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Edited version of your private ruling
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Ruling
Subject: GST and Simplified Accounting Method
Question 1
Are you eligible to apply the business norms simplified accounting method to calculate GST for your store?
Answer
No
This ruling applies for the following periods:
N/A
The scheme commences on:
N/A
Relevant facts and circumstances
You operate a Takeaway Shop and Café style business.
Both businesses prepare takeaway and dine in food products.
Your sales are predominantly made up of takeaway food.
Your turnover is less than $2 million.
You do not have adequate point-of-sale equipment.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 123-1.
A New Tax System (Goods and Services Tax) Act 1999 Section 123-5.
Reasons for decision
Section 123-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), provides the Commissioner with the power to provide in writing an arrangement that specifies the type of retailer who can use a simplified accounting method and the methods for working out net amounts for those types of retailers. The Commissioner detailed the arrangements in a legislative determination, A New Tax System (Goods and Services Tax) (Simplified GST Accounting Methods) Determination 2001.
The written arrangement was subsequently reiterated in a series of ATO publications. The umbrella document is the publication Simplified GST accounting methods for food retailers. Fact sheets exist for each of the retail business types outlined under the business norms method.
Under the business norms method, retailers with a turnover of less than $2 million may apply. In addition the shop must be a retailer of the type defined in the table below to be eligible to use the percentages stipulated in the table, for GST-free sales and GST-free purchases of stock.
Business norms | ||
Type of retailer |
GST-free sales |
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% |
Healthfood shops |
35% |
35% |
Hot bread shops |
50% |
75% |
Pharmacies that also sell food |
Dispensary: non-claimable 98% |
Nil |
Rural convenience stores |
Converters: 22.5% |
30% |
You have advised that you are a retailer with a turnover of less than $2 million. Therefore, you are eligible to use the business norms method if your store appears in the table. As your store does not sell fuel or alcohol but does prepare takeaway food, you are eligible to use the method if your store is a convenience store as defined below.
According to the fact sheet Business norms percentages no.2 convenience stores that prepare takeaways, a convenience store (also known as a mixed business, milk bar or deli), derives its business income mainly from the sale of mixed business product lines (such as bread, milk, dairy products, cigarettes, confectionary and grocery lines).
The booklet Simplified GST accounting methods for food retailers NAT 3185-06-2011 states that a convenience store may also sell takeaway food, for example freshly prepared sandwiches. If it does sell takeaway food, but the takeaway food sales are not the main source of income for the business, it is a convenience store. On the other hand, if a business income is mainly from the sales of takeaway or dine-in food (such as a fish and chip shop) but also sells some mixed business product lines (for example, cigarettes, ice-creams, milk, bread and some grocery lines), it is not a convenience store.
You advised us that the sale of takeaway food is the main source of income for your store. Therefore, your store is not classified as a convenience store and you will not be able to use the business norms percentages for convenience stores that prepare takeaways.
For your information, if your store did not predominantly sell takeaway food and sold mostly mixed business product lines, you could then be eligible to use the business norms simplified accounting method. Alternatively, you may currently be able to use another simplified GST accounting method the snapshot method. Information on this method can be found on the ATO website.