Satchat - Gst Payg Fax Newsletter #4

SATCHAT - GST PAYG FAX NEWSLETTER #4

Disclaimer

The information produced in this newsletter is specifically for Satisfaction Software clients and is based on information either available from ATO information published or private rulings to Satisfaction Software. Satisfaction Software will not be held responsible for any actions or decisions made on this information should it change from time of publication. If you are going to make decisions that effect your business based on this information it is mandatory that you get a second opinion to verify the accuracy of this information before you act on any decisions.

4.1Timetable

Satisfaction Software has achieved our deadline. Now it is your turn!!

In November 1999 when GST became no longer just "a strong rumour", Satisfaction Software made a commitment to our existing clients to have them ready for GST in the remaining short time period. We also made the decision, with the exception of a couple of businesses that we were in advanced stages of planning new systems, not to take on any further new business and make our existing clients our major focus. A simple decision! The timetable as follows was deliberate; trying to give clients the month of June to review and become familiar with the changes and training their staff. A difficult challenge but one that Satisfaction Software has met.

DateDescriptionCompleted

November 1999Send out questionnaires for clients to defineY

their particular GST requirements.

December 1999Send quotes to clients for changes for GSTY

(even though some requirements were still unknown at

that stage and are still now!!).

January 2000Clients to authorise to proceed with GST changes.Y

End of May 2000Completed software changes for all accounting basedY

clients who signed the quote by the 17th January 2000.

End of May 2000Trained all accounting clients on GST updates.Y

Early June 2000Changes for some clients who do not use ourOn Schedule

accounting software but have operational software

such as manufacturing or warehousing.

Early June 2000Install all clients who have been trained andY

given authority to proceed by 17th January 2000.

Late June 2000Install Withholding Tax update for those clientsOn Schedule

only who proceed with this.

Now it is your turn!

DateDescription

19 June 2000By the end of the second week of June, Satisfaction Software

would like all clients to have:-

-set up their GST codes in the Chart of Accounts in the live area.

-Copy the live area to the test area.

-Put through sample transactions in the test area for July (e.g. 5 or so) in each of the areas of data entry (e.g. Cash Book, General Ledger Journals, Creditors, Debtors [ie. Auto Take Up Journals], Invoicing as appropriate etc.).

-Run and check figures to Calculation Sheet.

June 2000For remaining 2 weeks of June, train all staff on all effects of GST.

1st July 2000"G" Day! (a Saturday). Satisfaction Software will be open from 8:30am to 4:00pm on Saturday to handle GST support calls. We will also remain open until 8:00pm on Friday 30th June 2000 to offer any help required. Satisfaction Software will send you a form for you to advise us whether you will be working on July 1 so we can work out whether we need to have all staff available or only skeleton staff (that does not mean only James!) on hand.

7th July 2000Satisfaction Software requests that all clients confirm their various General Ledger interface files to the General Ledger after they process the first week of July transactions. Then run a Calculation Sheet to check both the GST Clearing Accounts and check various GST categories on the Calculation Sheet and advise Satisfaction Software if you have any concerns.

Your commitment to perform the above activities is very important.

This is a time of major overhaul of the tax laws. Satisfaction Software has changed the InfoWare family of products in good faith to meet the GST requirements as known. It is mandatory on your part to enter sample transactions in the test area to make sure you are getting results as expected. The software update has been provided on the basis that you are going to be pro-active and formally acceptance test the changes.

It is equally critical to train all staff on the effects of GST in the remaining time in June.

Also as a part of being pro-active, it is recommended that after the first week in July you confirm the various General Ledger interface files as applicable (Debtors, Creditors, Payroll, even though Payroll has not been changed, and Inventory, if applicable) to the General Ledger and then print the Calculation Sheet to check both the clearing account figures and other figures on the Calculation Sheet. For your stress levels and ours as well, we ask clients not to ignore this request so if there are any unexpected problems then these can be resolved very early in July should they somehow pass through our testing and your acceptance testing. Leaving this until running a report just before the 21st August for monthly GST return clients and the 21st October for the 3 monthly return clients is a situation that can be easily avoided with pro-active effort.

4.2GST Training Completed

All clients who have committed to the GST modifications by the 17th January 2000 (and a few additional late starters) that use all of our InfoWare accounting software modules, have been trained for GST updates to their areas (including customisations). The feedback from clients is positive, in not only feeling comfortable with the approach that we have taken for GST, but also positive in the sense that in the GST tutorial we touched on other existing features within InfoWare. Without exception, clients received some other benefits of InfoWare in either features or reviewing procedures. Also, being trained with other InfoWare clients in similar industries and discussing both software and industry situations is re-assuring for many clients.

4.3FBT Reporting - greater fairness

As part of The New Tax System, the value of most fringe benefits provided to employees will appear for the first time on 1999-2000 group certificates.

Employers are required to report an amount on employee group certificates only where the total taxable value of fringe benefits provided to an employee exceeds $1000 in a fringe benefits tax year.

This does not mean people will pay more tax.

The amount reported on the group certificate will not be included as assessable or taxable income or affect the amount of the standard Medicare levy payable.

But it does mean greater fairness.

Reporting the value of the benefits will make things fairer because some employees will no longer be able to sacrifice salary to get government benefits aimed at genuine low-income earners, or avoid responsibilities such as:

-employee liability for the superannuation contributions surcharge, termination payments surcharge, Medicare levy surcharge

-child support obligations, and

-Higher Education Contribution Scheme repayments.

For information contact the FBT inquiry service on 13 33 28.

4.4PAYE Tax Rate Scale Changes

As part of the PAYG tax reform, there are significant reductions in PAYE tax. A new set of tax scales has just been released by the ATO.

As part of this process, the ATO has changed the calculation of the Tax Amount for PAYE calculations to the nearest dollar. Formerly, it was to the nearest 5 cents. This results in a software change for calculating and posting tax.

As part of this software change, Satisfaction Software will also update the Payroll Tax Scales automatically for the new rates effective from July 1, 2000 so you do not have to manually edit the Tax Tables.

Price: $ 75.00

Please advise your Satisfaction Software representative if you have overridden any of the existing Payroll Tax Tables, as this will be lost in the update.

4.5Blank Paper Group Certificates

Many clients have selected to print Payroll Group Certificates on blank paper (either laser or dot matrix) rather than pre-printed ATO Group Certificate stationery. A reminder that to do this you must: -

-Advise the Tax Office that you are going to do this. The ATO will request a letter from you stating InfoWare has been authorised to do this. A copy was given to you at GST Training. If this is lost, ring Tracey and she will fax you another copy.

-Electronically lodge via diskette the Group Certificate data.

This is not necessary for clients who are using ATO Group Certificate stationery.

4.6BAS - Capital Acquisitions

For Capital Acquisitions for either Input Taxed Supplies, with no GST or for private usage, these are to be "Grossed Up" into the G10 Capital Acquisitions figure rather than G11 Non Capital Acquisitions. This will result in 3 new G (sub) codes as follows:

G13C Capital Acq. For Input Taxed Supplies

G14C Capital Acq. With No GST In Price

G15C Private Use Of Capital Acquisitions

These new codes are required to show any GST free components of Capital Acquisitions. The existing GST codes for G13, G14 and G15 will now be described as follows:

G13 Other Acq. For Input Taxed Supplies

G14 Other Acq. With No GST In Price

G15 Private Use Of Other Acquisitions

The new GST codes will add into G10 instead of G11 currently. The calculation sheet total for G13 will also include G13C, the same for G14/G14C and G15/G15C.

The calculation sheet report has also been modified to only show the total of adjustments at either G7 OR G18 (NOT BOTH!!!) This is according to the ATO's BAS instructions.

For sites installed earlier, this will be another update in late June with these codes and changes.

4.7ATO Begins Mailing BAS Instructions - Smaller Business Extension of Time

The Australian Taxation Office (ATO) have started mailing comprehensive instructions to businesses and tax agents regarding the new Business Activity Statement (BAS).

The 148-page booklet has comprehensive instructions, a step-by-step guide to completing the BAS, an index, explanations of terms, practical examples, sample BAS forms, details of taxpayer rights, where to get help and an explanation of all the changes.

The first BAS's are due to be lodged in late August for businesses with an annual turnover of $20 million or more.

Smaller businesses reporting quarterly have been given extensions of their first three lodgements of three, two and one weeks respectively.

The first quarter ends on September 30 and the BAS is due on November 11.

Quarter two finishes December 31, with the BAS due February 4.

Quarter three finishes March 31, with a one-week extension on the BAS until April 28.

For the fourth quarter of this financial year (finishing June 30, 2001) and every future quarter, the BAS is due 21 days after the quarter's end.

4.8GST Codes to be set by June 30, 2000

A reminder that you will no longer be able to change the GST Codes defined in the Chart of Account Maintenance after June 30, 2000. If an account has the wrong GST Code defined in it from July 1, 2000 then a new Chart of Account will need to be created. This maintains an audit between the GST reporting and the GL Current Account's GST Code definition.

This may be reviewed later in the year after GST has settled in.

You have free and full option to change the GST Code in the Chart of Account Maintenance up to and including June 30, 2000.

FAQ’s

Q - In the GST training tutorial, bank charges are listed as a G14 code. Shouldn't this be a G13 code (Acquisitions for Input Taxed Supplies)?

A - No.

There is an inconsistency in the calculation worksheet as supplies (sales) of GST Free items (e.g. some food items) are reported separately, as G03 GST code, to input taxed sales (e.g. some bank charges) as G04 GST code. For acquisitions, they are grouped together into a single code G14.

Code G13 (acquisitions for making input taxed supplies) is specifically acquisitions for organisations that are an input taxed supply type organisation (e.g. banks and other financial institutions). With the exception of one division of one client, Satisfaction Software is not aware of any other client who is a provider of input taxed supplies. Hence for all other clients, the G13 codes (G13, G13C) should not be used on the General Ledger Chart of Account Maintenance.

Note: To add to the confusion, until version 1.3.C of GST training tutorial, the flowchart on page 5 incorrectly gives example of Bank Charge as G13. This should be G14. Sorry!

Q - I am classified as a large remitter of tax by annually remitting over $1 million in group/PPS tax. As such I have to remit tax liabilities on a weekly basis. How does this affect my filling out of the calculation worksheet and subsequently the business activity statement for the PAYE group tax field into figure W2 when I have already remitted this on a weekly basis?

A - The draft version of the Large Withholders Guide to PAYG states:

"If you are large withholder you must complete W1 on your activity statement. You do not complete W2 and W4 as the ATO records these PAYG withholding amounts on your account when your electronic payment is processed."

Note - Withholding Tax as part of a voluntary agreement will go into W2 with the gross payment going into W1.

Q - What is the web address for verifying ABN’s?

A - If you think you have a doubtful ABN, phone the ABN hotline on 13 72 26. There is currently no website for validating an ABN. ABN must be either an 11 or 14 digit number.

Q - The Business Activity Statement has an adjustment figure for any adjustments on this Business Activity Statement that relate to a prior period. However with the Business Activity Statement from the InfoWare family of products, adjustments on prior periods can be taken up with normal supplies and acquisitions accounts and are not separated as adjustments. Why is this?

A - The Final "BAS Instructions" document from the ATO states on pages 36-37:

"Discounts, rebates, refunds or other changes to consideration

If there is a change to the consideration for any of your sales or other supplies, you may account for that change by showing either (but not both):

-at G1, the amount of your sales or other supplies for the current period as increased or reduced by the amount of that change, or

-the change as an adjustment at G7 or G18.

For example, you give a volume discount in the current tax period. If you have chosen to net discounts off your supplies in your accounts, you can reduce the amount of your supplies at G1 on the current activity statement by the amount of the change. You can do this whether the discount relates to a supply accounted for on the current activity statement or on a previous one.

If the change to the consideration relates to exports, other GST-free supplies or input taxed sales and income and other supplies, also show the reduced amount at G2, G3 or G4.

Alternatively, if you have chosen to record your discounts in a separate account, you can show the amount of the reduction as an adjustment on the activity statement for the tax period in which you give the discount. You can do this whether the discount given relates to a supply accounted for on the current activity statement or on a previous one. You do not account for a change in consideration as an adjustment if there is no GST included in the price of the supply. The net amount of your adjustment is shown at G7 or G18."

Q - How do I process private expenses such as motor vehicles, computers etc. where a portion of the business is work related and balance is private?

A - The Final "BAS Instructions" document from the ATO states on page 56:

"Acquisitions and importations partly for private or domestic purposes

If you include an amount for an acquisition or importation at G10 or G11 and, at the time you made the purchase or incurred the expense you planned to use the thing acquired (goods, services, real property, rights or anything else) partly for private or domestic purposes, you need to include an amount at G15. The amount you include at G15, is the part relating to the planned private or domestic use."

For example:

As an extension to FAQ #5 regarding asset purchases, you will need another Clearing Account for the private usage portion of asset purchases before transferring the total to your current assets account.

ie.F/A Clearing Account - PurchasesG10

F/A Clearing Account - Private Usage of PurchasesG15

F/A Clearing Account - TransferredN/A

If your estimated private usage changes at a later date you need to show the change at G18 on your BAS. You can achieve this by having 2 more GL accounts and doing the appropriate journal which will affect the Acquisitions Adjustments GST Control Account also.

Changes in Private UsageG18

Changes in Private Usage (offset)N/A

Adjustments for changes in private usage should only be made during "Adjustment Periods" as determined by the ATO depending on the value of the purchase. An adjustment period is typically the last GST period of the financial year.

Q - For tax invoices over $1,000 the name and either the address or ABN of the recipient of supply (customer) is required. For cash sales, does this mean that I have to get a name and address or ABN of every cash sale customer for sales over $1,000?

A - A tax invoice is required so that a recipient of supply ie. customer can claim an input credit for the amount of GST. In the case where the recipient of supply is a private individual then they are not entitled to an input credit under normal circumstances. In a cash sale environment where a customer desires an input credit, for purchases over $1,000 you are required to record their name and either their address or ABN so they can receive an input credit. For private individuals, as they are not receiving an input credit, this will not be required. For InfoWare clients this is most practically achieved by either: