Remitting GST to the ATO

Registered entities charge GST on their taxable sales of goods and services and remit the GST they collect to the Taxation Office. They pay GST on the goods and services they buy, but they can claim this GST back from the Taxation Office as input tax credits. In practice, they will offset their input tax credits against the GST they have collected. Only the net amount is remitted to the Taxation Office. If the net amount is negative, the registered entity can obtain a tax refund from the Taxation Office.

Example – A church, registered for GST, paid $200 in GST during the period and collected $150 GST on the rental of the church hall (Rental of $1,650).

To obtain the amount of GST refundable, calculate as follows:

GST Collected $ 150
Less GST Paid $(200)
Net Refund Due $ (50)

If a church is making payments to a religious practitioner or employees, it must also be registered for Pay As You Go withholding. Any GST refund will firstly be offset against the PAYG withholding and any balance owing to the Church is refunded.

Liability for the GST

If a registered entity has forgotten to charge the customer GST, the liability for the GST remains with the registered entity. It is still required to remit the GST to the Taxation Office. The entity will need to calculate the GST as 1/11 of the proceeds received.

Simple GST Example

a) The example below outlines the GST transactions for a Church that is not registered for GST.

Transaction	Sell Price	GST charged	Less input tax credits	GST paid to ATO
Forester sells trees to timber mill	100.00	10.00	0.00	10.00
Timber mill processes timber and sells to furniture manufacturer	200.00	20.00	(10.00)	10.00
The Furniture manufacturer sells to an unregistered church	250.00	25.00	(20.00)	5.00
Total GST remitted				25.00

In the above example, a forester sells trees to a timber mill for $100 plus 10% GST. The forester remits the $10 to the Taxation Office.

The timber mill processes the timber into dressed timber and sells this to a furniture manufacturer for $200 plus GST of $20.

The timber mill deducts the GST it has paid from the GST it collected and remits the difference of $10 to the Taxation Office.

The furniture manufacturer sells the timber to a church that is not registered for GST purposes for $250 plus GST of $25. The furniture manufacturer remits the net GST of $5 ($25 collected less $20 paid on inputs).

The forester, timber miller and furniture manufacturer have collected GST and remitted it to the Taxation Office. However, they have all passed the GST cost on to the next entity in the chain of transactions. They have not borne the cost of the GST but have simply acted as a collection point for the Government. The full GST cost is ultimately borne by the unregistered end user, being the unregistered church, for it cannot claim back the $25 GST that is embedded in the price it pays for the furniture $275 ($250 plus GST of $25).

b) The example below outlines the GST transactions for a Church that is registered for GST.

Transaction	Sell Price	GST charged	Less input tax credits	GST paid to ATO
Forester sells trees to timber mill	100.00	10.00	0.00	10.00
Timber mill processes timber and sells to furniture manufacturer	200.00	20.00	(10.00)	10.00
The Furniture manufacturer sells to an unregistered church	250.00	25.00	(20.00)	5.00
The church claims back the GST paid on the furniture				(25.00)
Total GST remitted				0.00

A forester sells trees to a timber mill for $100 plus 10% GST. The forester remits the $10 to the Taxation Office.

The timber mill processes the timber into dressed timber and sells this to a furniture manufacturer for $200 plus GST of $20. The timber mill deducts the GST it has paid from the GST it collected and remits the difference of $10 to the Taxation Office.

The furniture manufacturer sells the timber to a church that is registered for GST purposes for $250 plus GST of $25. The furniture manufacturer remits the net GST of $5. The net GST paid at each stage is equal to 10% of the value each business added to the goods. This is a principle that applies throughout. GST is payable on the value added.

The forester, timber miller and furniture manufacturer have collected GST and remitted it to the Taxation Office. However, they have all passed the GST cost on to the next entity in the chain of transactions. They have not borne the cost of the GST but have simply acted as a collection point for the Government. The end user, being the registered church, can claim back the GST and therefore only bears the cost excluding GST. The cost of the furniture to the registered church will be $250, being $275 less GST credit of $25. As seen in these two examples, the goods purchased by a registered church will cost lesser as compared to an unregistered church.

Special Types of GST Transactions

Most transactions are taxed in the normal way as shown in the previous example. The registered supplier charges GST on sales, claims the GST it pays on its purchases as an input tax credit and remits the net amount of the GST to the Taxation Office. If the purchaser is a private consumer or an unregistered entity, it cannot claim back the GST on the purchase and the GST becomes a real cost.

However, there are two types of special GST transactions. These transactions are taxed in different ways.

GST-Free an
Input taxed

GST-Free Transactions

The supplier does not charge GST when selling the GST-free good or service to the buyer. However, a registered supplier can still claim input tax credits from the Taxation Office for the GST paid on the goods and services it has bought. Therefore, there is no GST included in the price to the consumer, including no hidden GST.

Examples of GST-free goods and services are:

Medical services
Education
Basic food
Child care
Water rates
International travel
Exports
Retirement village
Some charitable activities and
Religious service

Example

A doctor does not charge GST on its patient fees. However, the doctor can claim GST credits from the Taxation Office for the GST paid on purchases, such as stationery, medical supplies, computers, rent, etc.

Input Taxed Transactions

A small number of transactions are input taxed. No GST is charged to the buyer on an input taxed transaction. However, the seller cannot claim input tax credits from the Taxation Office for the GST paid on the goods and services it has bought.

The main categories of input taxed transactions are:

Financial services (eg loans, interest bearing deposits, bank fees)
Some fundraising events by charities
Residential rents and
Sale of residential property

Example

The bank does not charge GST on its loan application fees. Nor can the bank claim an input tax credit for the GST it has paid on its purchases, such as stationery, printing, computers, etc. Therefore, the GST on purchases is a real cost to the bank. It may seek to recover this GST cost by increasing its loan application fees.

Comparison of GST Transactions

	GST-Free (eg Medical Services)	Input Taxed (eg Bank Services)	Normal (eg Office Supplies)
Cost of Inputs	100	100	100
Plus 10% GST	10	10	10
GST Claim	(10)	0	(10)
Actual Cost	100	110	100
Plus Profit	50	50	50
Price before GST	150	160	150
Plus 10% GST	0	0	15
Net Cost to an un-registered purchaser	150	160	165
GST Claim	0	0	(15)
Net Cost to registered purchaser	150	160	150

The most advantageous category is that of GST-free. No GST is included in the price to the consumer and all GST paid by the registered supplier is refunded to them.

The cost of normal transactions differs between registered and unregistered purchasers. In the above table you can see that the cost of the goods (eg office supplies) for an unregistered purchaser is the $165. However, the cost to a registered entity is only $150. Although the registered purchaser would initially pay $165 to the supplier, the purchaser could then claim an input tax credit of $15 from the Taxation Office.

When is GST Not Charged?

GST is not required to be charged to the purchaser in the following circumstances:

The transaction is “GST-free” or “input taxed”
The supply is made free of charge (e.g. gifts)
The supplier is not a registered entity or the transaction is not connected with the supplier’s business or
The transaction has no connection with Australia.

How Does GST Affect Churches?

If a church has registered for GST, it can claim input tax credits for the GST it has paid on its purchases. This will provide a significant saving. As seen from the previous example, the purchase of office supplies was $15 cheaper for a registered entity.

However, if a church is registered for GST, it must also charge GST on normal (taxable) GST transactions. No GST need be charged on GST-free or input taxed transactions.

Listed below are some of the transactions on which a church may need to charge GST.

Hire of the church hall
Playgroups
Catering
Social events
Bookshop sales
Camps
Charges between the church and the denominational office, such as administrative fees

There are some specific GST-free categories available for churches. Church transactions are discussed in detail in Exemptions for Churches and Specific Church Transactions.

Hint

Remember that if a registered church does not charge GST on a taxable transaction then the church is still responsible for remitting the GST to the Taxation Office. The church will need to remit 1/11 of the proceeds received. Therefore it is vital that the church considers whether GST applies before it enters into a transaction. For example, before running a social event, GST must be considered.