UTS homeUTS:Tax: E-manual

 

Alphabetical Listing

A     B    C    D    E    F    G    H    I    J    K    L    M    N    O    P    Q    R    S    T    U    V    W    X    Y    Z

Accommodation

A supply of accommodation to tertiary students is a supply of non-commercial accommodation, as it is specifically excluded from the definition of commercial residential accommodation.

The supply of residential accommodation for tertiary students is input taxed.

Input taxed goods & services do not have GST charged on them. UTS is not entitled to claim an input tax credit on acquisitions (for GST paid) relating to these supplies.

Although residential accommodation is input taxed, any supply of food included as part of the accommodation fee is taxable and an apportionment of the input tax credits must be made.

Accommodation provided to non-students in college style accommodation will be taxable. Long term accommodation (in excess of 28 days) will be input taxed.

Accruals Based Accounting (Non-cash accounting)

It is mandatory for UTS to account for GST under the accruals basis of accounting.

Under Accrual Accounting  - income (and tax) is accounted for when the right to receive it comes into being. It is not actual receipt, but the right to receive that is important.

Acupuncture

Acupuncture services are listed as being GST-free if performed by a recognized professional.

For additional details please refer to the reference below.

Reference: s.38-10

Administrative Services

The following administrative services are GST free:

  • program changes;
  • enrolment processing or services;
  • issue of identity cards;
  • assessment of students and examination arrangements;
  • processing academic (including duplicate degree copies) and sporting results;
  • overdue charges or late payment charges;
  • preparation and printing of student progress reports;
  • arrangement of meetings with students;
  • record keeping;
  • administration of the library;
  • administration of a textbook scheme;
  • administration of the sale, lease or hire of faculty equipment to students as part of the supply of an education course to the students;
  • administration of the supply of course materials;
  • graduation degrees / diplomas / certificates;
  • course reinstatements; and
  • charges for HECS statements.

Adjustments Notes

An adjustment note is similar to a tax invoice that arises from an adjustment event relating to a taxable supply.

Adjustments may be required in the following situations:

  • Cancelled sales;
  • Returned goods;
  • Discounts / part refunds / rebates applied;
  • An error in the original invoice;
  • An error in delivery affecting the transactional value; and
  • A change in the GST status of the transaction.

For adjustments between $55 and $1,000 the following information is required to meet the requirements of a Tax Adjustment Note:

  • The words “Adjustment Note”;
  • The supplier’s ABN;
  • Supplier’s name;
  • Issue date of the Adjustment Note;
  • Description of the need for the adjustment;
  • The price on the original Tax Invoice and the adjust price of the transaction; and
  • The amount of the adjustment to GST and a statement to the effect that the adjusted price includes GST.

For adjustments over $1,000 the following additional details are required on the Adjustment Note:

  • Customer’s name; and
  • Customer’s address and ABN if address not shown.

GST Ruling 2000/1 (and its addendum GSTR 2000/1A) provide additional detail on Adjustment Notes.

If an Adjustment Note is required, a copy should be promptly forwarded to the FSU,  Tax & Insurance section.

Australian Business Number (ABN)

The UTS ABN is 77 257 686 961.

To check the accuracy of an ABN visit the Aust Government List in Summary as Business Entry Point.

It is compulsory for all contractors, and goods and service providers to have an ABN before any work commences for UTS. The ABN should be listed on the invoice or tax invoice provided to UTS.

An invoice is supplied if the ABN registrant is ABN registered only. A tax invoice is supplied if the ABN registrant is ABN and GST registered. Only GST registered ABN registrants can and are obliged to charge GST if the goods or services are taxable. ABN only registrants cannot charge GST.

Adult & Community Education ("ACE")

ACE courses, may be determined by the Commonwealth Education Minister and are likely to add to a student’s employment related skills are GST-free.

Most ACE courses are not subject to a Ministerial determination.  An explanation of ACE courses is also provided in GST Ruling 2000/27. Please also refer to the short course classification flowchart.

Reference: s. 195-1 of the GST Act.

BAS Reconciliation

The Business Activity Statement (“BAS”) is completed on a monthly basis in the Financial Services Unit and are submitted electronically to the Australian Taxation Office. The BAS is lodged on 21st of the following month.

Barter, In Kind Contributions, non-monetary transactions

Where supplies are taxable supplies, each party will be liable to GST on the supplies it makes. The amount of GST is based on the market value of the Supply.

No GST will be payable where the consideration for the relevant supplies are made in the same month and have the same GST inclusive market value.

Reference: GSTR 2001/6 focussed on GST and Non-Monetary Consideration.

Cash Prizes

ATO Ruling GSTR 2002/3 discussed prizes in a monetary or non-monetary form.

Monetary & non-monetary prizes (eg, a calculator or a book voucher) provided to students for (say) outstanding academic performance are GST-free as the student did not make any payment in connection with the supply.

Child Care

Child care services are GST-free under the legislation if the childcare supplier is a registered carer or an approved child care service. The terms 'registered carer' and 'approved child care service' are defined in section 3 of the A New Tax System (Family Assistance) (Administration) Act 1999. Paragraph (b) of the definition of an 'approved child care service' includes an approved family day care service.

Reference: ss.38-140 & 38-145 of the GST Act.

Chinese Herbal Medicine

Chinese herbal medicine is listed in the GST legislation as being a GST-free service.

Reference: s.38-10 of the GST Act.

Course Materials

The supply of 'course materials'  as defined in section 195 of the GST Act for a GST-free course is GST-free.

Course materials are materials or items supplied by the University to students.

Course materials are defined as materials that the provider of the course supplies that are necessarily consumed or transformed by the students undertaking the course, for the purpose of the course.

This requirement infers that the materials must be essential or fundamental for the student to use up or convert in undertaking the course. If the student purchases materials directly from a third party such as a stationer, the supply is not the supply of course materials and GST applies.

The following are examples of course materials:

  • photocopied or printed educational materials that specifically relate to the course;
  • taped lectures that specifically relate to a course;
  • course notes for a particular course;
  • unexposed film and developing chemicals;
  • art supplies;
  • chemicals used in a chemistry class;
  • work books that provide space for students to complete exercises, etc.; and
  • consumable stationery items to the extent to which they are necessary for the course.

The following are examples of materials that are not course materials:

– textbooks;

– binders used for assignments

– calculators

– sporting equipment

– musical instruments;

– computers

Reference: GST Ruling 2001/1 Paragraphs 81 to 85

Club Membership of unincorporated clubs

Unincorporated clubs need to assess their activities in view of the GST legislation. If registered for GST, they are obligated to change GST on their subscription fees.

Donations / Gifts

A gift, is not defined in the GST Act and takes its ordinary meaning. A gift is made when the donor does not receive a material benefit. Please refer to “Sponsorships / Scholarships” for comments on the term “material benefit”.

The GST Act specifically excludes a gift made to a non-profit body (eg UTS) from being consideration for a supply.

Therefore gifts to UTS are not subject to GST and may be income tax deductible for the donor.

Reference: Paragraph 9-15(3)(b) and paragraph 49 of GSTR 2000/11

Educational Course

A supply is an educational course as defined in the GST legislation as:

  • A *pre school course; or
  • A *primary school course, or
  • A *secondary school course, pr
  • A *tertiary course; or
  • A *Master’s or Doctoral Course, or
  • An *adult and community education course (see above), or
  • An *English language course for overseas students, or
  • A *first aid or life saving course, or
  • A *professional or trade course, or
  • A *tertiary residential college course

* The above terms are defined in the GST legislation.

Reference: s.195-1 of the GST Act

Exports

As GST is primarily a tax on consumption in Australia, it is not intended to apply to things that are not consumed in Australia, such as exports. Exports are therefore GST-free providing certain conditions are met.

Goods and services exported within 60 days of invoice or payment are GST-free.

Reference: s.38-185(1) of the GST Act.

See also “overseas transactions”.

Field Trips & Excursions

Field trips and excursions are GST-free if they relate to the curriculum of an educational course and they are not predominately recreational in nature.

Any supply of accommodation as part of a field trip or excursion is subject to the GST.

Any food supplied as part of an excursion is subject to GST (if taxable).

Reference section 38-85 of the GST Act.

Fines & Penalties

Fines and penalties are not treated as consideration for any supply, and are not subject to GST.

Compulsory taxes and regulatory charges are not subject to GST. Fees for service, particularly in those areas where a government is competing with the private sector, are generally taxable.

Reference: s.81(5) of the GST Act.

Grants

Grants that are conditional upon something being created for the grantor in return for reviewing the grant are GST taxable. Only grants that are completely unconditional will be GST free.

If there is no obligation tied to the grant and no other supply to be provided by the University in return for the grant, no GST will be payable. Grants that have no GST will be treated like donations or gifts.

Grants, donations or subsidies paid to the University without any strings or conditions are not subject to GST.

However, if a grant is paid to the University for a specific purpose (for example, the production of a report), or is subject to conditions, GST will apply.

The existence of a contract, agreement or a memorandum of understanding often indicates that a grant is subject to GST. Each and every grant needs to be reviewed on its own merits to ascertain whether it is subject to GST or not.

Note: GST will not apply if the only condition imposed is purely peripheral to the grant. For example, a grant may simply be conditional on the University providing information on how the grant is being spent. The Tax Office considers that this does not necessarily mean that the grant is consideration for the information unless the grantor gets some benefit from the information, or the grant is made for the specific purpose of getting that information. Such grant conditions need to be reviewed to ascertain whether GST applies.

Reference: GST Ruling 2000/11 Grant of Financial Assistance.

GST & FBT Interaction

From the commencement of GST on 1 July 2000, two categories of Fringe Benefits Tax (FBT) were created.

Type 1 benefits represent the total value of fringe benefits provided to employees or their associates, where the provider of the benefit is entitled to an input taxed credit, at the time the benefit was acquired. This category includes GST creditable benefits.

When calculating the FBT liability, the aggregate of Type 1 benefits is grossed-up by 2.1292 and multiplied by the FBT rate of 48.5%.

Type 2 benefits are other benefits not included in Type 1. Input tax credits are not available for Type 2 benefits.

When calculating the FBT liability, the aggregate of Type 2 benefits is grossed-up by 1.9417 and multiplied by the FBT rate of 48.5%.

GST Ruling 2001/3 explains when fringe benefits are subject to GST, Note  GST Ruling 2001/3A addendum is also available.

GST Overview

The Goods and Services Tax (GST) is a broadly based consumption tax that aims to tax private final consumption expenditure. GST is a tax that is charged on the supply of goods and services in Australia and on goods imported into Australia. The GST commenced on 1 July 2000.

The GST does not apply to exports of goods and services consumed outside Australia.

GST is charged at a rate of 10% on the value of the supply.

Some supplies are GST-free and others are input taxed, which means that no GST will be charged on the supplies.

Tax is paid at each step along the chain of transactions until the end user is reached. Businesses making taxable supplies will receive a GST credit on inputs (input taxed credits). If the GST charged by the business on the goods and services it supplies (the output tax) exceeds the input tax, then it only pays the net amount.

Input tax credits are not available for anything acquired or imported for private consumption.

GST Contract Clauses

Taxable contracts silent on GST should include a clause similar to the following:

"In the event that any goods and services tax becomes payable in respect of supplies made under this contract, the consideration payable hereunder shall be increased by the amount of tax imposed and the supplier shall be entitled to recover the increased amount from the recipient."

This clause is illustrative only. It is recommended that contracts should be individually reviewed by the UTS Legal Section.

GST Act

The primary GST legislation is the A New Tax System (Goods and Services) Tax Act 1999, herein referred to as the GST Act.

Imports

Imports, subject to few exceptions, are generally subject to GST.

GST is payable on 'taxable importations'. The amount of GST is 10% of the 'value of the taxable importation'. This is the sum of the customs value of the goods, the cost of international transport of the goods to their place of consignment, plus insurance to the extent that these costs are not already included in the customs value of the goods, equals the customs duty tax payable in respect of the local entry of the goods.

Importers pay GST on taxable importations irrespective of whether or not they are registered for GST or carrying on an enterprise. GST is paid to the Australian Customs  Service in the same manner that customs duty is paid (unless deferral arrangements apply, in which case it is taken into account in determining the 'net amount' for a tax period under the Business Activity Statement (BAS)).

Importers are entitled to input tax credits where the goods are imported for a creditable purpose, the importation is a taxable importation and the importer is registered for GST. The amount of the input tax credit is equal to the amount of GST payable on the taxable importation, unless the goods have only been imported partly for a creditable purpose, in which case the input tax credit is apportioned.

Input Tax Goods

The supplier of input taxed goods does not pay GST on the supply and is not entitled to an input taxed credit (that is, credit for GST paid) on the things acquired to make the supply. Some examples are:-

  • financial services, except exported financial services that are GST-free;
  • residential rents and the supply of residential premises other than of a new house;
  • the subsequent supply of precious metal after the first supply of the precious metal.

Internal Transactions

Transactions between two or more faculties or management units of UTS are not subject to GST. As a business entity does not tax itself.

Norfolk Island

Norfolk Island is an external territory of Australia. External territories are beyond the scope of the GST Act and Income Tax Assessment Act. Goods and services purchased from Norfolk Island businesses will not have GST imposed nor any input tax credit claimable by UTS.

References: GSTR 2000/31.

On-charging or recharacterisation of expenses

The ATO considers that transactions lose their characterization as they move along the supply chain.

For example, if a lessor of a property pays stamp duty to the Office of State Revenue, GST is not payable as it is specifically prescribed as GST-free under s.81-5 of the GST Act. However, if the lessee oncharges the stamp duty to the lessee, GST is payable on the stamp duty. The ATO’s rationale is that the character of the expenditure has changed as the stamp duty has been converted to a cost to be passed on. In the hands of the lessee the amount of stamp duty is simply part of the cost of rental.

GST would not apply however, if the stamp duty was paid on behalf of the lessee. In this way the lessor would be reimbursed or recovering an expense for the lessee.

Reference: GSTR 2002/2 paragraphs 191 – 197 

Overseas Transactions

A supply between two Australian businesses will be GST-free if the supply is made to the recipient who is not Australian.

Reference: s.38-190(4) of the GST Act.

Petty Cash

A downloadable GST compliant Petty Cash form is available

All petty cash reimbursements should be supported with either a receipt or tax invoice. For net amounts over $50 ($55 with GST included) a tax invoice must be attached to the petty cash docket. This tax invoice should have a valid ABN included .

For amounts under $55 a receipt or ticket etc should be attached. For UTS to correctly claim GST it needs a tax invoice for transactions over $55. If there is no tax invoice attached, then the purchase will costs 10% more (as UTS does not get the benefit of the GST paid).

GST-free items such as fresh food need to be shown separately on the petty cash docket.

Please ensure that all petty cash dockets have the appropriate receipts or tax invoice.

These tax guidelines are meant to supplement the existing petty cash rules not replace them.

Pilates

Pilates is not recognised as a prescribed supply under the terms of section S38.10 of the GST Act. Consequently pilate classes are subject to GST.

Related Entities; AccessUTS Limited, Insearch Limited, UTS Union Limited & UTS Student Association

The above named entities are not grouped with UTS for GST purposes. GST should be imposed on the sale of services to these entities.

Record Keeping

For GST purposes records are required to be maintained for 5 years after the transaction has completed.

Reference: s.70 of the Taxation Administration Act 1953.

Reimbursement of staff purchases for UTS

Reimbursements are covered by Division 111 of the GST Act. UTS will be entitled to an input tax credit for the GST paid, if:

  • the employee incurs the expense in the course of carrying on the business of the university;
  • the expense is reimbursed by UTS;
  • the employee obtains a tax invoice for expenses where the GST exclusive value is $75 or more. If the GST exclusive value is less than $75, evidence of purchase, such as a cash register docket is required.

The University can claim input tax credits where it purchases uniforms, tools and equipment needed by its employees to do their job.

If the employee makes the purchase on his or her own account, the employee cannot claim input tax credits for the GST on the purchase because they are not carrying on an enterprise.  Nor could the University, unless the employee was acting as its agent in making the purchase.

However, in certain circumstances, the University can claim input tax credits if it reimburses employees or agents (this does not include students) for expenses they incur that are directly related to the performance of their duties.  In addition, where there is no direct relationship to work duties, input tax credits can nevertheless be claimed if:

  1. The University reimburses an employee, or an associate of the employee, for  expenses incurred by the employee or the associate; and
  2. The reimbursement is a fringe benefit (or an exempt fringe benefit) under the FBT legislation.

The University’s entitlement to the input tax credit will be determined as if the University had incurred the expense due to the rules of agency.

The amount of the input tax credit is 1/11th of the amount of the reimbursement.  To enable the University to claim the input tax credit, the employee, etc will need to obtain and provide the University with a tax invoice for the acquisition that they made.  However, adequate documentation will be required if the acquisition was for $75 or less, excluding GST.  The tax invoice will be effective even if the employee, not the University, is shown as the recipient. 

These rules also apply where an employer directly pays the work-related expenses of an employee.  This is treated in the same way as a reimbursement.

Rounding of GST

The rounding rule is to round down to the nearest whole cent below half a cent; round up to the nearest whole cent from half a cent.

Reference: ATO media release (Nat 2000/36) of 19 April 2000.

Scholarships

Please see Sponsorships and Scholarships (below). 

Seminars & Breakfast Meetings

The attendance at seminars & breakfast meetings are not an educational course and are subject to GST.

Services

Services or (activities) are not specifically defined in the legislation and as such retain the meaning from common parliance.

Short Courses are GST free if:

  1. Educational courses, that is part of a tertiary, master’s or doctoral course (local & overseas students), or
  2. University preparation, post high school and AEP; or
  3. A special education course, or
  4. An English as a second language course for overseas students, or
  5. A professional or trade course (essential prerequisite for entry to a profession or trade) or
  6. An adult or community education course likely to add to employment related skills.

Please refer to the short course classification flow chart.

Short Courses are subject to GST if they are:

  1. Hobby, personal development or recreational courses
  2. Continuing professional development courses to maintain membership of a professional body
  3. Short occupational courses to maintain skills and
  4. A course for a qualification which may be required by a particular employer or group of employers, for example, a motor drivers license for a courier.

Special Education Courses

A course of education is GST-free if it provides special programs designed specifically for children with disabilities or students with disabilities (or both) and is supplied at:-

  • A centre conducted by or on behalf of a State or Territory; or
  • Any other place that is not a school.

Sponsorships & Scholarships

Funding may be received from external parties, such as industry association scholarship. The funds may be provided in exchange for "material" naming rights. This type of sponsorship / scholarship is subject to GST as promotional services are provided for consideration.

If however, the naming rights are not considered to be a “material benefit” to the donor or party providing the scholarship (eg a small acknowledgement), the funding may be considered to be income tax deductible donation (as UTS is a registered charity for income tax purposes.) and not subject to GST.

A “material benefit” is defined in GST Ruling 2000/11 (at paragraph 66) as being beyond the mere recognition of the benefit being given.  If no material benefit is provided to the donor, the funding is outside the scope of the GST legislation.

The Australian Taxation Office has issued Class Rulings on the assessability/exemption of income tax recipients of scholarships.  Please see Class Ruling CR2004/95.

Suppliers without an ABN

Please refer to “ABN” above.

Tax Decision-making

Tax decision-making has been centralised in the Financial Services Unit. Please contact either Sadhna Sharma (2874) or Gary Laker (extension 4670) to discuss tax related issues.

Tax Invoice

An input tax credit for a creditable acquisition cannot be claimed unless the recipient (that is, UTS) holds a valid 'tax invoice' at the time it lodges its GST return for the tax period to which the credit is attributable . If this requirement is not satisfied, the credit claim will be deferred until the tax period for which the requirement is satisfied .

A tax invoice can only be issued for a taxable supply. The tax invoice must be issued by the supplier, except in the case of 'recipient created' tax invoice. If the recipient requests a tax invoice from the supplier, the supplier must issue it within 28 days after the request .

If the supplier refuses to issue a tax invoice in accordance with the recipient's request, the recipient may apply to the Australian Tax Office to investigate the matter, giving full details of the transaction. The recipient may also apply for a determination either:

(1) that a tax invoice is not required in the circumstances; or

(2) that such documentation as the recipient holds can be treated as a tax invoice . Penalties apply for failing to issue a tax invoice.

An example of a tax invoice is attached.

Text Books

Textbooks are not (GST-free) course materials and are therefore subject to GST.

The Educational Textbook Subsidy Scheme (ETSS) was introduced to mitigate the increase of the price of educational textbooks as a result of the introduction of the Goods and Services Tax (GST) on 1 July 2000. The subsidy is to assist students (and/or their parents/guardians) studying at Australian educational institutions. The Commonwealth Department of Education, Science and Training (DEST) administers the scheme.

The administration of the textbook scheme is GST-free as it is directly related to the supply of a GST-free education course.

The subsidy is capped at eight percent of the retail purchase price of textbooks

Travel Diary

A travel diaries is required whenever:

  • An employee is away from home (within Australia) for more than 5 consecutive nights and the purpose of the travel is not exclusively in the course of employment. For example the first week was work related and the second week was as a vacation.
  • Whenever UTS pays for overseas employee travel and accommodation.

A copy of the travel diary is attached.

The travel acquittance and travel diary should be attached and sent to:

Accounts Payable Supervisor FSU,
Level 6, Building 10, Fairfax Building, 235 Jones St, Ultimo 2007.

If sufficient details are available the travel diary can be prepared in advance. It needs to be signed after the trip by the traveller.

A detailed daily conference schedule will suffice.

The ATO advise, that in respect of sabbaticals, entries are expected on a regular basis, at least once per week.

It is important to note the purpose of the travel (ie, business) and that the travel diary is signed by the employee traveller. There is no need to sign after each entry.

Withholding Tax (Pay As You Go)

Please refer to ABN” above.

There is a requirement to withhold 48.5% on suppliers who do not provide an ABN. The exemptions to withholding are:-

  • The supply is made in the supplier’s private capacity, or as part of a hobby;
  • The payment is exempt income for the supplier (for example the supplier is a non-profit supplier)
  • The payment is to a non-resident who is not carrying on business in Australia or through an agent in Australia; or
  • The supplier is not an enterprise they have no expectation of profit or gain.

If these exemptions apply, please contact the Tax & Insurance Officer before using the attached declaration.

However, UTS has a requirement that an ABN is required before any work commences.

Therefore withholding tax should not be required.

Reference: TR 2002/9