Edited version of private ruling

Authorisation Number: 1011497814237

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Ruling

Subject: GST and Simplified Accounting System (SAM)

Question

Are you eligible to use the simplified goods and services tax (GST) accounting method (SAM), known as the Stock Purchases Method, for your business?

Answer: No.

You are not eligible to use the simplified GST accounting method (SAM), known as the Stock Purchases Method, for your business as this method is not the approved method for a takeaway food business. The Snapshot Method is the appropriate recording method for your business.

Relevant facts and circumstances

You operate a take-away fast food outlet.

You commenced operating several years ago.

You have been registered for the GST from the date of commencement of your business.

You have been using a cash method of accounting utilising receipts and purchase invoices.

During the financial year ended 30 June 2010 your turnover was less than $2 million.

You use the cash accounting method for reporting income tax.

Your business sells both taxable and GST-free food items.

Your business converts some of the GST-free food items you purchase into taxable products which are then sold.

You do not have an adequate point of sale cash register with which to identify and record your taxable and GST-free sales.

You are looking to purchase the appropriate point-of-sale equipment for your business in the near future.

You have requested the Commissioner to permit you to use the Stock Purchases Method for accounting for GST.

Decision

According to paragraph 123-10(1)(a) of A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you may choose to apply a SAM if you are a retailer of the kind to whom the method is available.

You are eligible to use SAM if:

· you are registered for GST

· you are a retailer who sells both taxable and GST-free food at the same premises

· your annual turnover is not more than the relevant threshold of $1 million for business norms method and $2 million for all other methods, and

· you do not have adequate point-of sale equipment to identify and record your mix of taxable and GST-free sales.

There are four methods that apply to different types of food retailers namely:

Business norms method for convenience stores, cake shops, continental delicatessens, fresh fish retailers who sell cooked fish, hot bread shops, pharmacies that sell food and health food shops.

Stock purchases method for grocers and supermarkets, convenience stores and milk bars, video hire outlets, health food shops, continental delicatessens, butchers, service stations, newsagents and greengrocers. This method is used by resellers who purchase products and resell them in an unchanged form. You cannot use this method if you buy GST-free ingredients and convert them into taxable items.

Snapshot method for grocers and supermarkets, convenience stores and milk bars, video hire outlets, fish and chips shops, health food shops, continental delicatessens, butchers, cake shops, hot bread shops or bakeries, dine-in and takeaway restaurants, sandwich bars, kiosks and canteens, tuckshops that are not input taxed. This method is used by converters and resellers who purchase GST-free ingredients and convert them into taxable items.

Sales percentage method for supermarkets and convenience stores that have adequate point-of-sale equipment and only convert a minimal amount of goods.

In your case, you are registered for GST; you sell both taxable and GST-free food at the same premises; your annual turnover is below $2 million; and you do not have adequate point-of-sale equipment to identify and record goods that are taxable and GST-free. As you are a retailer of a kind to whom SAM is available, paragraph 123-10(1)(a) of the GST Act is satisfied. Therefore, you are eligible to use SAM.

The appropriate method that you should apply is the Snapshot Method. Details on how to use this method are discussed in the ATO publication NAT 3185 (Simplified GST accounting methods),, which is available to download from our website. You do not qualify to use the Stock Purchases method because your business is not included in the list of retailers identified by the Commissioner in his determination "A New Tax System (Goods and Services Tax)(Simplified GST Accounting Methods) Determination 2001".

Our decision that you are eligible to apply the Snapshot Method as your SAM has effect from the start of the tax period specified in your notice; viz. the date of your application. Please be aware that you cannot revoke this choice within 12 months after the day on which you accept the choice; you cannot make a further choice within 12 months after the day on which you revoke a previous choice; and you cannot choose to apply more than one method at the same time.

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