-free sales and GST-free purchases. You need to do the snapshot twice a year to account for seasonal fluctuations in your trading patterns, ideally between both:

    • 1 June and 31 July (to cover the July to December tax periods)
    • 1 December and 31 January (to cover the January to June tax periods).

    If you start your business part way through the financial year, your first sample period should be in the first two months of trading. You do not need to wait for a later tax period to commence.

    To calculate the percentage of your GST-free trading, you must examine your sales over a continuous two-week period, and your purchases over a continuous four-week period (to make sure you account for irregular purchases).

    You need to record the amount and type of transaction (whether it is taxable or GST-free) for all of your stock purchases and sales.

    You also need to complete a daily worksheet detailing your calculations. At the end of the sample period, you should have recorded:

    • for sales:        
      • your total sales over two weeks
      • your total GST-free sales over two weeks
       
    • for purchases:        
      • your total stock purchases over four weeks
      • your total GST-free stock purchases over four weeks.
       

    From your sample period, you work out the GST-free percentage of your total sales and the GST-free percentage of your total stock purchases. You then use these percentages for each tax period until your next snapshot to calculate your GST-free amounts.

    Example: Snapshot method

    Maria is a convenience store owner who sells a variety of items, including groceries, newspapers, fresh fruit, vegetables, sandwiches and other takeaway food. She decides to use the snapshot method to calculate her GST-free sales and purchases.

    She examines her business sales for a two-week continuous period and records the following:

    Sales

    Total sales for two weeks

    =

    $24,500

    Total GST-free sales for two weeks

    =

    $17,640

    Percentage of GST-free sales in total
    ($17,640 ÷ $24,500 × 100)

    =

    72%

    Maria uses this percentage to calculate her GST-free sales for each tax period until she takes the next snapshot.

    She also examines her business purchases for a four-week continuous period and records the following:

    Purchases

    Total stock purchases for four weeks

    =

    $19,750

    Total GST-free purchases for four weeks

    =

    $15,405

    Percentage of GST-free purchases in total
    ($15,405 ÷ $19,750 × 100)

    =

    78%

    Maria uses this percentage to calculate her GST-free purchases for each tax period until the next snapshot is taken.

    End of example

    See also:

    Every tax period

    If you believe the four-week snapshot of stock purchases does not accurately represent purchases for your tax periods, you can calculate your purchases every tax period from your suppliers' invoices in the normal way.

    You can still use the two-week snapshot method for estimating your GST-free sales, even if you choose not to use the snapshot method for your purchases. However, once you have chosen not to use the snapshot method for your purchases, you must continue to work out your actual purchases for the year.

    You must also maintain a worksheet detailing your calculations.

    See also:

    5% GST-free stock estimation basis

    Retailers of mainly taxable goods may be able to use the snapshot method with the 5% GST-free stock estimation basis for their GST-free sales.

    You can use this estimation basis for goods that you purchase GST-free and will sell GST-free (such as bottled water, pure fruit juice, milk or fresh fruit). If you buy GST-free goods that you will both resell and convert (for example, you might resell some plain milk GST-free but you might also convert some of it into taxable milkshakes), you should include only the proportion of goods you have sold GST-free.

    You may use this option if your past or projected trading patterns show that your GST-free stock sales don't make up more than 5% of your total stock sales.

    The following food retailers are likely to be able to use this estimation basis:

    • cafes and restaurants with takeaway sales of some GST-free items
    • other takeaway food retailers (such as fish and chip shops)
    • kiosks or canteens
    • tuckshops that are not input-taxed.

    If you are purely a reseller and not a converter, see 5% GST-free stock estimation basis under the Stock purchases method.

    Example: 5% GST-free stock estimation basis

    Vera's Diner has GST-free sales of $1,200 (made up of $600 of bottled water and $600 of milk).

    Vera's total sales are $30,000, so her GST-free stock sales are only 4% of this total.

    Vera can use this estimation basis because the percentage of her GST-free sales is less than 5%.

    End of example

    If you are eligible to use this option, follow these four steps:

    • Step 1 – for each product line that you will resell GST-free, record the net amount for its GST-free purchase (reduced by the amount converted into taxable goods).
    • Step 2 – apply your mark-up for each product line to your net GST-free purchase (from step 1) to work out your GST-free sales.
    • Step 3 – add up your estimated GST-free sales for each product line to calculate your total GST-free sales.
    • Step 4 – to work out your GST-free purchases, you will need to either do a snapshot of your purchases or work out your GST-free purchases every tax period.

    If your mark-up is the same for each product line, you don't have to separately record the totals for each product line. Only record the total amount for GST-free purchases. Apply your mark-up to this amount to calculate your GST-free sales.

    Example: Calculating GST-free sales

    Lee's Lunch Spot buys a number of GST-free products in the tax period. Lee examines her records and notes that her GST-free purchases for the tax period are bottled water ($500) and milk ($1,000).

    Lee converts $200 worth of the milk purchases into taxable milkshakes and resells $800 worth of this milk GST-free.

    Lee works out her GST-free sales as follows:

    • Step 1 – the GST-free product lines she bought GST-free and then resold were bottled water ($500 worth) and milk ($800 worth – $1,000 reduced by $200).
    • Step 2 – she applied mark-ups of 60% for bottled water ($500 + 60% = $800) and 30% for milk ($800 + 30% = $1,040).
    • Step 3 – her GST-free sales totalled $1,840 ($800 for bottled water + $1,040 for milk).
    End of example

    If you choose to use this option, your worksheet should show how you worked out your GST-free purchases and your GST-free sales for each tax period.

    See also:

      Last modified: 30 May 2017QC 16262