CPA Australia answers some questions as to how the GST applies to a range of business issues.
CPA Australia answers some questions as to how the GST applies to a range of business issues.
Q. I run my own business and own a car which is partly for business use. How do I claim input tax credits on my running costs?
A. The Tax Office has recently issued a Bulletin, GSTB 2000/2, which explains the methods available for claiming input tax credits in respect of motor vehicle expenses. The methods available under the Bulletin are similar to the ones used for calculating deductible motor vehicle expenses for income tax purposes.
The methods available include the ‘formula’ (similar to the cents per kilometre method for income tax purposes), the ‘set rate method’, the ‘one-third creditable purpose method’ and the ‘log book method’. For further information on how to claim input tax credits for car expenses, refer to GSTB 2000/2.
Importantly, you cannot simply claim 1/11th of the amount that you claim for income tax purposes. In addition, you cannot claim an input tax credit unless you hold a tax invoice for each car expense that you incur (although no tax invoice is required for expenses under $50).
Q. I own commercial properties. Under my agreement with tenants, they are required to reimburse me for certain outgoings, such as council rates, land tax and water charges. Should I be adding GST to these outgoings when I seek reimbursement from my tenants?
A. As a general rule, GST will apply to any reimbursements paid by tenants pursuant to their commercial lease agreements. The Tax Office has recently issued a draft determination, GSTD 2000/D4, supporting this view. To illustrate the point, the ATO uses the following example:
On July 1, Annette leased commercial premises to Matthew. Under the lease agreement, the consideration consists of $1,000 base rent per month, plus Annette’s expenses for the rates in respect of the property.
Under the agreement Annette can recoup from Matthew any GST payable by her in relation to the lease.
Annette pays the local authority $220 for rates for July. The rates are ‘a tax, fee or charge’ specified in the Division 81 Determination made by the Treasurer.
Therefore the payment of the rates is not consideration and the local authority does not make a taxable supply to Annette. She is not entitled to an input tax credit in relation to the rates. Annette invoices Matthew for rent of $1,342. This amount is made up of $1,000 base rent, $220 outgoings and $122 GST.
Q. My employees are given corporate credit cards which are used exclusively for business purposes. Can I use the corporate credit card statement instead of a tax invoice for fuel purchases?
A. Unfortunately, you will probably not be able to use the corporate credit card statement in respect of fuel purchases. The Tax Office has released a ruling, GSTR 2000/26, which permits employers to claim input tax credits based on corporate card statements instead of tax invoices where certain conditions are satisfied.
One of the conditions is that you can only rely on the corporate card statement for those suppliers that only make taxable supplies, or those suppliers that supply sufficient information to the credit card provider so that the card provider can accurately split out the GST for any mixed supplies.
The questions were taken from the GST Assist small business helpline, which is managed by CPA Australia. The helpline number is 13 30 88.
Q. I run my own business and own a car which is partly for business use. How do I claim input tax credits on my running costs?
A. The Tax Office has recently issued a Bulletin, GSTB 2000/2, which explains the methods available for claiming input tax credits in respect of motor vehicle expenses. The methods available under the Bulletin are similar to the ones used for calculating deductible motor vehicle expenses for income tax purposes.
The methods available include the ‘formula’ (similar to the cents per kilometre method for income tax purposes), the ‘set rate method’, the ‘one-third creditable purpose method’ and the ‘log book method’. For further information on how to claim input tax credits for car expenses, refer to GSTB 2000/2.
Importantly, you cannot simply claim 1/11th of the amount that you claim for income tax purposes. In addition, you cannot claim an input tax credit unless you hold a tax invoice for each car expense that you incur (although no tax invoice is required for expenses under $50).
Q. I own commercial properties. Under my agreement with tenants, they are required to reimburse me for certain outgoings, such as council rates, land tax and water charges. Should I be adding GST to these outgoings when I seek reimbursement from my tenants?
A. As a general rule, GST will apply to any reimbursements paid by tenants pursuant to their commercial lease agreements. The Tax Office has recently issued a draft determination, GSTD 2000/D4, supporting this view. To illustrate the point, the ATO uses the following example:
On July 1, Annette leased commercial premises to Matthew. Under the lease agreement, the consideration consists of $1,000 base rent per month, plus Annette’s expenses for the rates in respect of the property.
Under the agreement Annette can recoup from Matthew any GST payable by her in relation to the lease.
Annette pays the local authority $220 for rates for July. The rates are ‘a tax, fee or charge’ specified in the Division 81 Determination made by the Treasurer.
Therefore the payment of the rates is not consideration and the local authority does not make a taxable supply to Annette. She is not entitled to an input tax credit in relation to the rates. Annette invoices Matthew for rent of $1,342. This amount is made up of $1,000 base rent, $220 outgoings and $122 GST.
Q. My employees are given corporate credit cards which are used exclusively for business purposes. Can I use the corporate credit card statement instead of a tax invoice for fuel purchases?
A. Unfortunately, you will probably not be able to use the corporate credit card statement in respect of fuel purchases. The Tax Office has released a ruling, GSTR 2000/26, which permits employers to claim input tax credits based on corporate card statements instead of tax invoices where certain conditions are satisfied.
One of the conditions is that you can only rely on the corporate card statement for those suppliers that only make taxable supplies, or those suppliers that supply sufficient information to the credit card provider so that the card provider can accurately split out the GST for any mixed supplies.
The questions were taken from the GST Assist small business helpline, which is managed by CPA Australia. The helpline number is 13 30 88.
