9. Australian Taxation Obligations

9.1 Goods and Services Tax

Goods and Services Tax (GST) is payable on the purchase of most goods and services consumed in Australia. GST may also apply to Australian goods and services consumed overseas depending on how they are delivered by the supplier. GST is funded centrally so it does not affect work area budgets.

The department collects GST on the sale of most goods and services that will be consumed in Australia, however, fees relating to passports and consular services are out of scope for GST purposes.

Payments between Commonwealth, State and Local government agencies are not subject to GST when certain conditions are met.

Taxable supplies

A 'supply' for GST purposes includes the supply of goods, services, advice, information or a grant. Refer to http://www.austlii.edu.au/au/legis/cth/consol_act/antsasta1999402/s9.10.html for the GST Act definition of a 'supply'.

A supply will be a taxable supply (and subject to GST) when the following criteria are met:

Tax invoices

A supplier must issue a tax invoice for any amount over $75.00 (excluding GST) where the supply is subject to GST.

A tax invoice must contain:

Tax invoices for more than $1,000 must also show the purchaser's name or ABN.

Common DFAT transactions

The tables below set out the GST treatment for common DFAT transactions.

Purchases

Transaction

GST treatment

A post purchases goods in Australia for use overseas.

  • The goods are GST-free (A0) when the supplier exports them directly to post within 60 days.
  • The goods are subject to GST (A1) when they are exported via the DFAT mailroom.

An Australian company undertakes research overseas for DFAT and its report is delivered in Australia.

  • The service is subject to GST (A1) because the report is delivered in Australia.

A contractor in Australia writes a procedural manual for a post. The contractor writes the manual in Australia.

  • The service is subject to GST (A1) because the manual is written in Australia.

A post contracts an Australian company to undertake archival work at post.

  • The service is GST-free (A0) because the focus of the work is overseas even though a small part of the work (e.g. administration) may be done in Australia.

A post leases artworks for display in the chancery.

  • The lease is GST-free (A0) because the service is used overseas.

A post leases a property overseas and pays the landlord in Australia.

  • The lease is GST-free (A0) because the overseas property does not have the necessary connection with Australia.

A Canberra employee flies to Sydney as part of a short term mission to post.

  • Domestic travel is GST-free (A0) when it is part of international travel.

An employee seeks reimbursement for goods they have purchased.

  • The GST treatment of the reimbursement is the same as if DFAT had purchased the goods.

Sponsorship / Grants

Transaction

GST treatment

A Canberra work area makes a grant to an Australian university for an overseas project. The university is registered for GST.

  • The grant is GST-free (A0) because the project has an overseas focus and expenditure will be incurred overseas.

A Canberra work area makes a grant to an Australian organisation for a project undertaken in Australia. The organisation is registered for GST.

  • The grant is subject to GST (A1) because expenditure will be incurred in Australia.

A Canberra work area makes a grant to an Australian charity that is not registered for GST.

  • The grant is out of scope (AZ) because the charity is not registered for GST.

An overseas company agrees to sponsor a post's public diplomacy event.

  • The sponsorship is GST-free (G0) because the transaction lacks the necessary connection to Australia.

An Australian company agrees to sponsor a post's public diplomacy event. The sponsorship is paid to DFAT in Australia.

  • The sponsorship is GST-free (G0) because the focus of the expenditure is overseas. The transaction lacks the necessary connection to Australia even though the payment is made in Australia and a small amount of administration work takes place in Australia.

A work area enters into an agreement for sponsorship in kind (no cash exchange).

  • Seek advice from FPT-FSB.
Sales

Transaction

GST treatment

A post provides services to an attached agency under the SLA.

  • The services are GST-free (G0) because they are provided overseas.

DFAT sub-leases accommodation to an overseas company with payment made in Australia.

  • The sub-lease is GST-free (G0) because the overseas property does not have the necessary connection with Australia.

A post sells a vehicle to an overseas company.

  • The sale is GST-free (G0) because the transaction does not have the necessary connection to Australia.

GST processes

1. FPT-FSB is responsible for managing the department's GST obligations. Questions about GST policy and processes should be sent to FPT-FSB via the Financial Management inbox.

Paying invoices from suppliers

2. Staff members must not authorise the payment of an account over $82.50, where the amount includes GST, unless a tax invoice has been provided and it contains the required information.

3. Staff members must make every effort to obtain a valid tax invoice from the supplier and keep a record of the correspondence on file. If the account is over $82.50 (including GST) and a tax invoice cannot be obtained the GST must be funded from the work area's budget because DFAT cannot claim a GST refund from the ATO.

4. Staff members may rely on the supplier's GST treatment unless it is clearly incorrect in which case staff should follow-up with the supplier or seek advice from FPT-FSB.

GST credits

5. To substantiate a claim for a refund of GST paid on a purchase, supporting documentation must be retained for 5 years, including:

GST only invoices

6. Work areas may need to enter GST only invoices directly into SAP to correct an error. Staff members must enter invoices in accordance with SAP Help Card 'Create an invoice for 100% GST'.

Purchase of Australian good and services by posts

Australian goods or services that are provided direct to the post and consumed overseas are out of scope for GST purposes because they lack the necessary connection to Australia.

For example, when a supplier ships goods directly to the post the supply is out of scope for GST purposes whereas the supply would be in scope if the goods were delivered to the post via an Australian address (e.g. DFAT Canberra).

7. Staff members should follow-up with the supplier if they believe GST has been charged for a good or service that was directly supplied.

Withholding tax

DFAT must withhold 46.5% of a payment where a supplier does not provide an ABN, except when they provide a written statement (e.g. the ATO 'Statement by a Supplier' form) that one of the following applies:

8. Staff members must provide a copy of the supplier's statement to the accounts payable area so the SAP vendor record can be amended to prevent money being withheld from a payment.

9. FPT-FSB must pay amounts withheld to the ATO in accordance with the ATO's timeframes.

Recipient Created Tax Invoices

Recipient Created Tax Invoices (RCTIs) are issued by the purchaser rather than the supplier. RCTIs are used when the amount payable is more easily determined by the purchaser than the supplier (e.g. contractor payments based on hours worked).

10. The supplier and purchaser must agree in writing to use RCTIs. Staff members should consult with AS FSB before entering into an arrangement with a supplier to use RCTIs.

Issuing invoices

11. Staff members must issue a correct SAP tax invoice to the purchaser of goods or services that are subject to GST at the point of sale or within 28 days of a request by the purchaser.

Payments between Australian government agencies

A payment between Australian government related entities is not subject to GST when:

The ATO defines a 'government related entity' as:

Agreements with agencies

12. Staff members must ensure that agreements with agencies clearly state the GST treatment of any payments to be made between the agencies.

Paying agency invoices

13. When paying an agency's invoice staff members can rely on the GST treatment in the invoice even if GST is included.

The following tax codes should be used when entering the invoice to PTWS or SAP:

Invoicing agencies

14. The GST must be treated correctly otherwise DFAT could be liable for the GST. Staff members should seek advice from FPT-FSB via the Financial Management inbox if they are unsure.

15. Before issuing a tax invoice to a government agency, staff members must determine if the following conditions apply:

If both conditions are 'True' the supply is not subject to GST. The invoice should be entered to PTWS or SAP with the following tax codes according to where the goods or services were provided:

If either condition is 'False' the invoice should be issued in accordance with the standard GST processing rules because the transaction does not meet the ATO's conditions for a non-commercial payment between government related entities.

Click on the link for the ATO fact sheet on GST and payments between government related entities.

Business Activity Statement

16. FPT-FSB must prepare and lodge the department's Business Activity Statement with the ATO in accordance with the ATO's timeframes.

GST Guide

A. Purchases

GST-free (Code A0)

GST free transactions are specifically legislated for in the GST ACT. Common examples include:

Subject to GST (Code A1)

Includes most goods and services purchased in Australia, including imports into Australia:

Note: Code A2 should be used for Australian capital asset purchases greater than $2,000 or items coded to a capital WBS element.

Capital purchase subject to GST (Code A2)

Includes capital goods and services purchased in Australia, including imports into Australia:

Input taxed GST exempt (Code A3)

Input taxed transactions are specifically legislated for in the GST ACT. Common examples include:

Out of scope for GST (Code AZ)

B. Sales

GST-free (Code G0)

GST free transactions are specifically legislated for in the GST ACT. Common examples include:

Subject to GST (Code G1)

Input taxed GST exempt (Code G2)

Input taxed transactions are specifically legislated for in the GST ACT. Common examples include:

Export sale that is GST free (Code G3)

Out of scope for GST (Code GZ)

9.2 Fringe Benefits Tax (FBT)

DFAT pays Fringe Benefits Tax (FBT) on fringe benefits (i.e. generally a fringe benefit is a payment or benefit provided in respect of employment other than salary, wages and superannuation) provided to employees and their associates (e.g. spouse or children). FBT applies to:

Contractors are not employees for FBT purposes.

FBT is paid on the grossed-up value (i.e the actual cost of providing the benefit plus the deemed tax [highest marginal tax rate plus the Medicare levy]).

Determining if benefits are subject to FBT

1. Staff members must seek advice from FPT-FSB on whether a proposed benefit would be subject to FBT before submitting the proposal for approval.

2. When providing FBT advice FPT-FSB must follow advice issued by the ATO. FPT-FSB may seek legal advice if necessary.

Recording benefits

3. Finance Managers and Divisional Coordinators must ensure benefits provided to employees are accurately recorded (e.g. using the specific benefit SAP general ledger codes).

Preparing the DFAT FBT return

4. FPT-FSB is responsible for preparing the annual FBT return for the CFO's sign-off.

5. Finance Managers and Divisional Coordinators must complete and certify their work area's FBT return (including a 'nil' return) by the deadline advised by the CFO.

Maintaining records

6. Work areas must maintain a record of fringe benefits they provide to employees, including the taxable value of each fringe benefit, for five years after the end of the FBT year (i.e. 31 March). Appropriate records include invoices, receipts, log books, odometer records and employee declarations.

7. Staff members who make declarations (e.g. otherwise deductible declaration) should maintain any information to support the declaration for five years after the end of the FBT year.

Employee payment summaries

8. The department must report the Reportable Fringe Benefits Amount (RFBA) on employee payment summaries where the total taxable value of the employee's fringe benefits for the FBT year exceeds $2,000.

The RFBA is not included in the employee's assessable income but it is included in a number of income tests relating to government benefits and obligations, including:

Staff members should refer to the Human Resources Manual to determine if an entitlement is subject to FBT. Staff members should also seek financial advice if they are unsure of the impact of a benefit on their personal taxation situation.

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