My point was not whether you can explain what you did or whether you can trick Manager into recording it. My point was whether you are allowed, under the guise of apportioning tax for items taxable at different rates, to arbitrarily round up after the apportionment is made and charge your customers more than they are legally obligated to pay. It seems you are effectively hiding extra profit as tax.
Again, I’m not an expert on Australian tax law, but anywhere I have worked, that would be illegal. Because your tax regime is an offsetting VAT system, your customers will want to claim input tax matching your invoices. And they would not be entitled to do so under any tax laws with which I am familiar.
I set the price on the product, i can effectively determine the GST rate…
Work out the apportioned rate is subjective and could be done a number of ways… it just needs to be fair and reasonable. It could be on cost price, retail price or any other method deemed fair and reasonable… each of these would yield a different rate.
I use just one method across all products for ease.
I determine a GST rate and clearly state what it is on the tax invoice. there is no issue from the sales side.
In regards to the customers, they are entitled to claim the GST if its a credible acquisition for them (usually B2B). The GST rate is claerly stated on the tax invoice which is what they can claim.
If they are a consumer (B2C) then there is no entitlement and makes no difference, but they actually would get the product cheaper because there is less GST in the final price
I do not understand why you think my customers cant claim the GST if they are entitled to it… they claim the GST they paid, albeit a rate less than 10% for some of my products.
If you think there is no GST credit entitlement to eligible customers, then your right, you don’t know Australian GST tax law.
If you can provide ANY shred of evidence on why this is illegal under Australian GST law, please feel free to show me by referencing any ATO issued statements, laws, ruling etc rather than throw statements around about other countries laws.
Well, after reading that document I can’t find anything that mentions a tax rate other than 10%.
The only mention of other percentages is when apportioning the taxable component of a mixed/combined product that will be taxed at the GST of 10%.
The ATO offer face to face advice for free. I have had them in 4 times now since 1998 just to ensure I am doing things correctly. There is no problem if you are occidentally stuffing up and they will put you on the right track. It is not a full audit.
As I stated in an earlier post I would interpret the ATO law in regards to Presentation of Tax Invoices that quoting a rate other than 10% would not be permissible and I would be surprised if this has been OKed in your private tax ruling.
I can see why rounding up your rate on the bundled price is compliant. Effectively, it changes the proportion of the underlying prices.
Take your original example and say that the price for the chocolate is $18 and the coffee $32. This yields a rate under your method of 3.6% which you would round up to 4.0%. This moves the underlying prices back to $20 and $30 respectively which would be considered as reasonable.
The proportion of the pack that is taxable would need to be stated as 40% (not 36%).
Another observation I would make is that the taxable proportion of the pack is different for the type of invoice used - amounts tax exclusive / amounts tax inclusive.
In your example for an amounts tax inclusive invoice the proportion is 42.31% (22/52 rounded) whereas for an amounts tax exclusive invoice it is 40% (20/50).
Thanks Vacuumdog…
I’m fine with the advice I have, just seems others have their own opinion as this has nothing to do with Manager nor my original question on here.
Ive reached out to the ATO by way of a formal private tax ruling which is legally binding…it doesn’t get more concrete than that. Maybe look that up over face to face as even the ATO’s face to face, or over the phone advice, is not legally binding.
I also had a friend who works as a GST specialist at a top 4 firm verify that he sees no issues… so ill take that advice above anyone saying its otherwise with no backing.
For context, the private ruling included our calculations (I.e. how we arrive to the 9% 8% etc), copy of the sample tax invoice template with the relevant fields, and obviously the relevant GST rulings and legislative references. ATO approved the ruling with no further questions, so nothing came up on their radar.
just for reference, from the ATO website:
“It should be noted, that where you are making a mixed supply the tax invoice need only show the value of the taxable supplies and the GST-free supplies and not an itemised list of all products contained”
ADJ, the above statement from the ATO website should also answer your question about taxable and GST-Free
Using my original example, I said Chocolate at $22 in GST (taxable) and coffee $30 Inc GST (GST Free)
This is very simple statement, but I also take into account all items including packaging which are fully taxable in working out the rate and increase the taxable component, but lets just ignore that for time being for easy of explaining and working out.
In essence,
Assume the above are RRP and I use this method to apportion the GST rate.
$2 GST is payable on a $52 sale.
So that is 4%
My tax invoice shows 1 line item “bundle 1”
I list the ex gst price, gst amount and GST inclusive price
I capture the $2 on my BAS at 1A and remit it to the ATO.
The Customer can claim $2 (if entitled), but that has nothing to do with me.
Remember this sells a a single line item… Bundle 1 = $52 inc GST
Typically 10-15 products can be in one package.
@Peza_au your private tax ruling is exactly that, private, and only you can rely on that ruling. There are other Australian users of this program and they cannot rely on your private ruling. They have to rely on the tax law and general rulings, unless they get there own private ruling.
I didn’t pose a question I made a statement and in my mind the statement still stands. I will summarise in point form:
The Australian GST rate (other than the zero rate) is 10% and reference to a rate other than 10% (or 0%) on a tax invoice in my opinion would not be ATO compliant. It is acceptable to only quote amount of GST without stating a rate. I think we agree on this and you are complying with this.
A tax invoice with a one line bundled mixed supply must state the proportion of the bundle that is taxable. This can be done by stating a fraction, a percentage or the actual amount to which the GST rate of 10% has been applied. These will vary depending on the type of invoice used (amounts tax exclusive/amounts tax inclusive).
Tax invoices for taxable sales of less than $1,000 must include enough information to clearly determine the following seven details: …
…
6. the GST amount (if any) payable – this can be shown separately or, if the GST amount is exactly one-eleventh of the total price, such as a statement which says ‘Total price includes GST’
7. the extent to which each sale on the invoice is a taxable sale
Using the example:
ex GST price $50.00
GST amount $2.00
Inclusive price $52.00
Item 7 from the ATO quote above is not included.
What amount do you quote at G3 on the BAS return? $0.00 or $30? Both may be acceptable, I don’t know, but G3 is titled Other GST-free sales (not supplies).
Whilst you are satisfied that you are compliant in terms of your private ruling other users may need to consider their own position and seek professional advice regarding this issue.