Registering for Goods and Services Tax

In Australia, businesses have to meet the following criteria before they can register for Goods and Services Tax:

The business must act as an enterprise and have a turnover in excess of $75,000 in each financial year (or $150,000 if the business is a non-profit organisation)
The business must act as an enterprise and project a turnover of $75,000 or more in the forthcoming financial year (or $150,000 if the business is a non-profit organisation)
The business must act as an enterprise and provide taxi travel as part of its services
GST registrations must be made through the Australian Tax Office. This can be done independently or by using a third-party service provider.

Making Payments

Business activity in Australia is recorded on Business Activity Statements (BAS) and for Goods and Services Tax purposes, these are returned to the Australian Tax Office on a quarterly basis unless the business turns over more than $200,000 in a financial year, in which case the statements are submitted on an annual basis.

Businesses must pay the full amount of tax at the time of any business purchase but registration allows them to claim back credits on any payments that have been made. Business Activity Statements highlight the amount of Goods and Services Tax paid on transactions and the amount being claimed back as tax credits.

Keeping Records

Record keeping is an integral part of managing Goods and Services Tax payments. To claim back tax credits successfully, you will need to present a valid tax invoice from your suppliers. Tax exemptions are applied to any individual products or services that cost less than $75. A valid tax invoice will contain the name of the supplier, their Australian Business Number and the price of the product or service including any Goods and Services Tax paid.

Invoices should be kept on record for five years after the date each Business activity Statement is lodged. The same invoices must be kept for five years for income tax return purposes. Understanding the basics of the tax can help businesses keep a tighter control on spending and ensure that they claim the credits they are entitled to.

Advocates assert that this system gets rid of the complicated income tax system of the United States, thinking that the value added tax is quite more efficient in bringing in more revenue, something that could be of great help to the economy. This is said to be a solution to the issue about lost online sales taxes, which occurred as a result of commerce being taken online and, in doing so, evaded policies mandated by the government on taxation of sales. With value added tax system, all sales have become taxed. So goods either sold at a brick and mortar shops or sold online are taxed. Most business transactions are now levied, and by business transactions we mean services and goods offered or vended. However, insurance services, some types of training and education, and loans are not covered by the VAT system.

This system provides extra income to pull down shortfall and to finance vital programs of the government for American citizens.

Nevertheless, levying on goods and supply sales can have negative effects, just so you thought that everything is good about it. There is always the other side of the coin. The system can be extensively regressive which means that when you put taxes on sold goods and services, you make them a bit more expensive than they actually are. And this creates a problem among people with less income because they are hit most negatively by higher prices of products.

Businesses find computations of value added tax terribly cumbersome and they do cost significantly. Since products have different prices, calculations must be done for each product. Business owners, of course, pass VAT and all the costs it incurs onto buyers.

All businesses are required by law to collect sales tax, so if you sell goods, products, or services, you are to impose taxes on them. Where consumers shoulder this tax, you are obliged to remit it to the government. The imposing of value added tax on goods and services is not a matter of your own discretion that you may or may not collect this tax, because this is your legal obligation. You can face litigation by not abiding by what was mandated. You are collecting value added tax and you are doing it on behalf of the state and you are obliged to turn the money in to the state on time.

For your information, nonetheless, not all states of the US charge sales tax. We are talking about New Hampshire, Alaska, Oregon, Delaware, and Montana.

Today, there are a lot of companies that sell items and advertise services online, and the problem with online business transactions is that the two parties, the seller and the buyer, may be in different locations, states, or even countries with different tax rules. The government has been sorting out this issue, but there is still no definite ruling regarding the matter, and different states have different legislation regarding sales tax collection of online products and services.

Value added tax is a convoluted matter and because of that you may opt for assistance to help you out with transactions involving sales tax. There are companies out there that help you ensure you do not encounter legal problems by elucidating which transactions are excepted from value added tax and which ones are charged. Expert advice from servicing firms is even more important during instances of large purchases. The complexity of sales tax rules becomes more relevant when making major business transactions such as purchasing real estate.

Despite the success of the Goods and Services Tax, observers still believe that the 10% charge applied on business and customer transactions has a series of economic and social implications. In particular, these concerns are levelled towards the end consumer who ultimately picks up the cost of Australian GST payments.

While business that are Goods and Services Tax registered can claim credits that see them reimbursed for any payments made, it is the everyday citizen who is already paying income tax on their earnings who continues to be penalised. Indeed, it could be easily argued that GST is simply a regressive tax that potentially targets low income earners and that the Australian Government is now consuming more of their earnings than ever.

Peter Costello, the former Treasurer of the Australian Government, certainly seems to believe that Goods and Services Tax is anything but regressive. During his tenure, which ran from 1996 to 2007, Costello argued that the abolition of state and territory taxes and their subsequent replacement had left consumers no better off or worse off than they originally were.

Consumer behaviour spiked dramatically in the months preceding the introduction of Goods and Service Tax, with many end users rushing out to purchase high-end consumer products that would become much more expensive as soon as the new tax system began. It is significant to note that Australian consumer spending and economic performance spiralled into negative growth during the first GST fiscal year.

Small businesses have also felt the impact of the new taxation system. Unlike consumers, a business that is registered for Goods and Services Tax can claim refunds from the Government in the shape of GST credits for any payments made under the new regime. Even so, small business owners claim that the increased cost of administration and continuous interaction with the Australian Tax Office is little more than the result of bureaucratic red tape.

Goods and Services Tax also had a negative impact on the Australian property market. The tax itself led to an increase of 8% in the price of new homes while demand fell by over 12%. Although the market recovered by 2004, arguments continue to rage over economic and social implications of the new tax and to a certain extent, this is largely justified by the fact that it is the consumer who has to shoulder the bill.